Chrysler gambling with sales incentive that helps pay for gas

Not sure if this is brilliant or depressing. Or both.

Chrysler announced Monday an offer that caps the price of gasoline at $2.99 a gallon for three years for people who buy or lease new vehicles from Wednesday through June 2. The offer is based on 12,000 miles of driving per year at the vehicle’s rated fuel economy. Customers will get a card for buying gas that is linked to their own charge account, Chrysler said. The customer will be billed $2.99 a gallon, and Chrysler will pay the rest.

I’m sure the honchos in Auburn Hills did their math on this (and when was the last time a US car company didn’t correctly anticipate fuel costs?) but to me it looks like this could get pretty expensive.

The story goes on to point out that at the current $3.61 a gallon average gas price, someone who buys a new PT Cruiser (est. 21 MPG) would only cost the company $1075 per car. That seems a bit much but not ridiculous for a car with an MSRP of $15,285.

However let us take the radical notion that gas prices have not yet peaked. If the price of gas hits $5 a gallon (and I wish that were unthinkable) the total cost to the company hits $3300*. Even if the price “only” hits $4.50 per, the company is on the hook for $2580 per car. Suddenly that PT Cruiser is costing Chrysler a lot.

All of this, btw, assumes something we all know to be false: That there is a relationship between the advertised MPG and what you actually get. If the car actually gets 18 MPG then Chrysler has to pick up the actual difference. At today’s prices that means a mere $150 increase over three years. However at $4.50 it’s about $500 more — which means Chrysler is in essence selling the PT Cruiser for about $12K. For the consumer it’s a great anti-inflation move, for the shareholders though? Well, for gas company share holders it’s great.

The other thing that will contribute to Chrysler’s costs is the fact that consumers will probably buy more expensive grades of gas. Why not always get super premium if it only costs me $2.99?

Here is my own personal indicator of the impact of the price of gas: I am now driving at or below the speed limit. This news so shocked Mrs. CollateralDamage that she briefly put down the latest guide to Disney.

*(In case you’re wondering here’s the formula I used 12000[miles] / 21 [MPG] = total gallons consumed [which I’ll call G]. G * price = total cost / (G * price – 2.99) = annual cost to Chrysler * 3 = total cost to Chrysler. Given my legendary inability to do anything beyond basic math I put this out there so that someone can and will correct me.)

Advertisement

Your stock holder dollars at work: What it costs to entertain at the Super Bowl

What follows is a verbatim copy of an email I received — I’m guessing by accident — listing one company’s prices offered to corporations for Super Bowl entertainment. Simply put: Hospitality has a markup of at least $1K.

“Below you will find our listing of GameDay Hospitality and tickets.

Ticket Only Ticket w/Hospitality

UPPER LEVEL
End zones and Corners $3,490 $4,499
Endzones-20’s $3,845 $4,799
Between the 20’s $4,435 $5,199

LOWER LEVEL
Endzone $4,140 $5,699
Corners $4,635 $6,499
Endline-15 $5,420 $7,899
15-30 $7,235 $8,235
Between the 30 $8,315 $9,365

The GameDay Program includes NFL guaranteed Game Ticket, Exclusive In-Stadium Hospitality (pregame food stations, open bar and live entertainment), NFL Experience Ticket and Official NFL Super Bowl Gift Bag.”