Chrysler Canadian Dealers Unfazed by Pricing, Incentive Disparities

LAS VEGAS – Chrysler LLC’s Canadian dealers will not get pricing relief to cover the competitive disadvantage posed by the country’s rising currency, the loonie, nor will they get a reprieve from a volume-incentive plan dismissed as unworkable in the U.S.

Yet, they couldn’t be happier.

Representatives of the auto maker’s 460 Canadian stores here gave standing ovations to Chrysler Chairman and CEO Robert Nardelli and President and Vice Chairman Jim Press, each of whom was attending his first dealer meeting since joining the Pentastar company.

Nardelli and Press gave heartfelt testimonials about their respective backgrounds, says a source that witnessed the event, noting Nardelli ended his remarks with: “God bless you.”

Nardelli came to Chrysler in August after careers at The Home Depot and General Electric, while Press defected in September from Toyota Motor Corp. The executives also declared unending support for the dealers.

Earlier, Press tells journalists Chrysler will not respond to the rising Canadian dollar, which has magnified the pricing disparity between Canada and the U.S.

Partly to accommodate an historic 10%-40% difference between the loonie and the American greenback, price stickers on Canadian vehicles are inflated.

Jim Press

Parity between the two currencies only was reached last month, ending three decades of dominance by the U.S. dollar. But a knee-jerk response, such as lowering U.S, prices, is not the answer.

“I don’t think anybody watches the currency and as soon as it moves, they start changing the price,” Press says. “You can’t do that. Currency is a long-term move. It goes one place to another, and when cycles come up, you take (that) into account. What you have to do is price at where the market is, and that’s what we’ll continue to do.”

Steve Landry, executive director-North American sales, tells Ward’s he recently sent memos to U.S. dealers, warning them against selling vehicles to Canada on the gray market.

“We do have some Canadians coming to buy U.S. vehicles to take back to Canada, but it’s fraught with complications,” he says, noting, for example, Canada has daytime running lights, which is government-regulated.

“So it’s not just homologation of an odometer. You have to also change the daytime running lights, which is a pain,” he says. “Our dealers are more into selling vehicles where they can take care of the entire lifecycle of that customer in that vehicle.

“Some dealers are actually calling in to say some Canadian brokers are trying to buy vehicles. We told them ‘no.’ We’re going to watch it, but I’m hoping it doesn’t get out of hand.”

The same situation existed in reverse in 2002, and auto makers, including Chrysler, responded by threatening sanctions against dealers who completed cross-border transactions.

Last month, a Toronto law firm filed a class-action suit against auto makers that threatened to disregard the warranties of vehicles privately imported from the U.S.

The suit, in which Chrysler is named along with American Honda Motor Co. Inc., General Motors Corp. and Nissan North America Inc., claims the auto makers are restricting the legal practice of cross-border shopping.

Canadian dealers appear unfazed by Chrysler’s intransigence on pricing. “There is, obviously, a big difference between American and Canadian pricing, but that’s how it’s always been,” says John Skelton, sales manager of Provincial Chrysler in the border community of Windsor, ON.

Echoing Press, Skelton says currency values are fluid. If pricing was adjusted immediately, “something would happen with the dollar, and you’d be right back at square one,” he warns. Notably, he has not received any customer backlash.

Meanwhile, Chrysler Canada tells its dealers that an incentive program tied to volume sales will be allowed to remain. American dealers decried the system because 60% rarely achieved the sales targets that triggered the bonuses.

However, a Chrysler spokesman says Canadian dealers like the program, because at least half meet the required targets. Once a target is achieved, dealers are rewarded $400 for every vehicle sold over a pre-determined period of time.

The new U.S. program eliminates the target and pays dealers $400 for each sale.

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