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Chrysler Reduces Vehicles at Dealers to Goal of 40-Day Supply




Aug. 4 Chrysler Group LLC, the U.S. automaker run by Fiat SpA, reached its goal of a 40-day supply of vehicles on dealer lots under a plan to reduce the need for sales incentives.

Dealerships had 136,734 cars and light trucks at the end of July, a 68 percent decline from a year earlier, the Auburn Hills, Michigan-based company said yesterday. All of its assembly plants are operating at full production, Kathy Graham, a Chrysler spokeswoman, said today.

Chrysler, the third-largest U.S. automaker, is adopting a system similar to that of Honda Motor Co. where it seeks to produce only enough vehicles to meet current demand. Having fewer unsold cars and trucks on dealer lot lets the company spend less on offers to lure consumers.

“It should allow them to reduce incentives down the road,” said Stephanie Brinley, an analyst at AutoPacific Inc. in Troy, Michigan. “They need to be more profitable and they can’t do that with too much inventory.”

Previously, Chrysler encouraged dealers to buy more vehicles and then used offers such as rebates and discount financing to help sell them.

“We’ve been working towards a ‘pull’ system by reducing our inventory, and levels are now at their lowest point in years,” Steven Beahm, vice president in charge of the sales organization, said in a statement.

Chrysler was helped by stronger demand for autos last month, as the federal government offered as much as $4,500 to buyers who traded in older, less fuel-efficient vehicles. Chrysler matched that incentive, and its sales last month fell just 9.4 percent from a year earlier. Through June this year, the company’s smallest monthly decline was 39 percent.

The automaker will try to keep inventory on lots at a 45-to-60-day supply, Graham said. The industry benchmark is 60 days, and Chrysler had a 109-day supply in July 2008.

Chrysler shut all its factories in early May after entering bankruptcy and didn’t reopen most of them until June 27. The plants were idled again for two weeks starting July 13 to prepare for 2010 models. Those moves also reduced inventory.

LINK:Chrysler Reduces Vehicles at Dealers to Goal of 40-Day Supply - Bloomberg.com
 
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