Forget Toyota. Chrysler's got the most problems.
By Chris Isidore, senior writerMarch 10, 2010: 12:13 PM ET
NEW YORK (CNNMoney.com) -- The car company that is off to the worst start of 2010 isn't Toyota. It's Chrysler Group.
Industry experts say that even though Chrysler's overall sales are down only 3% during the first two months of the year, estimates show more than half of Chrysler's sales have been to fleet customers, such as rental car companies.
American consumers have essentially turned their backs on the Chrysler, Dodge and Jeep brands. By some estimates, the once proud member of America's Big Three automakers fell to No. 7 in February in terms of sales to U.S. consumers.
Chrysler's sales to consumers have plunged more than 44% so far this year, according to estimates by industry tracker Edmunds.com.
By comparison, Edmunds.com estimates that Toyota's retail sales fell less than 14%, even though Toyota stopped selling its best-selling models for more than a week in January, and has been hammered by a constant drumbeat of bad news ever since.
Chrysler's numbers look even worse when you consider that it should be benefiting from easy comparisons to a year ago. Chrysler shut much of its production in early 2009 in an effort to save cash. Customers were also worried if it would survive the looming bankruptcy process.
The problem with fleet sales. Fleet sales may be masking bigger problems at Chrysler right now, but experts say they are not a very secure lifeboat for an automaker whose customer demand is sinking fast.
Sales to rental car companies are driven by deep price discounts, and they are bound to hurt the company's future sales and profits when the low-mileage used cars sold to fleets go on sale themselves.
"You can not viably survive with fleet and rental sales over 50%," said Jesse Toprak, vice president of industry trends for TrueCar, a car pricing and sales service. "The math just doesn't work."
Company officials, however, said Chrysler is on track to reduce its reliance on fleet sales and that they should make up only about 25% of total sales this year. But a Chrysler spokeswoman also said strong sales to rental car companies are a good sign.
"We have to rebuild consumers' confidence in the company," the spokeswoman said. "The fact that large companies are willing to buy our vehicles helps rebuild that confidence, so fleet is part our businesses strategy."
Chrysler admits that its pipeline of new vehicles is fairly limited right now, but it expects better sales at the end of this year when new models are due in dealers' showrooms.
Pipeline problems. But other experts say it's risky for Chrysler and Italian automaker Fiat, which bought a controlling share of Chrysler out of bankruptcy last year, to count on models designed in Italy to get American buyers interested in Chrysler again.
Erich Merkle, president of Autoconomy.com, an industry analysis firm, said the Fiat brand and designs are untested in the U.S. market. He points out that even Chrysler's better products, such as the Ram heavy-duty pickup, which just won Motor Trend's Truck of the Year award, has had sales problems.
"The fact that they're losing share on the pickup side, it says to me that this goes beyond the product itself," he said. "I think Chrysler in the near term will be at the mercy of the market. They'll continue to lose market share, but they've got to hope that a rising tide will lift all boats."
Chrysler's weakness in mid-size sedans, compacts and so-called crossover utility vehicles means that it is gaining the least of any major automaker from the problems at Toyota.
Jessica Caldwell, director of industry analysis at Edmunds.com, said traffic on its site for almost all the other major manufacturers moved up in the wake of Toyota's recall woes. "But nothing happened at Chrysler," she said.
Still, most experts think that Chrysler will be able to stay in business, at least in the near-term. But the news is unlikely to get much better soon.
"It really is survival mode for the next 18 months until they see product in the showroom," said Jeff Schuster, director of global forecasting at J.D. Power & Associates. "They're not finished with the turnaround yet. This is not something that can happen overnight."
First Published: March 10, 2010: 9:17 AM ET
Wednesday, March 10, 2010
The most troubled automaker isn't Toyota. It's Chrysler. - Mar. 10, 2010
via money.cnn.com
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