Crisis at Chrysler: Buyers bail

Cars sales plunge, trucks tank despite 11th-hour leases

Consumers are bailing out on Chrysler LLC -- the sign of a company in crisis.

Despite a four-day flurry of leasing to beat Chrysler Financial's exit from the sector, Chrysler still posted the biggest loss of any automaker in July U.S. sales.

The company's overall 28.8 percent plunge to 98,109 light vehicles slightly exceeded General Motors' 26.1 percent decline.

But the July results exposed the weakness of Chrysler's car lineup in the glare of the U.S. market's abrupt shift away from gas-guzzling pickups and SUVs to fuel-efficient cars.

Chrysler LLC truck sales fell 29.0 percent in July, close to the industry's 25.8 percent truck slide. But while industry sales of cars were flat in July, Chrysler LLC car volume fell 28.2 percent.

"More than (GM and Ford), Chrysler let its cars go while everybody focused on trucks," said Doug Scott, senior vice president for automotive at GfK Custom Research in suburban Detroit. "As trucks are punished in the market, Dodge suffers disproportionately."

Hammered

The U.S. marketplace hammered most automakers in July. Sales fell 13.2 percent to 1.14 million units, bringing the first seven months down 10.5 percent to 8.55 million units.

Toyota Motor Sales U.S.A. Inc., Ford Motor Co. and Mazda Motor Corp. joined GM and Chrysler LLC in posting double-digit losses in July. American Honda fell 1.6 percent. Nissan North America fared best among the top six automakers with an 8.5 percent gain.

During a conference call, Chrysler tried to counter what co-President Jim Press called "a lot of false speculation" about the health of the automaker. For the first time since it became a privately held company, Chrysler revealed financial results.

Through the first six months of 2008, Chrysler had an operating profit of $1.1 billion, and its cash on hand as of June 30 was $11.7 billion, Press said.

'Dancing on the sun'

"We'd like to be judged as a company on how well we do when we're under pressure," he said. "The hardest steel comes from the hottest fire. We're dancing on the sun."

Because Chrysler is privately owned, details of how the company arrived at the $1.1 billion figure are not subject to public scrutiny.

Chrysler Financial's announcement on July 25 that it was ending consumer leases by Aug. 1 triggered a rush of last-minute shopping that helped many dealers.

"In the last three days we (leased) more than 300 cars," Bill Golling, owner-president of Golling Chrysler, Jeep and Dodge in suburban Detroit, said on Thursday, July 31, the final day of leasing.

Golling said he typically leases about 125 cars a week.

George Fetsco, owner-president of nearby Rochester Hills (Mich.) Chrysler Dodge said: "Since this was announced, we've done about 40 (leases) a day. But it's front-loading a lot of business."

In June, the number of online product inquiries on major automotive Web sites fell to the company's second-lowest monthly level since 2003, said Compete.com, an automotive research company.

Hal Wurster, automotive managing director for Compete.com, said: "The negative word on the street regarding the state of Chrysler and other Detroit manufacturers seems to be keeping the serious shoppers away."

Nancy Kaffer of Crain's Detroit Business contributed to this report

You can reach Jesse Snyder at jsnyder@crain.com

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