Chrysler-Jeep dealers at the NADA convention make meeting were angry at the recent cuts to their subsidies. Knowing the company is in trouble didn't soothe them.
'Chrysler has tough decisions to make, and they are taking part of it out of our hide,' said Bernie Wagnild, president of Valley Automotive Group, which owns a Chrysler store in Apple Valley, Minn. 'Dealers want to know why, and they are mad.'
Bruce Bendell, president of Major Automotive Group in Long Island City, N.Y., echoed the sentiments: 'The bottom line is, `Do better by selling more.' '
But selling more to recoup the estimated cuts of $400 to $500 per vehicle means meeting and exceeding your 2001 sales goal, said Marc Trebar of Rallye Chrysler-Dodge-Jeep in Monroe, N.Y. 'Everyone has to take cuts, but how can we sell 110 percent of our target when the market is going to be down this year?'
The cuts in the Chrysler group subsidies and incentives, effective in late January, include:
Eliminating floorplan assistance on vehicles for the first 15 days.
Cutting the fuel allowance for vehicles delivered to customers.
Axing the $50 per vehicle marketing fee.
Reducing dealer discounts on vehicle options and accessories 3 percentage points, from a range of 14 percent to 18 percent to 11 percent to 15 percent.
Lowering reimbursement for new-vehicle preparation from an average of 1.4 hours to between 0.9 and 1.1 hours.
Dealers were reassured the Chrysler group will continue the product replacement program begun in 2000.
The packed room was shown a movie clip of new products. But dealers were told that two weeks ago executive members of their dealer council were shown all of the new products and could provide details to any interested store owner, said Chrysler executives.
John MacDonald, senior vice president of sales and field services, said by the end of the meeting the Chrysler group had 'created a lot of equity' with its dealers. 'It was not a picnic. Dealers realized their health depends on our health, and they acknowledged we all need to sell cars and work together.'
Despite the high cost of incentives, the Chrysler group will not try to eliminate customer incentives, as it unsuccessfully attempted last summer. Said Bud Liebler, senior vice president for global brand marketing: 'We have said we will keep our dealers competitive. I think frankly, we learned a little bit last year when we pulled back - that we can't beat that charge.'
MacDonald confirmed that a dealer would have to hit 'in the vicinity of 100 percent' of the 2001 sales target to recoup the lost subsidy money. 'More money would come at 110 percent.'
He disputed the dealer group calculation that the cuts amount to as much as $500 per vehicle. He said the 'direct cost to the dealer is under $200.'
'Some of the money we readjusted on the invoice will be recovered in the sale to the customer,' MacDonald said. 'Some dealers will pass it right through to the customer.'