Chrysler Still the Laggard, Despite Cash for Clunkers

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Joe Raedle / Getty

Chrysler vehicles at the Tamiami Chrysler Jeep Dodge dealership, which is slated to close, in Miami

Sales results from August are raising doubts about Chrysler Group LLC's post-bankruptcy comeback and indicate that the ailing automaker is in for an agonizing wait of several months before aid from its new Italian partner, Fiat, can finally make a difference.

Chrysler's performance last month was weak compared to that of the competition, as Toyota, Honda, Volkswagen and Ford Motor Co. all posted healthy sales increases, thanks to the Cash for Clunkers program, which boosted industry-wide sales to the highest level in more than a year.

Chrysler, however, appears to have had insufficient inventory in stock at dealers to take advantage of the surge in new-car shoppers, says Jessica Caldwell, an analyst for "Chrysler's lack of small cars also hurt," she adds, nodding to the Clunker-program buyers' strong preference for fuel-efficient vehicles. Even struggling General Motors Corp., which also closed its factories after filing for bankruptcy and saw total sales drop year over year, reported a sales increase of 30% in August, when measured against the previous month. Overall, Chrysler sales were up a meager 5% compared with July and dropped 15% year over year, to fewer than 100,000 units.

Adding insult to injury, Chrysler finished a distant sixth place in overall sales for the month, behind even the younger South Korean brands, Hyundai and Kia, which don't report their sales figure jointly, even though they are owned by the same company. When combined, the two Korean brands sold more than 100,000 vehicles in August, finishing ahead of Chrysler in monthly sales for the first time.

Chrysler executives insist that their numbers were not as bad as they appear. "Chrysler Group's large-car, minivan, crossover and truck segments all posted increases in retail sales in August," says Steven Beahm, vice president of sales operations, adding that Chrysler now has a 28-day supply of vehicles on dealer lots, the lowest figure in decades. Beahm also notes that Chrysler's truck, van and Jeep sales have been relatively stable. Of course, that's a far cry from what's needed most right now — sales growth. And new products designed with help from Fiat won't arrive until 2011.

Perhaps more troubling than current sales is a loss in public confidence. A new survey from Consumer Reports indicates that while more Americans are willing to consider purchasing an American vehicle, they don't view American cars equally. While the number of new-car buyers willing to consider a Ford has increased 17% and consideration of GM models has increased 6% — despite the company's bankruptcy — the number of shoppers willing to consider a Chrysler has dropped 25%.

A parade of innovative new models could change Chrysler's tarnished image, but that's not happening anytime soon. The only near-term "new" product from Chrysler is a heavy-duty pickup truck that will debut in October. After that, the automaker's next big introduction comes in the first quarter of 2010, when the new Jeep Grand Cherokee debuts. Overall, however, Chrysler's new-product pipeline is thin, suggesting that the automaker will struggle until help from Fiat materializes, says Rebecca Lindland, an analyst with IHS Global Insight. Ron Bloom, President Obama's point man on the automotive task force, acknowledged as much in a recent interview when he said that Chrysler, unlike GM, would not be ready for an initial public offering of stock next year.