Wall Street Journal
Chrysler Group LLC vowed to return to profitability by 2011 and pay back billions of dollars in U.S. bailout loans by 2014, an ambitious set of targets for a company that exited bankruptcy protection just months ago.
At the end of a day-long presentation of its long-awaited turnaround plan Wednesday, the company said it is counting on a slew of new models to spark a surge in sales over the next five years and drive its revival.
Chrysler—which has seen its sales plunge by half in the last few years—predicted revenue will rise about 20% a year, from $42.5 billion in 2010 to $67.5 billion in 2014, and said it would break even in 2011.
"Today is the first day of a new Chrysler. We have laid out our plans and we have become publicly accountable for the delivery," Chief Executive Sergio Marchionne said at corporate headquarters in Auburn Hills, Mich.
The forecasts—more bullish than many people expected—suggest the Obama administration's investment in the company could yet pay off. The government saved Chrysler with $9 billion in loans and pushed it into bankruptcy and an alliance with Italy's Fiat SpA in hopes of saving American jobs and an icon of U.S. industrial might.
"Some of you have [assumed] that we are losing money. This is not true,'' said Mr. Marchionne, who also is Fiat's CEO.
He and other executives said Chrysler already is seeing a significant improvement in its financial performance.
It broke even in September, has taken in more cash than it spent in the last few months and doesn't expect to use up cash even as it spends to develop and launch models based on Fiat technology.
As a result, Chrysler ended September with $5.7 billion in cash, up from $4 billion at the end of June, Mr. Marchionne said. On the sidelines of the presentation, the company's chief financial officer, Richard Palmer, said that "going forward we don't expect to consume cash."
Before Chrysler was ushered into bankruptcy April 30, it was burning more than $2 billion in cash a month. In bankruptcy court, Chrysler shed billions of dollars in debt, slashed its labor costs, shed hundreds of dealers and closed plants.
Mr. Palmer said the company expects to repay all its U.S. loans by 2014.
To hit its financial targets, Chrysler expects to double its world-wide sales, from 1.3 million cars and trucks in 2009 to 2.8 million in 2014, and predicted its U.S. market share will rise from about 6% in 2009 to 11% in 2014.
But Chrysler has based prior turnaround plans on big increases in sales only to be disappointed.
Earlier this decade, when it was owned by Daimler AG, Chrysler pledged to boost sales by one million vehicles, from about two million a year to three million, over 10 years. After a few years of gains and profits, growth stalled, losses mounted and Daimler gave up a majority stake in Chrysler in 2007.
Chrysler is facing considerable skepticism in automotive and government circles. Last week, the Government Accountability Office questioned whether the U.S. can recoup its investments in car makers.
Industry analysts who sat through the presentation of the company's turnaround plan said Chrysler's survival still depends heavily on whether the U.S. economy bounces back and car sale rise from their current historically low levels.
"Everything is in the market—that's the big kahuna. Next year is critical," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. Mr. Cole said if the U.S. market returns to annual sales of 12 million vehicles next year, Chrysler will fare well.
Mr. Cole also pointed out that Chrysler doesn't have many new products coming out in the next year.
Mr. Marchionne's team is undaunted. "We are confident we can weather the storm," said Mr. Palmer, who recently joined Chrysler from Fiat.
Chrysler received a significant endorsement after its presentation. Michael J. Jackson, chief executive of AutoNation Inc., a large dealership chain, said he was impressed by the plan and is now interested in acquiring additional Chrysler stores.
"AutoNation is a buyer as of tomorrow," Mr. Jackson said.
As part of Chrysler's comeback plan, the company aims to boost its Ram truck sales by 50% over the next five years, increase global Jeep sales by 60% and more than double U.S. sales of Chrysler-brand vehicles.
It will add small vehicles to its Dodge car brand and eliminate several Jeep products in favor of new models jointly developed with Fiat. By 2014, about half of Chrysler's engines will be based on Fiat technology.
New products are vital to creating consumer buzz to drive sales. Chrysler's sales continue to suffer more than its competitors'. In October, the auto maker's U.S. sales fell 30% while both Ford Motor Co. and General Motors Co. notched increases.
Chrysler also vowed to improve the quality of its vehicles, which have often scored poorly in customer-satisfaction surveys.
"We get it. We are not in denial," said Doug Betts, Chrysler's top quality executive. "We've got an issue to deal with both in terms of what people think of our quality and the reasons behind what they think."
Don Metzner, president of Armory Automotive, a dealer in Albany, N.Y., said he was encouraged to hear that Chrysler has positive cash flow.
"Not only was it a surprise, it's the essential ingredient needed to bring the exciting new product pipeline to fruition. My confidence in Chrysler is greatly enhanced," said Mr. Metzner, who attended the presentation.
Chrysler said it plans to invest $500 million in its dealer network over the next five years, including $120 million in 2010.
At the end of a day-long presentation of its long-awaited turnaround plan Wednesday, the company said it is counting on a slew of new models to spark a surge in sales over the next five years and drive its revival.
Chrysler—which has seen its sales plunge by half in the last few years—predicted revenue will rise about 20% a year, from $42.5 billion in 2010 to $67.5 billion in 2014, and said it would break even in 2011.
"Today is the first day of a new Chrysler. We have laid out our plans and we have become publicly accountable for the delivery," Chief Executive Sergio Marchionne said at corporate headquarters in Auburn Hills, Mich.
The forecasts—more bullish than many people expected—suggest the Obama administration's investment in the company could yet pay off. The government saved Chrysler with $9 billion in loans and pushed it into bankruptcy and an alliance with Italy's Fiat SpA in hopes of saving American jobs and an icon of U.S. industrial might.
"Some of you have [assumed] that we are losing money. This is not true,'' said Mr. Marchionne, who also is Fiat's CEO.
He and other executives said Chrysler already is seeing a significant improvement in its financial performance.
It broke even in September, has taken in more cash than it spent in the last few months and doesn't expect to use up cash even as it spends to develop and launch models based on Fiat technology.
As a result, Chrysler ended September with $5.7 billion in cash, up from $4 billion at the end of June, Mr. Marchionne said. On the sidelines of the presentation, the company's chief financial officer, Richard Palmer, said that "going forward we don't expect to consume cash."
Before Chrysler was ushered into bankruptcy April 30, it was burning more than $2 billion in cash a month. In bankruptcy court, Chrysler shed billions of dollars in debt, slashed its labor costs, shed hundreds of dealers and closed plants.
Mr. Palmer said the company expects to repay all its U.S. loans by 2014.
To hit its financial targets, Chrysler expects to double its world-wide sales, from 1.3 million cars and trucks in 2009 to 2.8 million in 2014, and predicted its U.S. market share will rise from about 6% in 2009 to 11% in 2014.
But Chrysler has based prior turnaround plans on big increases in sales only to be disappointed.
Earlier this decade, when it was owned by Daimler AG, Chrysler pledged to boost sales by one million vehicles, from about two million a year to three million, over 10 years. After a few years of gains and profits, growth stalled, losses mounted and Daimler gave up a majority stake in Chrysler in 2007.
Chrysler is facing considerable skepticism in automotive and government circles. Last week, the Government Accountability Office questioned whether the U.S. can recoup its investments in car makers.
Industry analysts who sat through the presentation of the company's turnaround plan said Chrysler's survival still depends heavily on whether the U.S. economy bounces back and car sale rise from their current historically low levels.
"Everything is in the market—that's the big kahuna. Next year is critical," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. Mr. Cole said if the U.S. market returns to annual sales of 12 million vehicles next year, Chrysler will fare well.
Mr. Cole also pointed out that Chrysler doesn't have many new products coming out in the next year.
Mr. Marchionne's team is undaunted. "We are confident we can weather the storm," said Mr. Palmer, who recently joined Chrysler from Fiat.
Chrysler received a significant endorsement after its presentation. Michael J. Jackson, chief executive of AutoNation Inc., a large dealership chain, said he was impressed by the plan and is now interested in acquiring additional Chrysler stores.
"AutoNation is a buyer as of tomorrow," Mr. Jackson said.
As part of Chrysler's comeback plan, the company aims to boost its Ram truck sales by 50% over the next five years, increase global Jeep sales by 60% and more than double U.S. sales of Chrysler-brand vehicles.
It will add small vehicles to its Dodge car brand and eliminate several Jeep products in favor of new models jointly developed with Fiat. By 2014, about half of Chrysler's engines will be based on Fiat technology.
New products are vital to creating consumer buzz to drive sales. Chrysler's sales continue to suffer more than its competitors'. In October, the auto maker's U.S. sales fell 30% while both Ford Motor Co. and General Motors Co. notched increases.
Chrysler also vowed to improve the quality of its vehicles, which have often scored poorly in customer-satisfaction surveys.
"We get it. We are not in denial," said Doug Betts, Chrysler's top quality executive. "We've got an issue to deal with both in terms of what people think of our quality and the reasons behind what they think."
Don Metzner, president of Armory Automotive, a dealer in Albany, N.Y., said he was encouraged to hear that Chrysler has positive cash flow.
"Not only was it a surprise, it's the essential ingredient needed to bring the exciting new product pipeline to fruition. My confidence in Chrysler is greatly enhanced," said Mr. Metzner, who attended the presentation.
Chrysler said it plans to invest $500 million in its dealer network over the next five years, including $120 million in 2010.
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