Is Chrysler's comeback fizzling?

Detroit's strongest automaker may have to cut production as more vehicles languish at dealerships.

Brett Clanton / The Detroit News

CHICAGO -- Chrysler has defied Detroit's downturn in the past two years -- gaining market share and earning solid profits -- but there are growing signs that its comeback may be starting to sputter.

After weaker sales in recent months, Chrysler, Dodge and Jeep vehicles are piling up on dealer's lots, taking nearly three months on average to sell.

On Wednesday, a top company executive said the automaker may need to cut factory production to cope with the surplus.

"We have more inventory than we'd ideally like," said Joe Eberhardt, executive vice president of marketing for DaimlerChrysler AG's Chrysler Group, after a news briefing at the Chicago Auto Show. "And we'll work with our dealers over the next couple of months to resolve that."

Chrysler will consider "adjusting production schedules" if stockpiles remain high, he said. Chrysler and its dealers ended January with a stockpile of 550,000 cars and trucks, down from 597,000 at the end of December.

Production cuts would be a setback for Chrysler, which has outperformed its Detroit rivals for two years on the strength of new vehicles such as the Chrysler 300C sedan.

Chrysler is the only one of Detroit's three automakers that is earning money on its car and truck business, with operating profits up 6 percent to $1.3 billion through the first three quarters of 2005. The company will report fourth-quarter 2005 results next week.

But Eberhardt's comments come amid increasing questions about the sustainability of the automaker's comeback.

Despite a string of wins following a three-year turnaround that shed about 40,000 jobs, Chrysler is beginning to show signs of weakness, according to some industry observers.

"They're still doing better than the other two Detroit automakers," said Jesse Toprak, chief auto market analyst for Edmunds.com. "But it appears they've lost a little momentum from last year."

In January, Chrysler vehicles sat on dealer lots for an average of 82 days before selling, the longest of any automaker, according to Edmunds data. The industry average was 58 days.

Also in January, after sales declines in November and December, Chrysler increased spending on rebates to woo buyers. In January, Chrysler shelled out an average of $4,191 per vehicle, up more than $1,000 since October and the highest of all major automakers, Edmunds said.

For the first time, the company is also providing discounts as high as $1,000 on the 300 in some markets. And some new vehicles such as the Dodge Dakota pickup and Magnum wagon have not been hot sellers.

Chrysler does not publicly provide details about its incentive spending but disputes claims that it has significantly raised rebates in recent months.

Company officials also downplay suggestions that high inventory levels or recent sales declines are signs its comeback is in trouble.

"There's no ***** in the armor here," said Jason Vines, a Chrysler spokesman.

Chrysler dealer Jim Kempthorn, however, said the automaker's rising inventories are a major concern. As the glut grows, dealers have been asked to accept more vehicles, which they don't always want or need.

"There has been a constant push," said the owner of Kempthorn Chrysler Plymouth in Canton, Ohio. "Now we are telling them we are full. We really need to get this inventory under control, but it's a real struggle. The people just aren't out there -- they aren't buying."

In December, Chrysler offered its dealers up to $750 for every extra vehicle they ordered during a year-end clearance sale.

And last month, the automaker introduced an incentive program that offers buyers zero-percent interest loans for 60 months on most of its vehicle lineup.

But if Chrysler needs to go further to clear out surplus vehicles, then it should consider all options open, said Chuck Fortinberry, a dealer at Clarkson Chrysler-Jeep.

"If they have to take a little production out so we can clear out the inventory and get the flow going," he said, "then that's a good thing."

Chrysler will introduce 10 vehicles this year, including the Dodge Caliber hatchback and Chrysler Aspen SUV.

Company officials said the new vehicles should bring improved sales in coming months.

You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.

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Well I'm shocked. Its really not as rosy as DCX has been painting out to be. For those of you that don't know me I've been saying for about 6 months now that dc is in just about the same shape as the other two. Now reality is starting to set in at Auburn Hills, and its not real pretty. Sales can't be up, if plants keep getting idled at a greater rate than the previous year.


Joe

 

It just took a little longer for the sales slow down to affect DCX. An indication of a strong lineup in my humble opinion. Things can't be too bad if they're introducing ten new vehicles.

 

Considering they axed basically 4 cars this past year? DCX has been pulling the wool over a lot of people's eyes. They also introduced 3 of the most popular cars last year. That really helped them out.

As for the 10 "new" cars they're releasing, almost all are SUV's or Crossovers.... so that's not exactly something most people are going to run out and buy....

Daimler is going to take the hit that both GM and Ford have taken and its not going to be as bad. The truth is, with all the crossovers and SUV's they've been pushing out....they're failed to capitalize on the market that Toyota/Nissan/Honda seem to own. That's the daily driver with good gas mileage and okay looks. I dont know if that will hurt Daimler or not, but right now they've got the big cars and these suv/crossovers.....but nothing really in between. The Avenger/Sebring is so lame sales will only continue to plummet. The Avenger probably will sell at first, but I dont expect it to be a "popular" car.

I hope Daimler doesnt stumble and that they are able to keep it up. It would be good for us as customers, but more importantly would be good for the American auto industry as a whole.

 

might have to do w/ financing companies LOL

 

People are still buying SUV's, just smaller ones. With the Caliber, Patriot, Compass I think DCX is heading in the right direction by offering fuel efficient SUV's and crossovers. The Caliber get's around 30 mpg and the Patriot and Compass should be close to that. All good news for the Dodge performance enthusiast because this helps keep the fleet average down so they can keep building the V\8 models that the rest of us want! C'mon Challenger!

 

I think the Caliber, Compass and Patriot will sell great. With a two feul efficent engines and one going overseas...

We have yet to see how the new Sebring and Avenger will sell since they are not even on lots yet... Hell we haven't even seen them un masked... I think they will sell nicely... Their engines are fuel efficent enough for me...

About the big SUV's and trucks... This is why we have MDS... Great gas milage, but still has power...

We might be hitting a little slump here, with a few vehicles gone and more coming.. But we won't take a hit as bad as Ford and GM...