Chrysler's financial arm on Friday said it would stop offering vehicle leases to U.S. consumers, a sharp break in strategy in response to plunging resale prices for gas-guzzling trucks and tighter credit.
"We are shifting our strategy to focus on retail products," said spokesman Bill Porter. "Effective August 1 we will no longer offer lease products in the United States."
Porter said the move by the unit of the No. 3 U.S. automaker, which is controlled by private equity firm Cerberus Capital Management, was prompted by the tough market conditions.
U.S. auto sales have dropped to their lowest level in 15 years, and the sudden premium on fuel-efficiency in the face of record gasoline prices has forced consumers to abandon SUVs and other light trucks.
The result has been a sharp decline in the resale prices for light trucks that has forced major automakers and related lenders to take large losses to write down the value of leases on those once-popular vehicles.
"You have got the dropping of the used car vehicle prices. You have got people that are struggling with the credit crunch," Porter said. "It is very difficult right now to offer competitive lease products. So we are switching our strategy."
Chrysler's larger rival Ford Motor this week took a $2.1-billion charge for its finance company when it reported second-quarter results, in large part because of the hit it took on the declining value of SUV and truck leases.
Nissan Motor Chief Executive Carlos Ghosn said this week that the reserves needed to cover losses on vehicle leases had been the one major surprise of the downturn for the Japanese automaker.