Starting today, Chrysler, is totally offering up to $6,000 worth of incentives on its 2009 vehicles as it races to emerge from bankruptcy protection and counter a prolonged U.S. sales slump.
It will offer up to $4,000 Consumer Cash on 2009 models, $1,000 Owner Loyalty for current Chrysler owners (which is also good for some 2008 models) and up to $1,000 Credit Union Bonus Cash for qualified customers.
The automaker filed for Chapter 11 bankruptcy last week and is working to allay consumer anxieties about buying its cars given uncertainty over its future.
Chrysler is trying to complete a sale to Italian automaker Fiat Group SpA and hopes to emerge from bankruptcy in 30 to 60 days. All of its factories have since been idled.
Chrysler said the incentives, which begin on Wednesday, are aimed at reducing the bottom-line price of the car. They include $4,000 cash, $1,000 for current Chrysler vehicle owners, and up to $1,000 for financing through a participating credit union.
The incentives come off prices negotiated with a dealer. They replace employee pricing plus rebates and zero percent financing.
Chrysler's sales are down 46 percent for the first four months of the year. The automaker has been subsisting on $4 billion in government loans since the start of the year.
It filed for bankruptcy protection on Thursday after a handful of its creditors refused to accept a government-brokered deal that would have reduced the automaker's secured debt.
On Wednesday, the judge overseeing Chrysler's bankruptcy proceedings ruled the automaker can start taking steps toward selling most of its assets to Fiat. The tie-up would add smaller, more fuel-efficient cars to Chrysler's lineup, give it Fiat technology and open new markets for Chrysler vehicles.
But even if the sale is approved, Fiat vehicles would not go on sale in the U.S. for another 18 months. Until then, the automaker will have to survive on revenue from its existing lineup, which remains heavily skewed toward trucks and sport utility vehicles.
The new incentives are Chrysler's latest push to keep customers coming into its showrooms. Over the weekend, the company launched a new advertising campaign, which included full-page ads in newspapers across the country that proclaimed it is "building a new car company."
Many in the industry have said consumers would be reluctant to buy a car from an automaker in bankruptcy protection because of fears that their warranties would not be honored if the company goes out of business. Jeremy Anwyl, chief executive of the auto Web site Edmunds.com, said an incentive program that offers enough of a deal might help allay consumers' concerns about Chrysler's future.
"Consumers are under distress too," he said. "If a car is a really great deal, people are going to put aside the risk."
Meanwhile, President Barack Obama said last week that Chrysler warranties would be backed by the U.S. government.
"Maybe some people have some worries about the longevity of the company," said Jim Press, Chrysler's vice chairman and president, in a conference call with reporters last week.
"Well, heck, now the president of the United States, the U.S. government, is not only going to back our warranties, they're going to be an investor in forming our new company."
“Chrysler LLC is building a new car company, and we are asking consumers to come see what we are building for you as we begin a vibrant new phase of our company,” said Steven Landry, Executive Vice President North American Sales and Marketing, Global Service and Parts - Chrysler LLC.
“Consumers are telling us that the net purchase price of the vehicle is the most important factor right now, so we are pleased to introduce incentives that address what the consumer is looking for.”
The incentive will run through June 1, 2009. Chrysler said that more than 1,500 credit unions are participating in the “Invest in America” program, which offers low-rate financing for new vehicles for approved members.
