Chrysler Offers Dealers Cash to Take Cars
Chrysler recently offered $1,000 for every car they sell over the next two months if the dealer doesn’t cut its March vehicle order and accepts cars from the automakers bank of overbuilds. Chrysler is offering this to dealers due to sluggish sales of pickup trucks and SUV’s. There are costs and benefits for both the dealers and the Chrysler corporation. Although Chrysler’s offer will cost a thousand extra dollars for each car, they are concerned about their image on Wall Street if they were to stop production at the plants. Essentially, Chrysler would be “saving face” if they were to keep the production up, which is the benefit of this extra $1,000. For the dealers, with interest rates rising it is costing them more to hold inventory and this cuts into their profits. The obvious benefit would be the extra $1,000 on each car the specific dealer accepts. This is a prime example of how businesses, large and small, weigh the costs and benefits of all of their decisions.
2 comments:
Another deal that was huge with car dealers this summer was Employee Pricing, which basically took the benefit of being an employee away and gave it to the customer. With this program, customers could purchase a car at the same amount that an actual employee of that dealer would purchase the car for. This at first worked out really well and the dealers were selling cars like crazy, but then later they realized they didn't make that much off of the sales and car sales are still down in general.
All car companies work very similar. They offer bonuses to both dealers and customers to increase profit. Especially when the economy is slow. These deals look much better for car companies than laying off their workers. This way Chrysler may influence dealers to sell more of their cars.
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