Chrysler Plans Major Increase in Second-Half Ad Spending

Expects to Hike Outlay in Certain Months for Remainder of 2006

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DETROIT ( -- Chrysler Group's advertising spending "is going up dramatically" in the later part of this year, President-CEO Tom LaSorda said here today after a speech to the Automotive Press Association. The automaker will more than double spending "in certain months" compared with what was spent in the first half of 2006, he said.
Chrysler Group President-CEO Tom LaSorda said the company would post a $1.5 billion third-quarter loss, and cited 'bloated inventories of our light-truck products.'
Chrysler Group President-CEO Tom LaSorda said the company would post a $1.5 billion third-quarter loss, and cited 'bloated inventories of our light-truck products.' Credit: AP

New-model launches
The outlay will go partly toward its new-model launches. George Murphy, senior VP-marketing at Chrysler, told Advertising Age in June the automaker was conserving ad dollars from the first half of the year for the eight new-product launches in the later part of the year. Those launches include the Dodge Nitro sport utility vehicle, Dodge Avenger, Dodge Ram 3500, Chrysler Aspen SUV and Chrysler Sebring sedan, and for Jeep, the Patriot, Compass, an all-new Wrangler and the first four-door Wrangler. The marketer spent $527 million in U.S. measured media in the first half of this year, according to TNS Media Intelligence.

But the company is also planning some branding ads that will hit on the corporate blending of DaimlerChrysler's American and German engineering. Mr. LaSorda declined to discuss what form the next round of the "Dr. Z" ads with DaimlerChrysler Chairman Dieter Zetsche will take; the initial "Dr. Z" spots left airwaves about a month ago.

Operating loss
The automaker will post an operating loss of $1.5 billion in the third quarter after 12-straight profitable periods, Mr. LaSorda said, citing "bloated inventories of our light-truck products." He acknowledged that Chrysler Group "has had an even steeper hill to climb than others," because it has historically been the most reliant on light trucks, a grouping that includes pickups, minivans and sport utilities. Those categories account for just over 70% of the company's U.S. sales.

So the automaker's strategy for its future growth is to continue to push outside North America and to enter new small-car segments both at home and abroad, with much of the growth coming from the Dodge brand.

A world market car
The Dodge Caliber, a so-called C-segment small-car entry and the smallest model in the Chrysler Group, is the first Dodge designed from the start for world markets. Mr. LaSorda said Chrysler sold nearly 7,000 Dodge Calibers internationally in its first three months of availability, and in the U.S. dealers are clamoring for more. "Although we filled our dealers' initial orders, we can't immediately meet requests for additional allocation," Mr. LaSorda said.

Despite a 9% jump in Chrysler Group's international sales from 2004 to 2005, the company sold just 180,000 units outside North America last year, compared to the 2 million new vehicles it sold in the U.S. alone in 2005. But Mr. LaSorda said Chrysler's international sales jumped by 14% in the first eight months of 2006 and the marketer is on track to more than double the number of models available outside America to at least 20 by 2007.

More small and mid-size
The new U.S. models being launched in the second half of this year will increase Chrysler's offering of small and mid-size vehicles by roughly 30% by 2007. Of the 10 all-new products Chrysler is introducing in North America this year, eight will be offered in international markets.

Chrysler Group needs a joint venture to profitably produce sub-compact cars in the so-called A and B segments, and is talking with potential, unnamed partners in China and Western Europe, Mr. LaSorda said.

DaimlerChrysler already has deals with overseas manufacturers for larger vehicles. It held a grand opening earlier this month for its new joint-venture plant with BAIC in Beijing, where the Chrysler 300C sedan and Mercedes-Benz E Class will be built for the local market. This spring, a venture with China Motor Corp. started building minivans in Taiwan and the carmaker has licensed South East Motors to produce minivans for the Chinese market.

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CORRECTION: An earlier version of this story incorrectly reported that Chrysler would more than double what it spent in the first half for the remainder of 2006, stating that second-half spending could be well over $1 billion. In fact, the automaker is doubling its spending only "in certain months" in the second half.
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