Chrysler Calls for ‘Marketing Rethink’ as US Price War Bites

28 April 2003

Chrysler Group is calling on its fellow US auto manufacturers to “rethink” their marketing tactics after a weak first quarter.

For the three months to March, Chrysler’s sales slipped 21% to €12.7 billion ($13.9bn; £8.8bn), though operating income swung from a €187m million loss last year to profits of €152m.

The company’s performance is becoming a major headache for parent group DaimlerChrysler. The latter’s chief financial officer Manfred Gentz revealed it would now be “difficult” for the US unit to reach its target of $2bn operating profits for 2003.

Gentz blamed the US unit’s troubles on the incentives battle raging between the ‘big three’ American carmakers. For over a year, they have been offering cheap financing deals and rebates to maintain sales figures.

However, the cost of such tactics are beginning to take their toll. Chrysler’s marketing outlay rose to 20% of sales in Q1, up from 17.7% a year ago, but the group still saw market share fall slightly, prompting Gentz to call for a new approach.

“We are always thinking about how to balance incentives and pricing,” declared Gentz. “I think we all have to rethink our marketing strategies.”

DaimlerChrysler, meanwhile, posted profits of €588m, down from €2.5bn last year (though this was inflated by a €2.5bn one-off gain). Operating profits beat analysts’ expectations on €1.4bn, which the group claims puts it on-course to beat 2002’s full-year total of €5.8bn. Sales slipped 8% to €33.7bn, though excluding the effects of currency fluctuations they rose 2%.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff