In his former post as president-CEO of DaimlerChrysler U.K., Mr. Eberhardt terminated the entire Mercedes-Benz dealer network, and their U.S. Chrysler compatriots fear he's trying to put them in the red to trim their ranks, too. "The dealers are ready for a lynching," one auto industry veteran said.
There is no evidence Mr. Eberhardt is trying to put anyone out of business and there is good reason to believe he is keeping his advertising powder dry until the end of the year. But it's easy to understand why dealers are getting antsy. Chrysler Group's U.S. vehicles sales slumped 14% in May to 191,261 units and are down 3% for the first five months to 943,600 units vs. a year ago.
The automaker also chopped measured spending on Dodge, the automaker's biggest-volume brand, by nearly $20 million in the first quarter, to $104 million vs. a year ago, according to TNS Media Intelligence. Jeep's spending slid some $21 million in the period to $59 million, though the falloff for the Chrysler brand was much smaller, at $3 million for the quarter.
Meanwhile, Chrysler Group's average incentive for the first five months of the year reached $3,842 per vehicle, well above its 12-month average in 2005 of $3,544, according to independent auto information site Edmunds.com.
The move-the-metal philosophy has also proved an inhospitable environment for some key marketing executives. Chrysler's two most visible marketing whizzes have left: Julie Roehm, director-marketing communications for all three brands, decamped in February for Wal-Mart, and just last week Jeff Bell, VP-product strategy, confirmed he was moving to Microsoft. Ms. Roehm, who was said to have been asked to take on a different, non-marketing role before she left the company, didn't return calls for comment last week. But in an interview, Mr. Bell said he left because he had come to a "crossroads in my career: Do I want to be an auto executive or a marketing executive?"
Mr. Bell declined to discuss former boss Mr. Eberhardt. But he did say that in the auto business "there's always the temptation to revert to the old thinking of stack 'em high and discount 'em low," and that kind of philosophy isn't unique to DaimlerChrysler these days.
Getting a bad rap
Mr. Eberhardt declined an interview. But George Murphy, senior VP-marketing, said the executive is taking a bad rap. "No one human being has as much power as people think," said Mr. Murphy. "Multiple people make decisions -- that's how you run the business." While he conceded dealer margins may be down, he said Mr. Eberhardt is a huge proponent of dealer profitability.
Mr. Murphy, moreover, maintains that the company isn't slashing spending, bur conserving its budget to put "most of its muscle behind the slew of launches in the second half of the year." Mr. Murphy said dealers were told the automaker was moving a lot of its first-half dollars, and they followed Chrysler's request to shift some regional group ad dollars from the second half of the year to the first to compensate.
Chrysler's second-half launches include the Dodge Nitro SUV, Dodge Avenger, Dodge Ram 3500, Chrysler Sebring, Jeep Patriot, Compass, all-new Wrangler and the first four-door Wrangler. "You're not going to risk anemic launches," said Jim Sanfilippo, exec VP of auto consultancy AMCI, "so it would be a smart move to cut back on your early-year ad budget."
'Tried like hell'
Mr. Murphy also said the TNS figures are misleading. Since Chrysler Group is spending about 20% of its ad budget in new media, which does not show up in that compilation, it appears as if spending has dropped when that may not actually be the case.
The sales figures, however, are indisputable, and Mr. Murphy said Chrysler Group's retail sales in April and May missed sales targets. "Our inventory is higher than we like," he said, by way of explaining the incentives.
Chrysler Group said its new Dodge Caliber small car and minivans were selling briskly. The company counts vehicle sales when dealers take possession.
As for Ms. Roehm and Mr. Bell, Mr. Murphy said he "tried like hell to keep both of them."
But Chrysler's marketers can't be happy with situations like the one involving the Dodge Ram 1500 pickup. The automaker had been running a contest, advertised on TV, print and online, for a successor to comedian Jon Reep as the next star of its famed "This thing got a Hemi in it?" spots. A woman won in online voting, and Mr. Reep said he filmed two commercials with his new female partner that were to air in February or March. They never did.
Mr. Murphy said the spots were killed because they didn't pre-test well with consumers or dealers.