California Autos Examiner

Friday, December 21, 2007

Chrysler's Project E: Explain Previous Statements

Update: Okay, I thought about this article and I really don't want to seem like I'm bagging on Chrysler. I don't know, I'm sitting there watching Superbad and I get a little punchy. As I had mentioned in the previous post, Nardelli and his team are ordering up a slew of improvements for existing models. We'll have to see how tangible those items are, but I am impressed with the rate at which these fixes are being tested and approved. I am worried a bit by this new purchasing czar and his fascination with sourcing things like batteries from far flung locations around the world, even when advised against doing so. It makes me wonder what else he might be purchasing against the advice of others. However, I just shake my head when I read that Chrysler engineers are high-fiving because they finally got LED tail lights approved. How hamstrung did Daimler have these guys?

When you use the B (bankruptcy) word, it tends to get people's attention. So today Chrysler PR went on the offensive to calm the troops and respond to the WSJ article 'Chrysler Faces Financial Pinch'. Chrysler CEO Bob Nardelli reiterated that the "Operationally bankrupt" remark was indeed merely to shock the whole company into action. In actuality, Nardelli says that Chrysler has "ample liquidity," rather like yours truly after three scotch and sodas.

In his response, Nardelli goes on to say that Cerebus and its investors are quite happy with the progress that is being made. Chrysler is looking forward to a New Year filled with delights such as the new Ram pickup, Challenger muscle car, Dodge Journey crossover and the hybrid Aspen/Durango twins. Yeah, and I'm looking forward to packing on a couple of extra pounds next year. Okay, maybe that's a bit too harsh.

Does Nardelli wish he could take back the 'B word'? Maybe. But Chrysler does need to get the ball rolling. It's my belief that with the exception of the 300C, Daimler really shot Chrysler in the foot. Can Team Cerebus turn things around in time? I hope so!

Nardelli's full response after the jump.

“There have been several recent media reports that have painted an inaccurate picture of Chrysler LLC’s current financial position. Therefore, the management of Chrysler and our parent company, Cerberus Capital Management, L.P., felt it imperative to correct the record since such misinterpretations and misperceptions are misleading and could leave the wrong impression in the minds of investors and other interested parties.

First and foremost, it is important to note that Chrysler is not only meeting, but, in many cases, exceeding its financial targets heading into 2008.

Importantly, Chrysler has ample liquidity. We are fully funded with working capital to meet our present and future needs and objectives. We are doing what any other prudent company is doing during this challenging economic environment. We are trying to instill a sense of urgency throughout the workforce, putting our capital to work effectively and efficiently, streamlining inventory, improving current products and developing new and innovative vehicles. Our dealer body is quite pleased that our inventory of vehicles was down another 4 percent in November.

In a 13-hour meeting this week with the Cerberus board of directors, Cerberus praised and was highly complimentary of Chrysler’s progress to date and unanimously approved our 2008 plan. We have a solid strategic direction to return the company to long-term profitability. We are on target and have the unwavering support of Cerberus, as well as our other key partner, Daimler AG.

Cerberus met with its investors last Thursday to share the progress that has been made and to convey to these investors that the company was meeting – and in many cases – exceeding – its targets. The report was well received.

Like many companies in today’s uncertain economic environment, Chrysler is moving aggressively to improve its business. We recognized in advance the increasingly competitive vehicle market heading into 2008. With that, we have been moving aggressively to make our company leaner. The steps we are taking include previously announced volume-related reductions at several North American assembly and powertrain plants and the elimination of four products from our lineup, which is very customary in the auto industry.

However, we are very excited about the new products coming in 2008. These include the legendary Dodge Ram pickup truck, the Dodge Journey crossover, the relaunch of the historic Dodge Challenger – which has already generated 8,851 customer orders – and two, all-new, large hybrid SUVs, the Chrysler Aspen and the Dodge Durango, demonstrating our support for the environment and more fuel-efficient vehicles.

For our current vehicle line-up we have already approved more than 260 line item improvements to enhance our products – most for the 2008 calendar year.

The recently completed national labor agreement with the United Auto Workers – which includes the establishment of an independent retiree health care trust – provides a framework to improve the long-term competitiveness of the company.

Since August and the first day of the new company, the management team has been working to improve Chrysler’s working capital, disposing of non-core (or non-earning) assets and reinvesting this cash into product development, new technology and new innovations for our customers.”

The following related statement can be attributed to Mark Neporent, Chief Operating Officer and General Counsel of Cerberus Capital Management L.P.:

"We remain extremely enthusiastic about our investment in Chrysler. Our underwriting assumed, and fully planned, that Chrysler would incur losses in the near term. Under the leadership of Bob Nardelli, Tom LaSorda and Jim Press, Chrysler is already on track to exceed its multi-year restructuring and recovery plan on virtually all key metrics. We met with the management team this week and fully endorse their strategic direction and their plan to meet the challenges of the current environment. We are confident that Bob, Jim and Tom are taking the right steps to bring Chrysler to profitability. Our mutual resolve to restore Chrysler to its leadership position as an iconic brand is unwavering."

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