CHRYSLER’S ZETSCHE WANTS TO RAISE QUALITY, LOWER INCENTIVES

Chrysler’s Zetsche praises franchise system.

January 31, 2004—Chrysler Group president and CEO Dieter Zetsche wants to eliminate “the ‘quality gap’ that has existed far too long between the domestic automakers and the best of the Japanese automakers.” Speaking at the opening session, Zetsche said Chrysler’s warranty expenses have been halved since 1996, and its quality should be “equal to the best in 2007.”

Zetsche predicted new-vehicle sales of more than 17 million this year. And “although average incentive levels remain high (and Chrysler Group will continue to do what it takes to remain competitive in the market), they may have begun to ease a little this year.” With all the new product coming in 2004, it “may be the welcome year that the ‘incentive war’ begins to wind down, and the new ‘product war ’ begins in earnest.”

Vehicles that do well in the product war will have bold, distinctive styling, Zetsche said. They will target narrower market segments, as with the Ford Five Hundred and Chrysler Pacifica. Successful new vehicles will also have more practical product features, like the “stow-and-go” seats in Chrysler ’s new minivans.

Zetsche offered a ringing endorsement of the franchise system: “I would bet that if you invited me back to this conference 25 years from now, I’d find the franchise dealer system alive and well, evolving and adapting, and as strong as ever … probably stronger still.”

In a follow-up press conference, Zetsche addressed a new requirement for Five Star dealers: “We’ve added exclusivity to Five Star” requirements, while understanding that dealers must be profitable.

Regarding Jeep’s recent “trail rated” marketing campaign, Zetsche said, “Many customers do not have the ways and means to test whether Jeep is king of the mountain.” Chrysler thought such a test by a third party—which can then give the designation—would be helpful.

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