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CEO: Chrysler Makes Progress After Bankruptcy

Fri, 06/11/2010 - 12:28pm
Manufacturing.net

DETROIT (AP) -- One year after Chrysler Group LLC's government-funded exit from bankruptcy protection, CEO Sergio Marchionne is telling employees that the company has made progress but still has a long way to go.

In a Friday e-mail to employees obtained by The Associated Press, Marchionne touted Chrysler's progress in its first year as a new company but said it is far from full recovery.

"The one-year anniversary is a significant milestone," Marchionne wrote to the company's 49,000 workers. "There is still a very long road ahead in our drive to rebuild our business and to deliver on our promises to repay the American and Canadian taxpayers who gave us a second chance."

Marchionne, who also heads Italy's Fiat SpA, was given control of the automaker by the U.S. government when Chrysler emerged from bankruptcy on June 10, 2009. The company would have run out of cash and been sold off in pieces without roughly $15 billion in aid from the U.S. and Canadian governments.

He pointed to a $143 million first-quarter operating profit, two straight months of sales gains, cost savings from integration with Fiat, and plans for 16 new or updated vehicles by the end of this year.

"Crisis can bring out the best in a company and its people," Marchionne wrote.

Chrysler's sales growth in the U.S., its primary market, have lagged behind industry gains through the year. Through May, its sales were up 7.9 percent, far behind the industrywide gain of 17.2 percent, according to Autodata Corp. May sales rose 33 percent, but one-third of that was low-profit sales to fleet buyers such as rental car companies.

Chrysler also has struggled with quality problems, perennially getting low rankings from J.D. Power and Associates and Consumer Reports magazine.

Although Chrysler reported a first-quarter operating profit, it still posted a net loss of $197 million including interest and taxes.

The automaker plans to begin repaying the U.S., Canadian and Ontario governments starting next year, with full repayment in 2014.

Chrysler simply is trying to survive 2010 as it tries to update and roll out new cars and trucks at a fast pace, said Aaron Bragman, an auto industry analyst for IHS Automotive in Troy, Mich.

Marchionne thus far has done what he said he would do, Bragman said. The company is no longer bleeding cash, and its sales are up, even if a large percentage is to fleet buyers, he said.

"They've got the foundations to be able to survive this year," he said. "They're hunkering down right now and trying to change caterpillars into butterflies."

A new Jeep Grand Cherokee sport utility vehicle is due in showrooms shortly, and the company promises to substantially rework its midsize cars, the Chrysler Sebring and Dodge Avenger, so they are competitive in a key part of the market.

But Bragman said no one has seen the new versions outside the company.

"We need to see it because the vehicle they're starting with is not exactly at the top of anyone's list," he said. "And the competition has made such extraordinary improvements."

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