Chrysler's new K-cars: stingy with gas but hefty on price
Chrysler's new K-car will not be cheap. The automaker plans to get all that the market will bear when the Dodge Aries and Plymouth Reliant go on sale Oct. 2 -- two cars on which the strapped automaker is counting for its survival.
So far, the market is bearing the high price tag well. Chrysler spokesmen say that when the first models moved off assembly lines, they already had enough wholesale orders in hand to keep assembly plants busy until September. And if fleet and commercial inquiries turn into orders, production should be assured for another month.
The lowest price for a K-car -- a 2-door coupe -- is tentatively pegged at just over $6,000. However, and this is important to the financial success of the project, the average K-car will go out the dealership door at closer to $7, 500, says Jerry Pyle, vice-president of sales for the long-harried carmaker.
Chrysler hopes that big-car drivers, used to ordering costly luxury options, will "move down" to the fuel-efficient new models, bringing with them their taste for the "creature comforts." Selling these "loaded" cars is much more profitable to dealers than selling stripped-down models.
"I don't think we have to underprice the General Motors X-cars," Mr. Pyle asserts, adding that the new Chrysler car is highly competitive with GM's popular front-wheel-drive models. "If you put the K-car next to an X-car, we have a 6-passenger car and the X-cars are 5. Further, we will be [getting] 2 to 3 more miles per gallon than the X-cars."
The Environmental Protection Agency rates teh 4-speed manual-shift X-car at 24 miles per gallon city and 37 highway. With automatic transmission, the figures are 21/33. Estimated numbers for the Aries/Reliant are 25/40 manual and 23/35 automatic.
So, if Chrysler -- which lost $1.1 billion last year and stands to lose as much or more in the current fiscal year -- is going to move into the black, it has to make money on all its cars, not just the big cars. To maximize its profit on the total car, Chrysler looks for a heavy increment of options on every K-car sold.
The margins on the K-car are enough for the company to meet its operating costs, according to Mr. Pyle. The dealer discount is 15 percent on the car and 19 percent on options.
Why such optimism on options?
"The vast majority of the people who buy the GM X-cars, and who will consider a K-car, in our judgment, are movedowns," notes Mr. Pyle. These drivers are coming down from intermediate or full-size cars into more fuel-efficient smaller cars, he says, but they still want "creature comforts" in their cars, small or big.
The Chrysler sales vice-president, who is a Ford Motor Company "ex" as are so many of the top echelon at Chrysler, is swinging around the country now in a big pitch for the soon-to-bow Aries and Reliant. The company has been so battered by a long spate of bad publicity because of its lagging sales and financial problems that it is hunting for words of hope.
Indeed, the K-cars are Chrysler's big hope for survival. If they fail, the company could follow suit.
Chrysler is counting on car buyers to at least take a look at the car. J. D. Powers, a Los Angeles-based marketing company, did a survey last January that showed that only 25 percent of all US motorists would even consider the purchase of a Chrysler automobile.
But, the report went on, another 19 percent said they would consider a Chrysler car if they felt the company was financially stable and would be around to perform service.
With the federal government loan guarantee now in the glove box, Chrysler is counting on at least 44 percent of all potential car buyers taking a look at the car.
The new K-cars will be bucking not only the imports, many of which are priced significantly less than the new Chrysler car. It also will come head to head with the new Ford Escort, with engineering and design input from Ford facilities in Europe as well as the US.
Also, next spring GM will introduce its fron-wheel-drive J-car, replacement for the Chevrolet Monza and Pontiac Sunbird.