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Chrysler's desperation move: $2.99 gas for your shiny new SUV

So what do you do if your company produces mostly heavy, inefficient vehicles as gas soars past $4 a gallon? Some might say you should produce more efficient cars. But not Chrysler, which has instead opted to make gas cheaper, guaranteed!

Today, Chrysler CEO Bob Nardelli announced that anyone crazy enough to buy a heavy, high-horsepower, low-mileage Chrysler product before May 31 will be able to buy gas for no more than $2.99 a gallon for three years. Just take your shiny new Aspen or PT Cruiser to the gas station and use your special gas card; Chrysler will pick up the cost over $2.99 a gallon.

Some critics are calling this plan a cheap gimmick. But there is no denying that Chrysler is at a disadvantage relative to General Motors (NYSE: GM) and Ford (NYSE: F) when it comes to offering new cars that get decent mileage. And it is light years behind the auto design leaders, Toyota (NYSE: TM) and Honda (NYSE: HMC). So it needs some kind of gimmick to help its dealers clear out the cobwebs that are quickly forming on their lots.

In recent years, Chrysler has relied heavily on trucks and SUVs for sales, and its hot new cars like the Challenger are gas guzzlers. (Hey, your Hemi sure is fast! Sorry about the 11mpg!) Its lineup is in desperate need of an overhaul and products that offer decent mileage. But developing new cars is difficult and very expensive, and it's not clear that Chrysler's owner, Cerberus Capital Management, has the money to do it. The alternative -- advertising and sales gimmicks, long favorites in Detroit -- is cheap by comparison.

This promotion might work, at least for a few weeks. But it points to much larger problem: Chrysler doesn't have the goods to compete right now, and it's not clear when it will, if ever.

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Last updated: July 24, 2008: 05:38 PM

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