Chrysler Seeks $5B More in Gov't Viability Plan
February 17, 2009Chrysler LLC requested another $5 billion from the U.S. government and said 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.
The automaker, which has been kept alive by the $4 billion in government loans it received in December, also 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.
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.
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.
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.
More details were expected to be available later Tuesday, when the Treasury Department was expected to make the full text of Chrysler's plan available to the public.
Last month, the automaker 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 on Tuesday, saying it would enhance its viability plan and help its lineup.
Chrysler said in 2008 it has cut fixed costs by another $3.1 billion, cut its work force by 32,000, or 37 percent and discontinued four models, among other cost-saving measures.
However, 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., which has accepted $13.4 billion in government loans, was scheduled to reveal its restructuring plans later Tuesday.
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