DETROIT -- Dr. Z can't give 'em away.
Despite reviving the blistering employee-discount program slammed as "marketing crack," the Chrysler group's U.S. sales are expected to be down 17 percent in July compared with last year. And, although the $225 million ad barrage featuring DaimlerChrysler Chairman Dieter Zetsche was impossible to escape, it did little to lure prospective buyers.
Not only did some consumers fail to note the employee-discounting message that accompanied most advertising, they were also unmoved by the German-engineering positioning or the DaimlerChrysler chairman, whom they overwhelmingly believed was a fictional character.
Auto experts predict the Chrysler group will be forced to crank out a new promotion.
"We clearly are not doing what we did last July," said a Chrysler group dealer in the Northeast. A dealer in the West said late last week that this month he had sold only about 30 percent of what he had in July 2005.
The automaker will report July sales on Tuesday, Aug. 1. But auto-information web site Edmunds.com forecasts the Chrysler group's U.S. sales will slide 17 percent vs. July 2005. The drop reflects one fewer selling day than last year.
There are other reasons why the employee-discount program, which moved tons of metal last time, isn't cutting it now.
Jesse Toprak, executive director of industry analyst at Edmunds.com, said history has shown that incentives don't work well the second time around. He noted that consumers may have figured out that 0 percentfinancing is actually a better deal than employee discounts because of high interest rates on new-vehicle loans.
Others fault rising gasoline prices, which are taking a toll on the entire industry.
But some of the blame must be left at the feet of the bespectacled Dr. Z.
Art Spinella, president of CNW Marketing Research, said the spots just aren't what the doctor ordered: Eighty percent of new-car intenders thought Dr. Z was a fictional character.
Instead of luring buyers who intended to buy competitive brands, CNW found the employee-discount ads pulled ahead sales from people who had planned on buying a Chrysler group product later in the year.
And while the German-engineering pitch made more potential buyers consider Chrysler group products in the Northeast, if failed to sway them in the South and Southern California.
German accent difficulties
The commercials have been panned as silly by critics. But one Chrysler dealer said his research found seven out of 10 customers liked them. Only half, however, were as fond of the radio commercials; the remainder said they had a hard time understanding Zetsche's German accent.
The automaker might bid auf Wiedersehen to Dr. Z's ads, but can ill afford to drop metal-moving promotions.
Even though it's more financially robust than its Detroit rivals, the Chrysler group's second-quarter operating profit plummeted 90 percent to $65 million from $695 million a year ago. The unit's revenue fell to $15.9 billion from $16.7 billion in the second quarter of 2005, and the automaker said the Chrysler group could lose as much as $639 million from July to September.
In order to end the year in the black, as Zetsche promised analysts, the company will have to unload more vehicles. It was sitting on a 91-day supply at the end of June, according to a spokesman, 16 days more than the same period a year ago and "a little higher than we'd like." A 60-day supply is the considered ideal. He declined to discuss the supply and whether the employee discounts were working.
Overall industry sales off 11 percent
To be sure, Chrysler isn't alone: The entire U.S. industry's sales will be off 11 percent from July 2005 to 1.54 million units, Edmunds.com predicts. But that is compared with record-setting sales in July 2005 fueled by employee price incentive programs.
The Chrysler group has had its inventory gathering dust longer than General Motors or Ford Motor Co. every month this year, said Tom Libby, senior director of the Power Information Network. In July, it took the Chrysler group 85 days "to turn" compared with 83 for GM and 81 for Ford, PIN data found. Still, that's an improvement: In June, the Chrysler group had a 93 day-to-turn rate, compared with 73 for GM and 74 for Ford.
John Plecha, director of Jeep marketing and global communications, told Advertising Age on July 21 that the employee-discount promotion was generating sales beyond that brand's projections.
"We do most of our business during the last five days of the month," he noted.
But Toprak said Edmunds' projections take those month-end sales pushes into account. He projected the Chrysler group would sell more cars and trucks in July, 191,000, but that's only 4 percent more than it did in June, translating to a slight market-share bump to 12.5 percent from 12.4 percent.
You may e-mail Jean Halliday at [email protected]