Last Update on : March 1, 2008
Chrysler on track boss says
.jpg) Chrysler LLC Vice Chairman and President Jim Press defended the automaker's financial well-being Friday and said the company is on track to meet its financial targets, despite a weakening U.S. auto market that he predicts won't improve until early 2009.
"We're also starting to see the impact of the tightening credit situation affecting more and more of our customers," Press told reporters after an event in New York. "We've been in sort of a recession a little longer than we've known. It's probably better for us to get through it, to get to the other side quicker, than to fool ourselves into thinking everything's OK."
Both Chrysler and parent Cerberus Capital Management LP sought to minimize a financial report this week by Germany's Daimler AG, Chrysler's former parent, which said Chrysler lost $2.7 billion between Aug. 4 and Sep. 30, 2007.
In December, Chrysler CEO Robert Nardelli had said the company expected to post a $1.6 billion loss for all of 2007 -- something Chrysler privately reiterated Friday. Since being acquired by Cerberus last August, Chrysler has been tight-lipped about its finances, which it no longer must disclose publicly.
"There's no news and no impact on our operations," Press said Friday of reports about losses at the automaker. Chrysler has made an "operating profit" since Cerberus purchased 80.1 percent of the Auburn Hills unit, he said, and attributed the discrepancy between the Daimler and Chrysler figures to differences in U.S. and European accounting standards.
For publicly traded firms, a statement like Daimler's about losses at Chrysler could roil stock trading. But the effect on Chrysler is minimal now that the car maker is privately owned, said Peter Henning, a Wayne State University law professor. "It only has an impact if it worries Cerberus' bankers or investors, but they understand accounting issues," Henning said. But, he added, "clearly it's not good from a public relations standpoint."
A statement from Cerberus also said Chrysler lost less than the reported "$2.9 billion during the course of the year" and that differences in the calculations are because U.S. and international accounting rules vary.
In a statement, Cerberus echoed Press and said that any differences in calculating Chrysler's financial results were tied to variances in U.S. and international accounting rules.
"Cerberus is confident that (Chrysler senior managers) are taking the right steps to bring Chrysler to profitability, and is pleased that Chrysler has not only been meeting but in many cases exceeding all key metrics," the statement said.
Press said predictions that the auto industry could rebound in the second half of 2008 is "wishful thinking." Chrysler's estimate of 15.5 million total U.S. auto sales in 2008 might be too high, he said. February is shaping up as a "tough" month and "below trend," he said, echoing other automakers. Some analysts think sales could fall 10 percent or more this month.
"This year is going to be a pretty severe year," Press said.
Amid a contracting auto market, Chrysler said in November it was cutting up to 12,000 jobs as it shrunk unprofitable fleet sales and announced it would stop selling four models. Those cuts are on top of 13,000 jobs cut as part of its 2007 restructuring plan..
"You plan for the worst and pray for the best," Press said. He said the company would continue to shrink its product lineup domestically and add vehicles in overseas.
"In a company that's selling 2.5 million vehicles, we don't need 11 SUVs," Press said, adding Chrysler's lineup would "be smaller and more focused."
Press denied any undisclosed plan to seek new investors or hold an initial public offering and he declined to disclose detailed Chrysler financials.
"The marching orders we have are to make this a financially successful company," Press said.
Improving the company's performance benefits Cerberus no matter what the private equity fund decides ultimately.
"We can be a long-term hold or an attractive acquisition," he said.
In other comments, Press:
• Predicted in the wake of new fuel economy regulations adopted by Congress in December that eventually every vehicle sold will be some type of hybrid.
• Said he thought it was reasonable to see Chrysler selling one-third of its vehicles overseas and perhaps as high as half.
• Dismissed Consumer Reports annual review of automakers that harshly criticized Chrysler, which tied for Suzuki for last place for its 2008 models. He said the magazine was focusing on "a picture of the past" and not on more than 250 improvements made "with light-speed."
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