DaimlerChrysler has released this statement to coincide with today’s press conference announcing a ‘turnaround plan’ for the Chrysler Group:

  • Chrysler Group is expected to return to profitability in 2002
  • Increasing annual benefits of the restructuring measures at Chrysler Group; 7.2 billion euros ($8.1 billion) by 2003
  • Restructuring charge of up to 4.0 billion euros ($3.9 billion); 3.0 billion euros ($2.8 billion) in Q1 2001

DaimlerChrysler’s Operating Profit Targets* (excluding one-time effects):

  • in 2001 between 1.2 billion euros and 1.7 billion euros
  • in 2002 between 5.5 billion euros and 6.5 billion euros
  • in 2003 between 8.5 billion euros and 9.5 billion euros

DaimlerChrysler today announced at the annual press conference in Sindelfingen, Germany, the company’s 2001-2003 Turnaround Plan for the Chrysler Group and the overall company performance outlook for 2001 through 2003.

The Turnaround Plan anticipates that the Chrysler Group will return to profitability in 2002.

Assumptions: Exchange rate 2001: 1 euro = $0.93; 2002/2003 strengthening of the euro against the US$ expected stable economic developments in our most important markets, continuation of relatively high demand in most key automotive markets during 2001-2003, weakening demand in North America (approximately 16 million vehicles annually in the USA in 2001-2003)

The Turnaround Plan for Chrysler Group is comprised of a number of measures aimed at cutting costs and boosting revenues. It is designed to improve financial performance and market position, and to lay the foundation for sustained positive results in the future. The plan involves six specific action areas. Four focus on reducing costs; material management; plant management; fixed cost management and restructuring operations. Two focus on enhancing revenues: revenue management and product strategy.

The Chrysler Group is renewing more than two-thirds of its products between 2000 and 2003. In fact, as it completes the launch of the all new Jeep Liberty (Jeep Cherokee in Europe) and Dodge Ram models this year, the average age of the Chrysler Group vehicle line-up will be just 2.1 years – giving it the youngest product range of any U.S. vehicle manufacturer.

Several key initiatives have already been announced since December 2000.

These include an overall 15 percent, reduction in material costs; a reduction in the workforce of 26,000 – or 20 percent – over three years; the idling of six plants through 2003; and a revenue-enhancing plan for dealers.

In total, the Turnaround Plan aims to generate additional benefits through annual savings and profit improvements of 3.3 billion euros ($3.1 billion) in 2001, rising to 5.2 billion euros ($5.7 billion) in 2002, and 7.2 billion euros ($8.1 billion) in 2003.

For the year 2001, the Chrysler Group anticipates an operating loss between 2.2 billion euros ($2.0 billion) and 2.6 billion euros ($2.5 billion).

The implementation of the planned measures will lead to a restructuring charge of around 3.0 billion euros ($2.8 billion) in 2001 and will be booked in the first quarter. In the following years, additional charges of up to 1.0 billion euros ($1.1 billion) could be necessary. Chrysler Group plans to return to modest profitability in 2002; an Operating Profit of more than 2 billion euros (more than $2 billion) is expected in 2003.

The Turnaround Plan includes a number of financial and operative performance milestones:

By mid-year 2001:

  • Workforce reduction of 12,000 employees; and,
  • Launch of the Jeep(R) Liberty.

By year-end 2001:

  • Total workforce reduction of 19,300 employees;
  • Reduction in material costs by more than five percent;
  • Major plant adjustments (e.g. elimination of shifts and change of line speed), including closure of the Toluca Transmission Plant;
  • Launch of the new Dodge Ram; and,
  • Operating loss in the range of 2.2 – 2.6 billion euros ($2.0 – $2.5 billion).

By year-end 2002:

  • Launch of the new Dodge Viper;
  • Further plant cost reductions and additional workforce reduction of 4,200 employees; and,
  • Break-even for the full year.

By year-end 2003:

  • Achieving the total workforce reduction of 26,000 employees;
  • Achieving the full 15% reduction in material cost compared to end of 2000;
  • Launch of the new Dodge Durango, and a medium-duty pickup truck and;
  • Operating profit of more than 2.0 billion euros (more than $2 billion)

DaimlerChrysler Group Outlook through 2003

DaimlerChrysler expects a 2001 operating loss in the region of 3.8 billion euros to 4.3 billion euros. Excluding one-time effects of 3.0 billion euros related to the restructuring measures at the Chrysler Group and around 400 million euros (at equity consolidation) as a one-time charge related to the Mitsubishi Motors Turnaround Plan, an operating loss of between 0.8 billion euros and 1.0 billion euros is expected.

For the whole year of 2001, operating profit — adjusted for one-time effects — is expected to be between 1.2 billion euros and 1.7 billion euros.

In 2002, the company is working toward an operating profit in the range of 5.5 billion euros and 6.5 billion euros, and a further increase in operating profit in 2003, to a level of between 8.5 billion euros and 9.5 billion euros.

These forecasts are based on the assumption that economic developments in the key markets will remain generally stable, and that vehicle demand in these markets will continue at the levels of recent years. In the USA, it is assumed that demand for passenger cars and light-duty trucks will be approximately 16 million units annually.