Is Chrysler's Comeback Fizzling?

[Perian]

Source: detnews.com

Is Chrysler's comeback fizzling?

Brett Clanton / The Detroit News
Detroit's strongest automaker may have to cut production as more vehicles languish at dealerships.

CHICAGO -- Chrysler has defied Detroit's downturn in the past two years -- gaining market share and earning solid profits -- but there are growing signs that its comeback may be starting to sputter.

After weaker sales in recent months, Chrysler, Dodge and Jeep vehicles are piling up on dealer's lots, taking nearly three months on average to sell.

On Wednesday, a top company executive said the automaker may need to cut factory production to cope with the surplus.

"We have more inventory than we'd ideally like," said Joe Eberhardt, executive vice president of marketing for DaimlerChrysler AG's Chrysler Group, after a news briefing at the Chicago Auto Show. "And we'll work with our dealers over the next couple of months to resolve that."

Chrysler will consider "adjusting production schedules" if stockpiles remain high, he said. Chrysler and its dealers ended January with a stockpile of 550,000 cars and trucks, down from 597,000 at the end of December.

Production cuts would be a setback for Chrysler, which has outperformed its Detroit rivals for two years on the strength of new vehicles such as the Chrysler 300C sedan.

Chrysler is the only one of Detroit's three automakers that is earning money on its car and truck business, with operating profits up 6 percent to $1.3 billion through the first three quarters of 2005. The company will report fourth-quarter 2005 results next week.

But Eberhardt's comments come amid increasing questions about the sustainability of the automaker's comeback.

Despite a string of wins following a three-year turnaround that shed about 40,000 jobs, Chrysler is beginning to show signs of weakness, according to some industry observers.

"They're still doing better than the other two Detroit automakers," said Jesse Toprak, chief auto market analyst for Edmunds.com. "But it appears they've lost a little momentum from last year."

In January, Chrysler vehicles sat on dealer lots for an average of 82 days before selling, the longest of any automaker, according to Edmunds data. The industry average was 58 days.

Also in January, after sales declines in November and December, Chrysler increased spending on rebates to woo buyers. In January, Chrysler shelled out an average of $4,191 per vehicle, up more than $1,000 since October and the highest of all major automakers, Edmunds said.

For the first time, the company is also providing discounts as high as $1,000 on the 300 in some markets. And some new vehicles such as the Dodge Dakota pickup and Magnum wagon have not been hot sellers.

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[Buick61]

No. It's not. 2006 will be a great year for the Chrysler Group.

[paul8488]

There's no reason to assume any streak will be maintained indefinitely. The LX cars are great, but they're losing appeal as they pop up everywhere. Caliber might do well, but the Nitro could very well slip under the radar, as could that pig of a Chrysler SUV(whatever it's called). I don't think they'll slip too far, but I don't see them advancing much this year either.

[Arizona Slim]

They need to just admit they blew it on the Dakota's styling and redo the thing.

[Buick61]

Between the Caliber, Sebring, Avenger, Nitro, Compass, Aspen, and Wrangler, I just don't see how they could suffer some major decline. On top of that, the new minivans are right around the corner.

[lio45]

"There has been a constant push," said the owner of Kempthorn Chrysler Plymouth in Canton, Ohio. "Now we are telling them we are full. We really need to get this inventory under control, but it's a real struggle. The people just aren't out there -- they aren't buying."

Wonder if DCX is pushing this owner to change the dealership name? It'll be 5 years since...

[IMPALAon20s]

in 2005, there was a pricing battle, "gm red tag" "gm employee discount", ford "employee and family price" and chrysler/dodge also got into the act, and did so with a couple of new products(charger,grand cherokee), so its only a given that the following year, with same products sales may decrease. a little premature to start sticking a fork in them. i do admit, the stratus, and neon replacements need to come out soon! and wait til that chrysler aspen comes out later this year,a durango based suv.

[Whirling_Dervish]

Originally Posted by Arizona Slim

They need to just admit they blew it on the Dakota's styling and redo the thing.

Previous gen Dakota was GREAT! Current one.......not at all. I looked at one last year and was very disappointed.

[Bravada]

LXs might be nice cars, but facts are facts and the costs of freezing capital in this staggering inventories are exorbitant. I know it's the American auto industry, but normally the auto industry should be a zero inventory one - if they freed this working capital frozen here, they could probably recreate Imperial and Plymouth in two years.

I remember Lee said in his autobiography that when he came to Chrysler, they used to stah unwanted Volares and Aspens on old baseball fields and places like that and then tried to shove them down the dealer network. The cars rusted before they even reached the customer and Chrysler didn't have cash for longer than a week at a time.

[SobeSVT]

I think is just a market cycle blown into a crisis by the media which is addicted to bad news. I will wait to see the 4th quarter results before saying anything else in this matter as the new Chrysler product don't look to inspiring to me, especially that Aspen thing, is just hideous.

[MBHockey13]

Wow - that Aspen is just all kinds of wrong.

I'm not too optimistic about the Stratus/Cirrus replacements. Those cars haven't been competitive since the mid '90s and from what I'm hearing the new ones aren't a great leap from those.

[zeobandit]

Originally Posted by Arizona Slim

They need to just admit they blew it on the Dakota's styling and redo the thing.

No kidding. The Dakotas are suffering from a major case of the uglies!

[Cortazzo]

Originally Posted by Arizona Slim

They need to just admit they blew it on the Dakota's styling and redo the thing.

I actually like the dakota's styling, especially with the blacked out sport trim. Besides that, i think their product stream is strong, and important products are coming out to replace products that have absolutely zero traction in the market like the Neon and the Stratus/Sebring. If the new models replacing these get any kind of attention at all it will boost DCXs bottom line by at least a little bit. The Caliber in particular is a strong product with some innovative details and new powerful and efficient powertrains that will appeal to young value conscious buyers.

[SUPERBADD75]

i don't think Chrysler can fall too far, their sedan lines are already fleet queens but other than that their trucks and minivans are well received by the public. the Durango, although not too pretty, has its following and is a pretty decent vehicle under the ugly body work, and the Dakota alone won't kill their sales. i don't suspect it's nearly as significant as the Ram and Caravan/T&C are, so it can probably sustain itself until the next refresh. Jeep has done pretty well for itself with the new Grand Cherokee, and the Wrangler has zero competition. i see Liberties all over the roads here, so i imagine they hold their own as well. so what does that leave? the Neon is gone, replaced by the Caliber. with crossovers as popular as they are, Chrysler could do okay with the Caliber if they market it right. the Stratus couldn't get any worse than it is now, and at worst it will just continue to be a Hertz favorite. the new Nitro looks incredible and should bring some additional sales to Dodge. the Aspen, although somewhat ugly, should be good for some additional Chrysler showroom traffic. i don't see how Chrysler falls this year, or they shouldn't lose much ground anyway.

[awalbert88]

One month hardly constitutes a trend, or the end of a trend. That said, I don't expect Chrysler to maintain the rate of growth they had last year, even with new product coming out. All the previous "Chrysler Comeback"s have failed after a couple of years. I hope this one doesn't, if for no other reason than the fact that DCX is mainly only doing well with the Chrysler arm here in the US. It'd be ashame to see Mercedes actually have to fix their problems and start competing with Cadillac again. :p