As if Chrysler LLC needed any further motivation to quickly complete its reorganization and emerge from Chapter 11, there is fresh evidence that the filing has indeed cut into consumer confidence in the struggling automaker's vehicles.
According to a
Detroit Free Press report
quoting Automotive Leasing Guide, resale values of Chrysler, Jeep and
Dodge products three years off the production line fell 6% in the first
seven days after Chrysler's April 30 bankruptcy filing. A Dodge three
years out of the showroom sold for 37.3% of its original value prior to
the filing, but has fallen to 31.2% of its value since.
By
comparison a three year old Toyota sells for about 45.5% of its value,
and similarly aged Hyundai's retain about 40.9% of their value.
Automakers
have warned since last December that bankruptcy filings risked sending
consumers to competitors, worried about spending five figures on a
struggling brand. The government has tried to offset those fears by
backing warranties at Chrysler and General Motors Corp. (NYSE:GM), but the values
appear to be an indication that the reputation of the brands have
indeed been tarnished by a filing. The drop in resale value could also
lead banks to charge higher up-front costs or fees to consumers wishing
to finance purchases of Chrysler vehicles, making the brands less
competitive in the marketplace.
The drop is also another
reminder of the risks General Motors is facing as it prepares for a
possible bankruptcy filing as soon as the end of this month. -
Lou Whiteman
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