- The Washington Times - Sunday, May 31, 2009

Discounts of up to $12,000 are driving Chrysler cars off the lot nationwide as bargain-hunting consumers help terminated dealers clear inventory before the June 9 deadline.

“We’ve actually had a better month than we’ve ever had. The [Jeep] lot is empty,” said Hamid Saghafi of Dulles Jeep in Leesburg, Va.

“We’re trying to make deals, some ugly deals, and get them off our lots. Ugly to us, pretty to the customer.”

In Lansing, Mich., Story Chrysler Jeep owner Leo Jerome said sales have never been better, even if he is losing his Chrysler franchise.

“Business is terrific. I’m not just saying that. We don’t have enough sales people to keep up with the people who are coming in,” said Mr. Jerome.

Other Chrysler brands are also selling, though not as briskly as the popular Jeeps.

“Sales-wise we’re doing pretty well,” said John Gunning, owner of Manassas Dodge in Manassas. “We’re down to about 55 Dodges. I think we sold 30 this month.”

Chrysler said on May 14 that it was terminating franchise agreements with 789 dealers, about 25 percent of its total, as part of its bankruptcy restructuring. The terminated dealerships had about 44,000 new cars in stock at the time.

The automaker has offered to help sell and transfer, for a fee, leftover inventory to surviving dealers. Many dealers are already taking advantage of the program.

Some question whether customers and other dealers will be able to absorb their inventory in such a short time and fear they eventually will have to sell at steep losses, possibly at auction.

But 28,000 vehicles - nearly two-thirds of the terminated dealers’ inventory - already have been sold either to customers or other dealers, Chrysler spokeswoman Kathy Graham said Friday. There are 16,000 left, she said.

Chrysler offered rebates this month of up to $4,000 on 2009 models, in addition to $1,000 in “owner loyalty” rewards for current Chrysler owners and $1,000 for members of selected credit unions - which customers can join on the spot. Rebates on 2008 models are bigger. The automaker is also offering zero percent financing for six years on certain models and “generous” factory-to-dealer cash, Ms. Graham said. How much of that cash is passed on to customers is up to each dealer, she said.

The company has not guaranteed to find a buyer for all the rejected dealers’ cars, but Ms. Graham noted that Chrysler has not produced any new cars since May 1 and that 44,000 cars represent about two weeks’ worth of sales.

“We don’t anticipate any problem at all moving the inventory that the dealers would like us to move,” she said.

Still, most dealers expect they will lose money on cars they sell to other dealers.

Doug Swaim, general manager of Star Chrysler Jeep near Los Angeles, said cars are moving but need to move faster.

“It’s not enough, but it’s a lot,” he said. “We’re not selling as much as we need to, and it’s not profitable. We are selling some cars at moderate to substantial losses. We can’t be assured that we’re not going to lose more money if we have to sell the cars at auction.”

The dealership has shed up to 30 percent of its inventory in the past two weeks, he said, but must contend with some “unrealistic” shoppers.

“There are a lot of bargain hunters out there who don’t think 30 percent and 40 percent off is enough, and that’s a product of unrealistic expectations,” Mr. Swaim said.

Jack Fitzgerald, owner of Fitzgerald Auto Malls, who is losing three franchises in Maryland and one in Florida, said he also is pricing his Chryslers, Dodges and Jeeps to sell.

“We’re discounting them very heavily and selling them,” he said. “We’re actually losing some money on them. They’re moving out; we’re going to get rid of them.”

At Montrose Dodge in Germantown, owner Rick Shaub said he has sold about 12 new cars - 20 percent of his inventory - but hasn’t cut his prices much.

On 2008 Dodge Ram trucks, customers are getting up to $12,000 off, almost all of it from manufacturer incentives, Mr. Shaub said.

“We don’t have to discount them [much more than that] because [Chrysler is] going to give us what we paid for them. It’s not 50 percent off like some people think.”

Chrysler will charge dealers a fee of $350 on 2009 models and $1,850 on 2008 models to inspect and transport them to surviving dealers. The automaker will also deduct items such as advertising costs and dealer holdback, which compensates the dealer for the time the car stays on his lot.

Chrysler will not find buyers for cars with more than 125 miles, any damage, or any dealer-installed accessories.

“If you buy from Chrysler for $27,800, they are going to pay you $26,500 and charge an additional $350 on top of that,” Mr. Gunning said.

“Anybody would rather sell to a customer than have somebody haul it away from you,” he said. “I think some dealers would make the judgment to just get the cars off the lot.”

Mr. Gunning said that, as a result, dealers could be inclined to sell cars at a loss of $1,000 or more- on top of the hefty manufacturer incentives.

“[Chrysler’s offer] works for some people, others are not particularly happy with it,” said Paul Taylor, chief economist at the National Association of Automobile Dealers. “Dealers are trying to move as many units as possible @ retail, and that can mean considerable savings” for customers.

Gerry Murphy, president of the Washington Area New Auto Dealers Association, agreed.

“I have started to see some aggressive advertising. The sand is running out of the bottle,” he said. “Obviously, it’s better to retail those cars and parts than deal with your former franchisor. This is what dealers do and are good at.”

Some dealers who are staying with Chrysler say they are not being hurt by the discounting at other dealers.

Sil Gonzales, owner of a chain of dealerships including Casa de Gonzales Chrysler Jeep south of Los Angeles, said the incentives and national advertising are bringing in customers.

“We had the best weekend last week, we were able to sell eight Jeeps,” Mr. Gonzales said, adding that he is not selling his cars at a loss.

c Staff writer Andrea Billups contributed to this report.

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