Thursday, July 23, 2009

Chrysler Cash for Clunkers Program, Smart PR Or Not?

Chrysler Corporation just announced a beefed up incentive, Cash for Clunkers, to entice buyers to purchase their fuel efficient cars. Combined with a government program of the same name, auto buyers who trade in their old gas guzzlers stand to receive incentives of between $4500 and $9000. The programs are designed to get older, less fuel efficient vehicles off the road, and to boost the sale of Chrysler products obviously. It’s too bad the program is not in effect here in Germany, or else we could trade the “clunker” Mercedes A190 we hare having so much trouble with. For US auto buyers and Chrysler, this seems to be a win-win proposition, as consumer trust in the Chrysler brand sank when news of their imminent bankruptcy hit the presses.

New car sales for Chrysler plummeted by 47% between the first half of 2008 and the same period this year., but the auto maker has had sales woes for years. For this writer, the question arises; “How is giving away thousands going to increase revenue?” The 33 Chrysler models eligible for these incentives will obviously be sub-compact, compact, or super fuel efficient sedans. The point here being, the price markup for lower priced vehicles net’s less cash when these vehicles are sold in the first place, or at least one would think so.

The government’s contribution not withstanding, just how is giving away profit going to help a car manufacturer in bankruptcy? Maybe I am stupid or something, but this feels like one of those “bait and switch” deals to me. Given a statement by Steven Beahm, VP-sales operations Chrysler, it looks like getting people inside the dealership may be the reason the auto maker is “piggybacking” on the government shell out:

It is also interesting to note that Ford plans no such “matching” program for their buyers, and why should they? According to Mark Fields, Ford President of the Americas; “We feel we have an appropriate level (of incentives) right now.”
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