Chrysler, Not Toyota, the Most Troubled Carmaker

Thus far in 2010, the carmaker that has had the worst start is Chrysler, not Toyota.

Industry analysts report that although Chrysler’s total sales are only down by three percent in the first two months of 2010, estimates indicate that more than 50 percent of Chrysler’s sales were to fleet customers like rental car organizations.

Retail Sales Plunge

American carbuyers have basically rejected the Dodge, Jeep, and Chrysler brands. According to certain estimates, Chrysler dropped to seventh in U.S. sales in February. Chrysler was once in the top three automakers in the U.S.

The Chrysler Group’s sales to retail customers have dropped by over 44 percent so far in 2010, according to figures released by Edmunds.com, an auto industry tracking site.

By contrast, Edmunds.com reports that Toyota’s retail car sales fell less than 14 percent despite the fact that Toyota did not sell its best-selling vehicles for over a week in January and has been pummeled by a steady stream of bad press ever since.

Chrysler’s sales seem even worse when you account for the fact that the company should be benefiting from comparisons to 2009. Chrysler shut down most of its production last year in an attempt to save money. Consumers were also concerned if Chrysler would survive its impending bankruptcy procedure.

The Trouble with Fleet Sales

Chrysler’s fleet sales could be hiding larger problems at the company currently, but analysts say that they are not a reliable lifesaver for a carmaker with waning customer demand.

Rental car sales are powered by large discounts, and they are sure to hurt the carmaker’s future profits and sales when the used, low-mileage vehicles purchased by fleets hit the market themselves.

“You can not viably survive with fleet and rental sales over 50%,” explained TrueCar’s vice president of market trends Jesse Toprak. "The math just doesn't work.”

Company executives, however, indicate that the Chrysler Group is on track to minimize its dependence on fleet sales and that they should comprise only approximately 25 percent of total sales in 2010. But a spokesperson for Chrysler also said that healthy sales to rental car companies are a positive sign.

“We have to rebuild consumers' confidence in the company,” the spokesperson said. “The fact that large companies are willing to buy our vehicles helps rebuild that confidence, so fleet is part our businesses strategy.”

Chrysler concedes that its pipeline of new cars is relatively limited currently, but the company expects improved sales at the conclusion of 2010 when new models are expected in the showrooms of dealers.

Pipeline Issues

Other industry analysts say it’s unwise for Chrysler and Fiat, the Italian carmaker that bought a controlling portion of Chrysler last year, to rely on models conceived of in Italy to regain the interest of American consumers.

Chrysler’s lackluster sales in mid-size sedans, crossover SUVs, and compacts mean that it is benefiting the least from Toyota’s recall problems.

According to Edmunds.com, website traffic for every other major carmaker increased after Toyota’s recall issues. “But nothing happened at Chrysler,” Jessica Caldwell, Edmunds’ director of industry analysis, said.

Nevertheless, most analysts believe that Chrysler will be able to remain in business, at least in the short run. But the news for the carmaker will probably not get better anytime in the near future.