Chrysler-Losses mount at our Company

[ACJupiter]

Chrysler Shows $300 Million Loss Through April; Plant to Close
By Mike Ramsey and Linda Sandler



"June 30 (Bloomberg) -- Chrysler LLC, closing plants as U.S. sales tumble, had an operating loss of about $300 million in the first four months of the year, less than projected by owner Cerberus Capital Management LP, according to documents provided to investors.

Cerberus had forecast a deficit of about $700 million, according to the report, presented at a June 12 meeting of the private-equity firm's financiers. The analysis preceded today's announcement that Chrysler will shutter a minivan factory and reduce production of pickup trucks because of declining sales.

Figures showing Chrysler is exceeding some of its owner's expectations follow growing questions about the third-largest U.S. automaker's health. On June 26, speculation in European financial markets forced Chrysler to say it wasn't considering bankruptcy.

``They have clearly been very, very aggressive on the cost fronts,'' said Mark Oline, automotive analyst at Fitch Inc. in Chicago. ``The challenge is to keep cutting costs at the same pace and exceed the revenue declines.''

Chrysler Financial, also owned by Cerberus and run as a separate entity, lost $67 million before taxes through March, compared with an anticipated $270 million profit.

Loan demand has fallen this year as the automaker suffered a 19 percent decline in U.S. vehicle sales through May. Record gasoline prices have sapped demand for light trucks, including profitable big pickups and sport-utility vehicles, which accounted for about 70 percent of Chrysler's sales last year.

Exceeding Expectations

The documents show Chrysler exceeding expectations set by Cerberus for reducing fixed costs. Total U.S. sales have dropped 8.4 percent this year and are headed to 15-year lows. Chrysler's U.S. volume has plunged as the automaker trims models, idles plants, eliminates jobs and cuts back on less-profitable sales to business fleets.

``We'd assumed several years of operating losses for Chrysler,'' said Timothy Price, a partner of Cerberus, who declined to discuss details in a phone interview. ``They're ahead of their plan, and doing a good job despite one of the most adverse economic environments in our lifetime.''

Chrysler, based in Auburn Hills, Michigan, said today it will close its St. Louis-area minivan plant by the end of October and scale back to one shift of production at its nearby Dodge Ram truck plant by Sept. 2.

About 1,500 jobs will be cut by closing the minivan plant; Chrysler will eliminate 900 additional positions at the truck plant.

Consumer Shifts

``We just don't see two plants of capacity, and so we were forced to take a plant out,'' President Tom LaSorda said in an interview. ``People shifting to other segments of the marketplace left us no choice but to respond.'' Chrysler also makes minivans in Windsor, Ontario.

Chrysler's revenue was $300 million less than projected through April, while its $8.1 billion in cash was $3 billion higher than planned, the document said.

Chrysler hasn't disclosed financial figures since being sold by Daimler AG to closely held Cerberus for $7.4 billion in August. Chrysler spokeswoman Shawn Morgan declined to comment on the document.

The report says Chrysler had an operating loss of $1.2 billion in 2007 on revenue of $59.7 billion and ended the year with $9.5 billion in cash.

Some of the figures differ from what's been reported previously. Chief Executive Officer Robert Nardelli this month said the company had $9 billion in cash at the end of last year. Chrysler attorney Michael Hammer said in court hearings in February that the company's 2007 loss was $1.5 billion.

Payroll to Fall

Chrysler's employment is expected to decline 12 percent this year and end 2008 at 63,700, split between 18,500 salaried workers and 45,200 hourly workers, according to the document.

Chrysler said its fixed costs were $3.9 billion through April, $500 million lower than expected. Capital spending totaled $800 million, about $300 million less than planned.

The loss at Chrysler Financial was attributed to lower- than-planned finance revenue of $1.43 billion and an unanticipated $300 million deficit from interest-rate swaps. The swaps are contracts in which two borrowers agree to exchange periodic payments based on the size of the outstanding debt and changes in prevailing lending rates."

To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net

Last Updated: June 30, 2008 19:50 EDT

[SRTpusher]

hmmm.. i wonder if the fact that canadians have gov't healthcare has anything to do with why they didn't shut that plant down?

[brampton builder]

Windsor and Brampton are two of the top quality plants in the whole corparation . I am sure the health care thing has some merit to run . Windsor runs 3 shifts , St Louis runs 1 . Why would you shut a 3 shift operation down and send it all to the one shift plant .

[ekool]

It looks like its going to be a bit of time before Chrysler can turn this around as well. They are really lacking in "small" cars that I think are going to be picking up steam soon.

[425 Hemi]

Efficiency was the reason for reducing production at the St. Louis north plant The Warren plant assembles 65 units per hour, while the north plant in St. Louis assembles about 41 units per hour.

[Ragamuffin]

I'll admit that I either don't have/know enough about this or the facts,but I seem to be smelling 'mousey' !!! Ooooo, I just wish I/We/Challengertalkers could be in charge !!!Heck,with gas /oil prices and everything that is affected thereby,most products/companies/financials are down [ even Starbucks announced today they are closing 600 stores by years end] . I do not 'get it' ! By the stats above in post #1, Cerberus bought Chrysler for $7.4Bil ; yet in just 4 months time it's reported a $1.2-1.5B loss with revenue of $59B[ for the whole year] with a net profit or $9.5B in cash. Unless I'm missing something or lack in logistical arithmatics, they are already ahead of their purchase and have cleared/profitted about $2.1B [ yes, in only 4 months] !!! Is this legal for a company to make this much in such a short time [ could this be considered a "short buy" ?!?] ? I say keep St. Louis open for 1 shift and ship vans/trucks from there Southward and save a bit of fuel.The vehicles made up in Windsor ship East, West ,North and in the top tier U.S. Seems logical,simple too ?!?! Also tool up in St.Louis/Belvidere for the All New Dodge Hornet,push the mpgs to 85mpg and not let Nissan or China do this.Yes, our wages are what 10 times theirs.but save on cargo ships fuel !

[Ragamuffin]

Originally Posted by 425 Hemi

Efficiency was the reason for reducing production at the St. Louis north plant The Warren plant assembles 65 units per hour, while the north plant in St. Louis assembles about 41 units per hour.

Ahhhh, ok even at 41 units per hour x [???] say $ 20,000 per vehicle = $820,000 per hour !! { times that by , say, an 8 hour shift/work day = $6,560,000 /million dollars per/d} Chrysler is thereby clearing profitting $400-420,000 per hour [approx.] or $ 3,360,000 per shift/work day !!!!!

[425hpChargerSRT8]

yea, its hard to beleive a company can be losing money when they bring in that kind of revenue. But you have to remember, if the cars dont sell then the revenue is not there. Thats regardless of how many they make

[WO51]

Correct me if I'm wrong, I was always under the impression vehicles on dealer lots are already bought and owned by the dealer.. of course funded at leveraged rates through Chrysler Financial, which is a business unit of DaimlerChrysler Financial Services -- a tangled web.

My guess is the excess finshed goods inventory is not reflected at Chrysler -- therefore should ultimately emerge as poor receivables at Chrysler Financial... and will impact future revenue stream there as well. The bean counters already know this is coming and that's why the recent loan and floating rumors of bankruptcy is being tossed at Wall Street -- and not just at Chrysler.

I would like to know the total impact to the supply chain, including Chrysler, Ford and GM suppliers and dealers... I'm seeing dealers around here consolidating or going under at alarming rates.

This fallout is huge... I believe we're all in for a rough ride.

.