Key dealer sees Chrysler holding pickup truck share

Reuters |Published: Friday, February 16, 2007

DETROIT (Reuters) - A major Chrysler Group retailer expects the struggling No. 4 U.S. automaker to maintain its share of the pickup truck market this year by offering generous discounts in the face of tough competition.

Sid DeBoer, chief executive of Lithia Motors Inc. , said Chrysler would have to maintain higher sales incentives on its Dodge line of trucks in the face of newer offerings from General Motors Corp. and Toyota Motor Corp. <7203.t>

"Dodge will have to have higher incentives until they get their new truck out," DeBoer said in a conference call to discuss Lithia's quarterly earnings. "That will drive and maintain their share. I don't see any decline in share for their truck volume

Chrysler, which this week announced a restructuring plan intended to cut 16 percent of its work force and restore the company to profitability by next year, has a lot riding on the continued success of its Ram pickup truck line.

The vehicle is the single best-selling model for Chrysler, a unit of DaimlerChrysler AG .

The pickup truck accounted for almost 17 percent of the automaker's sales last year at a time when Chrysler was reeling from a costly inventory build-up that drove it to a $1.48 billion operating loss.

But Chrysler has had to support its truck and SUV sales by offering the most aggressive discounts in the industry.

Auto tracking service Edmunds.com estimates Chrysler spent an average of $3,853 in incentives per vehicle last month to sell off its inventory -- more than three times the amount spent by Toyota.

DeBoer said those incentives gave the Ram pickup truck a price advantage Chrysler would need to maintain until it gets new models to showrooms, which is not expected until late next year.

"That's a great truck and it is way cheaper than everyone else's when they put the money on it and they'll keep the money on it," DeBoer said.

Chrysler's problems in 2006 were compounded by a near revolt from its dealership owners, who complained that the automaker was forcing them to take unwanted inventory and vehicles with the wrong combinations of features.

Chrysler CEO Tom LaSorda, who also took over as sales chief late last year, has made repairing strained relations with dealers one of his top priorities.

Lithia ranks as a major Chrysler retail outlet. Chrysler brand vehicles, including Jeep and Dodge, accounted for 40 percent of Lithia's fourth-quarter sales.

DeBoer also said he did not expect Toyota's full-size Tundra pickup to cut into sales for GM's recently launched Silverado in the increasingly competitive segment.

Toyota has called the launch of the Tundra, which debuts this year, the most important in the history of the company and its chance to move into the last segment of the U.S. auto market still dominated by domestic manufacturers.

"I think when it faces off against the new Chevrolet, the Chevrolet may end up being ranked above it," DeBoer said of the Tundra.

He added: "Toyota has a great truck. It will sell the production out. It will cost everyone a few units here and there, but I think overall it may be that people trade in smaller trucks on the new Tundra."