Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 20, 1990 TAG: 9005180048
SECTION: BUSINESS PAGE: D-1 EDITION: METRO
SOURCE: By DORON P. LEVIN THE NEW YORK TIMES
DATELINE: DETROIT LENGTH: Long
Chrysler, losing car and truck sales at an increasing rate, has decided on the risky tactic of grabbing at Americans with ads claiming that it makes better cars than Honda.
The ads may reveal more about Chrysler's dicey situation than about any breakthroughs in automaking.
What's happening to Chrysler illustrates in some measure the competitive pressures on American automakers, who are hanging on by their fingernails to customers tugged by better products and fatter rebates.
Chrysler's plight, however, also raises questions about how the company has performed since receiving a federal loan guarantee in 1981. It also raises questions about how Chrysler is going to survive.
The entire American car and truck market began softening last fall, but Chrysler's falloff was disproportionately large while Japanese automakers were gaining market share.
Iacocca - whose strength, most everyone agrees, lies in sales - took to the stump in February to proclaim the virtues of Dodges, Plymouths, Jeeps, Chryslers and Eagles in comparison to the Japanese competition. The real problem, Iacocca said in the ads, is America's "national inferiority complex."
The message had little effect on sales. Critics denounced Iacocca's words as "Japan-bashing," an accusation he denied. They also noted that his company had been relying on Mitsubishi Motor Corp. to sell vehicles to Chrysler and help it with technology.
Chrysler's first-quarter car and truck sales fell 7.4 percent from a year earlier. At last count, for the last 10 days of April Chrysler's sales had plummeted further, by more than 20 percent, as those of Ford Motor Co. and General Motors Corp. perked up a bit.
But Chrysler officials said their research and letters showed solid support for Iacocca's opinions.
The company tried another salvo by inviting reporters to see the newest ads in the "Advantage Chrysler" campaign. The ads, starring Iacocca, invite consumers to "Meet the Americans That Beat the Hondas." On its face, Chrysler's claim is dubious. But Iacocca says in the ads, "You wanted proof, you got proof."
The "proof" comes from U.S. Testing Co., Market Research Inc. of Wheeling, Ill. The company, which performs consumer tests for Chrysler, Ford and many other clients, bought new Plymouth Acclaims, Dodge Spirits, Plymouth Sundances, Dodge Shadows, Honda Accords and Honda Civics.
Then researchers, who did not say for whom they were working, paid 200 new-car shoppers in Los Angeles to drive the cars for a short distance through Brentwood and along the San Diego Freeway and then to answer some questions.
By a margin of 4 to 1, the test drivers preferred the Plymouths and Dodges to the Hondas. Iacocca said that even he was surprised by the results.
Why did these people prefer Chrysler products when so much other evidence, such as the Honda Accord's status as the best-selling car model in the United States, shows that Honda is more popular?
One clue is the way test subjects were screened: Only current owners of domestic models were selected. Moreover, while demographic data were not available, film clips appeared to portray older-than-average drivers. Both groups tend to demonstrate a predilection for domestic brands, said some market researchers.
In any case, the reaction of the test subjects reinforced the industry consensus that Chrysler cars have indeed improved significantly in the last few years.
But will that improvement sustain the company in the long run? For now, the marketplace appears to be saying no, though Iacocca insists that it is only because perceptions have not caught up with reality.
Brock Yates, a columnist for Car and Driver magazine who has written books on the industry, said Iacocca's "whole position, that the American public has an inferiority complex and doesn't know what it values, is nonsensical."
Yates added: "He sounds like a man who has run his string out, who is desperate."
Automotive consultants who specialize in long-term strategy contend that Chrysler's cars and trucks don't sell better because the company has not invested enough in new engines, transmissions, chassis or body styles.
The Chrysler minivan, which along with the Jeep has been the company's most profitable model since it was introduced in 1983, is facing serious competition from Toyota, GM and others. A restyled minivan coming later this year may help.
Clearly, Chrysler has not had as much money for development as the other large automakers. At the same time, Iacocca decided to spend part of what he had on Gulfstream Aircraft, financial service acquisitions and a $1 billion technology center.
Chrysler has spent hundreds of millions on rebates. Its unfunded pension liability is close to $3 billion, the largest in American industry, forcing the company to put tens of millions from its monthly cash flow into the pension fund.
Chrysler's cash and credit cushion could hold out for another year or two, most analysts say, if sales do not worsen further. But without another marketing miracle like the minivan, Iacocca, who is scheduled to retire at the end of 1991, may first be looking for a partner with deep pockets that can merge with his company.
by CNB