Posted: Wednesday, 04 November 2009 7:49PM
Chrysler Aims To Pump Life Into Car Lineup
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AUBURN HILLS, Mich. (AP) — Chrysler plans to overhaul its vehicles with technology from its new Italian partner, Fiat SpA, and says it has the cash to pay for it, helped by the U.S. government and lower costs.
CEO Sergio Marchionne, who also runs Fiat, began unveiling Chrysler's new five-year business plan on Wednesday. The plan calls for 75 percent of its vehicle lineup to be new or changed by this time next year, and 100 percent by 2012. Marchionne said the company plans to spend $23 billion on the product turnaround through 2014.
It expects to break even in 2010 and report an operating profit of $5 billion in 2014.
But future growth hinges on better cars and sales. The company's mid-sized sedans, the Dodge Avenger and Chrysler Sebring, along with many other models, have flopped. Chrysler said it will update these cars to make them more comfortable and quieter, then replace them in 2012 with Fiat designs. That could make Chrysler competitive in the largest part of the U.S. car market.
Besides the mid-size car, Chrysler will introduce four new Dodges by 2013. They include a seven-passenger crossover vehicle, a mini-car and a compact. By the end of next year, most current Dodge models will receive new exteriors, interiors and engines.
Ralph Gilles, the company's chief designer, said the Dodge brand will have crisp handling, be quieter, more fuel-efficient and have more luxurious interiors, reflecting consumer complaints about all those issues.
The Chrysler brand also will get six new vehicles, including a Fiat small car and a new mid-size crossover in 2013. The automaker is also considering adding a mid-size pickup to its Ram truck lineup.
Chrysler is depending on a recovery in U.S. sales and a jump in market share. It expects auto industry sales of 10.5 million vehicles in 2010 to rise to 14.5 million in 2014, and that its share can jump from 9 percent this year to 13 percent in 2014. It also expects its global sales to more than double to 2.8 million in 2014 from 1.3 million this year.
Marchionne said that is a realistic goal, especially now that consumers can be more confident that Chrysler has a plan for its future.
"We've been incredibly quiet for the last five months," he said. "The lack of information outside of Chrysler has not helped."
The company plans to lower sticker prices to boost sales and generate more cash as it fixes its struggling lineup.
Doug Betts, senior vice president of quality, said that work is under way to tackle quality problems, too.
"We get it," he said. "We're not in denial related to the public record for quality for Chrysler."
But it will be tough to win back car buyers, who are skeptical of Chrysler's quality. The automaker's sales are down sharply this year as buyers flee to other brands and a weak U.S. economy curbs demand for autos. Chrysler lost upward of $8 billion last year and would have run out of cash without government help.
Marchionne's Fiat, which now owns 20 percent of Chrysler with an opportunity for more, was put in charge of rescuing the 84-year-old automaker by the U.S. government, which so far has provided roughly $15 billion in aid. Chrysler still has around $9 billion of that loan.
Chief Financial Officer Richard Palmer said the company aims to pay back government loans by the end of 2014. But the Government Accountability Office said earlier this week that Chrysler and General Motors Co. are unlikely to be able to pay back their loans in full.
Chrysler's had $5.7 billion in cash at the end of September, up $1.7 billion since it exited bankrutpy protection in June. As recently as December, though, the automaker was practically out of cash.
Its operations broke even in September because of savings from job cuts and factory closings by the prior owner and through combining Chrysler and Fiat's operations.
Joe Veltri, Chrysler's product development chief, said he has a lot more funding to revamp products and create new ones. Chrysler can go to a cupboard of Fiat technology to develop new products, a vast difference from Chrysler's prior owner, Cerberus Capital Management LP, which was not a manufacturer but a private equity firm.
"We have far more tools to work with," he said.
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Photo Copyright 2009, Getty
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