Chrysler Critics Yell Fire Sale in Crowded Car Lot

Automaker Revives Staff Discounts but Gets Bashed for Lack of Brand Building

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Nissan had Mr. K, and now Chrysler Group has Mr. Z.

Not everyone, however, has been applauding the program dealers say Mr. Z-a.k.a. Dieter Zetsche, the chairman of DaimlerChrysler's management board-will herald in ads next month: the return of the employee discount. The July incentive program, designed to relieve the overload of unsold autos on dealer lots, has been likened to a fire sale by critics who charge that the industry would be better served by brand-building than price-slashing. Others point out Chrysler's current 0%-financing deal actually ends up cheaper for consumers.

The automaker won't reveal details of the program, to be unveiled this week, but dealers said the push will revive both the employee discount and the 30-day-return guarantee.

Though the deal it replaces-0% financing for 60 months on many models-actually works out better for buyers, consumers better understand the language of employee discounts without having to do the math on no-finance fees. And the 30-day return policy has many contingencies, prohibiting trade-ins or leases but mandating financing from Chrysler's financial arm.

One thing, however, is clear: Chrysler Group has to do something to ease swollen inventories and clear the lots for a slew of all-new models coming later this year. Because plants have fixed costs, such as paying United Auto Workers union members nearly their entire salaries whether they work or not, it may be more cost-effective to churn out more vehicles and sell them cheap than to scale back production.

In the ads, the effervescent, mustachioed German "Mr. Z" will tout Chrysler's American heritage and American engineering coupled with German engineering as a means of communicating the brand's value. Omnicom Group's BBDO, Troy, Mich., and New York, handles.

There's irony there because Mr. Zetsche has publicly blasted his Detroit competitors on several occasions for hurting the industry with incentives just a few years ago during a previous stint running Chrysler Group. Indeed, his choice as spokesman perplexed some industry observers. "Dieter Zetsche is a very likable guy, but no one outside the industry knows him," said George Peterson, president of consultant AutoPacific, who also questioned whether "German engineering" was a compelling proposition, given quality problems at Chrysler sibling Mercedes-Benz USA.

Playing the "German card is gutsy because it could hurt Mercedes-Benz," while moving Chrysler ahead, said Dan Gorrell, VP of auto consultant Strategic Vision.

Chrysler's "German engineering" strategy, short-lived in ads a few years ago, could make Mercedes more vulnerable to competitors by clouding the brand's benefits, said Wes Brown, analyst at consultant Iceology, and lead Mercedes prospects to wonder why they are paying a premium.

BMW is touting its corporate independence in the first advertising from GSD&M, Austin, Texas, while Volkswagen of America's VW brand stresses its German roots in ads from Crispin Porter & Bogusky, Miami.

But the biggest issue is employee discounts themselves, which are effective at moving the metal but could tarnish brand image long-term. Discounts train new car and truck buyers to wait for the deals, said Mr. Peterson, who called employee discounts "the American rite of summer car fire sales."

Todd Turner, president of consultant CarConcepts, predicted Chrysler Group will only discount select models. He expects the Dodge Ram full-size pickup, the Dodge Durango SUV, new Jeep Commander seven-seat SUV and Chrysler Magnum sport wagon to be part of the program due to their inventory buildups, along with Chrysler Sebring cars, Chrysler Pacifica and Jeep Wrangler because new or updated versions are coming this year.
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