Chrysler Cuts June Sales Target

By: Mike Bartley

DaimlerChrysler AG's Chrysler Group, which has made improving dealer profitability a priority, cut its June sales target. As such, dealers are expected to collect bonuses much easier.

According to a recent letter to retailers from Steven Landry, Chrysler's executive vice president for North American sales, global marketing, service and parts, the Auburn Hills-based automaker slashed its "Volume Purchase Allowance" goals by ten percent this month.

In the letter, Landry urged dealers to sell more Dodge Caliber and Nitro vehicles, among other newer models. "We can sell more Caliber," the letter stated. "It is perfect for the U.S. market. Sebring and Avenger are great vehicles, and we need your help to advertise them locally Compass and Nitro need a push from both of us."

Once dealers hit their targets, they get bonuses for any additional product lines that they sell. This campaign has created friction between several dealers who say it often calls for unrealistic targets. Additionally, there are those who voiced uneven playing field that benefits larger and lucrative dealerships at the same time wounding those that are smaller and less profitable.

Chrysler spokesman, Markus Mainka, said, "We try to ensure that the target-setting process is reasonable, transparent and also reflects how we think the industry will develop. And we constantly continue to review the effectiveness of the program and make potential changes as necessary in consultation with the dealer council."

Since late 2006, Chrysler has been trying to heal its estranged relationship with dealers after the company overestimated the market and crammed overbuilt vehicles onto retailers' lots. In his "mid-year review" letter, Landry pointed out measures taken in the first six months of the year and plans for the remainder of 2007. Landry wrote that one area in which the automaker has made progress is in setting "realistic retail sales targets."

Under Chrysler's new targets for this month, dealers will gain $500 for each vehicle they sell over their goal. For every vehicle they sell over the original target, they will earn $650. The change motivates dealers who may have been discouraged because it appeared they weren't going to hit their targets, said Ron Kutz, the general manager at Dallas Dodge Chrysler Jeep dealership. "It makes it obtainable."

The lowered June goals also give dealers a shot at reaching their quarterly targets and getting those bonuses, Kutz said. "It's not just a reduction for June, but it's a reduction for April and May, which therefore means if I missed April, then wow! I have a chance to catch up on the all the money from April. It's a double win for a dealer."

Doug Wilson of Wilson Dodge in Flowood, Miss., said that the new targets show the automaker is paying attention to "what's going on in the marketplace and with our sales. This shows that their numbers were unrealistic to begin with and out of touch with the current market conditions."

This month, vehicle sales are expected to reach about 16.2 million units on a seasonally adjusted annual rate, said Erich Merkle, an analyst with IRN Inc. in Grand Rapids. That compares to a 16.3 million annual rate last June. "We're seeing some weakness in the market in terms of sales," Merkle said. "It's slight, but it's there."

Like , increasing interest rates and gas prices have greatly affected auto purchasers spending habits. However, Chrysler's lower June targets may have more to do with how its vehicles are being received in the marketplace, Merkle said. "They're going to have to tread water for a while until they get their new minivans," he added. "That will be their next big hit."

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