Error processing SSI file
Chrysler dealers told to shape up
A good dealer
What quality makes you prefer one auto dealership over another?
Comment on this story
DaimlerChrysler AG's Chrysler Group is poised to increase its U.S. market share a full point to 14 percent in coming years, but will need a stronger, smaller dealer network to effectively compete against foreign rivals. "We need a distribution system that is world-class, and we do not have that now," Chrysler CEO Dieter Zetsche said Wednesday in a presentation to automotive analysts in Dearborn.
The automaker has been praised for rolling out popular new vehicles such as the Chrysler 300 sedan that have helped restore profits, but still gets poor marks from customers in some dealership customer satisfaction surveys.
ZetscheAs part of a goal to match industry-leading Japanese automakers in key business areas such as quality and productivity by 2007, Chrysler is encouraging dealers to upgrade stores and put more emphasis on customer service while also recruiting new dealers in major urban markets.
The overall strategy is to have fewer dealerships, but more larger stores that consolidate the Jeep, Dodge and Chrysler brands under one roof when that makes sense, and to increase the profitability of individual stores.
"We're looking to raise the number of vehicles (sold) in a store in a fairly significant way in the next five years," said Gary Dilts, Chrysler's vice president of sales. "In return for that, we're expecting and working toward improved locations and facilities, which we think we need to be competitive."
On average, Chrysler dealers sell fewer than 500 cars and trucks a year, taking into account rural dealers, Dilts said. The company would like to see that number grow "substantially above 500," with dealers in large metro markets averaging about 1,500 vehicles annually, up from 900 today, he said.
Like Ford Motor Co. and General Motors Corp., Chrysler's 4,000-dealer network is more than four times the size of Japanese automakers such as Toyota Motor Co.p., which sold 2 million vehicles in the United States last year, compared to Chrysler's 2.2 million.
Chrysler is trying to cut its overall dealer count through attrition and by helping larger dealers buy out smaller stores when a franchise comes open in a market.
Chrysler has recently captured the attention of U.S. consumers with new vehicles such as the Chrysler 300 sedan, one of nine new cars and trucks launched last year.
"Now the challenge for Chrysler is making the dealer experience equal to the product," said Scot Eisenfelder, senior vice president at J.D. Power and Associates, which conducts dealer customer satisfaction surveys.
Chrysler, Dodge and Jeep all scored below the industry average in a vehicle sales satisfaction survey released by J.D. Power in November. But Chrysler has shown progress in recent National Automobile Dealers Association surveys, pushing past other domestic automakers on the future value of franchises, product and quality, Dilts said.
Armed with that data, Chrysler last month brought in 160 top U.S. dealers and showed them the automaker's future product plan. The idea was to sell the potential of Chrysler, which has 16 more new vehicles on the way before the end of 2006, and encourage them to bid on franchises in urban areas where the company wants to grow.
Chrysler's strategy could spell trouble for its roughly 1,000 rural dealers.
Big Three automakers have tried to trim their dealer networks by making it harder for rural dealers to compete, said Jim Ziegler, an Atlanta auto retail consultant. He points to Chrysler's "volume program award," which gives bonuses to dealers large enough to capture 15 percent market share in their area.
"The small-town dealership is becoming an endangered species," he said.
Randy Fuller, has a stand-alone Jeep dealership in Show Low, Ariz., that sells 40 SUVs a year.
"They have been leaning on us for the last couple of years to either sell the Jeep dealership or buy a Chrysler dealership," Fuller said. "Dieter Zetsche has made no bones about the fact that he thinks Chrysler is over-dealered."
Dilts denies there is any effort afoot to kill off small dealers, defending the award program as an incentive to perform better. He declined to say what an optimal number of dealers for Chrysler would be.
Chrysler dealers will invest $1 billion a year through 2008 to upgrade stores, Dilts said. He believes that signals they are on board with company plans to become more competitive.
"I can't see any dealer complaining if Chrysler tries to improve customer satisfaction," said Ken Zangara, owner of Zangara Dodge in Albuquerque, N.M., and former chairman of the Dodge dealer council.
The push to improve Chrysler's dealer network comes as the automaker is posting sales and market share gains on the strength of popular new products.
Zetsche said Chrysler will reach 14 percent U.S. market share, up from 13 percent in 2004, but did not give a time frame for hitting the goal.
To gain one point of market share, however, Chrysler will have to sell roughly 170,000 more cars and trucks a year, even as analysts expect the U.S. market to be flat in 2005.
Zetsche sees an opportunity to increase sales with new products such as the 2006 Dodge Charger, which goes on sale this spring. Even if the market does not grow, but Chrysler increases sales, the automaker will improve market share, he said.
"It's simple math."
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Copyright © 2005
The Detroit News.
Use of this site indicates your agreement to the Terms of Service (updated 12/19/2002).