Chrysler pays dealers to stock up

DaimlerChrysler / Chrysler -2007 Chrysler Sebring

Automaker will give bonuses for every '07 model they take before year's end with their full allotment.

Josee Valcourt / The Detroit News

Chrysler's plan for dealers

Giving dealers $200 for every 2007 model they order through the end of the year, if they order all the vehicles Chrysler has allotted to them.

Paying dealers $400 for every 2006 model they take from the sales bank, which is inventory that was not built to fill a dealer order

Promising to eliminate the sales bank in 2007
Source: Detroit News research

With dealers balking at ordering new 2007 model cars and trucks, DaimlerChrysler AG's Chrysler Group has started offering cash bonuses to dealers who stock up before the end of the year and promised to halt its practice of overbuilding vehicles and pushing them onto dealers.

In a Webcast to dealers Wednesday afternoon, Chrysler sales executives acknowledged dealers' growing frustration about the automaker's huge supply of unsold Jeep, Chrysler and Dodge vehicles and implored them to step up one last time to order their full allotment of vehicles for the rest of the year.

"We need you to help put us back in a position of strength by taking your November unassigned vehicles and also taking your December dealer orders so that we can get to 2007 really marching," Steven Landry, head of Chrysler's field sales operations, said in the Webcast, which aired on a dealers' Internet site. "We have a plan in place but we need you to come along."

After the Auburn Hills-based unit of DaimlerChrysler posted a $1.5 billion loss in the third quarter, Chrysler executives have been under tremendous pressure to finish the year strong and clear out excess inventories of vehicles built without dealer orders, known as the sales bank.

But many Chrysler retailers have refused to order new vehicles because their lots are teeming with unsold inventory.

Dealers pay financing charges on cars on their lot and interest piles up the longer a vehicle sits unsold, which is the main reason dealers balk at accepting excess inventory.

To help allay those concerns, dealers said Chrysler told them last week that the automaker will give them $200 for every 2007 model car or truck they take -- if the dealers take the full number Chrysler has allotted them for November and December. Chrysler also will pay $400 for every 2006 model dealers take from the sales bank.

During Wednesday's Webcast, Chrysler executives promised dealers that the automaker will build to demand next year and not pressure them again.

"They give you some incentive for the troops to march," said Alan Helfman, a Chrysler and Jeep dealer in Texas who has ordered about 300 2006 and 2007 models. "(Chrysler's) the generals and we're the troops who take it to the battlefields. Fortunately, we have something to fight with in the battlefield."

Chrysler spokeswoman Lori McTavish confirmed that the Webcast outlining the company's year-end strategy took place, but said the automaker does not discuss the content of its communications with dealers.

"We consider that to be a matter between our dealers and the company," McTavish said.

This isn't the first time that Chrysler has promised to eliminate the sales bank, several dealers told The Detroit News. While some believe Chrysler will halt its historic practice of building cars without having orders for them, others are doubtful.

For now, the new dealer cash incentives signal that Chrysler's high stockpile of older models is discouraging dealers from ordering 2007 models, which should be rolling into dealerships this time of year.

"A lot of Chrysler dealers have physical limitations on their lots so they can't take more vehicles," said Jesse Toprak, an analyst with Edmunds.com, a research Web site for car buyers.

While Chrysler is playing catch up and trying to convince its dealer body to take new model vehicles, competitors have their 2007 vehicles already in place at dealerships, Toprak said.

That puts Chrysler at a disadvantage because consumers who are comparison shopping new cars and trucks, will go elsewhere if they can't find the 2007 Dodge, Jeep or Chrysler vehicle they're looking for, he said.

Dealers can use the $200 they get for taking 2007 models at their own discretion, including adding it to existing consumer discounts. By itself, the incentive isn't unusual, even if it's being offered at the start of the 2007 model-year cycle, Toprak said.

But the automaker's gesture comes at a time when Chrysler is trying to shrink its inventory and when some dealers -- still grappling with lots crammed with 2006 vehicles -- have balked at the company's request to order more cars and trucks.

"Chrysler is trying to find ways of pushing its 2007 inventory into dealership lots," Toprak said. "That's not quite the norm."

One dealer who spoke on condition of anonymity said he does not plan to take more vehicles than necessary despite the automaker's latest deal issued last week.

"Our allocation isn't that high," the dealer said, "but we don't need any more cars."