Chrysler has asked for an additional $2bn in US federal loans on top of the $7bn originally requested and said it would be viable on annual US sales 1.8m units down, and as a standalone operation, though would benefit greatly from the proposed Fiat alliance. It plans to axe 3,000 workers, three model lines and 100,000 units of capacity this year.
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The company also said it plans 24 new model launches in four years, including electric vehicles.
Similar to General Motors, Chrysler ruled out bankruptcy, saying in its submission to the US government last night it thought an orderly restructuring outside of bankruptcy, together with the completion of a standalone viability plan, enhanced by a strategic alliance with Fiat, was the best option for the automaker and its stakeholders.
“We believe the requested working capital loan is the least costly alternative and will help provide an important stimulus to the US economy and deliver positive results for American taxpayers,” the submission said.
Chrysler said electric technology was now a primary strategy for developing fuel-efficient, low emission vehicles, including an electric-drive vehicle in 2010.
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By GlobalDataTo reduce costs, dealers, suppliers and second lien lenders’ concessions had been implemented or agreed and a tentative agreement had been reached with the UAW to give Chrysler with a work force cost structure competitive with ‘transplant’ [foreign] automotive manufacturers operating in the US.
Since asking for a $7bn loan late last year, Chrysler said there had been an unprecedented decline in the automotive sector with the continued lack of available credit affecting consumers and dealers, leading to reduced wholesale orders.
“Due to this continued lack of consumer credit, we are revising our seasonally adjusted annual rate (SAAR)… We are now projecting a SAAR level of 10.1m units for this year, (which is a 40-year low for our industry) and an average SAAR level of 10.8m units for 2009-2012. This is a reduction from our original December submission of 7.2m units, or an average 1.8m units annually during the four years.
“For Chrysler, this represents a sales decline of approximately 720,000 units, (or an average 180,000 units per year) assuming a 10% market share, [and] approximately $18bn in lost revenue and a $3.6bn decline in cash inflows during the four years,” the submission said.
“Based on this, we will require incremental financial support to continue our orderly and effective restructuring and are therefore now seeking an incremental $2bn in addition to the remaining $3bn that was within the scope of our original 2 December plan submission.”
Chrysler said its proposed Fiat alliance would enhance its viability plan and provide it with access to competitive fuel-efficient vehicle platforms, distribution capabilities in key growth markets and substantial cost-saving opportunities.
Next year, it would launch a new Jeep Grand Cherokee, a new Dodge Charger and unibody Durango and a new Chrysler 300.
The first electric-drive vehicle is also scheduled to reach the market in 2010 and will be followed by other electric-drive vehicles, including [Chevrolet Volt-like] range-extended electric vehicles, in following years in order to further reduce fuel consumption.
Chrysler said the alliance would further help it achieve fuel efficiency standards from access to smaller, fuel-efficient platforms and powertrain technologies.
“The alliance would enable Chrysler to reduce its capital expenditures while supporting the company’s commitment to develop a portfolio of vehicles that support the country’s energy security and environmental objectives.”
In 2009, Chrysler plans to reduce fixed costs by $700m, reduce one shift of manufacturing, cut 3,000 workers, axe three vehicle models, eliminate 100,000 units of capacity and sell $300m of additional non-earning assets.
Other cost savings and improved cash flow would be achieved through a number of measures including: reduced dealer margins, elimination of fuel fill and a reduction of service contract margins.
Chrysler said new agreements with the United Auto Workers would deliver a work force cost structure is competitive with transplant automotive manufacturers.
It had started talks with suppliers and expects substantial cost reductions.
“Chrysler supports supplier associations’ proposals, which would provide a government guarantee of OEM accounts payables,” the submission said.
It had also agreed equity for debt swaps with creditors and expects to further reduce outstanding debt by $5bn.
“This reduction will also provide immediate cash flow via interest savings of between $350m and $400m annually,” the submission added.
