DaimlerChrysler to Slash Fleet Sales Over Next Three Years

Chrysler Group plans what it described as an "aggressive" reduction in sales to rental agencies and other fleet operators to shore up the residual value of its cars and trucks over three years, executives said.

Steven Landry, who was named on Friday to take over Chrysler's sales efforts in North America, said the automaker plans to reduce fleet sales to 21% of its total sales volume by end 2009.

The plan also forecasts a reduction in sales to car rental agencies to 15% of Chrysler's volume over the same time period, he said.

Chrysler representatives, who were speaking to reporters on a conference call to announce the appointment of new sales executives, declined to say how much of the automaker's sales volume goes to fleet buyers.

"Let's just say it's an aggressive move" -- a cut of 70,000 units in fleet sales this year and more in 2008 and 2009, said Chrysler Chief Executive Tom LaSorda.

Chrysler sold a total of 593,291 vehicles in the first quarter in the United States, down 3.3% from a year earlier.

The announcement of the targeted reductions was the most detail Chrysler has given on plans to throttle back on sales to fleet buyers, which typically command a much lower margin than showroom sales of new vehicles.

Chrysler's larger domestic rivals, GeneralMotors and Ford Motor , have made similar pushes away from fleet sales.

Detroit-based automakers are betting they can return to profitability by shunning cut-rate fleet sales and cutting back on production capacity.

Analysts say such sales in past years allowed the automakers to keep costly assembly plants running but chipped away at the value of their brands.

Reducing Incentives Too

The automakers have also been reducing sales incentives in a parallel effort intended to protect resale values and move away from volatile swings in monthly sales volumes.

Landry said Chrysler sales incentives were down marginally to date this year and that the automaker's goal was to reduce sticker prices so that they are closer to the actual prices buyers pay after discounts.

"Each time we launch a new product or new vehicle, we are price repositioning it downward along with our incentives," he said.

Chrysler Group on Friday named Landry as the head of its sales and marketing in North America, replacing LaSorda, who had temporarily assumed that responsibility in December.

Michael Manley was named executive vice president of international sales and marketing for Chrysler.

Both executives will report directly to LaSorda, the company said.

Landry has been vice president of sales and field operations, while Manley serves as vice president of sales strategy and dealer operations.

Chrysler parent DaimlerChrysler has put its U.S. operating unit up for sale. LaSorda said on Friday that all options remain open for the unit.

"Let me just say this: the process continues, and all options remain open. My focus continues to be on the recovery and transformation plan," he said. "This is the one thing we can control. We can make the decisions."