Friday, March 21, 2008

Chrysler sets new rules for discount

Workers' friends, some relatives cut out of best deals


Chrysler LLC has stopped allowing employees to share their employee discount price -- typically around 5% below factory invoice on the purchase or lease of a new vehicle -- with friends and extended family, the Free Press has learned.

"Chrysler LLC continually monitors employee pricing in assessing its competitive position within the marketplace, and the company adjusts accordingly," spokeswoman Beverly Thacker said in explaining why the program was cut.

She stressed that the employee discount program continues for employees and retirees, who are allowed six discounts for themselves and immediate family members each year.

The move could come as a culture shock in metro Detroit. Using friends' discounts on new U.S. vehicles is ingrained in the local car-buying landscape, where thousands of people tied to the auto industry are accustomed to the discounts. Most TV and newspaper ads routinely list the discounted prices.

Chrysler's Employee Choice Program allowed employees and retirees to give the same discount, plus a $200 fee, to a friend, extended family member or acquaintance. They were allowed to give one discount a year, though last year, they could do it twice. The company said the discount was used 60,000 times in 2007.

The so-called EC Program began in October 2004 and was officially terminated in January. Thacker said the discount ranged from 4% to 6%, but most received a 5% discount.

After canceling the program, Chrysler mailed to former EC customers a $1,000 certificate toward the purchase of a new Chrysler-brand vehicle, Thacker said. Chrysler declined to quantify the savings from the change.

Chrysler employees can still help a friend get a smaller deal on a new Chrysler vehicle. Under the so-called Friends Program, friends, neighbors and extended family members are given a preferred price -- up to 1% below factory invoice plus a $75 administration fee -- toward the purchase or lease of select models.

Thacker also noted that Chrysler had boosted its supplier discount by $500.

Carl Galeana, owner of Galeana's Van Dyke Dodge in Warren, said the elimination of the discount has not affected his sales. He said most sales there involve a company discount.

"I've always felt it was an artificial stimulus. Don't get me wrong, it's a good thing to have, but at some point, we have to get along without it. If everybody in the city has a number, it doesn't do us all any good. At some point, we have to sell retail," Galeana said.

New leaders shake things up

Since Chrysler came under the control of Cerberus Capital Management in August, the new management team has been remaking it as the first privately held major U.S. automaker in more than 50 years.

Employees have been facing many changes that affect them in many ways. Last week, Chrysler Chief Executive Bob Nardelli announced that the automaker would have a near-company-wide shutdown in July, during which employees would have to use two weeks of vacation. Employees who lacked enough time could face unpaid time off, the company has said.

Nardelli has spoken several times about Chrysler's change to a private company and the creation of an owner-operator mentality. "There's no doubt that the leadership team has always been passionate about Chrysler. But now they've got some real skin in the game," according to Nardelli's speech at the New York auto show Wednesday.

"Ask anyone who has a meaningful ownership stake in his or her company. It makes a huge difference in the way they approach their jobs and in their dedication to their work."

Jessica Caldwell, an industry analyst with Edmunds, said the move to cut the friends discount is another example of Chrysler's efforts to save money. While the 60,000 times it was used last year "doesn't seem like a big number," Caldwell said, "it seems like they are counting every penny these days."

The automaker's internal numbers indicate that Chrysler lost $2.9 billion last year on operations and restructuring costs, the Free Press has reported.

Some workers see a benefit lost

Many workers interviewed outside Chrysler's truck assembly plant in Warren said they were unaware of the change and that the program was popular.

April Lynch, 42, of Monroe figured the change would become controversial as more people heard about it and saw it as a lost benefit. "I think they need to give us something," she said.

Another Chrysler worker questioned whether it made good business sense, fearing that potential customers would just "go with another company."


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