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Chrysler Group May 2007 U.S. Sales Rise 4 Percent

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Chrysler Holds Steady

Chrysler, which is being sold to private-equity firm Cerberus Capital Management, posted total sales of 199,393 vehicles for the month, up from 191,261 a year earlier. The company will release a breakdown of its Chrysler sales later in the day.

The German parent company's luxury Mercedes-Benz USA division posted a 0.7% rise in May sales.

Chrysler, which derives more than 70% of its revenue from truck and SUV sales, was hit hard by rising gasoline prices. In a move to concentrate on more lucrative sales to dealerships, the Auburn Hills, Mich., company is following the lead of its rivals in reining in low-margin sales to rental-car fleets. It is also relying heavily on incentives to lure buyers, which helped it boost sales in April, when the industry as a whole took it on the chin.

Generally, analysts expected U.S. auto sales for May to recover from April's 7.6% decline, as more accommodating weather and a moderate increase in incentives helped lure buyers back to dealerships. Total auto sales volume for May was expected to increase between 3% and 7% compared to May 2006, when not adjusted for an additional selling day in the current month.

The outlook for the overall industry, however, still remains less than ideal. "Lower consumer confidence, associated in part with the slowdown in the housing market, [seems] to be taking more of a toll on light-vehicle sales," Lehman Brothers auto analyst Brian Johnson said in a note to investors Wednesday. "Consumer pressure is also being exacerbated by the recent rise in gas prices."

Chrysler also reported Friday that it plans to build a $570 million plant in Mexico to make a new family of more-fuel-efficient V-6 engines. The plant is expected to start production in 2009, with an annual capacity of 440,000 engines. It will be located in the northern state of Coahuila, where Chrysler has a factory that builds Dodge Ram pickups.

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