California, here we come

LOS ANGELES -- It's early, but Chrysler Group's comeback effort in California is showing results.

To tackle long-standing shortcomings in the country's biggest market, Chrysler has:

-- Opened 17 dealerships in the past 20 months, bringing its store roster to 127 including Fiat.

-- Launched an ad campaign with California-themed TV commercials.

-- Separated California from Chrysler's Western sales region, making the state its own region with a budget comparable to the automaker's eight other regional sales offices.

And in the first two months of this year, Chrysler Group vehicles accounted for 6 percent of all retail registrations in the state, its largest share of the California market since 2008, according to Polk data.

Chrysler's goal is to pull even with its national market share, which Polk said was 10.3 percent of U.S. retail registrations through February -- so it still has a long way to go.

Dealers attribute Chrysler's recent momentum to a revived product lineup -- 16 new or reworked nameplates in the 2011 and 2012 model years. They also credit last year's opening of the California Business Center, which brought staff, funding and a renewed focus to the market. The California-themed commercials seem to be moving the needle.

"The plan ultimately has really started to take hold this year," said Jason Stoicevich, director of the business center. "This is really where we've started to officially turn the corner and get back to the numbers we're capable of out here."

In early 2011, Chrysler split the California market from its Western regional sales office. Under the old system, the needs of dealers in California competed with those in eight other states for attention and marketing funds.

"California is all we're talking about on our conference calls now," said Jon Gray, CEO of two Chrysler Group dealerships in Orange County. "We're not talking about what marketing programs are needed for Idaho."

Stoicevich said that when Chrysler's Western region included California, it oversaw some 400 dealerships. Now, Stoicevich's team oversees just 125 dealerships.

"Our dealer count can be as much as half of what some of the other regions are but with the same amount of resources," Stoicevich said. "We can be a lot more intimate, not only with the market but also with the dealers."

Gray said the regional management now has the funding and flexibility to tailor marketing to more nameplates.

"Historically, money would have been shifted to the two or three hotter models, and everything else would have suffered accordingly," Gray said. "Now they're doing a better job at supporting the clear flagship models of each brand, but the models in each segment below that aren't just being left out to pasture."

Sales data and industry analysts paint a mixed picture of Chrysler's comeback efforts.

For instance, according to Polk, the automaker's retail registrations grew last year by 55 percent to 50,875 vehicles. The figures exclude fleet sales.

But Chrysler still relies heavily on incentives to move the metal here, spending $3,300 per vehicle, similar to what it spends nationally, according to TrueCar.com data.

According to shopping data from Compete Inc., a market research company, Chrysler garners less attention from consumers in California than it does nationally.

Dennis Bulgarelli, director of automotive at Compete, said Chrysler is still battling consumer perceptions of poor vehicle quality.

"Perceived quality issues are pretty ingrained, and convincing consumers that that is not the case anymore takes some time," Bulgarelli said. "You have to continue to drive that point home, and people have to believe it and experience it."

David Pedder is one of Chrysler's newest dealers, having opened a Chrysler-Dodge-Jeep-Ram dealership in Hemet, Calif., a town about 90 miles southeast of Los Angeles, in mid-November. "I was prepared to lose money with the Dodge-Chrysler-Jeep franchise for a while, but it's producing right out of the gate," he said. He's selling about 40 new vehicles a month, and sales are growing about 10 percent a month.

In 2005, the automaker had 198 dealerships in the state.

Today, it has 104 Chrysler-Jeep-Dodge-Ram dealerships and 23 Fiat stores.

The decline looks worse than it is because many former stand-alone Dodge and Chrysler stores consolidated with others under one roof.

In California, Chrysler Group, excluding Fiat, has about 30 percent fewer franchises today than in in 2005.

As Chrysler re-establishes its brands in neglected areas, dealers are finding they must reconnect with customers who have drifted away.

"There was a D-C-J store here that went belly up about three years ago, and trying to reconnect is part of what we're doing, and it hasn't been all that easy," dealer Pedder says. "With stores closing down and people not being able to service cars in their local areas, it probably left a bad taste in their mouth."

Chrysler has helped some dealers strengthen their presence in the state by buying dealership land and leasing it to the dealers.

For example, Chrysler helped California Superstores, a dealership group majority-owned by New York hedge fund York Capital Management, reopen shuttered points by buying real estate. The group reopened five former Chrysler Group dealerships in the state and three Fiat dealerships.

Gray struck a deal with Chrysler to lease the property of his second dealership, which opened last summer in San Juan Capistrano, Calif. The point had been vacant for three years, and Chrysler's help with the real estate deal let Gray put his money to use elsewhere. The new store is off to a strong start, averaging about 70 new vehicle sales a month this year, nearly double its sales target set by the factory Gray said.

Gray said the lease deal let him "use my time and resources on the store -- sales, employees, training and all the important things that make a rooftop go."