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Chrysler: Big stocks will pay off

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By Mary Connelly and Jamie LaReau
Automotive News / August 29, 2005


DETROIT -- Now it's Chrysler's turn.

Now that General Motors' summer blowout sale has depleted its inventory of 2005-model cars and trucks, the Chrysler group appears ready to grab market share in September.

The reason? This spring, Chrysler increased vehicle production in anticipation of market-share gains, says spokesman Kevin McCormick.

"We're still heavy with 2005s," McCormick says.

The Chrysler group began August with 488,600 units in stock, a 53-day supply. Ford Motor Co. had a 47-day supply, and GM had cut its supply to 35 days. GM says its current inventory is down to 500,000 units, less than half what it had been on Aug. 1 of 2004 and 2003. The figures include 2005 and 2006 models.

A fatter inventory means Chrysler can extend its employee discount incentive into September. GM will be hard-pressed to match Chrysler, says Jon Myers, chairman of the Dodge National Dealer Council.

No ammo?

Last week GM extended employee pricing through September. But Myers says GM is nearly out of ammo.

"One thing we have that GM doesn't have is inventories of '05s," says Myers, who owns Naples Dodge in Naples, Fla. "Last year I ran out of '04s in October. Most of the people coming in wanted a leftover for a deal. It was really tough." Using employee pricing on carryover models is especially successful, Myers says. Most 2005 models are similar to 2006 models but are cheaper.

Chrysler has not announced its plans for September. But its current incentive has no expiration date.

Given its inventories, Ford could continue its employee incentive a while longer. But Ford has not indicated whether it will extend its employee pricing incentive after its Sept. 7 expiration. (See story on Page 3.)

The Big 3 face a tense September as they try to avoid a sales slump in the wake of the employee-pricing summer blowout. To complicate matters, GM and Ford will move toward value pricing with 2006 models - if they can wean consumers from discounts.

Chrysler won't make it easy for them. "Most Chrysler Jeep dealers have pretty good inventories of '05s," says John Schenden, chairman of the Chrysler Jeep National Dealer Council and owner of Denver Pro Chrysler- Jeep in Denver. "GM did this a month earlier than we did. So we still have the benefit of better inventories."

Plenty of '05s?

GM began its summer blowout sale in June, a month ahead of Ford and Chrysler, so GM's stock of 2005 models is slimmer. At the end of July, GM's light-truck stocks were the lowest for any nonstrike month in 10 years, says David Healy, an analyst with Burnham Securities.

Paul Ballew, GM's chief sales analyst, says GM still has plenty of 2005 models to sell. But some GM dealers say they are short of stock.

Lynn Thompson, co-owner of Thompson Pontiac-GMC-Cadillac-Saab in Springfield, Mo., says he sold 320 2005 models in June and July. He has 81 units left. Of those, 40 are large SUVs. He blames high gasoline prices for those vehicles still sitting on his lot.

Dealer Gordon Stewart says his sales are slowing down because his inventory is just "wiped out."

At the start of May, Stewart had nearly 800 2005 models. Now he has 160. Stewart is president of Stewart Management Group in Harper Woods., Mich., a multifranchise dealer in Florida and Michigan.

He expects his August new-vehicle sales to drop 15 percent from the 2004 level because of low inventory.

Analysts say all three domestic automakers eventually will face a payback period of slow sales after the summer sales surge. "GM is more sold out of '05s than Ford and Chrysler," Healy says. "They will get into the payback period earlier."

Payback will spread wider throughout the fall, analysts say. According to Jesse Toprak, executive director of industry analysis at Edmunds.com: "There will definitely be some payback the last four months of the year."

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