Chrysler Claims to Need Another $2 billion

Like GM, Chrysler submitted its plans to Congress today and asked for an additional $2 billion in loans. Chrysler originally asked for $7 billion and was given $4 billion, but since December, the market has worsened and changed their forecast.

Chrysler is reducing fixed costs, production, number of models and selling off assets. Even with all of these actions, it is not enough and so they need more money. Like GM, I wonder about Chrysler's "business as usual" mentality and if they can make radical changes to increase sales. With four upcoming electric vehicles on the horizon, I believe Chrysler can be a success if given a chance.

From Automotive News:

In submitting its viability plan to the federal government today, Chrysler LLC asked for an additional $2 billion beyond the $7 billion in loans it sought late last year and outlined further steps to cut costs.

Chrysler said it will reduce fixed costs by an additional $700 million, cut 100,000 more units of production capacity, discontinue three more model lines and sell $300 million more in assets.

"Since Chrysler LLC's original $7 billion submission, there has been an unprecedented decline in the automotive sector," the company said in a statement. "Based on this, we will require incremental financial support to continue our orderly and effective restructuring."

The Bush administration gave Chrysler only $4 billion of the $7 billion in loans it sought.

The automaker promised to complete its viability plan by the March 31 deadline. Chrysler says it could survive on its own but would be "enhanced through a strategic alliance." That alliance, with Italian automaker Fiat S.p.A., would give Chrysler access to a supply of fuel-efficient small cars.

Highlights of Chrysler's viability plan • Seek $2 billion more in U.S. loans, for a total of $9 billion • Reduce fixed costs by an additional $700 million this year • Eliminate 100,000 units of production capacity • Cut 3,000 more jobs • Sell $300 million in additional assets • Discontinue 3 more model lines • Submit final plan by March 31 • Begin paying back loans in 2012

Concessions Chrysler has been negotiating for concessions with the UAW, dealers, suppliers and debt holders. Chrysler said those concessions have largely been agreed upon. Chrysler's statement said the UAW concessions would make the automaker competitive with transplant manufacturers in the United States. Last year, Chrysler asked Congress for a $7 billion loan to help it survive until the economy turns around. With auto sales running at an annual rate of about 10 million for the first two months of 2009, Chrysler officials acknowledge that recovery won't happen until 2010. Congress denied Chrysler's request. The Bush administration provided $4 billion at the end of December. Before today's announcement asking for an additional $2 billion in loans, Chrysler had said it still needs the other $3 billion to survive. Chrysler suffered a precipitous loss of sales and revenue in 2008. The company's 30 percent sales loss was the steepest among major carmakers in the United States last year. Chrysler claims its restructuring plan, launched in February 2007, was on track until June 2008. That's when fuel prices soared to $4 a gallon and the credit crisis was gathering momentum. The credit meltdown forced Chrysler's captive finance company, Chrysler Financial, to exit the leasing business in August 2008, costing the carmaker 20 percent of its sales volume almost overnight. Since launching its recovery plan, Chrysler has eliminated 1.2 million units of capacity and stopped building four unprofitable models. In the process, Chrysler has slashed its work force by 32,000 and cut fixed costs by $3 billion. Chrysler says it has identified more than $1 billion in unproductive assets and already sold $700 million worth.

Alliances Chrysler is relying on alliances with other carmakers to rebuild itself. Chief among those partnerships is a proposed alliance with Fiat, announced in January. Under terms of the deal, Fiat would supply Chrysler with a range of small cars and sub-2.0-liter engines that will help Chrysler meet U.S. fuel economy requirements. Fiat gets access to the U.S. car market for its products, including the Fiat 500 small car, while Chrysler gets access to Fiat's international markets. The alliance is contingent on U.S. Department of Treasury approval of the $7 billion loan Chrysler originally requested. Chrysler says Fiat will not receive any U.S. taxpayer dollars. Chrysler has taken other cost-saving measures to meet Treasury requirements, including: • Suspending its salary merit pay programs for 2009. • Ending matching contributions for workers' 401(k) plans. • Making top executives sign waivers banning them from taking incentive compensation or golden parachutes. • Eliminating retiree life insurance.