Chrysler still viable, says V. Ch. Jim Press
Despite the doom and gloom sounded by ratings agencies and Southern Senators, Chrysler is preparing to ride out the worst the economy can throw at it, and will be able turn a reasonable profit even in a long recession, the automaker’s vice chairman told reporters during a Tuesday “roundtable.”
The sharp cuts Chrysler has made since it was taken over by Cerberus Capital Management, in 2007 have repositioned the automaker to survive even an extended downturn in the U.S. market, asserted Jim Press, the troubled automaker’s second-in-command.
“We feel we’re on a firm footing, financially,” proclaimed Press, prior to beginning the last of eight meetings Chrysler has held with dealers from across the U.S.
According to the plan Chrysler submitted to the federal government to justify a bailout, the U.S. market will slip by as much as 2 million units, this year, to a total sales volume of just 11.1 million, and could hold at that dismal level “for a couple years, and maybe as much as four years, going up to 13 million”,” when the market finally starts to recover. And, if anything, added Press, a worst-case scenario could see sales slip as low as 10 million.
Even at that level, Chrysler claimed, “We were still viable. We were still okay,” according to Press.
The new year certainly doesn’t give industry-watchers much hope, with January delivering the industry its fourth straight month of sales declining more than 30 percent. Chrysler’s own numbers were down nearly twice that, at 55 percent.
During his conversation with reporters, Press acknowledged that Chrysler has been burning through tremendous amounts of cash – and said that without the $4 billion in loans the White House approved just before year’s end, the automaker would’ve been broke. But things look a bit more upbeat, as a result of that aid and the extra $1.5 billion given Chrysler Financial out of the Congressional bank bailout package. Press stressed his optimism that another $3 billion will come with the approval of Chrysler’s viability plan, due on March 31st. And still more government assistance is potentially on tap from the $25 billion program designed to encourage the development of advanced powertrain technology.
But that alone won’t be good enough to keep Chrysler going, the vice chairman acknowledged. To get there the company has to maintain intense cost discipline, and that includes yet another round of employee buyouts, revealed late in January. Meanwhile, Chrysler is continuing to cut unprofitable products and walking away from money-losing fleet business – one reason, said Press, why the company’s January sales were so depressed.
But all things considered, he added, “We feel good, as good as we can in these uncertain times.”
Significantly, Press indicated that the upcoming viability plan will not depend on the proposed strategic alliance with Fiat. But such a deal would make it even more likely for Chrysler to survive, he asserted. “We go from viability to profitability with the help of a global powerhouse.” The deal would give Chrysler “billions and billions and billions of dollars in assets,” added Press, referring to advanced powertrains, small passenger car platforms – and access to Fiat’s global distribution system.
The Fiat venture will not be finalized until after the government rules on Chrysler’s viability plan. Meanwhile, Press revealed, there are significant details to still be worked out with the Italian automaker. The proposed alliance is just the latest of several joint efforts Chrysler has lined up. It is producing a version of its minivans for Volkswagen AG. And it has an even more expansive arrangement with Nissan. The Japanese maker is building a small car for Chrysler’s Latin American dealers and, for now, work is proceeding, said Press, on a U.S. small car Nissan will build that is to be called the Dodge Hornet. Chrysler, in turn, is planning to produce a version of its Ram to replace the slow-selling Nissan Titan.
But beyond those ties, said Press, “Now that we’re in talks with Fiat, we’re not talking with any other manufacturer.”
Chrysler won’t rely solely on the kindness of strangers, however. Press noted that the U.S. maker is planning to launch eight new models over the next 18 months, including a remake of its big 300 series sedan. Initial reports, from journalists and analysts who have been given a sneak peek at the next 300 have been highly positive.
The transition is a painful one, and virtually every “stakeholder” is being impacted, from parent Cerberus – which is foregoing profits from the bailout and watching its equity being diluted – to the tens of thousands of Chrysler workers who will be out of a job by the time the company’s situation stabilized.
Then there are the dealers, who have been flooding into the eight meetings Chrysler has been holding. While rivals Ford and General Motors have specific targets for reducing their dealer count, Steven Landry, Chrysler’s vice president of sales and marketing insisted “We don’t have a particular goal.” But the carmaker’s retail body will certainly be getting smaller, he added, noting the goal is “fewer dealers (each) selling more, and spreading their operations further apart from each other.”