Chrysler sales in need of ‘Hemi’
DETROIT — The latest numbers on auto sales show that Chrysler needs to quickly figure out how to navigate the car market as deftly as it did bankruptcy court.
Ford’s Fusion midsize car outsold all eight Chrysler brand models combined in June. Chrysler’s two minivans, which for years dominated their market segment, were outsold by the Honda Odyssey. Only one Chrysler Group LLC model showed a sales increase over June of last year, the Dodge Challenger muscle car.
"In this business, you’re either going to succeed or fail with product," said Joe Barker, senior manager of North American vehicle sales forecasting for the CSM Worldwide consulting firm in Northville, Mich. "Right now, Chrysler lacks a competitive product."
Chrysler emerged from bankruptcy protection after just 42 days on June 11, cleansed of much of its debt and labor costs. But with sales down 46 percent from the first half of last year the company faces a huge challenge to make money again under its new Italian owner, Fiat SpA.
Chrysler’s poor June performance also casts doubt on whether the U.S. government’s $7 billion allocation will be enough to get the automaker through the U.S. sales slump, which is projected to last into next year.
The company’s poor June performance was expensive. Chrysler led the industry in discounts, with an average incentive of $4,873 per vehicle, almost $800 more than it spent in May, according to the Edmunds.com automotive website cash advance.
And Chrysler still has a lot of cars sitting on dealer lots even though all 12 of its assembly plants were closed for nearly two months and 789 terminated dealers sold much of their inventory at fire sale prices. Chrysler ended June with 195,272 vehicles on dealer lots, a 71-day supply. Industry experts say a 60-day supply is optimal to reduce the need for sales incentives while providing enough selection for buyers.
Analysts say the company has no new products coming until late next year and will have a difficult time making money with its current model lineup. Fiat Group SpA, which took over running Chrysler earlier this month, will provide badly needed small-car and small-displacement engine technology, but that’s more than a year away.
"We have at least another year of nothing. This is not going to be something that they’re going to get out of overnight," said Tom Libby, an independent Detroit-area auto analyst.
For its part, Chrysler says it was happy with the sales figures. Spokeswoman Kathy Graham noted that inventory is less than half of what it was in June 2008 as Chrysler matches production with customer demand. "Even though the sales may look bad in the short term, we’re doing the right things that position us for when the market rebounds," Graham said.
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