DCX puts dealers in a bind - No Calibers without taking overstocks

KATIE MERX, FREE PRESS BUSINESS WRITER - - Chrysler Group dealers say the company won't give fast-selling Calibers to dealers who won't buy excessive stock of big trucks, SUVs and less-popular cars. The company is even threatening to hold back other upcoming fuel-efficient vehicles, they said.

Dealers say that during a satellite broadcast last week, the company asked them to take on 50% more inventory than they want, or at least 90 days' worth. But it offered to help them foot the financing costs for anything above 80 days' worth.

"They're incentivizing the dealer to take more product," Gary Ran, an analyst at Telemus Capital Partners in Southfield, said Wednesday. "It's just like the incentives Chrysler has already made available to the customer."

Chrysler declined to comment on the specifics of the call, but a spokesman said the company tries to provide a balanced variety of vehicles to its dealers. No dealers are being singled out, and there are no repercussions for not accepting vehicles, he said.

It is not uncommon for automakers and dealers, which are independent but closely linked businesses, to push and pull each other over slow-selling vehicles.

"Dealerships don't have full control of what they're going to get. This is especially true of domestic dealerships," said Jesse Toprak, executive director of industry analysis at Edmunds.com.

On Wednesday, Chrysler announced that it would offer, for one week, $750 to $1,500 to customers who buy vehicles that haven't sold for at least 146 days -- those with invoice dates of March 31 or earlier.

In July, the automaker revived employee pricing and 0% financing on slower-moving inventory such as the Dodge Durango SUV and Dodge Ram 1500 pickup.

A change in what drivers want

Gas prices hovering around $3 per gallon have slowed sales of large vehicles. Customers instead are moving to small vehicles such as the new Dodge Caliber, which can get an estimated 30 miles per gallon on the highway.

Chrysler, Ford Motor Co. and General Motors Corp. all have said in the last week that they will cut production of their large pickups and SUVs in the fourth quarter in response to the decreasing demand for the vehicles.

And Chrysler CEO Tom LaSorda said Wednesday in Auburn Hills that the company is "upping production of all the cars and mid-size SUVs."

But dealers and analysts say the companies were too slow to see the turn in the market.

Edmunds.com reports that last month, while the Caliber sold 17 days after arriving on dealer lots, on average, Rams sat for 92 days -- about three months -- before a sale, and Durangos sat for an average of 136 days, or 4 1/2 months.

LaSorda said the incentives should help clear out that old inventory. But dealers and analysts say the incentives aren't good for anybody.

"They're just another indication that things haven't turned around a bit," Ran said.

Two dealers, who wished to remain unnamed to avoid possible repercussions from Chrysler, said the company's offer to share the cost of financing more inventory seems to be a move to unload its own excessive inventories off storage lots near its manufacturing plants. Chrysler offered to pay dealers who carry more than 80 days' worth of inventory a flat per vehicle fee of $100 to $150 per month to cover the cost of financing those vehicles. The amount depends on how long the vehicle sits before it sells.

But dealers said Chrysler's financial incentive doesn't cover the whole cost and doesn't do anything to sell them.

The two dealers said they were hopeful that the offer announced Wednesday would help move old inventory off their lots.

Chrysler's profits fell 91% in the second quarter, and the company has forecast that it could lose $600 million the three months ending Sept. 30.

Chrysler dealers said they believed part of Chrysler's motive for forcing more inventory onto sales lots is to reduce the overall number of Chrysler, Dodge and Jeep dealers nationwide, much like Ford said last week that it plans to do.