Chrysler Dealers Confident Spend Money To Make Money

DEARBORN, Mich. January 13, 2004; Reuters reported a surge in spending by its U.S. dealers could provide a sorely needed boost in sales for DaimlerChrysler's (XETRA:DCXGn.DE - News; NYSE:DCX - News) Chrysler division, the automaker said on Tuesday.

Gary Dilts, senior vice president of sales at Chrysler, said the spending spree was something that had developed over the past two years, as low interest rates and other factors prompted dealers to invest in upgrading or expanding aging showrooms and service bays.

"They're doing it on their own," Dilts told reporters, saying an average of 500 dealers selling Chrysler vehicles, including its Dodge and Jeep brands, were now spending about $2 million per year on facility improvements that were leading to more business.

"The returns are good," Dilts added. "They're seeing a 20 percent return when they do it."

He was referring to increased sales of auto parts and service and improved capital assets at the dealerships. But he said Chrysler's new vehicle sales were also up by about 10 percent at dealerships that had already completed major upgrades.

With a total of 4,200 dealers nationwide, Dilts said the jump in spending on dealership improvements, now averaging a total of about $1 billion per year, was likely to continue for the next seven years.

"These are substantial redos," he said, adding that facility spending had previously totaled no more than about $300 million a year.

In an earlier presentation to an auto industry conference, Dilts said another trend among U.S. dealers was a move toward so-called "big-box auto stores" -- sprawling group dealerships able to boost showroom traffic by featuring more than one brand.

Such stores could lead to more consolidation in the dealership business, but Dilts said Chrysler felt it now had too many U.S. dealerships anyway.

The company has encouraged putting all its brands under one roof at dealerships in some parts of the country under a program dubbed Project Alpha.

"Some people don't feel comfortable in a small store," Dilts said. "It's too personal for them."