Automaker offering richest discounts of Big Three to knock down inventory
DETROIT - Chrysler Group is offering its U.S. dealers incentives of up to $1,250 per vehicle sold this month and next in order to clear excess inventory in the run-up to the summer car shopping season, dealers said Monday.
Chrysler has struggled with high inventory levels this year, prompting the unit of Germany's DaimlerChrysler AG to offer the richest consumer discounts of any of the domestic automakers.
The reliance on customer rebates and incentives cut Chrysler's first-quarter earnings by more than half, even though the automaker has scored with some top-selling vehicles and avoided the losses and erosion of market share that have plagued both General Motors Corp. and Ford Motor Co., the other members of Detroit's Big Three.
At the end of April, Chrysler had an 80-day supply of vehicles in inventory, the company has said, above the two-month supply that it has targeted as a more desirable level.
On average, Chrysler offered a consumer discount of $3,769 in the first four months of the year, more than the $3,189 offered by Ford or the $3,050 by GM, according to industry tracking service Autodata.
Chrysler, which last week announced a zero-percent financing offer for new car and truck buyers, also asked dealers to take more vehicles for May and June, a move that would cut into its own unsold inventory of over 586,000 vehicles as of the end of April.
Dealers that accept the additional vehicle shipments and meet sales quotas can receive cash of up to $1,250 per sale, dealers presented with the offer said.
It was the second dealer incentive program that Chrysler has rolled out this year, leaving some dealers uncertain of whether they would be better off carrying the additional inventory.
The move comes at a time when higher interest rates have also boosted the cost of holding dealer stocks of unsold cars, traditionally one of the largest single costs for showroom operators.
"Obviously, they've got a problem and we've got a problem," said Jim Corwin, owner of Corwin Chrysler-Jeep in Hickory, Pennsylvania. "It's getting to the point where I think we're all busting at the seams at the dealer level."
Corwin said that he had benefited from Chrysler's earlier dealer incentive program but was still working to sell down about half of the additional vehicles he had taken on.
Dealers were positive about the potential boost from Chrysler's offer of zero-percent financing through July 5.
"The zero percent really moves iron," said Alan Helfman, the manager of River Oaks Chrysler-Jeep in Houston.
Helfman said he was still considering whether to take Chrysler's offer of cash payments for accepting additional vehicles this month.
Dealers that did not accept the offer could be undercut by others in the same geographic market, who would use the additional cash back to drive down prices on a range of vehicles, he said.
"It's very tough if you don't do it," Helfman said. "You're at a heck of a disadvantage."