Chrysler to Continue Employee Discounts and 'Dr. Z' Ads

Unsold Product Inventory Rises to Highest Level in Five Years

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DETROIT (AdAge.com) -- Chrysler Group, as expected, is extending its employee discounts through Aug. 31, using the same "Dr. Z" ads featuring DaimlerChrysler Chairman Dieter Zetsche that failed to jump-start its sales in July.
Chrysler is pushing ahead with its 'Dr. Z' ads, despite widespread criticism and the fact that the campaign has failed to halt the automaker's sales slump. | ALSO: Comment on this article in the 'Your Opinion' box below.
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High inventory
The automaker needed some sort of deal in August to clear the decks of 2006 models to make room for crucial new 2007 products. John Murphy, auto analyst at Merrill Lynch, said Chrysler Group's inventory at the end of July was the highest it's been in five years.

"It sounds like Chrysler is still desperate," said John Bulcroft, president of auto consultant Advisory Group and a former ad chief of Porsche and Audi.

Sales fall 37%
The marketer reported that its sales last month for Dodge, Chrysler and Jeep fell by 37% to 150,349 vehicles compared with last July, when the industry posted its best monthly sales ever. Chrysler Group sold more vehicles -- 185,946 units -- in June through zero-percent financing deals.

Continuing the discounts is a sign that the automaker hasn't read the market as well as it could have in terms of its reliance on trucks and big sport utility vehicles, said Susan Jacobs, president of auto consultant Jacobs & Associates. Employee discounts were the most successful incentives in 2005, she said, but in 2006 Chrysler Group "may have overestimated the power of the ad campaign," she said, calling the Dr. Z ads "too gimmicky."

Consumer perception
A July survey of new-vehicle intenders by CNW Marketing Research revealed 80% thought Dr. Z was a made-up character.

"There's too much personality and not enough nuts and bolts about what German engineering means for Chrysler [Group] cars," Ms. Jacobs said.

Mr. Bulcroft said the ads make the mistake of portraying the Chrysler chairman as a funny German. "When things get really terrible and the ad agency gets desperate and can't think of anything else to do, their response is: 'Let's put the CEO in the commercial.'"

Other top auto executives to have appeared in commercials include retired Chrysler Corp. Chairman Lee Iacocca, when the company was nearly bankrupt; and Ford Motor Co.'s President-CEO Jac Nasser, during the Firestone tire debacle before he was forced out in fall 2001. His successor, William Clay Ford Jr., also appeared in ads to boost the image of Ford Motor Co.'s biggest-volume arm, Ford Division.
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