Chrysler’s desperation move: $2.99 gas for your shiny new SUV
Posted by: in Companies Competitive StrategyFiled under: Industry, Consumer experience, Competitive strategy, Marketing and advertising, Private equity
So what do you do if your company produces mostly heavy, inefficient vehicles as gas soars past $4 a gallon? Some might state you should produce more efficient vehicles. But not Chrysler, which has instead opted to make gas cheaper, guaranteed!
This day, Chrysler CEO Bob Nardelli announced that anyone crazy enough to purchase a heavy, high-horsepower, low-mileage Chrysler product before Might 31 will be able to purchase gas for no more than $2.99 a gallon for three years. Just take your shiny new Aspen or PT Cruiser to the gas station and use your special gas card; Chrysler will pick up the cost over $2.99 a gallon.
Some critics are calling this plan a cheap gimmick. But there is no denying that Chrysler is at a disadvantage relative to General Motors (NYSE: GM) and Ford (NYSE: F) when it comes to offering new automobiles that get decent mileage. And it is light years behind the auto design leaders, Toyota (NYSE: TM) and Honda (NYSE: HMC). So it needs some kind of gimmick to help its dealers clear out the cobwebs that are quickly forming on their lots.
In recent years, Chrysler has relied heavily on trucks and SUVs for sales, and its hot new automobiles like the Challenger are gas guzzlers. (Hey, your Hemi sure is fast! Sorry about the 11mpg!) Its lineup is in desperate need of an overhaul and products that offer decent mileage. But developing new vehicles is difficult and very pricey, and it’s not clear that Chrysler’s owner, Cerberus Capital Management, has the money to do it. The alternative — advertising and sales gimmicks, long favorites in Detroit — is cheap by comparison.
This promotion might work, at least for a few weeks. But it points to much more massive problem: Chrysler doesn’t have the goods to compete right now, and it’s not clear when it will, if ever.
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