Chrysler Customers Swamp Dealerships As Leasing Nears End

DETROIT -(Dow Jones)- Chrysler LLC's decision to suspend leasing is unintentionally serving as the best end-of-month sales incentive the auto maker could have implemented to help clear dealer lots of inventory.

Chrysler dealers say showroom traffic and sales have soared in recent days, with nearly 100% of transactions done with leases. Dealerships are flooding local newspapers with advertisements and some are staying open until midnight as they try and squeeze in as many lease deals as possible. They are also pondering what business will be like come Friday without one of the key tools in their financing toolkit.

Chrysler announced last Friday it would no longer offer leases as of Aug. 1, a dramatic move made necessary by the steep declines in residual values of pickup trucks and sport-utility vehicles in recent months as fuel prices soared and consumer confidence waned. Ford Motor Co. (F) and General Motors Corp. (GM), which have also suffered big losses from leases, are taking steps to tighten their leasing practices, though they will continue to offer leases.

Chrysler dealerships in the Michigan and New York markets, where leasing typically generates 50% to 75% of dealers' sales volumes, are the biggest beneficiaries of the late-month surge.

Golling Chrysler Jeep Dodge Inc., located in Bloomfield Hills, Mich., more than tripled its business, selling 112 vehicles on Monday and 96 on Tuesday, said owner Bill Golling. The majority of sales were through leasing.

"We would like to retain the lease program, but the economic realities means it's just not possible," said Golling, who is keeping his dealership open to midnight and serving hot dogs and hamburgers to customers.

"Leasing was a great advantage when you could get more car for less money at a better term, but that doesn't exist anymore," he said, adding that he hopes Chrysler will respond with some strong and new incentives on Friday. Chrysler has said that it plans to plow more financial resources into its sales incentives.

Could Bring Sales Forward

The end-of-month surge in sales at Chrysler could help spruce up the company's July sales numbers, which are predicted to show another double-digit decline when the figures are released Friday. Through the first six months of 2008, Chrysler's U.S. sales were down 22%, the biggest drop of any major manufacturer, as the company relies more than its peers on sales of trucks and SUVs.

The jump in sales also likely indicates that many buyers are buying sooner than they otherwise would have, indicating that sales in coming months could suffer as a result. For auto dealers struggling with bloated inventories of trucks and SUVs, however, their first priority is moving the 2008 models off the lot before new models hit the showroom floor and before the current batch lose even more value.

"I have got to get rid of this inventory and move out the 2008s and then we can figure out something for August sales," said Paul Steel, who runs three dealerships in Michigan, including Southfield Chrysler Jeep.

Steel said he has to sell about 500 vehicles alone at the Southfield location before so he can start accepting Chrysler's 2009 models.

"It has been a frenzy," Steel said. "Everyone is trying to get in now on a three-year lease hoping that Chrysler Financial will get back in the game by the time their lease is done."

Steel has kept his dealerships open until midnight every night since Monday, and he expects his staff will be working until at least 2 a.m. Friday morning to process all the orders.

"We are seeing many people either keep the same vehicle they have or go up a vehicle," Steel said.

Tough Time To Lose Leasing

For dealers and auto makers, the scaling back or elimination of leasing makes their job tougher at a time when U.S. auto sales are already at their lowest levels in 15 years. Adding to the problem is that foreign auto makers such as Toyota Motor Corp. (TM) and Honda Motor Co. (HMC) aren't in the position of having to eliminate leases, as residual values on their car-heavy portfolios have held steady or risen in some cases.

Auto makers will attempt to compensate for the lack of leasing as an option by ramping up incentives, including longer-term loans at lower rates. That's a move that comes with risks, as it cuts into profit margins and creates expectations among consumers that bargain-basement deals will always be available. Auto makers and dealers have in recent years tried to reduce their reliance on incentives, but the steep decline in sales has backed them into a corner.

For years, leases have made it possible for consumers to drive newer, more- expensive cars than their budgets might otherwise allow. In a lease deal, the vehicle is owned by a bank or a finance unit like Chrysler Financial, and the customer merely rents it, usually for two or three years. Auto makers benefit from leases because they facilitate the sale of higher-priced vehicles, which generate more profit.

But leases are becoming a liability amid tanking resale values, especially of used pickups and SUVs. In most cases, when a lease is up, the customer returns the vehicle to the auto maker, which then resells the car or truck. The problem for auto makers lately is that the values at which they are able to sell those off-lease vehicles are far lower than they had assumed they would be when lease contracts were written.

Ford Motor Credit announced last week that it took a $2.1 billion write-down in the second quarter associated with its leasing business. GM affiliate GMAC Financial Services said Thursday it wrote down $716 million related to leases, a figure that would have been more than three times higher if it weren't for various arrangements with GM. Both Ford and GMAC are taking steps to make leases more expensive, pushing consumers to enter into loan agreements to purchase instead.

Chrysler, which is owned by investment firm Cerberus Capital Management, hasn't disclosed how much it has lost as a result of leases gone bad.

Moire talks with both Fiat and Tata

NEW YORK: Automobile major Chrysler LLC is looking for ways to cut costs and also line up partnerships with foreign auto makers including India's Tata Motors to shore up its finances, a media report today said. The Wall Street Journal quoting people familiar with the matter said, "Chrysler LLC is scrambling to slash costs and line up partnerships with foreign auto makers to shore up its finances amid a painful downturn in sales and a deteriorating outlook for the company." Chrysler had discussions with Tata Motors about having the company sell and possibly assemble jeeps in India, the report added. "Separately, Chrysler has had talks about leasing one of its US plants to produce cars for Italy's Fiat SpA, they said. "Chrysler has been exploring alliances since it was acquired a year ago by Cerberus Capital Management LP, and has mapped out a deal to make trucks for Nissan Motor. Both sets of talks are preliminary and may not lead to deals," the newspaper noted. With the deep downturn in the US vehicle sales of Chrysler, Cerberus has "become more concerned about Chrysler's ability to turn around on its own and has stepped up efforts to reach out to foreign car companies," the report said. Further, quoting people familiar with the matter, the publication said that the talks with Tata and Fiat are taking place in parallel discussions with other auto companies. Chrysler's US vehicle sales fell 22 per cent in the first half of the year and has worsened in recent months. In other cost-cutting efforts, Chrysler is getting ready to offer early retirement packages for salaried employees and the offers are also part of an effort to trim its white-collar work force by 1,000, the report added.

6.4-Liter Hemi-Powered SR 392 Roadster SEMA Special To Hit Auction Block At Monterrey [Monterrey]

The SR 392 roadster, built by Quality Metalcraft's Michael Chetcuti and Chrysler's Mark Allen and Ralph Gilles, will be auctioned off in August at the the Russo & Steele car auction during the Monterrey Historics. In case you've forgotten, the SR 392 concept made its debut in the Chrysler display at last year's SEMA show and it's named after the 392 6.4-liter Hemi crate engine under the hood. Since then, it's traveled the country, winning show awards left and right. We only hope it finds an owner who treats this Hemi-powered hot rod right. Full press release after the jump.

galleryPost('SR392SEMA', 8, 'Hemi-Powered Hellion Of A Hot Rod');

Private Seller to Auction One-Off Chrysler Concept Roadster at Russo & Steele

A sleek black and chrome Detroit-style roadster, designed by Chrysler's Mark Allen and featuring a 6.4 L Hemi crate engine, will be auctioned at the Russo & Steele car auction in Monterrey, California this August 14-16, 2008. The SR 392 Roadster has won several prestigious awards at Hot Rod shows throughout the country this year.

Detroit, MI (PRWEB) July 30, 2008 — An edgy, HEMI-powered, award-winning roadster from Chrysler's 2007 Mopar SEMA exhibit will be up for bidding at the August 14-16 Russo and Steele Auction in Monterey, California.

The SR 392 Roadster, featured widely in 2008 issues of both Hot Rod and Street Rodder magazines, has won numerous prestigious awards. Most recently it was hand-selected by the widow of the late Boyd Coddington for a Boyd Coddington's Pro's Pick Award at the Good Guys Nationals in Columbus, Ohio.

It also won a Chip Foose Design Excellence Award at the 2008 Grand National Roadster Show. "This hot rod is truly trend-setting. It's design elements will be mirrored in hot rods and show vehicles for years to come," Foose said.

For nearly two years, Chrysler's Mark Allen and Ralph Gilles planned to build the SR 392 Roadster as a SEMA stunner with Michael Chetcuti of Livonia, Mich.-based auto supplier, Quality Metalcraft (QMC). Allen is chief designer, Jeep/Dodge Truck Studios - Chrysler LLC and Gilles is Vice President of Jeep/Truck & CFM Design - Chrysler LLC. Gilles and Allen are members of Chrysler's Mopar Underground SEMA design team, a group of in-house automotive enthusiasts who donate their time to SEMA project vehicles.

Allen, Chetcuti and Gilles saw a challenge in proving that the 6.4-liter HEMI crate engine could apply to a vehicle other than traditional muscle cars or modified upfits. The team's idea was to redefine the classic hot rod with a more functional urban and industrial attitude to create a distinctly Detroit roadster.

Allen said, ''It was important to convey the car's theme as an homage to Detroit - the cool Detroit with its unique artistic community, music and gritty vibe. We used durable materials and let the mechanicals show to reflect the industrial backbone of the city. We wrapped it all up in a high-gloss black-and-chrome wrapper to evoke Detroit's cool attitude.''

''The core design elements of this roadster speak to the grit and industrial edge of our city,'' said Chetcuti. ''Things like the mezzanine flooring detail and Eames-inspired seating - these take an industrial cue but are by no means 'rat-rod.' It is a refined and organized design throughout.''

Awards for the SR 392:

* Mothers Choice Award - Excellence in Automotive Design (SEMA, 2007)
* Hot Wheels Designer's Choice Award (SEMA, 2007)
* Chip Foose Design Excellence Award (Grand National Roadster Show, 2008)
* AMBR Outstanding Class Award (Grand National Roadster Show, 2008)
* America's Most Beautiful Roadster (Grand National Roadster Show, 2008)
* Altered T-Roadster Award - 1st Place (Detroit Autorama, 2008)
* Street Rodder Magazine: Driven Award (Detroit Autorama, 2008)
* International Show Car Association: Outstanding Engineered Award
(Detroit Autorama, 2008)
* Boyd Coddington's Pro's Pick Award (Good Guys Nationals, Columbus, OH, 2008)

Media Coverage:

* Detroit Auto Scene - December 31, 2007 & January 7, 2008
* Mopar Collector's Guide - February, 2008
* Hot Rod - April, 2008
* Street Rodder - May, 2008
* Street Rodder - June, 2008

Shows:

* SEMA Show - Las Vegas, NV - October, 2007
* Grand National Roadster Show - Sacramento, CA - January, 2008
* Autorama - Detroit, MI - March, 2008
* LA Roadster Show - Pomona, CA - June, 2008

Chrysler health care changing

BY SUSAN TOMPOR • FREE PRESS COLUMNIST

Chrysler's UAW retirees and surviving spouses need to pay close attention to some paperwork that could be sitting on the kitchen counter.The papers apply to your health care coverage.

If seniors miss the July 31 deadline, you could be socked with extra fees that add up to 20% or 45% more each month for coverage.

Direct billing

Thousands of UAW-Chrysler retirees and surviving spouses soon will be required to pay $11 a month for single coverage and $22 a month for family coverage.

You would need to authorize deductions from your pension check by July 31.

It also is very important to sign and date the back of the form.

Yet if UAW-Chrysler retirees do not respond, they'll automatically be enrolled in what's called the "direct billing payment option."

How much will that cost?

Direct billing -- the second box listed on the form -- has a $5 monthly service fee.

So instead of paying $11 a month, you'd pay $16 a month. Or instead of $22 a month, you're looking at $27 a month.

$5 service fee for a bill

I realize $5 extra per month doesn't sound like much, yet I can't imagine anyone wanting to pay a service fee to get a monthly bill.

And $5 a month does add up to an extra $60 a year -- enough to cover nearly six months of coverage for a single retiree.

If you do end up getting stuck with the monthly fee, though, the letter states that it's possible to later authorize deductions from the pension check by providing 45 days' notice to Benefits Express.

The form also includes a box for opting out of the UAW Amended Plan to enroll in a catastrophic plan only. There are no monthly premiums, but the catastrophic plan has higher deductibles, out-of-pocket maximums and co-payments.

And someone can elect to waive Chrysler-provided health coverage.

A group of UAW protected retirees will not have new cost-sharing requirements. They are entitled to an annual pension benefit of $8,000 or less -- excluding lump-sum payments and others -- and their pension benefit rate is calculated on a specific formula per year of service.

David Elshoff, a spokesman for Chrysler in Auburn Hills, said the company is doing what it can, including using phone blasts or recorded messages, to remind retirees and surviving spouses to take some action to avoid extra fees.

Retirees also can learn more at www.chryslerretirees.com.

Or if Chrysler retirees lost their pension election form, they can call Benefits Express: 888-409-3300.

No such July 31 deadline applies to UAW-GM or UAW-Ford retirees.

What's difficult for many retirees, of course, is that it can become overwhelming to read all the new rules.

The UAW-Chrysler health care coverage letter gets bogged down by discussing legal notices and the like.

That's because health care coverage would be amended as part of a still pending settlement.

Chrysler LLC said a judge will decide in August whether to grant approval for the automaker to establish a $9.75-billion retiree health care trust fund negotiated with the UAW last year.

Chrysler to trim 1,000 salaried jobs worldwide

This is 3rd round of cuts in 18 months

BY TIM HIGGINS • FREE PRESS BUSINESS WRITER

For the third time in the past 18 months, Chrysler has announced plans to cut its salaried workforce.

Workers were told Wednesday that another 1,000 white-collar jobs worldwide would be eliminated by Sept. 30, following a first half of the year in which Chrysler saw its U.S. sales drop 22%.

The job cuts come on top of more than 27,000 job reductions already announced since February 2007, when the automaker began trying to correct its downward spiral.

Since then, Chrysler has been acquired by a new majority owner, Cerberus Capital Management, and the U.S. auto market has tumbled, sending shock waves throughout the domestic auto industry.

"The signs of economic challenge continue for the U.S. market and as a result, further actions must be taken to improve our business and return to profitability," Nancy Rae, Chrysler executive vice president for human resources and communications, told workers by e-mail.

"In response to the continued deterioration in the U.S. automotive market," she added, "an incremental reduction in both salaried head count and supplemental resources is, unfortunately, necessary."

A Chrysler spokesman confirmed the cuts.

"Chrysler LLC has a clear, long-term strategy to build a profitable enterprise, even in this challenging economy," Rae wrote. "Despite these challenges, the company's liquidity position through the first half of the year remained unchanged versus December 2007 as a result of aggressive programs to reduce working capital, the sale of noncore assets and volume-related manufacturing reductions."

Late last month, Chrysler announced it was shutting down its St. Louis-area minivan plant and reducing a shift at its pickup plant there.

On June 30, Chrysler had 18,500 salaried workers worldwide with 9,500 in the Detroit area, said David Elshoff, a Chrysler spokesman. He couldn't say how Wednesday's announcement would be felt locally.

The Auburn Hills automaker hopes the bulk of cuts will come through voluntary buyouts, early retirements or attrition but cautioned that involuntary layoffs could be considered if goals aren't met.

"The provisions of the special retirement programs, which will be effective Aug. 31, 2008, are consistent with programs announced" in February 2007, Rae wrote.

David Cole, chairman of the Center for Automotive Research, was not surprised by the move, noting the automaker's efforts to partner with other automakers to bring small cars to market.

"The cost of having an overly large organization just doesn't do it anymore," Cole said.

Chrysler loses $431 million

Automaker gives results after Daimler data

BY TIM HIGGINS • FREE PRESS BUSINESS WRITER

Chrysler LLC released financial figures Thursday that indicate the automaker lost $431 million in the first three months of this year.

The Auburn Hills automaker's decision to officially release limited financial figures is a first since going private last August and comes in the form of a clarification to financial statements issued early Thursday by minority owner Daimler AG.

"Chrysler LLC has a clear strategy to build a profitable enterprise for the long term as an independent company, even in this challenging economy. Our full-year plan for the market in 2008 has been aggressively conservative, allowing us to be better positioned for the current slowdown," said Shawn Morgan, a Chrysler spokeswoman. "Despite the challenges, Chrysler continues to meet or exceed its plan on all financial metrics."

Daimler, which has maintained a 19.9% stake in Chrysler Holding LLC, the umbrella organization that includes the automotive business and Chrysler Financial, announced it lost 373 million euros, worth $585 million at today's exchange rate, on its share of Chrysler, primarily during the first quarter of 2008.

That would imply that Chrysler Holding lost $2.9 billion under European accounting standards as used by Daimler. (Daimler reports most of Chrysler's financial results on a three-month delay.)

Chrysler executives have argued strongly against using Daimler's numbers to judge the Auburn Hills automaker's finances, saying the differences between U.S. and European accounting standards are too different for a fair comparison. In the past, however, Chrysler as a private company never officially released its own numbers. As a privately held company, it is not required by the Securities and Exchange Commission to report audited financial results.

Thursday marked a change.

According to a Chrysler statement: Daimler's stake in Chrysler Holding experienced a net loss of 65 million euros -- $102 million -- under a U.S. accounting standards. Of that, Chrysler said 55 million euros -- $86 million -- came from its automotive business.

This would imply Chrysler Holding as a whole lost $509 million, of which Chrysler LLC lost $431 million.

Chrysler attributed the differences between Daimler's stated loss of 373 million euros and Chrysler Holding's accounting loss of 65 million accordingly:

• A 130-million euro adjustment for differences between accounting

Fitch cuts rating on credit for Chrysler

Public concern expected to further harm firm's standing

BY TIM HIGGINS • FREE PRESS BUSINESS WRITER

Suppliers and retail customers concerned about Chrysler LLC's financial condition could exacerbate the struggling automaker's situation, Fitch Ratings cautioned Tuesday as it further downgraded its credit rating on the Auburn Hills automaker.

Fitch reiterated that Tuesday, adding: "This could be accelerated in the event that suppliers or retail customers become concerned with Chrysler's financial condition and restrict trade credit or reduce retail purchases."

The rating agency downgraded Chrysler to CCC from B-minus. Fitch has only two rating levels below CCC for high-yield corporate borrowers.

"The downgrade reflects Chrysler's restricted access to economic retail financing for its vehicles, which is expected to result in a further step-down in retail volumes," a Fitch note said. "Lack of competitive financing is also expected to result in more costly subvention payments and other forms of sales incentives."

Last week Chrysler announced it was getting out of offering leases on new vehicles through its financial arm, Chrysler Financial. The automaker said falling resale values of vehicles coming off lease were to blame.

Chrysler has said it will redirect its resources into financing deals to help customers purchase new vehicles.

But Fitch said it expects the change to result in a sales decline for Chrysler.

"Given the challenges in the bank, auto and capital markets, it is unlikely that third-party financing will step in to fully replace lost volumes," Fitch said. "Higher sales incentives are also unlikely to close this gap, resulting in lower production volumes at Chrysler."

Chrysler executives have maintained that the privately controlled automaker is meeting its financial targets and has issued statements that it is not considering bankruptcy.

Chrysler sales have dropped 22% so far this year, more than twice the rate of the industry as a whole.

Last week Chrysler indicated that it lost $431 million in the first three months of this year on its automotive business.

The automaker has said it ended 2007 with $9 billion of cash on hand.

The company also has tapped into a $2-billion loan allowed under the original deal with Daimler AG that gave Cerberus Capital Management majority control of Chrysler last August.