Dealer Executive Says Chrysler Group's Problem Is Not Enough People in Showrooms

Chrysler Group President and CEO Tom LaSorda has said the auto maker's growing assembly flexibility might someday accommodate as many as 14 product launches a year.

But that day will not come in 2007.

December's debut of the Jeep Patriot cross/utility vehicle capped a company-record 10 unveilings for the 2006 calendar and model year. Asked how many introductions Chrysler plans for this year, LaSorda says only: “Slightly less than that.”

This may rub dealers the wrong way. Against a backdrop of bloated inventories, Chrysler sales have been sliding.

“There's just not people in the showrooms,” says Earl Hesterberg, CEO of Group 1 dealership chain, with Chrysler brands representing more than 10% of a 140-franchise portfolio.

To spur sales and clear '06 inventory, Chrysler last month began offering dealer incentives of up to $7,000 a vehicle.

Meanwhile, among expected products in the 2007 launch cycle are a redesigned minivan and a car based on a Dodge Avenger concept.

Some dealers are buoyed by Chrysler's evolving design.

“It's moving in a great direction,” says Eric Ryan, general sales manager at Birmingham Chrysler Jeep in Troy, MI.

The auto maker gives a hint of future direction in the Chrysler Nassau and Jeep Trailhawk concept vehicles.

The Nassau is based on the LX platform that shoulders the Chrysler 300 and also will be the basis for the Dodge Challenger muscle car when it debuts in 2008. The Trailhawk is based on the new Jeep Wrangler platform and blends refinements from the Jeep Grand Cherokee.

Meanwhile, there is considerable evidence that Chrysler quality is improving. During an 8-city October tour that brought LaSorda face to face with representatives from 75% of Chrysler's retail network, he says dealers are encouraged about that.

“If you asked them, there's a clear indication that quality's improved dramatically,” LaSorda says.

But, as always nothing comes easily to Chrysler dealers these days.

“Some of them said there's not enough work back in their repair shops,” LaSorda adds. “I said, ‘Get used to it.’”

Chrysler declines to reveal its warranty costs, but a spokesman confirms the auto maker's expense per unit sold (a correlation to warranty costs) is down 40% compared with last year.

Chrysler dealers hope their short-term pain will pay off with long-term gain.

“Hopefully, the (customer) loyalty factor's there,” Ryan says.

Still, Hesterberg describes his Chrysler business as “very problematic.” High inventories, which Chrysler has vowed to eliminate, are “just part of it,” Hesterberg says.

He explains: “They've been pushing cars since about November (of 2005). But the way you work your way out of problems is at retail and there just hasn't been any retail spurts for, basically, the whole year (2006).

“They tried employee pricing and Dr. Z ads and things like that, and we never had an uptick. The weakness is simply customer traffic.”

Hesterberg singles out the Dodge Caliber as an exception. A small-car entry introduced last year, it is making a strong showing in the market.

But the Caliber is too little, too late, Hesterberg suggests. And LaSorda agrees.

“If it came out a year earlier, we would have looked even more brilliant,” LaSorda says.

“It's hard when people come to me and say, ‘Well, how come you're not into small cars?’” he adds. “But a vehicle program takes us three-and-a-half to four years to do.”

In 2002, Chrysler was hemorrhaging, coming off a full-year loss of nearly $2 billion.

“So you have to put your money into the products you know you can sustain yourself for profitability and growth,” LaSorda says, referring to high-margin trucks and SUVs.

But in today's market, he adds, “you've got to do both.”