Chrysler Weighs Deeper Discounts
Chrysler Group on Thursday said it was considering whether to offer deeply discounted employee-level pricing on its 2006 vehicles ahead of the launch of its new Sebring, a revamped mid-size sedan that the automaker expects to win buyers away from the dominant Japanese brands.
Chrysler plans to roll out an aggressive new discount program on its cars and trucks to clear out unsold 2006 models between July and year-end, although a decision on the terms of the promotion will not be made until next week, Chrysler Group President Tom LaSorda said.
One option discussed with dealers was employee pricing, LaSorda said, a move that would make Chrysler the first of the traditional Big Three automakers to bring back the discounting strategy that had defined a costly price war last summer.
“We’ve gone through a number of options that we will consider,” he said. “There is no final plan yet.”
Whatever form Chrysler’s discount plan takes, it is expected to put increased pressure on Ford Motor Co. and General Motors Corp., Chrysler’s larger rivals, to follow suit, analysts have said.
Employee pricing could save consumers thousands of dollars on new car purchases because those prices are typically several percentage points below the standard dealer’s invoice.
Such discounting proved popular with car buyers when GM introduced it in June last year, forcing Chrysler and Ford to follow suit for July, August and September.
But investors have watched such sales programs with concern since they sacrifice profit margin for sales volume.
Chrysler, a unit of Germany’s DaimlerChrysler, has struggled with high inventory levels this year, prompting it to offer the biggest consumer discounts of any of the U.S. automakers, particularly on its slower-selling trucks and sport utility vehicles.
At the end of May, Chrysler had a 77-day supply of vehicles in inventory, above the two-month supply that it had targeted as a more desirable level.
Although inventory is down from year-earlier levels, it is more expensive to carry because of higher U.S. interest rates, representing a major new cost for dealers.
