DETROIT -- The Chrysler group's summer blowout sale has flopped.
In July, the automaker tried to reignite last year's summer sales frenzy by reviving its employee-pricing incentives. Chrysler's daily vehicle sales rate actually fell, even as Ford and General Motors refused to follow suit.
The company's daily selling rate in July was 6,014 units a day, down from 7,152 in June. That left it with 560,210 vehicles on dealership lots, its highest Aug. 1 vehicle inventory this year compared with the past five years.
Chrysler's vehicle inventory did shrink from 647,700 units on July 1. But the lower selling rate meant that as of Aug. 1, Chrysler was stuck with a higher days supply of vehicles - 93 - than it had on July 1, when it launched its Employee Purchase Plus program. Chrysler reduced inventory because its assembly plants had their traditional summer shutdown in July - not because of the summer blowout sale.
"Consumers' response has been muted so far" to the employee-pricing incentives, wrote John Murphy, auto analyst for Merrill Lynch in New York, in a report to investors.
Chrysler rolled out Employee Purchase Plus with a corporate image ad campaign featuring DaimlerChrysler CEO Dieter Zetsche, who is called Dr. Z in the ads.
New ads tout deals
Chrysler is extending Employee Purchase Plus through the end of August. But it is adding new tags to the "Ask Dr. Z" ads that emphasize various elements of the incentive.
And Chrysler has introduced three new ads that omit Dr. Z and promote the August incentive only. Dealers had requested ad messages that help them move the metal, a dealer said.
Chrysler has struggled with high inventory since December, when it began paying dealers as much as $750 a unit to take the extra stock. At that time, company executives said it could take six months to get rid of excess inventory.
On July 27, Chrysler group CEO Tom LaSorda told analysts the company will cut production by between 60,000 and 75,000 units, mostly in the third quarter. Those include some cuts that the company already had announced. LaSorda did not specify which plants would reduce production or when these cuts would occur.
Company spokesman Jason Vines said Chrysler retail sales rose 9 percent in July. He also said the Dr. Z ads helped Chrysler dealers attract a higher percentage of trade-ins from GM, Ford and import brands than before the campaign. Vines said Chrysler will spend $100 million on the campaign in July and August.
Critics have been too quick to judge the "Ask Dr. Z" advertising campaign on the basis of summer sales results, Vines said. The campaign, which uses Zetsche to tout the engineering expertise that Chrysler gets from its German corporate parent, has a larger purpose.
"This is an image campaign," Vines said. "It can take months, if not years."
'Stick with it'
Analysts say an incentive such as employee pricing works best the first time it is offered. Last summer, GM, Ford and the Chrysler group all offered employee pricing. Record sales resulted. This summer, Chrysler was the only automaker to offer it.
"Chrysler had to carry the weight alone," said Art Spinella, analyst for CNW Marketing Research Inc. in Bandon, Ore. "Splitting that marketing money between Dr. Z and the employee discount didn't do anything."
But the Dr. Z campaign's message touting German engineering could work if Chrysler gives it time, Spinella said.
"It isn't a negative," he said. "It just hasn't had time to turn into a strong positive yet. If they stick with it, it will become a cornerstone strategy. More and more people will pay attention to what his message is, rather than to the mustache."
You may e-mail Bradford Wernle at [email protected]