Tag Archive | "Chrysler Group LLC"

Chrysler Pulls Application for U.S. Loans as Carmaker’s Financials Improve

Chrysler Group LLC withdrew its application for U.S. Energy Department loans after the government tightened its lending standards and the company’s financial standing improved.

Chrysler “remains confident in its strategy to bring competitive, fuel-efficient vehicles and technologies to market on schedule,” the Auburn Hills, Michigan-based company said yesterday in a statement. The decision won’t impact Chrysler’s ability to achieve its financial targets, the company said.

Sergio Marchionne, chief executive officer of Chrysler and majority-owner Fiat SpA, told reporters Feb. 4 that the automaker was seeking less than $3.5 billion in loans from the government’s Section 136 program, which encourages production of fuel-efficient vehicles. He said the department’s due diligence process was reflecting “some of the deals they’ve done,” without making specific mention of loan recipients such as Solyndra LLC that have filed for bankruptcy protection, reported Bloomberg.

“Sergio lost patience,” Richard Hilgert, a Chicago-based analyst for Morningstar Equity Research, said in a phone interview. “The company is now on solid financial ground and really no longer needs to have the DOE loans. They would have been at very attractive rates, but the market has very low interest rates right now and they could probably borrow at very attractive rates without these loans.”

Chrysler, which is 58.5 percent owned by Turin-based Fiat, forecast on Feb. 1 that earnings may double this year after reporting its first full-year profit since exiting bankruptcy in 2009. The company earned $734 million in 2011 excluding costs associated with paying back the U.S. and Canadian government loans.

Marchionne plans to introduce technology such as natural- gas powered vehicles in the U.S. to help meet 2025 regulatory standards that call for the average fuel economy to rise to 54.5 miles per gallon. The automaker expects to begin selling an electric version of the Fiat 500 small car by early next year.

“While we were continuing to work with Chrysler to come to an agreement, we are pleased that they are capable of achieving their business goals without department support,” Damien LaVera, an Energy Department spokesman, said yesterday in an e- mail. “The company’s decision to move forward without this loan reflects the tremendous financial turnaround that Chrysler and its workers have achieved.”

Ener1 Inc., the maker of batteries for electric cars whose subsidiary received a $118 million Energy Department grant, in January filed for bankruptcy protection after defaulting on bond debt amid Asian competition. Ener1’s bankruptcy followed the failure of at least two U.S. government-backed renewable energy companies, the solar-panel maker Solyndra and energy-storage company Beacon Power Corp.

Ford Motor Co., the second-largest U.S. automaker, received $5.9 billion of Energy Department loans in June 2009. Nissan Motor Co. borrowed $1.6 billion, and Tesla Motors Inc. was loaned $495 million at that time. General Motors Co., which also emerged from bankruptcy in 2009, withdrew its application for $14.4 billion in loans in January 2011.

Marchionne signaled at the North American International Auto Show in Detroit in January that Chrysler might withdraw its request for loans if the amount made available by the government was “too restrictive.” Borrowing from the U.S. likely would impair Chrysler’s ability to “refinance itself” for the term of the loans, he said.

The U.S. Treasury Department and Canadian government, which backed Chrysler’s bankruptcy, exited their holdings in the company in July when Fiat paid $625 million to boost its stake to 53.5 percent on a fully diluted basis. Fiat increased its ownership to 58.5 percent in January after a commitment to build a 40-mpg rated Dodge Dart compact car in Belvidere, Illinois.

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Chrysler Talking to Banks About Auto-Lending Venture

DETROIT—Chrysler Group LLC is in discussions with banks about establishing an in-house lending arm through a joint-venture to better compete in the U.S. auto market, according to people familiar with the matter.

Chrysler, which gave up its struggling finance unit in its 2009 bankruptcy, has used government-owned Ally Financial Inc. as its preferred lender for customers loans and leasing, and for the loans that dealers use to finance vehicle purchases from the manufacturer, reported The Wall Street Journal.

With its contract with Ally scheduled to end in 2013, Chrysler is talking to several major lenders including Ally, and J.P. Morgan Chase & Co., to create a new lender. Banks have approached the auto maker in the past year as its fortunes rose.

The auto maker would take an ownership stake but not completely own the lending unit, said one of the people familiar with the matter. The banks would provide all financing. The deal would be similar to an agreement that Italy’s Fiat SpA, the majority owner of Chrysler, struck in 2006 with Credit Agricole SA to form Fiat Auto Financial Services.

A Chrysler spokeswoman declined to comment. JPMorgan and Ally also declined to comment.

The current arrangement with Ally hasn’t allowed Chrysler to pursue some potential loan customers other auto maker have enjoyed particularly in leasing, these people said.

“Chrysler likes the relationship they have with Ally, but they also want options,” said Chuck Eddy, who sells Chrysler, Dodge, Jeep, Ram and Fiat brand vehicles from his Youngstown, Ohio, dealership.

Mr. Eddy said he is satisfied with Ally as a lender; he sold 1,300 new cars last year and 90 percent were financed by Ally. “But competition is good, it keeps everyone honest and the rates where they need to be,” he added.

Ally also hasn’t provided so-called “floor plan” loans used to buy inventory to some weaker dealers.

Other major auto makers, including Ford Motor Co., General Motors Co. and Toyota Motor Corp., have in-house lending arms that industry executives say provide affordable financing to dealers and consumers and which can ensure credit availability in an economic downturn.

The inability of GM and Chrysler to offer loans to a wide-range of consumers amid the 2008 financial crisis contributed to those companies’ eventual bankruptcies.

In January, Chrysler leased only 9 percent of the vehicles it sold. That is compared with the 20 percent industry average. Leasing is important because it can lower the monthly payment of a company’s most expensive, and highest profit vehicles.

For instance, Chrysler, through the first nine months of 2011, leased 20 percent of Chrysler-brand vehicles, 6 percent of Dodges and 15 percent of Jeeps, according to Experian. The 20 percent leasing rate at Chrysler, which is considered the company’s premium brand, is well below GM and Ford’s premium brands. Around 47 percent of GM’s Cadillacs and 29 percent of its Buicks are leased. Ford Lincoln brand depends on leasing for 49 percent of sales.

Ally has the largest share of the U.S. auto lending market, but the lending arms of Honda Motor Co., Nissan Motor Co. and Toyota do more leasing, according to Experian.

The move toward establishing an in-house auto lender is a reversal for Chrysler CEO Sergio Marchionne, who had said previously such a move wasn’t necessary. In the more than two years since he took control of the Auburn Hills, Mich., company, rivals GM and Ford have benefited financially from having more control over auto lending.

As recently as last week, Mr. Marchionne said he didn’t feel that Chrysler was at a disadvantage in financing because of the lack of a finance arm.

In addition to aiding sales, a finance arm can be a valuable source of profit. GM started its own finance arm in 2010 after the purchase of subprime lender, AmeriCredit Corp. GM still has a lending agreement with Ally, which was established during its own 2009 bankruptcy. GM’s new finance unit made $281 million through the first nine months of 2011.

GM at first said it didn’t need a captive lending arm, but feared competition from rivals and the threat that loans could dry up in another downturn.

AmeriCredit helped GM get back into subprime lending, while Ally now provides most leases. GM this year is looking to expand its lending to dealers, which is still provided primarily by Ally.

Ally was originally GMAC Financial Services, and for 87 years was GM’s captive finance arm before it sold controlling interest to private-equity firms in 2006. GMAC switched its name after the auto maker severed its limited ownership stake during its bankruptcy. Ally was boosted by $17.2 billion in government loan support and still is struggling with losses from mortgage-lending.

Chrysler is nearing the end of a four-year contract that made Ally its primary auto lender. That agreement allows the auto maker to use its marketing money to help subsidize loans and leases through Ally. The auto maker needs to decide a year ahead of the contract end if it will extend the deal, one of those people said.

Chrysler’s deal with Ally came after the Obama Administration, which ushered Chrysler and General Motors in and out of bankruptcy, determined Chrysler Financial could survive only with a major cash infusion, which it refused to provide.

Chrysler Financial continued to operate as a third-party auto lender and insurance provider under the ownership of Cerberus Capital Management LP, the private-equity firm that bought Chrysler from DaimlerChrysler Corp. in 2007. The equity firm agreed to sell it to Toronto-Dominion Bank at the end of 2010.

Ally today is the largest financier of new car loans, according to industry researcher Experian Automotive.

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Chrysler Dealers Defend ‘Halftime in America’ Ad

Chrysler Group LLC’s U.S. dealers swung into action on Wednesday to rebut complaints that the auto maker’s emotional Super Bowl ad provided support to President Obama’s re-election campaign.

“We have no doubt that this ad had no political agenda of any kind but rather [was] a statement of fact and hope for the future for all of us and America,” the company’s National Dealer Council said following an emergency meeting.

The single airing of the auto maker’s “Halftime in America” two-minute commercial on Sunday during the Super Bowl sparked debate from living rooms to dealerships across the country. The controversy boosted viewership with more than five million people viewing the ad on YouTube, reported The Wall Street Journal.

Oliver Francois, Chrysler’s chief marketing officer and architect of the ad, said he finds the controversy perplexing. “It was designed to deliver emotions and I don’t think emotions have a party. There was zero political message. It was meant more of a rally cry to get together and what makes us strong is our collective power and not our individual disagreements.”

At issue is whether the ad’s intent was to sell cars or to help President Barack Obama in this fall’s presidential campaign. His administration provided bailout funding and ushered Chrysler and rival General Motors Co. through a quick bankruptcy protection process in 2009.

“To say it was a political favor is bull hockey,” said Valdosta, Ga., dealer Cass Burch, who owns two Chrysler stores. “That comment makes me want to fistfight somebody. Here I was overwhelmed with emotion and pride…It is bush league for them to take something that is so heroic and so patriotic about our company and to make it political.”

In the spot actor Clint Eastwood intones: “Seems that we’ve have lost our hearts at times. The fog of division, discord and blame, made it hard to see what lies ahead but after those trials we all rallied around what was right and acted as one. Because that is what we do. We find a way through tough times and if we can’t find a way then we’ll make one. All that matters now is what’s ahead. How do we come from behind? How do we come together and how do we win?”

The following day, the advertisement became fodder for talk shows after Republican commentator Karl Rove told Fox News he was offended by the commercial. He described it as “a sign of what happens when you have Chicago-style politics and the President of the United States and his political minions are in essence using our tax dollars to buy corporate advertising.”

David Axelrod, Obama’s strategist, and Dan Pfeiffer, the White House communication director, praised the spot in tweets they posted to Twitter. Their reaction fueled complaints the ad touts the Detroit bailout ahead of the fall presidential election. The White House has said it wasn’t involved in the ad.

So far, the firestorm has had little effect on the Chrysler brand or on its sales, according to dealers and research companies that track consumer sentiment by monitoring social media websites, blogs, news websites and message boards.

Zeta Interactive, a New York-based marketing firm that mines 200 million different blogs and social media sites, said the buzz around Chrysler’s ad has been 83 percent positive. Collective Intellect, a tracking firm in Boulder, Colorado, said its research shows that since the spot aired, consumers’ affinity and favor of the Chrysler brand has increased.

Auto-shopping website Edmunds.com said it saw a 27 percent jump in consumers looking for information about Chrysler after the ad aired. The ongoing debate seems to have helped keep that momentum going. Edmunds.com said Tuesday’s traffic for the auto maker is showing a 23 percent increase, down slightly from Monday, but higher than all but two of the other auto brands that appeared in the game.

“Chrysler and its dealers have to be in heaven right now,” said John Durham, advertising professor at the University of San Francisco. “The shelf life of this ad has been significantly extended.” Super Bowl buzz “typically dies out shortly after the game.”

Some branding experts believe the political uproar isn’t resonating and is unlikely to tarnish the Chrysler brand.

“It is more of them talking to themselves,” said Charles Rashall, founder of brandadvisors, a branding firm in San Francisco, Calif. “Most people are fed up with that stuff.”

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Chrysler Gains Momentum

AUBURN HILLS — Chrysler Group LLC is on track to generate $3 billion in operating profit in 2012 thanks to rising vehicle sales in a recovering U.S. auto market, the company’s chief executive said Tuesday.

The auto maker should see its global sales reach two million cars and trucks this year, reported The Wall Street Journal, and rise 20 percent to 2.4 million in 2012, Sergio Marchionne said in an interview at the company’s headquarters here.

After restructuring in bankruptcy court, Chrysler is able to make money if it sells more than 1.5 million vehicles a year, he said, adding that the break-even point drops to 900,000 cars and trucks in 2012.

“That’s what gives us the basis for making $3 billion next year,” Mr. Marchionne said.

In the first three quarters of this year, Chrysler made $1.47 billion in operating profit. Year-to-date, the company has reported a net loss of $42 million, in part because it was paying interest on U.S. government loans for much of the year.

An increase in operating profit to $3 billion is in line with the business plans Mr. Marchionne outlined for Chrysler in 2009, when Italy’s Fiat SpA took a stake in the auto maker as part of its government-led bankruptcy. General Motors Co., which was also ushered into bankruptcy by the Obama administration, and Ford Motor Co., which turned around on its own, have already seen dramatic rebounds in their bottom lines. For the first three quarters of this year, GM reported $7.7 billion in net income, and Ford $6.6 billion.

Chrysler is benefitting from a far-reaching overhaul of its model line that Mr. Marchionne pushed through in 2010. With improved engines and plusher interiors, its cars and trucks are winning back American consumers. Through November, Chrysler’s U.S. vehicle sales had climbed 25 percent to 1.2 million cars and trucks. In November alone, its sales jumped 45 percent from a year earlier.

In 2012, Chrysler will add the Dodge Dart small sedan, a type of vehicle that accounts for a large chunk of the U.S. market and one that Chrysler hasn’t offered for about a decade. The Dart and other new or updated models, and expanded overseas business, should drive sales higher next year, Mr. Marchionne said.

Another boost to the bottom line has come from Chrysler’s decision to borrow money from a group of banks to pay off the $7.6 billion in loans it received from the U.S. and Canadian governments to fund its operations during its bankruptcy, which ended in 2009. Mr. Marchionne had complained the company was spending too much money on the loans, which carried an interest rate of more than 14 percent. The company spent $1.2 billion in interest payments last year, much of that for the Treasury loans.

For 2010, the auto maker booked operating profit of $763 million and a net loss of $652 million.

Separately, Chrysler officially confirmed Tuesday that it will reopen its Conner Avenue assembly plant in Detroit to start building its Viper sports car, which returns to the auto maker’s vehicle portfolio in late 2012. The plant, which had been idled as part of the bankruptcy and then saved by Mr. Marchionne after he decided to revive the Viper, will employ about 150 hourly workers.

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Chrysler Plans More Fiat Dealerships as 500 Misses Sales Goals

Chrysler Group LLC, falling behind its North American sales goals for the Fiat 500, plans to open 20 more U.S. dealerships during 2012’s first quarter to sell the Italian brand.

North American sales of the Fiat 500 this year through October reached 21,380, a rate below Chief Executive Officer Sergio Marchionne’s forecast of 50,000 for 2011. The rollout was hindered by complications in opening new Fiat stores instead of using existing space at Chrysler dealerships, reported Bloomberg.

Olivier Francois, head of the Fiat brand worldwide, started a U.S. marketing campaign featuring singer Jennifer Lopez in September. He is overseeing the introduction of the performance version of the 500, the Abarth, scheduled to reach showrooms early next year.

“The process of launching a new brand with three models, the 500, Cabrio and Abarth, is a process that takes time,” Francois said in an interview in advance of the Los Angeles Auto Show. “We continue to increase our customer awareness.”

Marchionne said today in Toledo, Ohio, that the lack of Fiat outlets has held back sales of the 500.

“We need to continue to work on distribution,” Marchionne told reporters. “We’ve had 50 dealers, 60 dealers trying to sell the car. I think Ferrari has more dealers than that.” The CEO was in Toledo to announce a $1.7 billion investment to update a Jeep sport-utility vehicle.

Chrysler has opened more than 120 U.S. Fiat stores this year, Richard Palmer, chief financial officer, said during Fiat’s third-quarter earnings call with analysts on Oct. 28.

Gualberto Ranieri, a Chrysler spokesman, said 130 U.S. stores should be open by year’s end and Francois said the number will rise to 150 by March 31.

“I think that’s a good level,” Francois said. “What is very important is not the quantity but the quality.”

Chrysler, based in Auburn Hills, Michigan, is majority- owned by Turin, Italy-based Fiat SpA. Marchionne is CEO of both companies.

Fiat is targeting a merger with Chrysler within the next three years. Marchionne said today instability in Italy may affect the decision on where the combined company will be based.

“I would be lying to you if I told you it didn’t,” he said. “That’s not to say that the current situation will force us to move away from Italy. We’re committed to the industrial backbone of the country. The country has to make some tough choices going forward, and it has to make them now.”

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Ford Sales Up 6 Percent; GM Flat; Chrysler Spikes 27 Percent

U.S. car and truck sales were up 7.5 percent in October, making it the industry’s best month since February.

But the results still fell short of analysts’ estimates, and experts warned that gains would be more modest in the months ahead.

Chrysler Group LLC saw the biggest sales gain, up 27 percent year-over-year on the strength of its new and refreshed vehicles. The Auburn Hills automaker sold 114,512 cars and trucks in October, compared to 90,137 for October 2010. That was enough to push Chrysler’s market share to 11.2 percent — a gain of nearly two percentage points, according to The Detroit News.

“It was another great month for Chrysler, much of it again on the strength of Jeep,” said analyst Michelle Krebs of Edmunds.com, though she noted that Chrysler’s Fiat brand continues to struggle. “(The) Fiat 500 still looks to be underperforming expectations, with sales of under 2,000 units last month.”

Ford Motor Co. sales were up 6.2 percent, climbing to 167,502 from 157,650 in October 2010. Ford’s market share, however, slipped slightly to 16.4 percent from 16.6 percent a year ago.

“The best way October sales could be characterized is solid,” said Ford sales analyst Erich Merkle, adding that the company still expects to finish the year strong.

“Ford reported a strong year-over-year growth in pickup trucks,” said analyst Himanshu Patel of JPMorgan. “(But) total car sales were down.”

October traditionally is a strong truck month for all manufacturers.

General Motors Co. posted the weakest increase of the Detroit Three. Its sales increased from 183,543 to 186,895, a gain of 1.8 percent. GM lost a full point of market share, dropping to 18.3 percent from 19.3 percent a year ago.

More promising was the fact that more than 80 percent of GM’s car sales and about 50 percent of its truck and crossover sales were 2012 models.

On the strength of these new models, the automaker was able to cut its average incentive by more $300.

Chrysler, Ford and Nissan Motors Co. all increased their incentives more than the industry average, according to data from the Power Information Network obtained by The Detroit News.

Still, Don Johnson, GM’s vice president of U.S. sales, called October a “lumpy month” that saw some products gain ground, while others ceded it to foreign competitors.

“We did see some of the Japanese manufacturers start to regain their footing,” he acknowledged during a conference call Tuesday.

The Chevrolet Cruze, which has been the best-selling compact car in the United States since May, returned its crown to Toyota’s Corolla.

The über-popular compact has been in short supply — along with other Toyota, Honda and Nissan models — since the March earthquake and tsunami delivered a one-two punch to the Japanese automobile industry. Now, just as the Japanese manufacturers say their inventories are returning to normal, they have been dealt another blow as devastating floods crippled key suppliers in Thailand.

Toyota Motor Corp.’s sales rebounded sharply from September, but they were still off from a year ago. Toyota sold 134,046 cars and trucks last month, compared to 145,474 in October 2010, a decline of 7.9 percent that left it with 13.1 percent of the market.

Toyota executives said they are confident they will be able to reclaim some of that lost share now that vehicle shortages are becoming a thing of the past. To help do that, the automaker is pulling forward its holiday promotions.

“We’ve gone through a tough six months,” said Bob Carter, general manager of Toyota Motor Sales, U.S.A. “The shortages are really behind us.”

At least that is the hope. Toyota said flooding has impacted many of its suppliers in Thailand, and the company is curtailing overtime at U.S. factories to conserve parts.

But the impact of the floods is being felt more acutely at Honda Motor Co., which has seen one of its own assembly plants shut down by the disaster.

Honda’s sales slipped by half a percent in October, dipping to 98,333 units from 98,811 a year ago. Honda’s market share fell from 10.4 percent to 9.6 percent.

Analyst Jessica Caldwell, also of Edmunds, called the Thai floods “a second blow” to Japanese automakers.

“I don’t fully think that they’re back,” she said. “It’s still going to be tough for them.”

Caldwell said American automakers could soon be impacted, too. GM said it has seen no impact to date, but is surveying its supply base to assess its exposure.

Ford said it does not anticipate any impact on its U.S. production.

Nissan was the only one of the major Japanese automakers to post a sales gain last month. Its October sales were up 18 percent, climbing from 69,773 units to 82,346 to claim 8.1 percent of the market.

South Korea’s Hyundai Motor Co. posted a 22.8 percent sales increase, while Germany’s Volkswagen AG topped the chart with a 35.6 percent gain. Hyundai’s market share increased from 4.5 percent to 5.1 percent, while VW’s climbed to 3.8 percent from 3 percent a year earlier.

Caldwell said she expects overall sales to continue to rise, but at a slower pace than the industry has seen since the end of summer.

“It seems like things are normalizing a bit,” she said, adding that pent-up demand is trumping consumers’ fear about the economy.

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