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'Leaner' Chrysler promised

2009-11-05 09:30
Chrysler's new Italian chief said Wednesday the American icon is a leaner, more focused automaker well on its way to achieving long-term profitability and regaining its sense of style.

Wearing his signature rumpled sweater, Sergio Marchionne led a team of executives through an eight-hour-long presentation of the automaker's five year plan, some five months after Chrysler emerged from bankruptcy protection.

"What you're witnessing is the beginning of a genuine transformation," Marchionne told reporters and analysts gathered in Chrysler's design dome at its Auburn Hills, Michigan headquarters.

"It's comprehensive, it's ambitious and it's serious."

Chrysler said it expects to break even next year, reach profitability in 2011 and repay 7.4 billion dollars in loans from the US and Canadian governments by 2014.

Key to the transformation is an intense alliance with Fiat, which obtained a 20% stake in Chrysler in exchange for sharing its technology and charismatic chief executive.

More than half of Chrysler's vehicles - including its Jeeps - will be built on Fiat platforms and Chrysler expects to cut out 2.9 billion dollars in purchasing costs over the next five years.

Update weak lineup

The automaker is going to invest 23 billion dollars to update its weak product lineup by eliminating some underperforming models, introducing new ones - including Fiat's popular 500 minicar - and refreshing 75% of its US vehicle lineup by 2010.

Chrysler has ambitious plans for regaining lost market share in its home market and also plans to work with Fiat to expand aggressively overseas.

It hopes to more than double its sales from 1.3 million vehicles in 2009 to 2.8 million vehicles in 2014.

Marchionne refuted recent reports that Chrysler is burning through the four-billion-dollar cash endowment it received upon exiting bankruptcy protection in June.

"The new Chrysler is being extremely parsimonious, i.e. cheap," Marchionne said, adding that Chrysler has substantially reduced its fixed costs and increased its cash position to roughly 5.7 billion dollars at the end of September.

Marchionne has taken the helm of a company wracked by years of turmoil and he acknowledged that its product offerings has suffered from neglect.

Chrysler underwent a painful divorce from Germany's Daimler in 2007 and its new owners - private equity group Cerberus - took the helm as auto sales were beginning to tumble.

Keeping afloat

The company shuttered plants and shed tens of thousands of workers, but the painful restructuring was insufficient to keep the company afloat during one of the worst economic downturns in decades.

Chrysler sought billions in government loans to keep the lights on while it restructured ahead of an April 30 bankruptcy filing, after losing 8.9 billion dollars last year.

Its US sales - which were down 30% in October even as its rivals posted gains - remain down 39% for the year to date. And with US auto sales expected to remain at historically low levels for at least another year, competition will be fierce.

But the cost-cutting moves and the trauma of bankruptcy have provided Chrysler with the instinct and a low cost structure to survive just about anything, Marchionne said.

"Survivors are a different breed of people," he told reporters.

"People who have lived through traumatic experiences where death may have been an option end up living their life differently."


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