- The Washington Times - Tuesday, September 19, 2006

2:29 p.m.

DETROIT (AP) — DaimlerChrysler AG’s Chrysler Group will cut deliveries to dealers by 90,000 vehicles, or nearly 24 percent, in the third quarter, as falling sales of trucks and sport utility vehicles have left it with bloated inventories, DaimlerChrysler Chairman Dieter Zetsche said today.

Chrysler will ship 290,000 vehicles in the third quarter, compared with the 380,000 originally planned.

For the entire second half of the year, Chrysler plans to reduce retail shipments by 16 percent, to 705,000 vehicles from its previous target of 840,000.

Mr. Zetsche announced the cuts in a Webcast from DaimlerChrysler’s headquarters in Stuttgart, Germany, four days after the company said Chrysler’s third-quarter loss would be $1.52 billion — more than twice what it had anticipated.

He said the company was forced to make the dramatic cuts after dismal sales this summer. Chrysler was counting on an employee-pricing promotion to drive sales after such promotions fueled record-breaking sales for the industry last year.

However, Mr. Zetsche said this year’s zero percent financing offers from Ford Motor Co. and General Motors Corp. ended up being more successful. Chrysler was the only company to repeat the employee-pricing offer, which gave outsiders the same prices the company charges it own workers.

“After the disappointing sales performance in July and August, we had to finally bite the bullet,” Mr. Zetsche said.

Chrysler’s July sales plummeted 37.4 percent from July 2005, while August sales were off 4.2 percent.

Mr. Zetsche said Chrysler was hit hard by the consumer shift away from gas-guzzling SUVs and pickups, and most of the inventory reduction will come in those segments.

That shift, attributed to high gas prices, also has been a blow to Chrysler’s U.S. rivals, Ford Motor Co. and General Motors Corp. The Big Three log most of their sales in the truck segment, while the more fuel-efficient car segment tends to be dominated by Asian competitors.

GM and Ford also recently announced steps to trim inventories. GM said earlier this month that it expects third-quarter production to drop 8 percent from the same period last year and fourth-quarter production to decline 12 percent. Ford said last month that it would temporarily halt production at 10 plants between then and the end of the year, pushing full-year production down 9 percent from last year.

Mr. Zetsche spoke about retail shipments, rather than production, and it was not immediately clear how the company would adjust its production plan. Retail sales are distinct from deliveries for rental businesses and other fleets.

Chrysler spokesman Jason Vines said yesterday that third- and fourth-quarter production would be cut beyond the 65,000 to 75,000 vehicles initially projected but said he could not provide specific numbers.

Mr. Zetsche acknowledged that the company should have acted sooner to trim inventories. He said DaimlerChrysler executives had hoped to avoid drastic cuts by continuously making small adjustments while working to boost sales.

“There’s no way around but saying we were too optimistic,” he said.

Mr. Zetsche also used the Webcast to criticize the United Auto Workers union for not giving Chrysler the same health care concessions it recently gave Ford and GM. The union has said it won’t give the company the same deal because it is in better shape than the other two.

“This is a very strange position that we should first lose 10 billion before we have the same as Ford and GM,” he said.

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