Chrysler Restructuring Plan: Asks Government For $5 Billion More In Loans

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NEW YORK — Chrysler LLC said it needs $9 billion of total government financing and it plans to cut 3,000 jobs and eliminate three vehicle models as part of its restructuring plan submitted to the Treasury Department on Tuesday.

Chrysler, which has been kept alive by the $4 billion in government loans it already has received, said it has implemented or reached fundamental agreements on concessions with unions, dealers, suppliers and lenders to comply with the requirements of its government loans and make its labor costs competitive with those at foreign automakers' U.S. plants.

The privately held automaker also revealed that it lost $8 billion in 2008.

"The focus of this company for the last two years and going forward is going to be to right-size for the marketplace and the realities of the economy," Chrysler Chief Executive Bob Nardelli said in a conference call with reporters.

When Chrysler originally asked for government aid in December it said it would need a total of $7 billion. But the Auburn Hills, Mich., company said Tuesday that the economy and the market for new cars has deteriorated significantly since its initial request.

"We have continued to see an unprecedented decline in the automotive sector," Nardelli said.

Chrysler said it now projects that automakers will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades. Previously, the company had predicted yearly sales of 11.1 million.

Chrysler Vice Chairman and President Jim Press said in the conference call that the company will eliminate the Chrysler Aspen, Dodge Durango and Chrysler PT Cruiser models.

The Aspen and Durango, both large sport utility vehicles, recently have been among the worst-selling vehicles in the company's lineup. The PT Cruiser, which was released to much fanfare in 2000 due to its funky styling, has also seen its sales slump.

Nardelli said Chrysler management will comply with restrictions on executive compensation. He also said the company has eliminated company matching to employee 401(k) plans, has ended merit pay increases and has made other white-collar cost cuts.

The company also said that as part of its restructuring plan, it will reduce production capacity by 100,000 units and cut fixed costs by $700 million in 2009. The company said it will sell $300 million in "non-earning assets" in 2009 and plans to start paying back its government loans in 2012.

Chrysler said it still plans 24 vehicle launches in the next 48 months and reiterated its intention to put an electric vehicle on the road by 2010.

The 199 pages that Chrysler submitted to the Treasury Department included the alternative of bankruptcy, should the government not come through with additional aid.

Nardelli said a Chapter 11 bankruptcy filing would require some $20 billion to $25 billion in debtor-in-possession financing, or else the company would have to liquidate.

"This is not a course of action we're recommending," Nardelli said. "But to be absolutely clear, we're confident we can succeed given the ... government loans and the constituent concessions."

In its filing, Chrysler also allowed a rare and detailed peak at its books. Chrysler has not reported detailed financial results since it went private in 2007, when private-equity firm Cerberus Capital Management LP bought an 80.1-percent stake in the automaker.

Besides booking a net loss of $8 billion in 2008, Chrysler said it had a cash balance of $1.9 billion at the end of the year, compared with $9.5 billion at the end of 2007. The company reported $47.6 billion in revenue for the year.

Last month, Chrysler announced a nonbinding alliance with Italian automaker Fiat SpA, under which Fiat would take a 35 percent stake in Chrysler and share its small-car technology. Chrysler has been hobbled by a vehicle lineup that is heavily reliant on trucks and sport utility vehicles.

That tie-up was contingent on Chrysler getting additional government aid. Chrysler stood by that alliance Tuesday, saying it would enhance its viability plan and improve its product lineup.

"Although our plan demonstrates we're viable as a standalone company, a potential global alliance with Fiat would enhance our long-term prospects by providing us access to additional small vehicles" and fuel-efficient technologies, Nardelli said.

Chrysler said it had studied three potential partnerships over the past 18 months. Besides the tie-up with Fiat, the company explored a partnership with General Motors Corp., but GM "took it off the table." Chrysler also said it looked into a partnership with the Japanese automaker Nissan Motor Co., but was unable to pursue it.

However, the company said it still plans to build full-size pickup trucks for Nissan under a previously announced agreement.

During 2008 Chrysler said it cut fixed costs by $3.1 billion, slashed its work force by 32,000, or 37 percent, and discontinued four models, among other cost-saving measures.

The company has been plagued by the downturn in sales and has experienced the most severe sales drop among the Detroit Three. Chrysler's U.S. sales fell 55 percent in January, compared with a 37 percent drop across the entire industry.

General Motors Corp. also outlined its restructuring proposal to the U.S. government Tuesday. GM's restructuring plan said it may need up to $30 billion in government loans as it implements a survival plan that includes cutting 47,000 jobs and closing five more U.S. factories.