Chrysler to Drop 'Clunker' Incentive
* AUGUST 2, 2009, 12:40 P.M. ET
DETROIT-- Chrysler Group LLC is dropping an incentive plan that offered to double the government's "cash for clunkers" rebates amid complaints from dealers that inventory is running short.
The move also comes after the cash for clunkers program, which offers rebates from the government of up to $4,500, brought waves of consumers into dealer showrooms.
In July Chrysler offered to double the rebate by adding up to $4,500 in incentives of its own for customer who qualify for the program. Clunkers rebates are available to consumers who trade in older vehicles and buy new, more fuel-efficient models.
Effective Tuesday, Chrysler will no longer offer a flat $4,500 rebate on top of the clunker incentive. Instead, it will vary the size of rebates, depending on the model and brand a customer selects.
Chrysler is changing the message "to focus less on the deal but more on the products," said Jodi Tinson, a spokeswoman for the company. The double your cash campaign "did what it needed to do" in terms of driving traffic to Chrysler dealerships, she said.
The marketing change comes as Chrysler is struggling with low inventory of its most popular products
because of prolonged factory shut-downs and after the success of the government program further depleted stocks at dealerships.
Chief Executive Sergio Marchionne, who holds the same title at Italian automaker Fiat S.p.A., took over at Chrysler in June after the automaker ran out of money and went through a federally funded bankruptcy process.
His challenge now is to return the automaker to profitability in the weakest vehicle market in decades at a time when the automaker has very few new products on the horizon. Mr. Marchionne said last month he wants to strengthen pricing and is willing to sacrifice market share to do so.
Chrysler dealers are now faced with a shortage of some of the company's most popular products such as the Jeep Wrangler
and its Town and Country minivan
. And many of the company's dealers are left with products that don't qualify for the government $1 billion program, which the House of Representatives Friday agreed to extend after the original $1 billion allocation ran out.
The company began rethinking its marketing strategy before it was apparent that the government funds would run out fast, Ms. Tinson said.
Bill Rosado, who owns a Chrysler, Dodge and Jeep dealerships in eastern Pennsylvania, said the Chrysler's double your cash incentive program succeeded in bringing in customers.
"Unfortunately the problem that we face with Chrysler is the lack of inventory," Mr. Rosado said. "I can't believe I'm saying this, I need more Chrysler inventory. My goodness, I've got to rehearse that line a couple times."
Chrysler restarted its factories last week after a two-week summer shut-down that extended many weeks of non-production this year as the company went through bankruptcy. The automaker produced about a third fewer vehicles in North America this year than last, as the company tried to adjust for a glut of inventory earlier in the year and turned off its factories.
Chuck Eddy who owns a Chrysler Dodge and Jeep dealership in Austintown, Ohio said he's waiting on more than 300 vehicles from Chrysler. "We've got enough cars to last through August, but September will be an issue," Mr. Eddy said.
The company whose U.S. sales have fared the worst of the major manufacturers falling 46% in the first six months of the year has been trying to get inventory in line the new market. For the first six months of the year, Chrysler has shed market share down to 9.8% from 11.7% for the same period last year. July sales will be announced Monday.
At the end of June, the company had about 195,000 vehicles in dealer lots, less than half what it had a year ago. Chrysler says it has an "adequate" 71 days supply of vehicles. But many of its dealers are clamoring for new stock especially for cars and trucks that qualify under the government rebate program.
Edmunds.com estimates that Chrysler has spent about 68% more on incentives for the first six months of the year than the industry average, at about $4,693 per vehicle.
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