Would You Buy a Car from Chrysler?

(page 2 of 2)

Since the company is virtually assured to reemerge from bankruptcy as part of a new company combined with Italian automaker Fiat, warranties will continue to be honored by Chrysler and the new company that emerges from bankruptcy without the government having to be involved.

Bargain Hunters, Start Your Engines

If car shoppers are still interested, they'll find plenty of deals. The clouds of bankruptcy over Chrysler and General Motors (GM) have greatly reduced demand. As a result, leading car-shopping site Edmunds.com says the average discount being offered on Chryslers, Dodges, and Jeeps is about 23% off sticker, vs. an average of 16% for the rest of the industry.

It's not impossible to find discounts of more than $10,000 on Chrysler minivans and SUVs, as well as Dodge pickup trucks that dealers are trying to clear from their lots. Older car models, such as the Chrysler PT Cruiser and Chrysler 300, are also seeing discounts of more than $5,000 at some dealerships. But those heavy incentives may dry up soon as Chrysler idles its production plants while it is in bankruptcy reorganization.

"No one can blame car buyers who shied away from brands that were mentioned in the same breath as the word bankruptcy," says Edmunds.com consumer advice editor Philip Reed. "[But] now that their warranties are being guaranteed, Chrysler and GM vehicles are good deals that are worth considering."

Let's say, though, that a consumer is wowed by the design of a Jeep Grand Cherokee or Chrysler 300 and wants to take advantage of the huge incentives. The next question might be whether their dealer is going to be around to service it a year from now.

More than 1,000 Dealers May Disappear

Forty-five Chrysler dealers went out of business in April, and more will be shuttered in the weeks ahead. Under Chapter 11, Chrysler can cut dealers without worrying about repercussions from state franchise laws. The company has about 3,150 dealers and is said to want to cut as many as 1,200 to 1,500 of them in markets where too many are competing for too few sales.

So the dealer that is 15 minutes down the road might be gone in a matter of months, with a dealer 45 minutes away the closest to service a vehicle. Other repair shops can perform warrantied repairs, but many car owners prefer to have service done at the dealer where it was purchased.

Earl Hesterberg, CEO of Group 1 Automotive, a company that manages dealerships of several manufacturers, including Chrysler, says a lot of local dealer advertising, combined with the company's national advertising, will need to make the case that buyers don't need to worry about being abandoned. "The good news is that the brands have a future," said Hesterberg.

Is there an argument to be made for waiting to see what Fiat brings over to sell in Chrysler showrooms, or even longer to see what new vehicles the combined company comes up with?

Unfortunately, Fiat suffers from some of the same quality problems as Chrysler. Fiat models do not score high for quality and reliability in Europe and South America, where they are sold now. Fiats and Fiat-owned Alfa Romeos sold in Europe are near the bottom in reliability and "need to improve significantly to move away from the foot of the table, where they have languished for several years," says U.K.-based Which?, a consumer advice publication similar to Consumer Reports in the U.S. A survey of people who owned Fiat models in Britain, by J.D. Power and magazine What Car?, put Fiat last of 28 brands in a 2008 Customer Satisfaction Index for two-year-old vehicles. Quality and reliability count for 30% of the score.

For now, Chrysler has found refuge. But it's not clear how its new partner will make its future any more promising.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

Business Exchange

Track and share business topics across the Web.