Residuals reduced on GM, Chrysler brands

Automotive Lease Guide is slashing projected residual values of 2009 models sold by all of Chrysler LLC's brands and half of General Motors' brands. The cuts reflect the brands' uncertain futures, the guide company says.

Automotive Lease Guide predicts what cars and trucks will be worth in 36 months — the length of a typical vehicle lease. Those forecasts affect lease rates and used-vehicle prices and help shape consumer attitudes toward brands and vehicles.

Starting next month, the guide company is cutting by as many as 5 percentage points its residual predictions for the Chrysler, Dodge, Jeep, Saturn, Saab and Hummer brands and several Pontiac models. Those cuts are in addition to other adjustments the company makes, up or down, to the values of individual brands and models.

GM executives say the automaker plans to emphasize Chevrolet, Cadillac, Buick and GMC. Hummer is for sale. Pontiac is to become a niche brand with a smaller lineup. GM plans to shed Saab and is studying what to do with Saturn.

Like GM, Chrysler is accepting emergency federal loans to stay in business while it restructures.

Value Judgement
Automotive Lease Guide is lowering its predictions of what many General Motors and Chrysler vehicles will be worth in 3 years. Residual values are expressed as the percentage of original sticker price that each brand's 2009 models are projected to retain after 36 months.

James Clark, editorial director of Automotive Lease Guide, said the company forecasts "additional risk" for the brands it has downgraded.

"We can't model exactly what the future holds," Clark told Automotive News, "because we don't know."

Automotive Lease Guide expresses its residual-value projections as a percentage of a vehicle's original sticker price. For example, the company predicts that a 2009 Pontiac Torrent crossover with two-wheel drive will be worth $8,037 in three years — 31.5 percent of its suggested new-vehicle retail price. The comparable 2008 Torrent has a projected 36-month residual of 40.0 percent.

With the across-the-board downgrades, Hummer's brand residual will fall to 38.6 percent next month, down 9.1 points from March 2008. Automotive Lease Guide is assigning Saab a residual of 36.1 percent, down 7.1 points from March 2008. Saturn's new residual is 41.3 percent, down 7.0 points from March 2008.

A residual of 50 percent or more is considered desirable for a brand or vehicle. Low residual projections make it harder for automakers to offer attractive consumer lease deals.

GM and Chrysler have cut back greatly on leasing in the past year. Last month, 3.3 percent of Chrysler's new-vehicle sales were leases, down from 24.7 percent in January 2008, according to Power Information Network. GM's lease rate in January was 2.8 percent, down from 18.3 percent in the year-ago month.

Joanne Krell, a spokeswoman for Hummer and Saab, says both brands seek to enhance their value to buyers with high-quality products and service.

"The things we can control, we'll do to the best of our ability — and better than the competition," Krell says.

Chrysler LLC spokeswoman Carrie McElwee declined to comment on the changes in brand valuations by Automotive Lease Guide, saying the automaker was unfamiliar with them.