Even as U.S. automakers scale back production capacity, yet another wave of cut-rate deals may be in the offing. This time the culprit is DaimlerChrysler
DaimlerChrysler is reportedly mulling an incentive program that would offer employee pricing to U.S. buyers this summer on 2006 Chrysler vehicles. General Motors
The German-American automaker's goal is to reduce its Chrysler inventory levels down to two months of supply, versus the 77-day supply the company was carrying as of the end of May. Thankfully, Chrysler's new 2007 lineup stands a good chance of attracting buyers without overly generous offers, although the new vehicles aren't likely to generate breakout sales. Obviously it also would be far better if Chrysler could avoid such giveaways, especially since its pre-tax profit margin on North American sales is already pretty slim, at just $223 per vehicle in 2005, according to the HarbourReport North America 2006.
If DaimlerChrysler does go ahead with the offer, the impact could be even worse for Ford
Add in a cut-rate financing deal that Ford doubtless will have to match, and Ford's 2006 outlook looks even shakier. If Chrysler keeps the aggressive financing going for an extended period, Ford's goal of 2008 profitability is going to look more and more like a pipe dream.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.