Brett Clanton and Josee Valcourt / The Detroit News

March 5, 2006

DETROIT -- You may have seen them and thought little about them.

But those huge parking areas throughout Metro Detroit filled with row after row of brand-new Chryslers, Dodges and Jeeps have become a source of friction between DaimlerChrysler AG's Chrysler Group and some of its dealers -- and a symbol of just how hard the automaker is pushing to maintain its sales momentum.

In lots at Detroit Metro Airport, the Michigan State Fairgrounds, the Pontiac Silverdome and other locations, Chrysler has stockpiled new vehicles -- many of them loaded with expensive options -- that haven't been ordered by dealers.

In recent weeks, the automaker has been pressuring dealers to accept extra vehicles from the so-called "sales bank." Chrysler will not disclose how many vehicles it has deposited in the bank.

"These are cars that are already built but they don't have a home for," said Jonathan Grant, managing partner of Chrysler-Jeep dealerships in Yonkers and White Plains, N.Y. "So they try to shove them down dealers' throats."

Anxious to keep its turnaround on track, Chrysler is telling dealers bluntly to work through the inventory and says it won't consider production cuts as a counter measure.

Chrysler and other automakers record sales and revenues after vehicles are shipped to dealers rather than when they are purchased by a customer. So it's not uncommon for car companies to push dealers to order vehicles and for dealers to push back out of fear of being stuck with costly excess inventory.

But many Chrysler dealers said the recent pressure to order new cars and trucks from factories and the sales bank is far beyond the norm.

Chrysler has gained market share in the United States in each of the past two years while General Motors Corp. and Ford Motor Co. have lost ground.

Chrysler maintains that most of its dealers support an aggressive sales strategy. The automaker already offers more sales incentives per vehicle than any other automaker.

In February, Chrysler spent an average of $3,167 per vehicle to woo buyers, while Ford shelled out $2,778 per vehicle and GM paid $2,540 per vehicle, according to Edmunds.com. Last week, Chrysler extended a zero-percent financing offer for 60 months through the end of March on select models.

In addition, Chrysler has been offering dealers an extra $1,000 for every extra car and truck they order. The offer, which expires at the end of March, helped Chrysler lower its inventory at the end of February to about 550,000 vehicles, which equates to a 67-day supply. It had 85 days' worth a year ago. By contrast, GM ended last month with an 89-day supply and Ford wound up with a 76-day supply.

Chrysler hails the incentive program -- in which 80 percent of its 4,000 dealers participate -- as an example of the cooperation it receives from dealers when the going gets tough. But some dealers say they didn't have much of a choice in participating in the "optional" program.

Grant said his partner in the White Plains store initially balked at accepting extra vehicles, but Chrysler pushed him to change his mind.

"He got at least 10 phone calls or visits from Chrysler personnel," Grant said. "There was relentless subtle pressure on the White Plains store."

For Grant and other dealers, the $1,000 spiff makes it worth it to order extra vehicles in the short term. Yet some Chrysler dealers worry that the automaker is so focused on its sales reports and balance sheets that it has started making business decisions that could jeopardize its winning streak.

Chiefly, they point to Chrysler's penchant to stockpile inventory rather than cut factory production, and to crank out high-end vehicles that are difficult to sell.

GM and Ford disclosed plans last week to cut production in the face of falling sales. Chrysler executives said they considered slowing down factories when inventories ballooned early this year. But last month at a private meeting of Chrysler dealers at the National Automobile Dealers Association in Orlando, Fla., the automaker told dealers to "sell through" the inventory issues, said Kevin McCormick, a Chrysler spokesman who attended the meeting.

"Production cuts were never talked about," he said. "They were not put on the table as an option."

Many dealers at the NADA meeting sounded off about the pressure to accept vehicles from the sales bank. While some industry observers have begun to question the sustainability of Chrysler's turnaround, Joseph Barker at CSM Worldwide Inc. in Farmington Hills said the automaker should continue to increase sales and U.S. market share this year.

"We're expecting them to do pretty well, even with growing pressure from Japanese and Korean automakers," he said.

Dan Frost, president of Southfield Chrysler-Jeep, estimates he pays $80 per vehicle each month in interest and insurance. So, when he agreed to accept 1,200 surplus vehicles last month, he admits it was an expensive gamble. "It's enormous pressure," he said.

But the risk paid off for Frost and many other Chrysler dealers, who benefited from the automaker's increased sales in January and February.

Some dealers are happy to have bulging lots heading into the busy spring selling season.

"This time of year, I'll take it," said Alan Helfman, owner of a large Chrysler-Jeep dealership in Houston, who estimates he ordered 100 more vehicles than he usually does in February. "You can really knock it out."

Chrysler's strategy of cranking out vehicles and then doing whatever it takes to sell them may not be the ideal scenario, but it's producing results, said John Schenden, past chairman of the Chrysler-Jeep dealer council.

As for those dealers who complain about being pressured to accept more vehicles, he said it's impossible to please everyone.

"There are a group of dealers out there," he said, "who would complain if you gave them two weeks in Hawaii -- and then it rained two days."