Chrysler raising incentives

AUBURN HILLS, Mich. February 7, 2003; Jeff Greeen writing for Bloomberg reported that DaimlerChrysler AG's Chrysler, whose U.S. auto sales lagged rivals last month, is increasing incentives to close the gap with General Motors Corp., a senior sales executive said.

Chrysler in January offered about $1,000 less per car on rebates and low-interest loans than General Motors, which is offering the most incentives, and that hurt business, Gary Dilts, Chrysler sales chief, said in an interview. Chrysler sales fell 12 percent to 129,222 vehicles, the least for the month since 1992. The U.S. market fell 1.9 percent.

"We struggled the whole month," Dilts said, declining to be more specific about the new inducements. "You always come down to what it costs a month and how do I impact the price. There's nothing like money to communicate value."

Chrysler needs higher sales to meet a pledge by Chrysler Chief Executive Officer Dieter Zetsche to earn $2 billion in operating profit this year. The unit lost $1.9 billion in 2001 and Zetsche said it had a "slight" operating profit in 2002. Zetsche said Chrysler's market share should improve "slightly" this year from 13.1 percent in 2002.

Chrysler spent about 11 billion euros ($12 billion) on sales and marketing costs in 2001, including rebates. The automaker spent 8.3 billion euros in the first three quarters of 2002.

Chrysler has said it wants to keep rebates lower than rivals and rely on its seven-year, 70,000-mile warranty, which is longer than rivals, to make up some of the difference. In January, Chrysler's average incentives per model were $3,058 compared with $3,961 at General Motors, the world's largest automaker, and $3,496 at No. 2 Ford Motor Co., according to CNW Marketing Research, which collects rebate data.

Chrysler will emphasize in its advertising the warranty and maximum rebate that a buyer can get instead of running details on individual models, Dilts said. New newspaper advertisements show the model, the warranty and a rebate in large letters.

Also, the automaker is going to peg its incentives costs in the future more to its market-share target and less on rebates at Ford Motor Co. and General Motors, he said.

"That's smarter for them because they aren't typically as high on the shopping list as other automakers," CNW Marketing Research president Art Spinella said. "They have to pay attention to what it costs to attract buyers to their cars, not just what everyone else is doing."

Chrysler's market share fell to 11.8 percent in January from 13.2 percent in the 2002 period, according to AutoData.

January U.S. sales fell to 1.1 million cars and trucks, better than analysts expected. General Motor's sales fell 2.5 percent and Ford sales rose 4.8 percent, according to Autodata Corp.

CNW estimates it will cost Chrysler about $1,000 more in average incentives per car and truck for each percentage point of market share it needs to gain. By comparison, Toyota Motor Corp. pays only $500 to $750 in average incentives per vehicle to get the same gain, according to CNW.

For the year, total U.S. sales of cars and light trucks are expected to fall 1.8 percent to 16.5 million in 2003 from 16.8 million in 2002 and possibly more if the U.S. goes to war against Iraq, the National Automobile Dealers Association projected.