Thursday, August 23, 2007

Chrysler better prepared to handle 2008 inventory, LaSorda says

Chris Vander Doelen, The Windsor Star

Published: Tuesday, August 21, 2007

There's not going to be any billion-dollar inventory problem with minivans this time as Chrysler launches the fifth edition of its popular family vehicle, company president and vice-chairman Tom LaSorda said Tuesday.

Badly burned by an oversupply of old vans the last time they launched an all-new generation of Dodge Caravans and Chrysler Town and Country minivans, this time Chrysler started cutting production of the old vehicles half a year before the launch of the new product.

Last time -- 2001 was the launch of the last completely revamped Chrysler vans -- the company ended up taking a financial bath worth more than US$1.2 billion when dealers were swamped with shipments of new vehicles before they could get rid of lots full of the previous product.

Chrysler President Tom LaSorda attends an event celebrating the manufacturing launch of the 2008 minivans, the Chrysler Town & Country and the Dodge Caravan at the Windsor Assembly Plant Tuesday.View Larger Image View Larger Image

Chrysler President Tom LaSorda attends an event celebrating the manufacturing launch of the 2008 minivans, the Chrysler Town & Country and the Dodge Caravan at the Windsor Assembly Plant Tuesday.

Bill Pugliano, Getty Images
Never again, the company vowed. They've made good on that promise, LaSorda said Tuesday as he presided over the official launch of the 2008 vans.

"The plant was down a long time" for the product changeover, LaSorda said when asked how sales of the old van are going. That's given North American dealers room to sell the old vans without resorting to fire-sale prices.

The company deliberately "kept (production) low" for the 2007 vans during the final months of its life cycle, he said.

The incentives required to move the old vans during the 2001 debacle hurt profits, hurt dealers and damaged residual values for hundreds of thousands of Chrysler minivan owners.

In a wider context, a glut of unsold Dodge trucks and SUVs during the summer of 2006 again forced the company to get control of high inventories of all its products. It has done so, LaSorda said.

The inventory of all unsold Chrysler, Dodge and Jeep vehicles is currently 454,000, LaSorda said, "the lowest we've had in years and years. We won't have an inventory problem like we had in 2006."

The 2006 glut, which was caused by an abrupt change in market demand as Americans suddenly switched from full-sized vehicles to more fuel efficient cars and crossovers, led to another US$1-billion-plus loss for Chrysler.

The inventory is different in Canada, where the minivan is a more important player than it is in the U.S.

Here, where the Caravan is the third-highest-selling vehicle out of 300 nameplates, the company actually had to "load up" on 2007 minivans before the new one launched, said Reid Bigland, president of Chrysler Canada. The sales arm of the company ordered about 30,000 of the old ones for dealers while they could, he said.

By the time the 2008s start arriving in dealers' lots in September, there should be only about 5,000 of the 2007 models left, Bigland said, which is "right on track" with where the company wanted its inventory in Canada.

"At a sales clip of about 4,500 a month they're coming down pretty quickly."

A similar situation has developed with the Pacifica, the executive said. Production of the luxury crossover was halted one week ago to devote 100 per cent of Windsor Assembly's attention to launching the new product, LaSorda said. Production will start next week.

A positive side-effect of the brief hiatus for Pacifica production has been making the crossover slightly harder to find for buyers and dealers, which seems to have whetted their appetite for the vehicle, LaSorda said.

"We have high demand on the order book from Canadian dealers and American dealers for the Pacifica - it's a pretty nice problem to have. These are all dealers orders so we're pretty happy with that."

LaSorda credited Frank Ewasyshyn, executive vice-president of manufacturing, for coming up with the "great trade-off" of halting the Pacifica during the minivan launch.

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