Sales of Chrysler Group's cars are suffering due to its new philosophy on pricing. Chrysler has been known for providing high incentives and with the change, its customers have not been so keen making purchases.
While it is true that Chrysler Group's sales had risen for the first time in 25 months last February, the increase was actually less than 1%.
It falls short of the 43% increase that Ford Motor Co. had and the 33% increase for General Motors Co.'s four remaining brands. Since 58% of Chrysler's February sales went to fleets, the carmaker didn't really earn that much, considering that it's the least profitable way to sell cars and trucks.
CEO Sergio Marchionne said that for the company to strengthen its brands in the long-term, it will have to decrease its incentive spending.
This is difficult to do when it's still a long way before new products are launched. However, Chrysler did add dealer incentives this month to provide stores with more bargaining room.
Another factor that hurt Chrysler's sales is the loss of regional dealer ad groups. The tight consumer credit has affected sales as well. Last February, Chrysler Group sold 84,449 vehicles, only 35,832 at retail. Sales in February 2008 totaled 150,093. Until the new Fiat-based products start arriving in 2012, dealers have a more challenging time at increasing sales.