Wednesday, February 18, 2009

Chrysler plan seeks $2 billion more in federal aid, will cut 3,000 more jobs

Alisa Priddle / The Detroit News
Chrysler LLC wants an additional $2 billion in federal aid on top of the $4 billion received to date and the $3 billion it has requested but has not been granted.

In addition, the struggling Auburn Hills automaker also plans to cut its fixed costs by $700 million and eliminate another 3,000 jobs this year. The plan also would:

• Reduce one shift of manufacturing

Discontinue three vehicle models

• Take out 100,000 units of capacity

• Sell $300 million of additional non-earning assets

Chrysler said it also has suspended the 401(k) retirement plan match, as well as incentive bonuses, merit increases, and has retiree life-insurance benefits.

These are among the first details of the restructuring plan submitted to the government this evening in a document designed to show the automaker can become a sustainable, standalone company if it receives a total of $9 billion in bridge loans from the government.

And it can be even more profitable with a partnership with Fiat SpA, Chrysler said.

"We believe that Chrysler LLC will be viable based on the updated assumptions contained in this submission, and that an orderly restructuring outside of bankruptcy, together with the completion of our standalone viability plan, enhanced by a strategic alliance with Fiat, is the best option," said Chrysler chairman Robert Nardelli.

But deteriorating market conditions and lack of credit, resulting in Chrysler sales falling 30 percent in 2008 and 55 percent in January, has forced Chrysler to revise its U.S. annual sales forecast to 10.1 million units for this year and 10.8 million units for 2009-2012.

For Chrysler it represents a sales decline of approximately 720,000 units, (or an average 180,000 units per year) assuming a 10 percent market share. That translates to about $18 billion in lost revenue and a $3.6 billion decline in cash inflows during the four years.

Hence, the request for an additional $2 billion.

The plan promises 24 vehicle launches in 48 months and pursuit of electric technology to develop fuel-efficient, low-emission vehicles, including an electric-drive vehicle in 2010. New products include new versions of the Jeep Grand Cherokee, Dodge Charger, Dodge Durango and Chrysler 300 next year.

The Dodge Durango and Chrysler Aspen will not resume production and Chrysler PT Cruiser will be discontinued this summer. Those three nameplates join the already announced eliminations of the PT Cruiser convertible, Dodge Magnum, Chrysler Crossfire and Chrysler Pacifica. ...More

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