By on May 5, 2010

To say that Chrysler’s 25 percent year-over-year sales increase last month came as a surprise would be pushing the boundaries of overstatement. Chrysler’s sales and market share have been in decline for a long time, but over the past several years, the tailspin seemed to have become terminal. So, how did the Pentastar (barely) make its 95k minimum volume level and increase sales by 25 percent over April 2009? Fleet sales, for one thing: according to The Freep, estimates that a full 40 percent of Chrysler’s April sales went to fleet customers.No wonder made a big deal about publicly finding Jesus on the fleet sales issue… at the end of the month (to say nothing of the conspicuous absence of retail sales numbers in its April report and massive increase in Sebring sales). And the bad news doesn’t end there. Not only did Chrysler top all automakers in per-vehicle incentives last month according to Edmunds’ monthly True Cost Of Incentives index with $3,374 on the average Mopar’s hood, they’re actually increasing incentives even further.

The Detroit News‘ Alisa Priddle spins the news hard, saying ChryCo is “sweetening sales” and justifying the incentive binge by arguing that it is necessary:

to remain competitive in an industry being pushed by uncharacteristically higher spending from Toyota Motor Corp

Interestingly, the DetN cites an Autodata figure of $3,664 for Chrysler’s April incentive spend, which is actually several hundred dollars more than Edmunds’ number. In any case, Toyota spent at least a thousand bucks less per vehicle than Chrysler ($2,498 according to Edmunds, $1,945 according to Autodata), so the Pentastar’s trouble moving product still comes down to the product itself.

So what are the Chrysler incentives? “Attractive financing” or $3,000 cash off Chrysler-brand products, $4,000 cash back for Jeep Liberty, Grand Cherokee or Commander (plus $1,000 for financing through GMAC), $500 in Mopar accessories for Wrangler buyers or $2,000 worth for Challenger buyers, $2,000 off Dodge Avenger, Nitro or Grand Caravan, $3,000 off a Charger or Ram, and much, much more.

Bizarrely, the DetN’s Priddle characterizes Chrysler’s incentive strategy as a

policy of restraint, as dictated by new CEO Sergio Marchionne

Get the latest TTAC e-Newsletter!

21 Comments on “Inside Chrysler’s Sales Increase: 40 Percent Fleet Mix And Industry-High Incentives (And Climbing)...”

  • avatar

    No wonder the average 2-3 year Chrysler resale value is only 40-50% its MSRP (sometimes even invoice!). Chrysler has relied heavily on fleet sales even in its decline. I would assume that they rely on fleet sales more than all other automakers.

    If you need to do this in the short run – then it is plausibly excusable – but as your long term strategy – time to pull the plug.

  • avatar

    The incentives made me rage so hard. I don’t understand them at all. I want the seller to name the price of the product.

    The end result is that I pretty much ended buying luxury cars and just say “I don’t care how much it is, as long as it’s good car”. Don’t even want to think about it. Crazy shit. Why cannot every automaker be like Scion?

  • avatar

    I disagree. I would argue that with co-operative shareholders, a business model of 40-50% fleet could be made workable (see Checker eulogy). Blogs like this have shown that the car-savvy are not the buyers they purport to be, witness GTO, G8, continued decent sales of the American Focus, etc. etc. If the management at Chrysler/FIAT can make 1-2% after-tax profit on quarterly results, I would predict a future with that very blueprint. The Charger, 300, Ram truck line and even the lowly Sebring appeal to some segment of buyers at some level, or you would be showing us more portraits of parking lots full of dealer-disavowed stock. There is a price-benefit level that these products can react to, given reasonably flexible manufacturing parameters. I recently drove a Magnum with a 2.7, and horror of horrors, found that this oft-derided machine was perfectly acceptable transportation, and accomplished the task assigned. I like to think I can represent the standard customer, and yes- at some price point- I would buy that car. Now, listen up Keynesians, this will be pure marketplace Darwinism at work. Can the builder make a profit at what the public is willing to pay? For the answer, Sergio, send me an open-ended consulting contract to General Delivery, Depoe Bay, Oregon.

    • 0 avatar

      They are not even close to a 1-2% GAAP profit. I would argue one month of EBIT profit was a fluke from some financial manipulations.

      I had a Charger Daytona and absolutely loved it. Still wish I had it!

    • 0 avatar

      @ olddavid:

      Your Checker analogy is incorrect. Checker’s business model is not similar to Chrysler’s. Chrysler is a retail automaker that also happens to sell the same cars to various fleets (consumer side first – then fleet – mainly to keep economies of scale running in factories – with UAW contracts you still have to pay those out of work employees if you need to idle a plant or production line). Checker does not have a consumer sided business selling for higher margins. Their sole model is to sell to taxi fleets (simple and profitable as it can be). My point with why your analogy is incorrect – Selling business to business versus business to consumer versus business to consumers and business. The 3 go to market strategies are not the same.

      The pain is you create a dichotomy when you sell the same product to consumers for higher margins and sell the exact same model for several thousand less per unit to a fleet. It is the reason why Chrysler has some of the highest rebates in the industry as their resale value on their cars is terrible – b/c in 2-3 years the wholesale market is flooded with used rental fleet Chrysler products. Consumers won’t buy a Chrysler product when they can get the same car used for 60% less. So they have to give you huge rebates and 72 mo free financing and other deals to sweeten the offer. In the end you wind up not buying a Chrysler product but the deal itself – car/truck came with it.

    • 0 avatar

      olddavid: “Now, listen up Keynesians, this will be pure marketplace Darwinism at work. Can the builder make a profit at what the public is willing to pay?”

      For Chrysler and GM cars, the past 10 years have shown the answer to be a resounding “no.” GM sold Cavaliers, Cobalts, Grand Ams, and Luminas by the pantload (an appropriate metaphor, that) yet obviously couldn’t command Civic or Corolla prices for them, let alone the amount of cash needed to amortize the union-driven costs attached to each car.

      So, bring on the $6,000 rebates, and vast amounts of red ink once SUVs took their predictable nosedive in market desirability.

      It’s been even worse for Chrysler — they didn’t even have the sales — and I still see little to change that. The upcoming 300C and Charger will no doubt be better than the current models, but will they be solid $35,000 cars, with $5000 of profit a piece? Not a chance in hell. Ditto the GC at $40+. Yet that’s precisely what Fiasler needs.

      I’d have little problem buying a Caliber for $8,000, an Avenger for $13K, etc. Either would likely give me 3-4 years of reasonably reliable, albeit bland and shoddily-built service.

      That’s what the market has determined these products have been worth, and will likely continue to be… but that’s obviously far less than Fiasler needs, because a lot of those costs still exist today.

  • avatar

    Numbers like this just mean a slower, more painful death for Fiat and Chrysler and more problems for the rest of the industry. Chrysler is excess capacity in North America now, close it and the other makers will be somewhat better off, even GM. Fleet sales and incentives are suicide, the profit and ROI aren’t enough to make a healthy business. One or 2% profit is really losing money, there can be no cash reserves built up for the industry-wide cyclic downturns and there is no money for product development.

    All the new product that Chrysler is supposed to have coming up is wonderful but those Chrysler fanboys out there don’t seem to get that even if the new vehicles are good maybe even great, the targets that they are aimed at are moving. By the time these are introduced everyone else will have better product that they do right now. Since Chrysler is pretty much at the bottom now, every new model will have to be a home run to improve their market share and maybe get off the incentive heroin. Merely good launches mean worse results and eventually death.

  • avatar

    Throw in GMs 32% fleet and only a 6% rise.

    Looks like President Goodwrench bet on a pair of gems.

    The slow swirl around the drain continues for both. At some point the fleet market will saturate and then these two will post some seriously ugly numbers that even the Fanboiz won’t try to defend.

    Sad ugly mess.

    Hope Ford continues to improve, they have plenty of fleet dependance also.


    • 0 avatar

      There is never saturation in the fleet markets, especially when it comes to car rental fleets.
      40% is way down from a even just a couple months ago, wasnt Feb’s mix near 60%?
      They gotta keep the lights on until the new product is here, once we’ve got the new product and its still sucking than we can call a spade a spade.
      $4000 on Grands seem like a great deal, they gotta get rid of them though. New model starts production anyday now.

  • avatar

    You are reading too much into the numbers. Chrysler did surprise with these numbers. Maybe there is hope in Chryslerland.

  • avatar

    I’ve owned twenty-some used cars and presently drive a 2004 Sebring. I’ve never liked a car so much.

    Of course, it’s a 2004 Sebring Limited convertible, so what’s not to like? It looks and drives like new, tho it has 75,000 miles.

    BTW, I’m told that the Sebring name will be changed to Nassau, and will be made in Italy, merged with a Lancia.

    PS: The new Grand Cherokee is due out this month. I hear it’s like a smaller, less expensive, more fuel-efficient Hummer.

    PPS: My other car is a ’96 Cherokee with 154,000 miles, and it also looks and drives like new.

  • avatar

    All things have seasons. Fleet-heavy product mix is something most manufacturers use at the end of product cycles, or for less successful product. Incentives have always been low at introductions, and adjust as the companies gauge reactions. As newer, better product is brought into the market, incentives and fleet numbers will tend to decrease. Daimler product is just winding down, the stuff replacing it seems to be better.

  • avatar

    Next year your tax return will be paid at the rate of:
    1 Chrysler Crossfire per $1000 of return
    1 Caliber per $750 of return
    1 Avenger per $499.99 of return

  • avatar

    And again, the negative people on this board ignore the fact that New Chrysler exited bankruptcy with $4 billion and, as of the end of March, had $7.4 billion. Please explain to me how a company that collected $3.4 billion in the span of nine months is at death’s door? In this economy and with their old product, that’s a pretty solid performance. And don’t forget that just a few short years ago, Ford didn’t have any product, either.

    • 0 avatar

      I would want to see the GAAP accounting of the alleged increase. Even if is really occurring, Chrysler has cut things so far to the bone, they’re going to have trouble rebuilding. They are also taking hard line and illegal approach in denying warranty claims. It’s getting pretty ugly in Auburn Hills.

    • 0 avatar

      Everything you say could be true, but collecting that much cash in such a short amount of time is still pretty impressive. Again, there may be more to it, such as timing of payments. Nonetheless, they started with $4 billion (which seems paltry) and now have $7.4 billion, which seems pretty impressive, at least on the surface.

      I’m also going to be the contrarian here when it comes to claims that they cut everything to the bone. Of course, that is indisputable, but what do you expect Nardelli to do given the cards he was dealt (i.e. the cost structure)? If money isn’t coming in and you can’t get financing, all you can do is scorched earth. Of course, I wasn’t there, but I think people have this tendency to think of companies like some monolithic institution like the government that doesn’t have to worry about balancing its books. To a certain extent, they don’t, but at some point they become more like you and me where if the credit cards are maxed out and there’s nothing in checking … then you are living paycheck to paycheck!

    • 0 avatar

      There is a short list of how to improve your cash position:

      – Make money. They lost $200 million so that is out
      – Sell assets
      – Borrow money (not likely)
      – Issue stock (again, no)
      – Extend your Accounts Payable

      Since they didn’t make any money, they could have only improved their cash position by selling assets or stringing out their suppliers. They better be careful.

    • 0 avatar


      It could also be that the losses are paper losses due to significant write-downs, depreciation or amortization? Remember, because this is a purchase, no more historical cost. The purchase price is going to be allocated over the assets purchased and it may be they are only figuring out what to write down or throw out by the seat of their pants?

      Or maybe a combination of the above? Just a thought.

    • 0 avatar

      Ah – I was wondering where all the accountants from Enron/ Arthur Anderson went!

      We all have to remember that most of Fiatsco’s (aka Chrysler) debt was completely wiped out and they had little long term obligations. This was set up so that Fiat can merge with them. Starting out with major assets and little liabilities makes for a healthy balance sheet even though you have a bad year (the majority of our losses are based rather on variable costs rather than legacy fixed).

  • avatar

    I’d love to see each manufacturers breakdown of fleet sales. I think Nissan has been hitting the fleets more indulgently lately.

    I would think Hyundai/Kia’s numbers would be in line or higher than Chryslers.

  • avatar

    I would like to see those numbers too.
    My rental last week was an Altima.
    Before that a Forester.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • jkross22: Arthur, Biden’s quote – Nothing will fundamentally change – isn’t the same as a...
  • mjz: How about Ford worry about their dismal history of recent incredibly botched product launches, instead of...
  • Imagefont: I for one am quite proud of our new president. I see the usual trolls here trying hard to spread...
  • Nick_515: jkross, if “tRump” didn’t give it away. maybe this will. /s
  • Arthur Dailey: @jkross and @freedmike; Thanks for those comments. As some have been trying to say, Biden is primarily...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber