New Chrysler auto incentives coming

With bankruptcy threatening to further weigh down the carmaker's sales, Chrysler is expected to announce a new incentive program Tuesday.

Chrysler's "Employee Pricing Plus Plus," program ended just days after the carmaker declared Chapter 11 bankruptcy. That program combined cash rebates with price reductions and cut-rate financing for qualified customers.

The new sales program is expected to rely heavily on giving dealers cash incentives, which means that customers will see big price reductions at the dealership, said Jessica Caldwell, an industry analyst with the automotive Website Edmunds.com.

Dealer incentives give auto dealers extra cash that can, in turn, be used to offset price reductions negotiated with customers. Dealer cash incentives are more subtle than straight cash rebates, so they aren't as damaging to a car brand's image and they don't reduce resale value of cars the way more straightforward customer rebates do.

But incentive money for dealers will likely be paired with limited customer rebates as well, Caldwell said. The carmaker announced in a conference call on Friday that the incentive plan would include some "loyalty" incentives for returning Chrysler, Dodge and Jeep buyers.

Chrysler has been the biggest spender among all auto manufacturers on incentives in the U.S. market. Last month, Chrysler spent $4,288 per vehicle on incentives.
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The next highest spender was General Motors, which is also undergoing a government-driven restructuring and may declare bankruptcy later this month. GM spent $4,063 per sale.

Despite the incentive spending, Chrysler sales were down 48% last month compared to April, 2008. Reduced fleet sales were a big part of the drop, the carmaker said.

Chrysler will probably not follow the lead of GM (GM, Fortune 500) and Ford (F, Fortune 500) by offering payment protection to buyers who might lose their jobs, Chrysler vice president of sales Steve Landry said in the Friday call. Those sorts of incentives didn't seem to be working well for other automakers, he said.

Media reports have drawn conflicting pictures of the bankruptcy announcement's impact on sales with some dealers reporting empty showrooms over the weekend and others higher-than-normal customer traffic.
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Not everyone sees bankruptcy as a disaster for Chrysler sales. Some customers are optimistic, focusing more on the possibility of a Fiat deal and on the fact that Chrysler isn't going out of business, said Scott Painter, chief executive of Zag.com, an automotive buying service provider, and Truecar.com, an auto pricing Website.

Interest in Chrysler, Dodge and Jeep products has actually gone up, he said.

Chrysler rolled out a new print advertising campaign over the weekend aimed at reassuring customers that the carmaker will not be going away anytime soon.

Over the tagline "Come see what we're building for you," the ad describes Chrysler's planned relationship with Fiat and points out that the carmaker's warranties are now backed by the federal government.