Turns Out Chrysler's Cap Fits the Customer

By Warren Brown
Sunday, June 1, 2008

It seemed a silly scheme, one at odds with the supposed fuel conservation goals of our nation, when it was announced early last month. I said as much in this space on May 11 when I criticized Chrysler's "Let's Refuel America" program, which offers to cap fuel prices at $2.99 a gallon for three years for many Chrysler vehicles bought during a one-month period that ends June 6.

I still think the plan is wacky, especially for a business that has had more than its share of troubles trying to convince the federal government that it is interested in reducing the amount of fuel its vehicles consume. Subsidizing gasoline prices at a company with an inventory that is 70 percent trucks, many of them gas guzzlers, seems a less-than-auspicious way of promoting energy conservation.

But, wacky or not, the "Let's Refuel America" program is working -- primarily because it was designed to serve Chrysler's buyers instead of Washington policymakers or people who write opinion columns.

Hard sales numbers for May aren't in at this writing. But the buzz among Chrysler dealers is that the program has been a hit, pulling in buyers who otherwise might have stayed out of dealer showrooms during our season of economic discontent.

And many of those buyers, Chrysler dealers and executives say, have been buying smart, picking up small, more economical models such as the Dodge Caliber and Chrysler PT Cruiser instead of more fuel-thirsty trucks such as the Dodge Ram.

Consumer response to the program has been good enough for Chrysler to extend it at least another month, which raises the questions: What did I get wrong? What did Chrysler get right?

I asked Robert Nardelli, Chrysler's chairman and chief executive, who was in the Washington area late last month to announce another Chrysler initiative that deserves attention, the company's "Honoring Those Who Serve" program, which aims to provide jobs, transportation and community services for the people who defend our country.

"Look," Nardelli said, "we didn't do the [gas subsidy] program absent a thought" about how it might be interpreted by policymakers who have been pressing Chrysler and the rest of the car industry to boost fuel efficiency and clamp down on vehicle size and horsepower. "We certainly weren't trying to encourage people to go out and drive more," or to engage in other fuel-wasting behavior, Nardelli said.

"We did it to be responsive to our customers who were telling us that fuel prices were top of mind. We did it to give them peace of mind over the next three years," he said.

Chrysler officials said they thought that buyers on the West Coast, where gasoline prices were among the first to reach and cross the psychologically significant line of $4 a gallon for regular unleaded, would bite hardest on the lure of a gas-price cap. They bit, Nardelli said, but no harder than consumers bit elsewhere in the country. The overall response in California and elsewhere around the nation was good enough to keep the program going.

Still, Nardelli said that Chrysler is mindful that it will have to do more to develop vehicles that use less fuel and produce lower emissions to bring in consumers in the future. That is not an inexpensive undertaking. It's one that could prove onerous for a financially challenged car manufacturer such as Chrysler.

But Nardelli said he is confident that Cerberus Capital, the private equity firm that owns Chrysler, is steadfast in support of his management team's future product plans, which will include a variety of small cars and electric vehicles.

Chrysler is going to have partnerships in those endeavors, Nardelli said, declining comment on any specific partner. However, it has been widely reported that Nissan will work with Chrysler to develop small cars.

"What I can tell you is that we are not operating under the 'not invented here' syndrome," Nardelli said. "We are going to have to have some alliances, some partnerships."

The new Chrysler isn't looking at the world through rose-colored glasses, Nardelli said. "We're focused," he said. "We're realistic. We can let the future shape us, or we can shape our future. We want to shape our future."

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