Cuts leave Chrysler prepared to get by on less cash

Alisa Priddle / The Detroit News

Auburn Hills -- Chrysler Group LLC can "adequately function" on $4 billion to $5 billion cash, the company's new CFO said Wednesday afternoon.

That's because the operation is operating much more efficiently and spending less than in the past, he said, echoing comments made in the morning by CEO Sergio Marchionne, who said Chrysler had $5.7 billion in cash at the end of September, up from $4 billion at the end of June.

The company will burn through less cash in the future, said Richard Palmer, Chrysler's chief financial officer, adding that Marchionne is not a big spender. "The parsimoniousness comes from the top down," Palmer said.

Chrysler executives are unveiling the company's business plan through 2014 during an all-day event here.

Palmer, who came from Fiat, said he was not surprised by the numbers he found when he took over the books in Auburn Hills.

By comparison in regard to operational spending, General Motors Co. has said it needs $11 billion to operate, Palmer said.

Marchionne said this morning that many underestimated the depth of cuts to fixed costs under the old Chrysler, which spent the spring in bankruptcy. The new Chrysler that emerged from Chapter 11 and formed a partnership with Fiat SpA "is being incredibly parsimonious, i.e. cheap, in its spending these days," he said in opening remarks to an audience that included journalists, industry analysts, dealers and workers.

The automaker must not just continue to be stingy about how much it spends, but also where it is spent.

That includes supporting its five brands to ensure they are better differentiated than they currently are and to make sure consumers get that message. Spending will increase on brand marketing and advertising.

The new CFO said he prepares monthly financial reports for the U.S. Treasury but does not have to go to Washington -- he calls them.

Palmer confirmed Chrysler will start publicly reporting its quarterly financials at the beginning of next year -- not because Treasury demands it, but "because it's the right thing to do," he told The Detroit News in advance of his presentation to come at the end of the day. "We are trying to be as transparent as we can."

The automaker's financial performance will recapitalize the company for shareholders to realize a return on investment and generate cash to repay loans, said board Chairman Robert Kidder.

"There is no business as usual at Chrysler," Kidder said.

The company starts with a new, better balance sheet and a business plan that will leverage Chrysler's alliance with Fiat, he said.

In addition to cost-cutting through more efficient parts purchasing, material costs and manufacturing, the Mopar brand will grow and there will be an emphasis on products.

11 new, refreshed vehicles by 2014

There will be 11 new or refreshed vehicles by 2014, said Ralph Gilles who heads design and the Dodge Car brand.

First up are improvements to the Dodge Caravan minivan, Dodge Avenger sedan and Dodge Journey crossover. The upgrades are to the exterior look, as well as the quality of the interior and new, quieter engines.

A new Dodge Charger is coming next year, as well as a seven-passenger crossover to replace the Durango.

The Dodge Caliber hatchback eventually will be replaced by a compact sedan, harkening to the days when the Neon filled that niche. And a new D-size sedan will replace the Dodge Avenger.

The subcompact or B-segment Dodge Hornet concept hatchback will make it into production.

A replacement for the Dodge Nitro will boast styling closer to the original Nitro concept, as opposed to the production Nitro that was watered down and not sold well.

Chrysler will introduce a hybrid version of the Dodge Ram in 2011 and put a test fleet of plug-in minivans and Rams on the road.

Also, a Jeep Wrangler with a diesel engine and a start/stop system that saves fuel when the engine turns off while the Jeep is in idle, is due by the end of 2011.

Brand strategies emerge

Internationally, all Jeep products will be sold globally whereas the Dodge car and Ram truck brands will be sold in appropriate markets as a regional or specialty brand, said Michael Manley, who oversees international operations.

The Chrysler brand will meld with Lancia brand products to take two somewhat weak and fragmented brands with low volume and visibility and collectively make their offerings stronger.

"The potential for growth is great," Manley said in forecasting volume to grow from 150,000 international sales in 2009 to half a million by the end of 2014.

Chrysler's products have less than 1 percent market share in each of the three main regions of the world.

Chrysler has 17 nameplates across its three brands that it sells internationally and they compete in only one-third of the global vehicle segments. Chrysler is noticeably absent in small cars, the A-,B-, and C-segment cars, which account for half of global volume, Manley said.

In the future, Chrysler's international vehicles will include B- and C-sized hatchbacks, D- and E-segment sedans, a D-sized crossover and minivans.

Chrysler to outline vision

At the all-day event, Chrysler is presenting its long-awaited, five-year business plan, outlining its vision on how it will address shortcomings and return to profitability.

More than 300 people gathered at the company's Auburn Hills headquarters, where the design dome in the Chrysler Technology Center has been transformed to host a giant press conference that will last eight hours -- with a short break for lunch.

While dealers and consumers want to know what products will be sold as Chrysler, Jeep, Dodge, Fiat and Alfa Romeo brands in the future, many of the presentations will focus on implementing Fiat systems to engineer more vehicles from fewer underbodies; developing new cars in 18 months rather than three years; manufacturing vehicles more efficiently using Fiat processes; and improving quality.

All new practices must collectively reduce cost so that Chrysler, which has shrunk, can still be profitable even if it has just 8 percent share of a market in which overall sales are down. Marchionne has said Chrysler could return to profitability by 2011. Bloomberg reported Tuesday that sources said Chrysler could break even by next year.

Some employees were watching the event on large screens in two auditoriums at the headquarters. Anyone else interested can follow a live audio webcast from their computer. The broadcast, accessible at chryslergroupllc.com, was set to start at 11 a.m. and run until about 6 p.m.