Chrysler products struggling in showrooms
Poor June performance casts doubt on survival
DETROIT — The latest numbers on auto sales show that Chrysler needs to quickly figure out how to navigate the car market as deftly as it did bankruptcy court.
Ford’s Fusion midsize car outsold all eight Chrysler brand models combined in June. Chrysler’s two minivans, which for years dominated their market segment, were outsold by the Honda Odyssey. Indeed, the Dodge Challenger muscle car was the only Chrysler Group LLC model to show a sales increase over June of last year.
Chrysler emerged from bankruptcy protection after just 42 days on June 11, cleansed of much of its debt and labor costs. But with sales down 46 percent from the first half of last year — a year in which then-Chrysler LLC lost $8 billion — the company faces a huge challenge to make money again under its new Italian owner, Fiat SpA.
Chrysler’s poor June performance also casts doubt on whether the U. S. government’s $7 billion allocation will be enough to get the automaker through the U. S. sales slump, which is projected to last into next year.
“In this business, you’re either going to succeed or fail with product,” said Joe Barker, senior manager of North American vehicle sales forecasting for the CSM Worldwide consulting firm in Northville, Mich. “Right now, Chrysler lacks a competitive product.”
For its part, Chrysler says it was happy with the sales figures. Spokeswoman Kathy Graham said Thursday that Chrysler gained one percentage point of market share in retail sales to individual buyers. To Chrysler, that indicates people aren’t penalizing the company for having sought bankruptcy protection.
Yet, the Dodge Ram pickup, Chrysler’s top-selling vehicle and for years among the top-selling cars and trucks in the U. S., fell off the list of top 10 sellers in June for the second straight month. It dropped to No. 12 with a 10 percent sales decline. Chrysler had no vehicles in the top 10 last month, according to Autodata Corp.
The company’s poor June performance was expensive, too. Chrysler led the industry in discounts, with an average incentive of $4,873 per vehicle, almost $800 more than it spent in May, according to the Edmunds. com automotive Web site.
Chrysler still has a lot of cars sitting on dealer lots even though all 12 of its assembly plants were closed for nearly two months and 789 terminated dealers sold much of their inventory at fire-sale prices. Chrysler ended June with 195,272 vehicles on dealer lots, a 71-day supply. Industry experts say a 60-day supply is optimal to reduce the need for sales incentives while providing enough selection for buyers.
Analysts say the company has no new products coming until late next year and will have a difficult time making money with its current model lineup. Fiat Group SpA, which took over running Chrysler earlier this month, also will provide badly needed small-car and small-displacement engine technology, but that’s more than a year away.
“We have at least another year of nothing. This is not going to be something that they’re going to get out of overnight,” said Tom Libby, an independent Detroit-area auto analyst.
If the U. S. market improves, though, that could help Chrysler through the tough period, Barker said. The government has said it has stress-tested the $7 billion figure and determined that it is all Chrysler will need to make it until Fiat products arrive and its CEO, Sergio Marchionne, can turn the company around.
Graham cautioned that the new Chrysler is only 20 days out of bankruptcy and has yet to reveal its product plan.
“We’re definitely focused on what consumers want,” she said.
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