Chrysler Expands Zero Percent Loans

DETROIT, Jan 7, 2003; Justin Hyde writing for Reuters reported that in a surprise move, the Chrysler arm of DaimlerChrysler AG on Tuesday matched incentives by General Motors Corp. and Ford Motor Co. blow-for-blow and then some, extending its zero percent loans and offering $3,000 rebates.

Chrysler executives have long bemoaned Detroit's escalating price war, and said this week at Detroit's auto show they would try to keep their incentives below those offered by GM. But Chrysler spokesman Marc Henretta said the company saw an opportunity after GM and Ford spent heavily on end-of-year promotions last month, likely depressing sales in January.

"We didn't play any games last month ... and we've got some money to move the needle toward Chrysler Group products," Henretta said.

While GM saw its December sales rise 36 percent and Ford's sales were up 13, Chrysler's sales rose just 1 percent. Merrill Lynch analyst John Casesa noted on Tuesday that Chrysler had a 75-day supply of vehicles in inventory at the end of December, more than its historical average and more than GM or Ford.

Chrysler will now offer interest-free loans of up to five years on its large sedans, large minivans and its Dodge Durango sport utility vehicle, or a $3,000 rebate.

It will also offer its first cut-rate six-year loan, for short wheelbase minivans. Ford pioneered the low-rate six-year deal late last year, as a way to make vehicles affordable to a broader range of customers, and GM offered a few deals earlier this week.

Goldman Sachs analyst Gary Lapidus said the six-year loan deals carried a number of risks for automakers, including increasing loan losses and stretching out the time buyers must hold onto their vehicles.

"We see this as another example of automakers pushing their structural problems into the future, offering consumers the opportunity to buy a new car without significantly increasing their monthly payments," he said in a research note.

GM last week announced $3,000 rebates on a number of slower-selling models, but scaled back their use of zero-percent loans, with Ford making similar moves this week. In December, each had offered zero-percent loans with additional rebates; usually buyers are offered loans deals or rebates, but not both.

All three automakers have experimented with cutting back on zero-percent loan deals since GM launched the tactic in the wake of the Sept. 11 attacks in 2001, but as sales slowed after every effort, zero-percent deals have reappeared in full force.