Chrysler group offers $500 million in dealer incentives

Reuters / December 5, 2006 - 4:00 pm
DETROIT -- The Chrysler group is offering half a billion dollars to U.S. dealers in an effort to clear 2006 inventory, a person familiar with the situation said today.

The Chrysler group is giving dealers up to $7,000 per vehicle in "dealer cash" for certain 2006 models, the person said. Dealers can either pass the money on to buyers or pocket it as profit.

The program, offered alongside a new round of rebates on 2007 models, should help ease tensions between Chrysler and its dealers, many of whom have complained about being pressured to order cars they cannot sell.

The U.S. arm of the German automaker reduced its inventory from 647,000 vehicles in July to 499,000 in November, but 2006 models still account for 32 percent of the total.

The Chrysler group is offering roughly $500 million in dealer cash on the remaining 164,000 2006 models.

The Chrysler group also has about 50,000 more vehicles in its "sales bank:" previously undisclosed parking lots full of vehicles unassigned to dealers.

The number of such vehicles swelled to 100,000 this year before dropping to about 50,000 last month, the Chrysler group has said. Last week, the automaker said it was on track to eliminating the surplus by year-end.

The dealer cash ranges from $2,500 on models such as the Dodge Charger to $7,000 on the Dodge Ram pickup and Durango SUV, the person said.

Chrysler spokesman Kevin McCormick confirmed the automaker was offering dealer cash, but declined to provide more details. "This is pretty standard practice to help clear out remaining prior-year inventory," he said.

The Chrysler group this year has been offering the most aggressive incentives of the Detroit 3, beating out larger rivals Ford Motor Co. and General Motors for discounts.

But some dealers have pushed back, accusing the Chrysler group of trying to force too many vehicles into its sales channel when it should have been cutting production.

In November, the Chrysler group offered an average incentive of $4,224 per vehicle, according to industry research firm Edmunds.com. Ford's average was $3,226 while GM's average was $2,539 per vehicle for the same period.

The Chrysler group also recently launched a direct-mail campaign, offering $1,000 coupons to 3.4 million customers shopping for a new car.