Chrysler not running in the red, CEO says

11/5/2009

DETROIT - Chrysler Group LLC is making an operating profit and building cash, the No. 3 U.S. automaker's boss told reporters and industry executives yesterday as he unveiled a five-year plan to turn around the company.

Sergio Marchionne, chief executive officer of Fiat SpA, which controls Chrysler, said the automaker generated about $200 million of operating earnings in the third quarter, which it closed out with $5.7 billion in cash, up from $4 billion when it exited its U.S.-sponsored bankruptcy in June.

"Some of you have been [presuming] that we are losing money … this is not true," he said during a daylong presentation. "Most of you underestimated the substantial reduction in fixed costs that was carried out by the old Chrysler. The new Chrysler is being incredibly parsimonious."

The disclosure of financial information was Chrysler's first since a restructuring funded by $12 billion from the U.S. government that put the automaker under the management control of Fiat.

The company said it believes that sharing purchasing between Chrysler and Fiat will save it some $2.9 billion from 2010 through 2014.

It aims to streamline its vehicle lineup, focusing its Dodge brand on cars and minivans while turning Ram into a trucks-only brand.

"It's an ambitious plan," said Erich Merkle, an auto industry analyst with Autoconomy.com.

"On the other hand, they don't have an alternative."

Chrysler Group Chairman Bob Kidder, who was appointed to represent taxpayers' interests, said the automaker would pay off U.S. government loans "with all deliberate speed."

"There is no business as usual at Chrysler. There is incredible commitment to, and energy for, change," he said. "We intend to make this a public company, a great public company, again."

Mr. Marchionne's financial objectives for Chrysler are just as ambitious.

Richard Palmer, the company's chief finance officer, said the automaker's operating income would rise to the break-even point by 2010 and net income would rise to break even by the following year.