Chrysler Asking for $7B Bridge Loan from Congress; Production of More Than 500,000 Electric-Drive Vehicles by 2013
Chrysler is asking Congress for a $7 billion secured working capital bridge loan by 31 December 31, 2008 to support ongoing operations as it continues to restructure its business, according to a summary of the presentation to be made by Chairman and CEO Bob Nardelli on 4 December. Like Ford (earlier post) and GM (earlier post), Chrysler cited the “unprecedented” drop in vehicle sales caused by the financial crisis as the fundamental cause of its financial distress.
Chrysler’s viability plan includes 24 major product launches through 2012, including a wide portfolio of hybrid electric-drive vehicles within several categories: Neighborhood Electric Vehicles (NEV), City Electric Vehicles (CEV), Range-extended Electric Vehicles (ReEV), and full-function battery electric vehicles (BEV).
Chrysler’s product plan includes the introduction of the first full function electric-drive model in 2010, along with the two-mode Dodge Ram hybrid, and expansion to additional electric-drive models by 2013. Chrysler will have close to 100 vehicles dedicated to testing and development within the Company, or assigned to Government and business evaluation fleets by the end of 2009. Chrysler plans to produce more than 500,000 electric-drive vehicles by 2013.
The company is currently selling its two-mode hybrid full size SUVs (Aspen and Durango) as limited volume specialty products.
In its submission to Congress, Chrysler also noted that it will continue to improve the performance of existing technology and support for flex fuel vehicles. For the 2009 model year, nineteen Dodge, Jeep and Chrysler models (73% of the product line), will offer improved fuel economy compared to previous models. The company has more than 1.7 million Flex Fuel Vehicles (FFV) on the road, and is on target to meet its earlier commitment of 50% of the fleet being flex fuel capable by 2012.
Chrysler based its projections on three sales scenarios: baseline, higher case and lower case. The baseline scenario uses an industry sales figure of 11.1 million units in 2009, increasing to 13.7 million units by 2102, with the higher and lower sensitivity cases varying by one million units up or down. (In contrast, the GM baseline scenario used a 12 million unit figure for 2009, increasing to 15 million in 2012. The downside scenario for GM is roughly comparable, however, at 12.8 million in 2012, compared to Chrysler’s projected downside of 12.7 million units in 2012.)
Although all the automakers have been suffering declining sales, Chrysler was especially hard hit—especially during the spike in gasoline prices earlier this year—due to the heavy emphasis on light trucks within its product mix. In November, Chrysler saw its sales down 47% from the year before. (Earlier post.)
Chrysler began its restructuring process in 2007, following its acquisition from Daimler by Cerebus. Since 2007, Chrysler has eliminated 1.2 million units of capacity, which represented more than 30% of its previously installed capacity, and will have separated more than 32,000 employees. Over the past 10 months alone, Chrysler reduced its fixed costs by $2.4 billion.
Chrysler ended the first half of 2008 with approximately $9.4 billion of cash. Ongoing declines in sales began depleting the cash reservers. Chrysler now estimates that at year end it will have approximately $2.5 billion available cash on hand.