REBATE DEBATE OPENS ZETSCHE'S REIGN AT CHRYSLER

Dieter Zetsche wasted little time hosting a dealer meeting after he took control of the Chrysler Group, but he left the audience of 62 Chrysler-Jeep and Dodge dealers with a mixed message.

The new president of DaimlerChrysler's North American operations at first impressed the dealers with his command of the automaker's problems and his affable nature.

But when he turned to the hot subject of how to sell new vehicles off bloated dealer inventories, attendees reacted with looks of disbelief. The new boss was urging an end to rebates, though not in the current competitive market.

"It was hard to see his logic," says Carl Galeana, who owns Dodge, Chrysler-Plymouth and Saturn dealerships in Warren, MI; Columbia, SC; and Daytona Beach, FL.

Adds Mr. Galeana, "He called for sharply cutting or wiping out incentives at a time when our major competition is putting them on big-time and demand is easing. That is tough to figure out."

Mr. Zetsche was reassigned to his post by DCX Chairman and CEO Juergen E. Schrempp after James P. Holden was fired after only a year at the Chrysler helm. Mr. Holden was well known to dealers because of his previous Chrysler post as vice president of sales and marketing.

Mr. Zetsche also surprised dealers the day he became Chrysler Group president when he sacked Theodor M. Cunningham, another sales staff alumnus who was a group executive vice president.

Messrs. Holden and Cunningham were regarded as "fall guys" for Chrysler's $512 million third-quarter loss, ascribed reportedly by Mr. Schrempp to the costly incentives needed to sell the oversupply of '00-model minivans on the eve of the refurbished '01 models.

Another attendee at Mr. Zetsche's meeting with dealers was Jonathan Grant, owner of Central Avenue Chrysler-Plymouth-Jeep, Yonkers, NY.

Mr. Grant says November sales of minivans at his store were off up to 35% and Jeep Grand Cherokees 25% "but he told us we're hemorrhaging and have to cut incentives."

Adds Mr. Grant, "The fear among us is that if they lop incentives and become profitable at a 12% market share, vs. 14% today, our ability to compete will be reduced."

Martin B. (Hoot) McInerney, a veteran Chrysler Corp. dealer in the Detroit and Florida markets, says, "They're trying to turn around and get control of incentives. But he (Mr. Zetsche) can't do that. The market controls that."

Says Robert Kaplan, vice president of Dominion Dodge, Salem, VA, "I have terrific product sitting in my showroom, the best I've ever had. But no one at the meeting and no Chrysler dealer anywhere can predict what's going to happen."

The ouster of Mssrs. Holden and Cunningham may have been tipped off in October when the chief of DaimlerChrysler Financial Services, Darrell L. Davis, another alumnus of the company's sales staff, was replaced by Juergen Walker, who like Mr. Zetsche and new COO Wolfgang Bernard, is from the Mercedes organization in Germany.

Mr. Davis was reassigned to a new senior vice presidency in charge of Chrysler parts and service. An insider says he was blamed for preferring a cautious residual-value policy on new vehicle leases.

"They want it both ways," a Dodge dealer says privately.