Liebler and McDonald NADA 2001Enlarge Photo
More for less; it’s a formula that car buyers find hard to resist. But it’s not necessarily a deal that’s exciting dealers on the Chrysler side of DaimlerChrysler. As part of the automaker’s new turnaround plan, they’re being told they’ll have to sell significantly more vehicles in 2001 to earn as much as they did last year.
“Dealers recognize their health depends on our health,” said John MacDonald, Chrysler’s senior vice president of sales. “They don’t make money unless we make money.”
Late last month, Chrysler announced plans to cut 26,000 jobs and close six plants as part of its effort to slash mounting losses. The U.S. unit is expected to report a deficit of $1.5 billion for the fourth quarter, and to continue to run in the red for months to come. Chrysler CEO Dieter Zetsche’s plan also cuts the money dealers make on every vehicle they sell. Exactly how much is a matter of contention, MacDonald estimating “about $200 a car,” some dealers putting the figure closer to $500.
The cuts will be reduced for dealers who meet tough new sales targets, Chrysler officials added. And those that top 110 percent of their new goals should earn as much or more than they made in 2000. That was small consolation for Bob Federico, a Dodge and Chrysler dealer from Wood River, Ill.
“When business was good, they didn’t cough up the billions they made for dealers,” said Federico. “Now when times are tough, they want us to share in their problems,” the dealer added, following a meeting with Chrysler officials at the National Automobile Dealers Association’s annual convention in Las Vegas.
“They’re sticking their hands into the dealer’s pocket,” echoed Marc Treiber, a dealer from Monroe, N.Y.
Talking to reporters following the dealer meeting, MacDonald said dealers would be likely to make up their reduced payments by giving consumers lower discounts. “Some of the money will be recovered in the cost to the customer.”
But industry observers questioned that logic. In the current market, price has become one of the big differentiators between competing products. If Chrysler dealers hope to sell more cars and trucks, they’d have to lower prices even more, observers countered.
During the automaker’s “make” meeting, it attempted to overcome resistance to the cuts and stir its frontline troops. Company officials noted that by 2004, 83 percent of Chrysler’s lineup will be updated. Few of the dealers emerging from the meeting seemed encouraged. But in the long run, said marketing executive Bud Liebler, dealers will rally to the cause.
“They have always been there,” said Liebler, referring to the carmaker’s prior financial crises, including its brush with bankruptcy in 1981. That crisis required a federal bailout, as well as significant concessions from workers, bankers, suppliers and dealers.
For more TCC coverage on the 2001 NADA show, click here.
For more coverage on the NADA convention, visit Automotive Executive Magazine (www.aemag.com).
Olds Axed: TCC Special Report (Dec. 30, 2000)