Last year, Chrysler reorganized its field organization into five regional business centers.
The idea was to allow the company's field staff to make decisions on vehicle content, incentives and marketing in each region. The shakeup was intended to make the company leaner and allow it to directly service dealers in their local market.
But has or will the reorganization help Chrysler boost sales? Although many Chrysler Group dealers think so, there's really no way to tell if it has, or, if in the long run, it will.
Because of 0.0% financing in the wake of Sept. 11th, industry sales skyrocketed in October, November and December. Thus, the real test for Chrysler's reorganization will be this year, once 0.0% goes away.
Jim Young, vice president of the Chrysler Group's Midwest regional business center, says prior to Sept. 11th, dealers were concerned about Chrysler's business plan, its advertising, merchandising, incentive programs and how the company is going to support them.
They still are.
“Zero percent makes business move,” says Steve Landers, owner of Landers Chrysler, Dodge in Benton, AK. “When it goes away, there'll be something else. Manufacturers have given something to the public that the public doesn't want to get rid of.”
The difference at Chrysler now is that those new incentives will be localized. For instance, the reorganization has allowed Chrysler's Midwestern regional business center to react to varying circumstances in different markets. For example, Detroit tends to be a leasing market and Chicago a buying market.
“In the past, incentives tried to water all the flowers,” Young says. “The lease subvention wasn't quite what it should have been (in Detroit) and the retail incentives weren't as strong as they should have been (in Chicago). Now, we're able to tailor our incentive programs.”
A secondary impact of Chrysler's reorganization is that it may help mend the relationship between the manufacturer and its dealers which soured after Daimler-Benz AG acquired Chrysler Corp. in November 1998.
“They came in and in one fell swoop kicked the s — out of us guys, and nobody took kindly to it,” says Stewart Hansen, owner of Stew Hansen's Dodge City in Des Moines, IW. “Now, they're being so damn warm and fuzzy, you can't believe it.”
That fell swoop was a series of actions where DaimlerChrysler AG took money out of dealers' pockets. First, their margins were cut.
“That really pissed the dealers off,” says Nick Twork, an analyst with the AutoPacific Group. “They also cut the stair-step program,” which paid dealers sales bonuses.
It got worse. Dealer incentives and subsidies were cut. Chrysler cut back on lease subvention. The company even stopped reimbursing dealers for the full tank of gas given with every sale. For a store selling 100 vehicles a month, that's $24,000 a year, according to one dealer's reckoning.
“We went after that lease business very hot and heavy, and then they decided that they didn't want to do that anymore,” says Mike Lowry, general manager of Allen Samuels Dodge-Hyundai in Ft. Worth, TX. “And when they did that, they saw sales fall off. I know we did. Residual-based financing was over 30% of our business.”
The result is that Chrysler, Dodge and Jeep dealers — in NADA's dealer attitude survey of franchise value, input and satisfaction — gave the automaker terrible marks.
Now, the Chrysler Group wants to repair its relationship with its dealers, boost sales and do so without relying as heavily on incentives at its competitors.
The reshuffling of its field service staff is key to that effort. But the evidence, so far, suggests that while the reorganization is helping improve the automaker's relationship with its dealers, it won't help the automaker regain lost market share.
While industry sales shot up 29.2% in October — the first full month of 0.0% — Chrysler sales only increased 9.1% for the month.
“The incentives were a joke compared to what Ford and GM came out with. Chrysler was not nearly as aggressive,” says Doug Waikem of Waikem Motors which counts a Chrysler-Jeep franchise among its 12 stores in the Massillon, OH, area. “All my managers are complaining about Chrysler's programs not being nearly as aggressive as what Ford and GM have.”
Chrysler's real problem is not organization, but product, according to AutoPacific's Twork.
“They need new vehicles, but they're not going to have anything coming for the foreseeable future of any consequence,” he says.
What's more, he adds, many of the new products Chrysler has introduced miss the mark. For instance, while the all-new Dodge Ram looks good, its power train is not comparable to those offered by either GM or Ford, he says.
Worse, a Jeep Liberty flipped over during an auto magazine's severe road testing. That focused attention on the Liberty's two-star rating in the National Highway and Traffic Safety Administration's rollover resistance rating. One star is the highest risk of rollover and five stars is the least.
It's not certain whether that could hurt the hot-selling Liberty. It doesn't help. Such product glitches are not lost on dealers.
What's worse for Chrysler and its dealers is that GM has been driving the market with incentives. If that continues, then the reorganization of Chrysler's field staff won't matter. The company will have to play an increasingly costly incentives game to stay competitive.