Chrysler offers dealers cash to take cars

Associated PressORLANDO, Fla. -

The Chrysler Group is offering dealers $1,000 for every car they sell over the next two months if the dealer doesn't cut its March vehicle order and accepts cars from the automaker's bank of overbuilds, dealers said.
Chrysler, the U.S. arm of DaimlerChrysler AG (DCX), wouldn't confirm the plan, saying it doesn't disclose details of its dealership workings.
But three separate dealers who spoke with Dow Jones Newswires at the National Automobile Dealers Association convention said the plan is designed to help soften the blow for dealers being pressured to accept more vehicles that aren't selling well right now.
Reaction to the plan was mixed among dealers interviewed before and after a meeting with Chrysler sales executives the convention. Some said they would go along with the plan - the $1,000 payment for every car sold is retroactive to Feb. 1 - and appreciated the innovation, while others are taking a wait-and-see approach.
The automaker also is offering incentives to customers, including 0 percent financing for five years on some models. Though Chrysler's inventory level is down from last year at this time and it gained market share last year - unlike rivals General Motors Corp. and Ford Motor Co. - its inventories have risen in the past couple of months.
Chrysler had about 85 days worth of inventory, 20 to 35 days higher than ideal, mostly due to sluggish sales of large pickup trucks and SUVs. Still, that's 11 days lower than last year at about this time. But the inventory situation concerns dealers, some of whom say they'd rather see Chrysler cut production than encourage dealers to accept more cars than they need.
"In order to do this, you have to over-inventory yourself," said Rick Keefer, president of a dealership in Florida that sells Chrysler, Dodge and Jeep brands. "They've been reluctant to stop production at the plants. They're concerned about their image on Wall Street. ... But I understand. Chrysler has done a heck of a job coming back over the last four years and they don't want to lose momentum."
Keefer said he's going to go along with the plan. He said Chrysler has offered dealers financial encouragement to accept inventory before, but not "not like this," Keefer said.
Jerry Dillard, a Chrysler dealer in Maryland, said he hasn't decided yet. "It's a leap of faith," he said. "But if the guys around you do it and you don't, you could have a problem." The problem for dealers is with interest rates rising, it costs more for them to hold inventory and that cuts into their profits.
Dealers begin paying interest when they receive a car from the factory. That's why Chrysler is working with dealers and adjusting its incentives to help dealers move vehicles, said Joe Eberhardt, vice president of sales and marketing. Chrysler also has a stable of new products coming this year that will help dealers build volume, Eberhardt said.
"We're trying to balance the inventory over the next couple of months," Eberhardt said.
An Arizona Chrysler dealer said the plan is a good one to move inventory. The $1,000 payment per car sold gives the dealer room to offer its own deal and advertise, said Rick Berry. "It's aggressive in an environment when everyone is tiptoeing around what they should do," he said. "It also tells me they're far from being broke."
Despite the inventory situation, Chrysler dealers said last year was a good one and are looking forward to the new products - such as the Dodge Caliber - this year. Most Chrysler dealers said the hot-selling Chrysler 300 and its derivatives helped drive traffic and sales. Unlike GM and Ford, Chrysler's North American operations are profitable. "By and large, business is not that bad," Keefer said. "Things will be fine."



-Matt-

 

On the face of it, it looks like it would help the dealers out, but when you stop and figure the interest that we get charged for flooring these things, it would only make sense if we could sell a massive ammount of vehicles very quickly. Considering the ammount of vehicles they require you to purchase in order to qualify, it will only make sense for the largest of dealers.

 

The way it works in detroit is that the dealer passes that extra money on to the customer. So that way you can sell more vehicles because you are selling them for less.


Joe

 

Yes, but in this case you only get the money under certain conditions, and if you don't sell enough vehicles fast enough, the interest eats up that extra $1000 in no time flat.

 

As long as you sell more than the amount you take. If you end with the same amount of cars at the end of March as you have right now. You'll still be paying a large amount of interest on floorplan. Plus the information given isn't accurate.

 

Around here the average salesman sells about 25-30 cars a month. The closest dodge dealer to me has 15 salespeople. And its just a dodge dealer. Most dealers in the detroit area are single brand dealers. There are only a handful of dealers that sell all three. Also within a 15 mile radius of me there are 15 dodge dealers, and 14 chrysler/jeep dealers. The market is huge in detroit. Mainly due to the fact of emps.

 

Well, I'm out in Montana, so an average month for me is 20 total between new and used.

 

Most dealers around here have seperate new/used salesmen. So those numbers I quoted you are new sales only.

 

Some dealers HAVE to take 300 vehicles for one month of production and pre-orders!! Or more!!

 

It just doesn't work for us small town ops.