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Jeep Wrangler

I hate to be sour on Chrysler but since "we the people" are an integral part of the automaker due to the fact our tax dollars are subsidizing the company, I question a recent move.

Chrysler announced that it is dropping its lifetime powertrain warranty in favor of a five year, 100,000 mile guarantee.

My buddy at Chrysler Rick Deneau commented that the change in warranty policy was the result of market research that showed car buyers actually preferred warranties with a fixed time period. The new 5 year policy makes the warranty transferable to a new owner if it maintains its 5/100,000 parameters. The old lifetime warranty was not transferable.

I have mentioned in the past that I like Rick, but in my humble opinion he has been forced to put some major spin in decisions made by the Auburn Hills automaker.

I personally do not understand how less can actually be more. But in the spirit of equal time I will take a look at both ends of the argument and you can decide if the new policy is advantageous if you are looking to buy a Chrysler.

First, in my informal polling of folks I personally know who own Chrysler products, many made the purchase for the satisfaction and peace of mind knowing that costly transmission and engine part replacements would be covered forever. In this economy many consumers are purchasing new cars with the intent to own them for more than five years. They have no intent to sell the vehicle so transfer of the warranty is irrelevant. One guy I know who owns a Jeep actually places the lifetime warranty coverage as his top reason for buying that vehicle.

On the other hand though, I spoke to some Chrysler owners who said this new policy would actually encourage them to stay with the automaker and buy another car. Many of these owners were the typical car buyers who like to trade in every three years or so. The basic reasoning is as follows: the average driver goes around 15,000 miles a year. So if you buy a new Chrysler and trade it in after three years you have put around 45,000 miles in the vehicle with two years remaining on the warranty. The transfer of that warranty will add value to the resale price of the car.

I still prefer the “more is more” lifetime policy, but both sides of the warranty argument seem to have compelling cases.

In an announcement that would have been shocking mere months ago, Chrysler has announced that it is scaling back incentive programs because the automaker is running out of cars to sell. This news is very surprising given that in the spring Chrysler, along with General Motors and several import car companies had inventories backed up to such a degree that they were running out of space to store all the excess.

The recent upswing in Chrysler's sales can be attributed to the double impact of both the Cash for Clunkers (CARS) program and Chrysler’s decision to essentially double the $4,500 maximum rebate offered by the government with a rebate plan of its own. By contributing an additional $4,500 to anyone trading in a clunker, the comany was able to entice a tidal wave of buyers with the promise of $9,000 off qualifying fuel efficient vehicles. So successful was the initiative that Chrysler’s dealership foot traffic has on average doubled compared with figures from July of 2008. This extra incentive is part of a hardcore rebate program that has seen Chrysler spend almost 70% more than the average of all other automakers so far throughout 2009.

While normally this rush of sales would be a welcome respite from one of the darkest financial periods in Chrysler’s history, particularly since the company is emerging from bankruptcy reorganization, the popularity of the double rebate has exposed the impact that idling production plants has had on the company’s inventory. After clearing out the vehicles which have been sitting since the spring, the fact is that Chrysler cannot produce enough of its most popular models in time to capture any of the remaining interest rustled up by the CARS program. Specifically, inventory of the Chrysler Town & Country and the Jeep Wrangler have never been lower than they currently are, and most of the vehicles, which are available on Dodge, Jeep and Chrysler lots are those which do not qualify for either incentive program due to their high fuel consumption.

The net result of this sudden success is that Chrysler is significantly changing its own rebate program, narrowing the number of vehicles, which can take advantage of the doubled-up savings and in some cases reducing the maximum cash back to under $3,500 through a summer clearance program that is separate from Cash for Clunkers. Chrysler dealers say that they have enough of most vehicles to last through August, but they fear what September’s inventory will look like. Right now, dealerships across the nation are sitting on one third fewer cars than they were in the summer of 2008, which is concomitant with Chrysler’s production slowdown that has seen only one third of the number of vehicles built this year as in comparison to the one before.

With 71 days of inventory on hand at Chrysler facilities, it would appear that the lots will never be completely empty, but unfortunately the fuel efficient vehicles currently popular with buyers will be difficult, if not impossible to find.