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May 6, 2008
Chrysler's "Let's Refuel America" program which guarantees anyone buying one of its vehicles in the next few weeks gas at $2.99 a gallon for 12,000 miles a year for three years carries some risk for the automaker.
With the current turmoil in the crude oil market, Chrysler could find itself paying out alot more than the 60 cents or so difference between $2.99 and $3.60 that exists now.
Three years, after all, is a long time when you consider how oil prices have almost doubled to over $120 a barrel in just the last 12 months. And Goldman Sachs is now talking about oil at $150 to $200 a barrel!
While speculation has had a part in driving up oil prices, it is hard to imagine how the high prices are not going to filter down to the pump. And if gas prices do remain higher than $2.99 a gallon, the program will only cut further into the company's profits.
On the other hand, if the price of gas does fall to below $2.99 a gallon - and the gas cards become invalid - Chrysler will have a bunch of unhappy campers on its hands.
Either way there is a risk with oil and gas/diesel prices being as volatile as they have ever been.
And then again the incentive could be undermined if other car companies come out with their own incentive plans on top of existing discounts.
"This is really more about helping customers contend with uncertain economic news," Chrysler President Jim Press was quoted as saying.
Bunk, of course.
What it's more about is a company whose sales were off 23.5 percent last month following an 18 percent drop last year and which has no subcompacts and a limited number of compact/small cars - the Dodge Caliber and Chrysler PT Cruiser - on its books when only small, fuel-efficient cars are reporting increased sales.
- Peter C.T. Elsworth
Posted by Peter C. T. Elsworth 
at 1:51 PM to Gas prices
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