Chrysler may offer 'employee pricing' as sales fall
By Barbara Powell and Jeff Green
Bloomberg News
Published June 22, 2006, 5:09 PM CDT
DaimlerChrysler AG's Chrysler unit may resume offers of so-called employee discounts to all customers next month in an effort to spur U.S. sales, Chrysler chief executive officer Tom LaSorda said today.
Chrysler may offer the discounts on some vehicles in July, LaSorda said in an interview. Details are still being worked out, he said. Three dealers, who asked not to be identified, said the automaker told them yesterday that it would offer employee discounts next month.
The discount spurs sales by reducing prices, while also cutting automaker profit. Chrysler would be reviving the offers after its U.S. sales declined 2.5 percent in the first five months of 2006 and 8.4 percent in May. Chrysler, General Motors Corp. and Ford Motor Co. are losing sales as buyers shift to cars and away from sport-utility vehicles, pickups and minivans.
``GM, Ford and Chrysler will all follow each other like lemmings,'' said David Healy, an analyst for Burnham Securities Inc. in Sierra Vista, Arizona. Ford and GM said today they don't have plans for employee discounts.
GM offered a similar discount beginning in June 2005, allowing customers to pay the same price as employees. The offer was matched by Ford and Chrysler and lasted through September. Sales jumped in June and July before tapering off.
Chrysler's plan to resume employee discounts was reported yesterday by Automotive News, a trade journal.
Joe Eberhardt, Chrysler's senior vice president of sales, said the company is having its final meetings with dealers today about a July incentive program, and details will be settled in the next couple of days. He wouldn't be more specific.
Chrysler is considering employee discounts and a money-back guarantee for buyers, Eberhardt said. He declined to give any details. The Detroit News, citing dealers and company officials, reported earlier today that Chrysler will allow buyers to return vehicles within 30 days.
Total incentives won't be increased next month, LaSorda said today in an interview on CNBC.
DaimlerChrysler's U.S. shares fell 40 cents to $47.70 at 4:01 p.m. in New York Stock Exchange composite trading. They have declined 6.5 percent this year.
In May, U.S. sales of Chrysler's Dodge Durango SUV fell 43 percent, while Jeep Grand Cherokee SUV sales dropped 38 percent, and sales of Dodge Ram large pickups fell 22 percent. Buyers are turning to more fuel-efficient vehicles as gasoline prices hover near record highs.
The average price of a gallon of gasoline peaked at $2.95 in May, the highest since September, according to the federal Energy Department. The average for the week ended June 19 was $2.87.
Chrysler's current sales incentives include no-interest loans on certain vehicles and $1,000 rebates for cars that have been on dealer lots since before Dec. 31.
LaSorda said today that employee discounts may not be offered on all models.
``You target a few, you may do more, but those are all of the decisions we'll make,'' he said in the interview. ``We don't want to drive the incentive battle up, either.''
GM has no plans to offer employee discounts, spokesman John McDonald said today. The Detroit-based automaker will focus on narrower strategic and tactical programs and limit the use of national marketing programs, he said.
``We're monitoring the marketplace closely and have been working with our dealers to ensure we have competitive programs in the marketplace,'' he said.
Ford this month began an incentive program called ``Drive on Us,'' which includes no-interest financing on almost all models as well as much as $1,000 to pay for fuel. The company doesn't plan to do employee discounts, spokeswoman Lydia Cisaruk said.
``It's going well and you'll see the results,'' she said. ``We're basically charting our own path.''
Ford led automaker incentives in May at $3,798 per car and truck, an increase of 0.2 percent from April. Chrysler incentives increased 2.6 percent to $3,784, according to Bandon, Oregon- based CNW Marketing Research Inc. GM May incentives fell 2.4 percent to $3,167 per model, CNW said. A year ago, GM was the biggest spender and Chrysler was third.
LaSorda noted today that sales declined last year after the first few months of the employee-discount promotion.
``Last year when it happened there was a falloff in volume'' later in 2005, he said. ``So we need to have an integrated plan that goes out to the rest of the year.''
--With reporting by Bill Koenig in Southfield, Michigan, and Greg Miles and Mindy Massucci in New York
By Barbara Powell and Jeff Green
Bloomberg News
Published June 22, 2006, 5:09 PM CDT
DaimlerChrysler AG's Chrysler unit may resume offers of so-called employee discounts to all customers next month in an effort to spur U.S. sales, Chrysler chief executive officer Tom LaSorda said today.
Chrysler may offer the discounts on some vehicles in July, LaSorda said in an interview. Details are still being worked out, he said. Three dealers, who asked not to be identified, said the automaker told them yesterday that it would offer employee discounts next month.
The discount spurs sales by reducing prices, while also cutting automaker profit. Chrysler would be reviving the offers after its U.S. sales declined 2.5 percent in the first five months of 2006 and 8.4 percent in May. Chrysler, General Motors Corp. and Ford Motor Co. are losing sales as buyers shift to cars and away from sport-utility vehicles, pickups and minivans.
``GM, Ford and Chrysler will all follow each other like lemmings,'' said David Healy, an analyst for Burnham Securities Inc. in Sierra Vista, Arizona. Ford and GM said today they don't have plans for employee discounts.
GM offered a similar discount beginning in June 2005, allowing customers to pay the same price as employees. The offer was matched by Ford and Chrysler and lasted through September. Sales jumped in June and July before tapering off.
Chrysler's plan to resume employee discounts was reported yesterday by Automotive News, a trade journal.
Joe Eberhardt, Chrysler's senior vice president of sales, said the company is having its final meetings with dealers today about a July incentive program, and details will be settled in the next couple of days. He wouldn't be more specific.
Chrysler is considering employee discounts and a money-back guarantee for buyers, Eberhardt said. He declined to give any details. The Detroit News, citing dealers and company officials, reported earlier today that Chrysler will allow buyers to return vehicles within 30 days.
Total incentives won't be increased next month, LaSorda said today in an interview on CNBC.
DaimlerChrysler's U.S. shares fell 40 cents to $47.70 at 4:01 p.m. in New York Stock Exchange composite trading. They have declined 6.5 percent this year.
In May, U.S. sales of Chrysler's Dodge Durango SUV fell 43 percent, while Jeep Grand Cherokee SUV sales dropped 38 percent, and sales of Dodge Ram large pickups fell 22 percent. Buyers are turning to more fuel-efficient vehicles as gasoline prices hover near record highs.
The average price of a gallon of gasoline peaked at $2.95 in May, the highest since September, according to the federal Energy Department. The average for the week ended June 19 was $2.87.
Chrysler's current sales incentives include no-interest loans on certain vehicles and $1,000 rebates for cars that have been on dealer lots since before Dec. 31.
LaSorda said today that employee discounts may not be offered on all models.
``You target a few, you may do more, but those are all of the decisions we'll make,'' he said in the interview. ``We don't want to drive the incentive battle up, either.''
GM has no plans to offer employee discounts, spokesman John McDonald said today. The Detroit-based automaker will focus on narrower strategic and tactical programs and limit the use of national marketing programs, he said.
``We're monitoring the marketplace closely and have been working with our dealers to ensure we have competitive programs in the marketplace,'' he said.
Ford this month began an incentive program called ``Drive on Us,'' which includes no-interest financing on almost all models as well as much as $1,000 to pay for fuel. The company doesn't plan to do employee discounts, spokeswoman Lydia Cisaruk said.
``It's going well and you'll see the results,'' she said. ``We're basically charting our own path.''
Ford led automaker incentives in May at $3,798 per car and truck, an increase of 0.2 percent from April. Chrysler incentives increased 2.6 percent to $3,784, according to Bandon, Oregon- based CNW Marketing Research Inc. GM May incentives fell 2.4 percent to $3,167 per model, CNW said. A year ago, GM was the biggest spender and Chrysler was third.
LaSorda noted today that sales declined last year after the first few months of the employee-discount promotion.
``Last year when it happened there was a falloff in volume'' later in 2005, he said. ``So we need to have an integrated plan that goes out to the rest of the year.''
--With reporting by Bill Koenig in Southfield, Michigan, and Greg Miles and Mindy Massucci in New York