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Chrysler Walking Incentive Tightrope

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Chrysler Walking Incentive Tightrope

By Eric Mayne

WardsAuto.com, May 5, 2010 2:29 PM

Is Chrysler Group LLC’s boss losing his nerve?

Despite CEO Sergio Marchionne’s very public and steadfast opposition to incentives, Chrysler opens the vault and offers 0% financing or cash bonuses on most of its vehicles through June 1.

But Chrysler says this program differs little from deals offered during March and April, when the auto maker’s sales jumped 24.9%, compared with year-ago.

“We have reduced our incentive spending roughly 20% compared with May 2009,” spokeswoman Kathy Graham tells Ward’s. “We expect the trend of declining incentive spend to continue through the end of the year.”

All ’10 Chrysler-brand vehicles are eligible for 0% financing over 60 months, 1.9% over 72 months or consumer cash of up to $3,000. All ’10 Jeeps can be had with 0% financing over 36 months or up to $4,000 in cash.

No-interest financing can be obtained on the purchase of “most” Dodge and Ram models, over 36 months and 60 months respectively. Or buyers can take advantage of consumer cash ranging as high as $3,000.

While Marchionne has promised to reduce incentives, “he said we would remain competitive,” Graham adds.

“I read it that way,” says Alfred Flores, vice chairman of the auto maker’s national dealer council and principal of Spring Chrysler Jeep Dodge in Spring, TX. “They’re keeping us competitive, both nationally and regionally. We’re competitive with the market, which is where we need to be.”

Incentive-tracker Edmunds.com calculates Chrysler’s average per-vehicle spend for April at $3,374 – the highest of its competitors and $720 greater than the industry average, but $1,000 less than the auto maker spent in like-2009.

However, American Honda Motor Co. Inc. and Toyota Motor Sales U.S.A. Inc. have been forcing the industry average upward by doling out record incentives in recent months – $1,787 by Honda and $1,792 by Toyota.

Marchionne has made no secret of his disdain for the high-incentive climate that has dominated the U.S. market in the last decade. “We became wholesalers for a long period of time,” he told journalists during January’s North American International Auto show in Detroit.

Marchionne said his goal is to “make sure that we don’t fall prey to that same type of bad habit that has plagued the performance of this industry in North America.” And being goaded into an incentive war was the worst of these, Marchionne suggested.

But at least one dealer isn’t bothered by a bad habit or two.

“I wish we could get a little more competitive on the Heavy Duty end – Ford’s kicking our butt,” says Robbie Ewing of Brown Chrysler Jeep Dodge in Devine, TX.

Among the vehicles excluded from the 0% financing is Chrysler’s award-winning Ram Heavy-Duty pickup. Notably, it is the only all-new vehicle the auto maker has in its showrooms as dealers wait for the ’11 Jeep Grand Cherokee midsize SUV expected by July.

Ewing says Chrysler is putting some $1,500 on the hood of its redesigned-for-’10 pickup, named Motor Trend’s 2010 Truck of the Year.

“But my brother, who runs a Ford dealership down the road, (has) got upwards of $8,000” on Super Duty pickups, Ewing says. “When we could take $10,000 off the price of a Heavy Duty (last year), a lot of people got that mindset.”

Exacerbating the situation is residual damage from engine woes dating back to ’07 Heavy Duty models. “(It) left such a bad taste in everybody’s mouth, a lot of people haven’t come back,” Ewing adds.

Total sales of fullsize light-duty Ram pickups were flat last month, compared with like-2009, according to Ward’s data.

Meanwhile, total deliveries of light-duty Ford F-Series pickups rose 43.5%.



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