Chrysler Sales Could Suffer Further With Bankruptcy Filing
30 April 2009 - 8:53PM
Dow Jones News
Chrysler LLC's bankruptcy filing threatens to accelerate the
company's already severe sales slide if consumers lose faith that
the company can remain viable and that warranties will be
honored.
President Barack Obama tried to head off fears Thursday in
announcing Chrysler's bankruptcy filing, reminding consumers the
government will back vehicle warranties. "If you are considering
buying a car I hope it will be an American car," he said, adding a
Chrysler purchase is "backed by the United States government."
Obama also said that GMAC Financial will provide auto loans for
Chrysler vehicles and floor plan financing to dealers. Cerberus
Capital Management LP, has substantial stakes in Chrysler and GMAC
and owns all of Chrysler Financial.
But the steps may not be enough to mitigate the psychological
impact on already jittery consumers. Chrysler sales fell 39% in
March as U.S. auto sales continued to hover near multi-decade
lows.
"There are so many choices out there, even though the risk is
mitigated, the many consumers may think, 'Why mess with it?'" said
Jeremy Anwyl, editor-in-chief of car shopping site Edmunds.com.
Chrysler, along with troubled rival General Motors Corp. (GM),
had argued that a bankruptcy filing would be a fatal blow because
of the chilling effect it would have on consumers. The companies
later said the government warranty backing would largely mitigate
that risk. It remains unclear how much it helped.
Edmunds predicts GM's sales fell 36% in April and Chrysler's
sank 39%, deeper declines than anticipated at Ford Motor Co. (F),
the only one of Detroit's auto makers surviving without federal
loans. Edmunds expects Ford sales fell 27% this month. The April
sales data are scheduled for release Friday.
Anwyl said Chrysler will be hard pressed to match the success it
had in 1979, when then-Chief Executive Lee Iacocca appealed to
consumers to buy Chrysler as it survived on a U.S. government
bailout. The company offered $50 to test drive a vehicle.
"They now have the communications challenges of building a
compelling case for why consumers should buy a Chrysler," he
said.
Mike Addy, who has a Dodge dealership in Myrtle Beach, S.C.,
said Chapter 11 could be devastating, though he also sees a
potential silver lining.
"I'm optimist by nature," he said. "It's just another day in the
journey. We're going to take every day as it comes. I don't see
this as prolonging an agony. I see this as an opportunity for the
corporation to emerge as a stronger leaner corporation."
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com.
(Kate Linebaugh of The Wall Street Journal contributed to this
article.)