Chrysler CEO Sergio Marchionne heads for lunch Wednesday during a break at the company's presentation at Auburn Hills, Mich.Bill Pugliano
A flood of new models and co-operation with partner Fiat SpA will drive Chrysler Group LLC to break even in 2011 and repay its U.S. and Canadian government loans by 2014, Chrysler executives vow.
"The fate of the Fiat car business and Chrysler are now inextricably intertwined," Fiat and Chrysler chief executive officer Sergio Marchionne told an audience that included analysts, suppliers, key union leaders, media and the great-grandson of Walter Chrysler, who founded the company in 1925. "It is an ideal combination," Mr. Marchionne said Wednesday.
The return to profits after a trip through U.S. bankruptcy court is based on an ambitious plan to nearly triple sales of Chrysler vehicles around the world by 2014 to more than 2.8 million. Chrysler sold a little more than one million vehicles in 2009.
Meeting those sales projections would require a recovery of the U.S. automotive market and Chrysler boosting its share of vehicle sales there. "We do need to reacquire some of the market share we lost in the past," Mr. Marchionne said Wednesday as he wrapped up a six-hour presentation by Chrysler's senior executives in the design dome at the company's headquarters in suburban Detroit.
To achieve that leap in sales, Chrysler is refreshing and redesigning 75 per cent of its vehicle portfolio by the end next year and the entire lineup by 2012 at a cost of $23-billion (U.S.).
The plan includes a massive transfer of Fiat technology in engines, transmissions and platforms - basic vehicle underbodies - that will allow Chrysler to develop new small and medium-sized cars, two segments in which it has been woefully weak.
In government circles, there is still deep skepticism that General Motors and Chrysler will be able to return the tens of billions of dollars used by the U.S. and Canadian governments to bail them out. A report by the U.S. Government Accountability Office issued earlier this week said Washington is unlikely to recover its investment in either of the two auto makers.
But GM CEO Fritz Henderson and now Mr. Marchionne say they can prove those predictions wrong.
"Today is the first day of new Chrysler," said the Italian-Canadian CEO, who was clad in his trademark sweater while almost all other senior executives who made presentations sported suits and ties.
The outline of the five-year business plan came one day after the auto maker reported a 30-per-cent decline in U.S. sales and a share of less than 8 per cent in the U.S. market, which is beginning to recover from its worst performance in decades.
Boosting sales volume will be a difficult task in the hypercompetitive North American market, analysts said. The plan includes a huge increase in Jeep sales to 800,000 by 2014 from 497,000 in 2008.
"That's going to be incredibly hard," said long-time industry analyst Joe Phillippi, who heads Auto Trends Consulting Inc. in Short Hills, N.J., and attended the presentation.
"There are so many competitors. Just because your name is Jeep, doesn't automatically give you a sale."
Chrysler's new plan calls for profit of $3-billion by 2014 and cutting debt in half by $4-billion by the same date. The company will break even in 2011, chief financial officer Richard Palmer said.
By 2014, 21 Fiat and Chrysler models will be built on seven platforms. That compares with the same number of models in 2010 from 11 platforms. By producing an estimated 305,000 vehicles per platform - more than double the current ratio - the company will save on development and tooling costs for all models.
Several Chrysler models will use Fiat engines, including the Italian company's Multair technology, which is used in smaller engines and provides better fuel economy and produces lower emissions than Chrysler's existing small engines.
Among the new products, Mr. Marchionne said mid-sized sedans to replace the Chrysler Sebring and Dodge Avenger are critical. Those models could be could be built in Chrysler's Brampton, Ont., plant alongside the company's large cars, one analyst said.
While the company did not outline what plants will receive new investment, the company's Windsor, Ont.-built minivans will get a major upgrade next year.
"The 300 [sedan]will not be moved from Brampton. The vans will stay in Windsor," Mr. Marchionne said.
Chrysler's cash position has improved since it exited bankruptcy protection, executives said, even though sales have fallen. The auto maker has $5.7-billion (U.S.) cash on hand, up from $4-billion. The revival will also be bolstered by new national advertising campaigns for Chrysler, Dodge, Ram and Jeep brands, starting last night with new ads for the Ram pickup.
Fiat gained control of 20 per cent of Chrysler and management control of the No. 3 Detroit auto maker in June.
Chrysler was bailed out with a $12.5-billion loan from Washington and $3.8-billion (Canadian) from the Canadian and Ontario governments. Ottawa and Ontario now own about 2 per cent of Chrysler, whose largest shareholder is a health care trust set up by the company and the United Auto Workers union.