Chrysler to Cut Prices on K-Cars 16%
Chrysler is slashing prices up to 16% on the cars originally built with taxpayer support to save the company from bankruptcy several years ago. The move is seen as part of an effort to wring a few more sales out of the venerable Dodge Aries and Plymouth Reliant.
Chrysler said Thursday that the 1988 models of the so-called K-car, already the cheapest in the compact class, will start at $6,995--a reduction of $1,369 from comparably equipped 1987 autos.
The plain-Jane cars, built in an ancient Detroit assembly plant stuffed with robots and other state-of-the-art equipment, would never have come to market if Congress hadn’t agreed in 1980 to guarantee up to $1.5 billion in loans to bail out Chrysler.
Conceived three years earlier, the cars were ready to enter production, but the company was virtually broke and didn’t have the money to pay suppliers to ship components to the assembly plant.
The federally guaranteed funds enabled Chrysler to build the K-cars and the newly designed four-cylinder engines that powered them. They became the mechanical core of nearly every new vehicle that Chrysler turned out in its subsequent financial recovery.
One-Time Costs Already Paid
Lately, sales have slowed as the car aged. So far this year, sales of the twin models are off 19%. Analysts say Chrysler can slash prices without necessarily losing money on each sale because the tooling and other one-time costs of building the cars are already paid.
“You’ve got a car that’s been around so long the fixed costs are already written off,” said Ted Sullivan, automotive analyst at Wharton Econometrics in Bala Cynwyd, Pa. “They’re saying there’s difficult competition, and perhaps they’re going to lose badly on sales unless they do something.”
The strategy is similar to the company’s successful effort to salvage its twin subcompacts Omni and Horizon, whose designs date to the late 1970s. Sales leaped by 80% last year when Chrysler slashed Omni and Horizon prices. The cars are still in production.
Though the price will be sharply lower on Aries and Reliant, customers will have fewer choices. Buyers will have to choose from two basic packages plus a short list of options. The company called it an effort to trim costs by reducing manufacturing complexity.
Including the steep price cut, Chrysler said its overall 1988 model prices will increase “not more than 1%.” Company officials wouldn’t elaborate but conceded that some models will see sizable price hikes.