Chrysler in ‘Much Better Shape’ Than 2006, Executive Says

Chrysler Group stands ready to avoid a repeat of 2006 when soaring gasoline prices drove customers away from the auto maker’s showrooms, and dealers were left to drown in inventory.

As the national average per-gallon price of regular gas inches skyward again, up $0.24 vs. 2006 to $2.70, according to the American Automobile Assn., Chrysler has a stable full of small and midsize vehicles powered by 4-cyl. engines with 30-mpg (7.8-L/100 km) ratings.

“We’re in much better shape today than one year ago,” says Chief Operating Officer Eric Ridenour.

Meanwhile, Chrysler says its inventory at the end of March was 499,000 vehicles – down 18% compared with year-ago, when it says its stocks totaled 606,734.

Chrysler also reports an 8% sales decline for March vs. prior-year, in addition to a first-quarter shortfall of 4.5% compared with the first three months of 2006. But Chrysler excuses last month’s sales performance by noting it suffers in comparison to last March, when the auto maker recorded its strongest sales performance of the year.

March 2006 also marked the beginning of a precipitous fall that contributed to a full-year loss of $1.4 billion and DaimlerChrysler AG’s decision to explore the sale of its U.S.-based unit.

With its inventory in check, Chrysler is insulated from the stockpiling issue that dominated headlines. It also is protected from the rising gas prices that wreaked havoc last year, when its only 4-cyl. offering was the Dodge Caliber small car.

Wrangler Unlimited back-ordered.

“Now, we sit here with (the) Caliber, Compass and Patriot,” Ridenour says, referring to the Caliber and its C-segment platform-mates from Jeep.

Would-be Caliber buyers have a choice of three I-4s from Chrysler’s World Engine lineup. They include displacements of 1.8L, 2.0L and 2.4L.

The Compass and the Patriot feature the 2.4L I-4, which also is the base engine for the Chrysler Sebring and Dodge Avenger D-cars.

“And (the) Sebring convertible,” Ridenour tells Ward’s in an interview last month. “So we’ll have a full complement of C- and D-segment (products), all getting 30 to 32 mpg (7.3-L/100 km) on the highway.

“The other thing we did last year, toward the tail end, was do a few adjustments within our product lineups to offer more 4-cyls. with more upscale features,” Ridenour adds. “If you’re a 4-cyl., fuel-economy driver and you want more stuff, and we knew there were those people out there, we can offer those kinds of packages.”

Dealers are encouraged. “Customers who always wanted a nice car had to give up (optional equipment),” says Ron Davis, general manager of Falls Chrysler Jeep Dodge in Cayahoga Falls, OH. “Now they can get both.”

Despite the recent spike in gas prices, Davis says there has been little discernable trend toward small cars. But as prices continue to rise, as expected, he predicts another swing in that direction, similar to last year.

Ironically, the Jeep Wrangler Unlimited midsize SUV – redesigned for ’07 as a larger, 4-door model – is continuing its torrid sales place.

“Those things we can’t keep in stock,” says Hoyt Scharff, new car managaer at Lithia Chrysler Jeep in Reno, NV. “As fast as they come in, they go out.”

Chrysler sold more Wranglers last month, 13,397, than any month in its history. Steve Landry, vice president-sales and field operations, says dealers are waiting more than 30 days to get a Wrangler Unlimited.

“We’re doing what we can to build them as quick as possible,” Landry tells reporters and analysts in a conference call.

Meanwhile, the proposed sale of Chrysler appears to be having a negligible effect on showroom traffic, Landry adds.

Chrysler compared first-quarter 2007 sales with the same period in 2001, when the auto maker underwent a major restructuring. But 2007 totals are significantly better.

“We actually have weathered through this very well and anticipate that April-May will be even better,” Landry says.

However, dealers are unsettled by Chrysler’s decision to continue its controversial volume purchase allowance program. The program rewards dealers for matching sales targets, but many claim it unfairly favors some stores over others.

Michael Manley, vice president-sales and dealer operations, tells the conference call that program will remain in place through 2007, but the auto maker will monitor it closely.

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