Chrysler's 'Dr. Z' Campaign Fails to Halt July Sales Slump

Buyers Unswayed by $225 Million Worth of Ads Starring Chairman

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DETROIT ( -- Dr. Z can't give 'em away. Despite reviving the blistering employee-discount program slammed as "marketing crack," U.S. sales are down a cool 17% at Chrysler Group in July over last year. And, although the $225 million ad barrage featuring Dieter Zetsche was impossible to escape, it did little to lure prospective buyers.
Consumers not only weren't moved by DaimlerChrysler Chairman Dieter Zetsche's emphasis on 'German engineering,' they overwhelmingly believed he was a fictional character. ALSO: Comment on this issue in the 'Your Opinion' box below.
Consumers not only weren't moved by DaimlerChrysler Chairman Dieter Zetsche's emphasis on 'German engineering,' they overwhelmingly believed he was a fictional character. ALSO: Comment on this issue in the 'Your Opinion' box below. Credit: AP

Consumers unmoved
Not only did some consumers fail to note the employee-discounting message that accompanied most advertising, they were also unmoved by the German-engineering positioning or the DaimlerChrysler chairman, whom they overwhelmingly believed was a fictional character.

In fact, auto experts predict Chrysler Group will be forced to crank out a new promotion. "We clearly are not doing what we did last July," said a Chrysler Group dealer in the Northeast. A dealer in the West said late last week that this month he had sold only about 30% of what he had in July 2005.

Predicted sales slide: 17%
The automaker won't report July sales until later this week, but independent auto-information site forecasts Chrysler Group's U.S. sales will slide 17% vs. July 2005. The drop reflects one fewer selling day than last year.

There are other reasons why the employee-discount program, which moved tons of metal last time, isn't cutting it now. Jesse Toprak, executive director-industry analyst at, said history has shown that incentives don't work well the second time around. He noted that consumers may have figured out that 0% financing is actually a better deal than employee discounts because of high interest rates on new-vehicle loans. Others fault rising gas prices, which are taking a toll on the entire industry.

But some of the blame must be left at the feet of the bespectacled Dr. Z. Art Spinella, president of CNW Marketing Research, said the spots just aren't what the doctor ordered: Fully 80% of new-car intenders thought he was a fictional character. Instead of luring buyers who intended to buy competitive brands, CNW found the employee-discount ads pulled ahead sales from people who had planned on buying a Chrysler Group product later in the year. And while the German-engineering pitch made more potential buyers consider Chrysler in the Northeast, if failed to sway them in the South and Southern California.

German accent difficulties
The commercials have been panned as silly by critics, including Advertising Age's Bob Garfield, but one Chrysler dealer said his research found seven out of 10 customers liked them. Only half, however, were as fond of the radio commercials; the remainder said they had a hard time understanding Mr. Zetsche's German accent.

The automaker might bid auf Wiedersehen to Dr. Z's ads, but can ill afford to drop metal-moving promotions. Even though it's more financially robust than its Detroit rivals, Chrysler Group's second-quarter operating profit plummeted 90% to $65 million from $695 million a year ago. The unit's revenue fell to $15.9 billion from $16.7 billion in the second quarter of 2005, and the automaker said Chrysler Group could lose as much as $639 million from July to September.

In order to end the year in the black, as Mr. Zetsche promised analysts, the company will have to unload more vehicles. It was sitting on a 91-day supply at the end of June, according to a spokesman, 16 days more than the same period a year ago and "a little higher than we'd like." (A 60-day supply is the considered ideal.) He declined to discuss the supply and whether the employee discounts were working.

Overall industry sales off 11%
To be sure, Chrysler isn't alone: The entire U.S. industry's sales will be off 11% from July 2005 to 1.54 million units, said Mr. Toprak. But he noted that July 2005 -- led by Detroit's employee discounts -- was a barnburner, with the entire industry posting a historic high monthly record of over 1.8-million units.

Chrysler Group has had its inventory gathering dust longer than General Motors Corp. or Ford Motor Co. every month this year, said Tom Libby, senior director of the Power Information Network. In July, it took Chrysler Group 85 days "to turn" compared with 83 for GM and 81 for Ford, PIN data found. Still, that's an improvement: In June, Chrysler Group had a 93 day-to-turn rate, compared with 73 for GM and 74 for Ford.

John Plecha, director-Jeep marketing and global communications, told Advertising Age on July 21 that the employee-discount promotion was generating sales beyond that brand's projections. "We do most of our business during the last five days of the month," he noted.

But Mr. Toprak said Edmunds' projections take those month-end sales pushes into account. He projected Chrysler Group would sell more cars and trucks in July, 191,000, but that's only 4% more than it did in June, translating to a slight market-share bump to 12.5% from 12.4%.
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