Wednesday, February 07, 2001

Dealers warn Chrysler that cuts will hurt image

By Beth Barovian
The Cincinnati Enquirer

        To save more than $600 million a year as part of its turnaround plan, DaimlerChrysler AG is cutting cash payments and other subsidies to its dealers in the Tristate and nationwide.

        The move has left some local dealers unhappy — and made them warn that the program will hurt Chrysler's image with customers.

        “Dealers will now have to cut costs and keep a smaller inventory, but people prefer selections,” said Rick Clark, the general manager of Kemper Dodge, 1280 E. Kemper Road, Springdale. “It is also going to be harder to offer customers incentives.”

[photo] Steve Wullenweber, general manager and part-owner of Wullenweber Jeep-Chrysler in Dent, says Chrysler's cuts in dealer subsidies are too drastic.
(Dick Swaim photo)
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        In the biggest cutback, Chrysler suspended the 15-day grace period before dealers must pay for shipped vehicles. It will be replaced by a new plan — dubbed “Dealer Market Performance Allowance” — which rewards dealers up to $500 a vehicle if they meet sales targets.

        “Our approach is to recognize dealers who order new cars and sell them sooner instead of later,” Chrysler spokesman Jay Cooney said.

        Beginning Monday, Chrysler also cut financial support for dealer advertising, eliminating reimbursements to fuel cars and trucks shipped to dealers, and reducing payouts to dealers for preparing cars for sale after delivery from the factory.

        In addition, Dodge, Jeep and Chrysler dealers will see the profit margin on selling extras — moon roofs, chrome wheels, security devices and other options — fall to 11 percent to 15 percent, from 14 percent to 18 percent.

        These cuts, like the 20 percent work force reduction announced last week, are efforts by DaimlerChrysler to remain competitive and be “a nimble company” in the automobile market, according to a news release issued by Daimler Chrysler.

        Some local dealers, like Steve Wullenweber, the general manager and part owner of Wullenweber Jeep-Chrysler, 6315 Harrison Ave., Dent, think the measures by Chrysler are too drastic.

        “Seems to me these guys run into one bad quarter and they then wreck every commitment they have made over the last three years to their dealers and customers,” he said.

        “They are making cuts on every level and have now passed on substantial costs to the dealers,” said Tom Gleason, the general manager of Sweeney Jake Chrysler Plymouth Jeep Eagle, 85 W. Kemper Road, Cincinnati. “The program will offset these new costs only if the objectives are reasonable.”

        Art Sinella, the vice president and general manager of CMW Marketing Research in Bandin, Ore., has little hope that dealers will benefit from the program. Sales have slumped this year, and the past five years were the automobile industry's best.

        For the next few years, Mr. Sinella said, dealers will be making almost nothing on new car sales. Commissions in that area result in only $300-$400, and dealers will now be using that revenue to pay for the costs that Chrysler is no longer covering.

        These cuts will eventually affect consumers.

        “Money for dealers is made in the transactions,” Mr. Sinella said. “Consumers will see more pressure to finance their cars through the dealerships, and sign on for extended warranties and things of that nature. Dealers will probably also be less generous with trade-ins.”

       The Detroit News contributed to this report.


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