Chrysler's product lineup struggles

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By Tom Krisher ASSOCIATED PRESS

DETROIT | The latest numbers on auto sales show that Chrysler needs to quickly figure out how to navigate the car market as deftly as it did bankruptcy court.

Ford's Fusion midsize car outsold all eight Chrysler brand models combined in June. Chrysler's two minivans, which for years dominated their market segment, were outsold by the Honda Odyssey. Only one Chrysler Group LLC model showed a sales increase over June of last year, the Dodge Challenger muscle car.

Chrysler emerged from bankruptcy protection after just 42 days on June 11, cleansed of much of its debt and labor costs. But with sales down 46 percent from the first half of last year - a year in which Chrysler lost $8 billion - the company faces a huge challenge to make money again under its new Italian owner, Fiat SpA.

Chrysler's poor June performance also casts doubt on whether the U.S. government's $7 billion allocation will be enough to get the automaker through the U.S. sales slump, which is projected to last into next year.

"In this business, you're either going to succeed or fail with product," said Joe Barker, senior manager of North American vehicle sales forecasting for the CSM Worldwide consulting firm in Northville, Mich. "Right now, Chrysler lacks a competitive product."

For its part, Chrysler says it was happy with the sales figures. Spokeswoman Kathy Graham said Thursday that Chrysler gained one percentage point of market share in retail sales to individual buyers. To Chrysler, that indicates people aren't penalizing the company for having sought bankruptcy protection.

Yet, the Dodge Ram pickup, Chrysler's top-selling vehicle and for years among the top-selling cars and trucks in the United States, fell off the list of top 10 sellers in June for the second straight month. It dropped to No. 12 with a 10 percent sales decline. Chrysler had no vehicles in the top 10 last month, according to Autodata Corp.

The company's poor June performance was expensive, too. Chrysler led the industry in discounts, with an average incentive of $4,873 per vehicle, almost $800 more than it spent in May, according to the Edmunds.com automotive Web site.

Chrysler still has a lot of cars sitting on dealer lots even though all 12 of its assembly plants were closed for nearly two months and 789 terminated dealers sold much of their inventory at fire-sale prices. Chrysler ended June with 195,272 vehicles on dealer lots, a 71-day supply. Industry experts say a 60-day supply is optimal to reduce the need for sales incentives while providing enough selection for buyers.

Ms. Graham noted that inventory is less than half of what it was in June 2008 as Chrysler matches production with customer demand. In the past Chrysler was notorious for keeping its factories in operation despite lower demand, flooding the market with unwanted cars and trucks.