Chrysler exec sees automaker viable by spring
Published: Saturday, January 24, 2009 at 4:49 p.m.
Last Modified: Saturday, January 24, 2009 at 4:49 p.m.
NEW ORLEANS -- A top Chrysler LLC executive says the automaker should be viable by springtime because of its restructuring, introduction of new and improved vehicles, and higher sales due to loosened credit and sweetened incentives for buyers.
Vice Chairman and President Jim Press defined "viable" as remaining solvent and continuing to invest in new products, with an ability in the future to repay government loans.
But he told reporters Saturday at the National Automobile Dealers Association annual convention that he doesn't know when the privately owned Auburn Hills, Mich.-based company will return to profitability.
Press said Chrysler can be viable if the U.S. light vehicle market shrinks from last year's 13.2 million in sales to just over 10 million. As recently as 2007, the market exceeded 16 million.
The struggling Chrysler has received $4 billion in government loans so far to hold off bankruptcy, and it expects to get $3 billion more after it files a viability plan with the government by Feb. 17. Without the loan money, its executives have said it would run out of cash.
Press told reporters that the country was living off loose credit and fast spending for years, and a correction probably is good. But that means automakers have to be prepared to make it on sales that are far lower than in previous years.
"Good business people will see this as normal and calibrate ourselves and our organizations as if today was the way life is going to be," Press said. "We shouldn't bank on some of these easy monies."
He said Chrysler's retail market share through Jan. 22 is 10.1 percent, the highest it's been in recent months. Sales, he said, have been better than in December, and a normal seasonal uptick in March, April and May should help Chrysler become viable, he said.
Chrysler's sales were down 30 percent last year compared with 2007, and they were off 53 percent in December. The poor showing led several industry analysts to predict the company could not make through 2009 without a merger, alliance or some other combination.
Earlier this week Chrysler announced a nonbinding preliminary deal for Fiat Group SpA to take a 35 percent stake in Chrysler in exchange for small-car and small-engine technology that will help Chrysler bring smaller, more fuel-efficient models to market faster.
But it could take two years for the Fiat products to arrive in the U.S., which is Chrysler's primary market. Fiat is not putting any cash into the deal.
Press said it still makes sense for the U.S. government to loan Chrysler money even though the automaker could be 35 percent owned by an Italian company, because it preserves jobs in the U.S.
"The viability of the company is in our minds not a question, but we're working through prosperity," Press said.
Chrysler employs about 66,000 people worldwide, with the bulk of them in the U.S.
Steven Landry, executive vice president of marketing and sales, said Chrysler expects to gain sales from new incentives that in part came from a $1.5 billion government loan to Chrysler Financial, enabling it to loan money again.
Chrysler on Thursday announced employee pricing, plus an incentive, plus low-interest loans to help move its vehicles.
"It's not going to be a great industry for 2009, but we really have to have our boxing gloves on," Landry said.
Chrysler shut down all 30 of its factories for much of December and January, but all plants will be back on line as of Monday, Press said.
By not producing, the company reduced its inventory from 498,000 at the end of last year to 456,000, and Press said the plants will have to come back on line to replenish stocks. The December inventory was 48,000 less than December of 2007, he said.
"We're going into a better season. We've worked through the winter," Press said.
Chrysler has been haunted by quality concerns for years, but Press and other executives said the company is on its way to fixing the problems with warranty costs after three months of ownership down 30 percent in 2008 compared with 2007. Warranty claims are at the lowest point in company history, Press said.
The company's vehicles, including the Chrysler, Dodge and Jeep brands, saw their scores fall sharply from 2007 in Consumer Reports' annual vehicle reliability rankings last year. Nearly two-thirds of its model lineup were below average, and the Chrysler Sebring sedan was the worst-rated car.
But Doug Betts, the company's chief customer officer, said the company has formed teams to identify and fix quality problems when they occur, and that should start showing up in Consumer Reports data this year. Consumer Reports, he said, averages scores for the past three years, so it will take a while for the measures to be fully visible.
"It's very, very correlated to warranty," Betts told reporters.
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