DaimlerChrysler says incentives, inventory too high

Reuters / June 28, 2006 - 7:00 am NEW YORK -- DaimlerChrysler AG Chairman Dieter Zetsche on Tuesday, June 27, said the company's U.S. unit was struggling with unacceptable levels of vehicle inventory and was spending too much on incentives to clear the glut.

"Our sales projection was too optimistic," Zetsche told reporters.

The remarks come just days before the Chrysler group is to roll out a new sales promotion campaign for July, expected to include employee-level pricing for any car buyer, money-back guarantees and a new advertising campaign featuring Zetsche as the face of the automaker.

Zetsche said that he expected overall U.S. vehicle sales would be near 17 million units on an annualized basis in June, up from May but down from a year earlier when GM first rolled out employee-level pricing, touching off a summer price war."For anyone but Toyota, it was a relatively slow month," he said of June.

Zetsche said that the company's marketing research showed that consumers had a favorable impression when the chief executive came out in direct support of its products.

The strategy recalls Chrysler's promotions of the late 1980s and early 1990s, when then-CEO Lee Iacocca brought the company back from the brink with an ad campaign that featured him and the memorable line, "If you can find a better car, buy it."Zetsche, known for his trademark wire-rim glasses and walrus-moustache, conceded that he had very low name recognition outside the U.S. auto industry. "The vast majority of people don't know me," he said.U.S. dealers who have seen the television ads featuring Zetsche say they promote Chrysler's German engineering and American heritage.

That marks a shift in marketing approach by the Chrysler group, which has so far kept itself at arm's length in the U.S. market from the parent company's German-based luxury-car unit, Mercedes-Benz.But Chrysler group executives said last week that the company would promote next year's launch of a more fuel-efficient, diesel version of its Jeep Grand Cherokee by pointing out that its turbo-charged engine was being built by Mercedes.And Zetsche, who also heads the Mercedes unit, said the Chrysler group had suffered in the market earlier this year because of the financial problems for rivals General Motors and Ford Motor Co."We were perceived as one of the Big Three," he said.

DaimlerChrysler's U.S. sales have fallen about 1 percent in the first five months of the year. The company has also had to resort to deep incentives of up to $5,000 on the Dodge Durango SUV in order to clear unsold inventory.The average per-vehicle spending on sales incentives was just over $2,200 in June, according to the Power Information Network. But the Chrysler group was spending almost $4,000 on average, according to the market tracking firm.