Chrysler's Gas Card Incentive Is Now Running On Fumes

Implications: Gas prices keep going up and Chrysler executives keep trying to pump life-and hype-into their gas-price protection incentive, which they have extended through July 7.

Analysis:

Lets face it, "Let's Refuel America" hasn't generated as much steam as sizzle, and now it's difficult to call the program anything but a failure.

 For one thing, Chrysler's May sales fell by 25 percent despite the incentive, the second-worst performance by a major automaker in the month, exceeded only by a 30 percent decline for General Motors, which was severely hampered by a major supplier strike.

 Second, Chrysler buyers' take rate in May for a LFA gas card turned out to be only 5 percent to 10 percent-meaning that over 90 percent of the company's customers opted for a conventional cash rebate or low-interest financing against three-year protection against gas prices above $2.99 a gallon.

And third, even in the arena of marketing buzz, where Chrysler execs insisted that LRA was proving its value, the concept has turned into a bust.

Shortly after Chrysler introduced LRA early in May, it looked like the concept might have significant legs. The company reported huge increases in traffic on its Web sites, a surge of consumer inquires to its dealers, and a lot of customer discussion with salespeople about the program.

So why hasn't LRA driven many actual sales? One reason, is that Chrysler hasn't been able to overcome the fact that it offers the least fuel-efficient lineup, overall, of any automaker.

Another problem for LRA is that no other major automaker quickly echoed Chrysler's program. GM refrained after having tried a similar program a few years earlier with poor results. Ford felt its more fuel efficient lineup didn't require something like LRA.

My take, is that customers understand the zero-sum game of incentives. In many cases they have negative equity in their trades, so what they really want is trading money. So if their choice is between no cash incentives or subsidized gasoline- they're going to take the cash incentive.

In any event, the lack of a significant competitor left Chrysler's marketing machine alone in promoting a gas price protection concept.

Nevertheless, it may be that the biggest long-term benefit to Chrysler of LRA is the very fact that the company was able to mount the program in the first place.

Against a backdrop of a highly non-cooperative market and amid all sorts of trouble signs for the company generally, being able to pull off LRA seems to have developed into something of an internal morale booster.