Chrysler Releases its Viability Plan

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CHRYSLER RELEASES VIABILITY PLAN

GM UP NEXT

By KATHY SHWIFF and SHARON TERLEP

Chrysler LLC is seeking an additional $2 billion in federal funds on top of the $7 billion bailout it requested in December as part of the viability plan submitted to the Treasury Department on Tuesday afternoon.

Fellow auto maker General Motors Corp. is expected to submit its viability plan to the Treasury shortly.

Chrysler, which cited an "unprecedented decline in the automotive sector" since December, said it expects to remain viable and conduct an orderly restructuring outside of bankruptcy.

Chairman and Chief Executive Robert L. Nardelli said the company's standalone viability plan, enhanced by a strategic alliance with Fiat SpA, is the best option for Chrysler employees, unions, dealers, suppliers and customers. The company so far has accepted $4 billion of its original $7 billion request.

Chrysler now expects industrywide sales of 10.1 million vehicles in the U.S. in 2009, a 40-year low, and an average of 10.8 million annually through 2012. That number is 7.2 million less than Chrysler predicted in December and means a reduction of $18 billion in revenue and a $3.6 billion decline in cash inflow for the company during the next four years.

Chrysler has signed a nonbinding agreement with Italian auto maker Fiat to create a joint venture in which Fiat would provide technology and engineering for the U.S. company to make small cars. Fiat also would help the company operationally, he said.

Chrysler's viability plan includes 24 launches in 48 months and the introduction of electric vehicles to help meet current federal fuel economy standards.

In addition, the company plans more restructuring this year, including cutting 3,000 jobs and eliminating one shift of manufacturing, discontinuing three vehicle models, removing 100,000 units of capacity, lowering fixed costs by $700 million and selling $300 million additional non-earning assets.

Chrysler said concessions from the United Auto Workers, dealers, suppliers and second-lien lenders have been implemented or fundamentally agreed on.

GM REPORT DUE

At GM, overnight negotiations with the United Auto Workers failed to produce a deal that would substantially cut labor costs, sources familiar with the talks said. Bargaining continued Tuesday.

The auto maker also is working to convince bond holders and other creditors to accept terms that will reduce its substantial debt.

GM said it will submit its restructuring plan regardless of whether is succeeds in cutting deals with the union or bondholders.

GM's plan, which sources say is 800 to 900 pages long, explains how the auto maker can turn around operations that have lost more than $70 billion since 2004. It is expected to detail plant closings, plans to eliminate models and brands and to further reduce structural costs.

UAW negotiations hinge on GM's efforts to change terms under which it pays the union to assume responsibility for billions in retiree medical costs.

The two sides made progress over the holiday weekend but were still hammering out significant differences, according to people familiar with the talks.

In an email to dealers, GM Sales Chief Mark LaNeve asked for support and urged them to focus on selling cars and trucks.

"While a lot of our attention will be focused on the viability plan update the next few days, we cannot lose focus on our customers," he wrote.

Ford Motor didn't ask for federal government aid, although the auto maker is likely to seek concessions in line with what GM and Chrysler win.

A person familiar with the matter said Ford has made "substantial progress" with the UAW including, but not limited to, new work rules. It was not expected that Ford would have a new agreement with the UAW Tuesday night.

[source: Wall Street Journal]

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I just want to get an alert from GM's SEC Filings page so I can downlaoad the document and read it.

Chrysler wanting just $2bn more is not that bad given the way the market is behaving. If they did get the UAW concessions and are able to reduce both legacy costs and align capacity with demand, all the better for them!