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Chrysler sales continue to struggle

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Chrysler sales continue to struggle



CEO Sergio Marchionne is absolutely certain that Chrysler will break even this year, but the company's most visible statistic so far, a 5.8% drop in first-quarter sales, is disappointing, to be polite.

All other automakers except Mitsubishi and Suzuki sold more cars in the first quarter than a year ago.

"Chrysler's basically in hibernation," said Aaron Bragman, an analyst with IHS Global Insight. "Many of their cars are simply not competitive. They don't have much cash. They either spend on developing new product or they throw massive incentives on the hood to sell what they have."

Chrysler is spending less on incentives -- 31% less in March, to be precise. But Toyota is offering unprecedented discounts on leases, zero-percent-interest loans and free maintenance to distract consumers from sudden acceleration problems. Competitors who don't counter such tactics could lose market share.

New vehicles can't come soon enough. The Dodge Ram heavy-duty trucks are fresh and profitable, but residential and commercial construction, which fuel brawny truck sales, remain in a deep freeze.

At the New York auto show, Chrysler touted its new in-vehicle TV service, but that's not enough to carry a turnaround.

Workers at the Jefferson North assembly plant are launching the 2011 Jeep Cherokee, which is expected to reach dealerships by June. A Dodge version is due by December.

Designers and engineers in Auburn Hills are hustling facelifts of the Chrysler and Dodge midsize sedans that are slated for the end of the year, when the petite Fiat 500 minicar also is to go on sale.

In two weeks, Marchionne and Chief Financial Officer Richard Palmer are to provide the first details of Chrysler's financial performance. Similar to General Motors' report Wednesday, Chrysler's numbers are to cover the period from its June 10 bankruptcy exit to the end of 2009.

In January, Marchionne said Chrysler would have to sell 1.1 million vehicles in the U.S. and 550,000 in Canada, Mexico and Europe this year in order to break even.

Chrysler will likely shrink in the near term until it can compete in the compact and midsize car segments and catch up in gasoline-electric, plug-in hybrids and other alternative powertrains.

But Marchionne won't hit the panic button because the bankruptcy restructuring reduced much of Chrysler's debt, seven old factories are off its books and labor costs are a fraction of their pre-bankruptcy levels.

"The real issue is cash," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "As long as they have a reasonable amount of cash and can control spending, they can hold out for some time."

Chrysler also will take years longer than GM to repay about $8.2 billion in loans from U.S. and Canadian taxpayers.

GM has promised to repay both governments $8.1 billion by this June 30.

Last November, Marchionne said Chrysler would repay government loans by the end of 2014.



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