Tag Archive | "Chrysler Group LLC"

Chrysler Recalling 299,718 Minivans to Fix Airbags

Chrysler Group LLC says it is recalling Dodge Grand Caravan and Chrysler Town & Country minivans from the 2008 model year to replace part of the airbag system called the occupant restraint control module or ORC.

The recall includes 299,718 vehicles. Most of the vans were sold in the U.S., but Chrysler says there are also 50,251 vehicles in Canada, 3,748 in Mexico, and 13,633 export models, according to The Wall Street Journal.

The car maker says the ORC modules may have been exposed to moisture that could eventually result in the illumination of the airbag warning light. The problem could also cause airbags to deploy unexpectedly. In a document filed with the National Highway Traffic Safety Administration, Chrysler said the affected vans were built from June 24, 2007, through July 30, 2008.

The company recalled the same group of vehicles in January to replace drain grommet for the heating, ventilation and air conditioning system. The grommet had the potential to allow moisture into the leak into the area around the ORC module.

Chrysler says its engineers have since determined that the printed circuit board in the modules that were previously exposed to moisture could still delaminate over time, leading to dysfunctional airbags. The company says it is not aware of any accidents or injuries related to the problem in vehicles that were serviced under the prior recall.

Chrysler will begin notifying customers about the recall in September and dealers will replace the ORC modules free of charge.

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Fiat-Chrysler CEO says he’ll stay on until at least 2015

TRAVERSE CITY – Chrysler and Fiat CEO Sergio Marchionne says electric vehicles are “overhyped” and that “plain-vanilla” technology is the key to meeting higher fuel efficiency standards.

At the Center for Automotive Research’s annual Management Briefing Seminars on Wednesday, Marchionne said he plans to stay on the job until at least 2015, and an initial public offering of Chrysler stock is unlikely before 2013 — later than has been speculated. His successor, Marchionne said, is likely to come from within the Fiat-Chrysler alliance, reported The Detroit News.

In a wide-ranging speech, and in comments to reporters afterward, Marchionne took generations of auto executives to task for opposing increases in federally mandated fuel efficiency standards, as well as other government-imposed requirements.

“This industry has got a very bad habit of crying wolf, and sooner or later somebody’s going to call your marker and call your bluff,” he said. Automakers, he noted, have long opposed mileage requirements, but ultimately they always complied.

Marchionne said a compromise deal between automakers and the Obama administration to boost 2017-25 fuel economy standards to 54.5 mpg — about double their current level — is “very doable.”

“Anybody who surrenders 14 years before the date and says, ‘I can’t get there’ ought not to be in business,” he said.

Even though Chrysler plans to unveil an EV Fiat 500 next year, Marchionne said the focus on electric vehicles is “overhyped.”
“It cannot be the only answer” to great gas mileage, he said.

The “plain-vanilla” technology of better engines and transmissions, he added, “will by themselves bring huge benefits.”
Environmentalists praised Marchionne’s candor.

“I welcome all truth-tellers,” said Dan Becker, director of the Safe Climate Campaign.

Marchionne, 59, said he hopes the Fiat-Chrysler alliance will be one of the five or six global players in the auto industry.

“It’s going to be up to the guy after me, I think — after 2015, hopefully. Maybe a year later,” he said at the event. “Chrysler will be here after me.”

Meeting with reporters later, Marchionne softened his comments: “I technically can go beyond 2015,” and will “leave later or earlier as the case may be. … I wouldn’t focus on the date. I would focus on the process.”

The new Fiat-Chrysler management team announced last week has 22 executives representing of nine nationalities. “It’s designed to be a proving ground,” Marchionne said.

The new leadership structure, he said, is intended “to ensure speed, clarity of direction and unity of purpose. When two enterprises integrate, they share everything: industrial resources and know-how, projects and targets, challenges and ambitions.”

Fiat, which owns a majority stake in Chrysler, is likely to replace some board members. “It is to be reasonably expected, without being traumatic.”

Marchionne expects 12.7 million cars and trucks to be sold in the U.S. this year, which puts his estimate on the lower side of automakers’ projections. “People are still very reluctant to make long-term commitments to hiring and to capital,” he said.

While Marchionne believes the industry is “out of the ditch,” he sees a gradual recovery in sales over the next three or four years, and doesn’t expect industry-wide sales in 2014 to be close to 15 million.

China, he said, is a looming challenge to the American automakers.

“China is the largest producer of cars in the world. They produce almost entirely for the enormous domestic market, but their future plans for the export market are significant,” Marchionne said.

“Even assuming China were to export only 10 percent of what it produces, the risk we face in our home markets is enormous. We cannot afford to be unprepared for the ascent of China, reassuring ourselves of our invincibility.”

While Chinese automakers have been promising to arrive in the U.S. for several years, Marchionne said, “They are coming. They have a right to be here.”

Fiat plans to have a plant running in China next year that can assemble 300,000 vehicles annually.

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Chrysler and Fiat Integrate Leadership

Sergio Marchionne, chief executive officer of Fiat SpA and Chrysler Group LLC, unveiled a single management team for the two companies Thursday and will personally lead the North American division of the newly united group.

The move effectively shifts the nexus of power to Auburn Hills, though Fiat-Chrysler’s formal headquarters will remain in Turin, Italy. The news comes a week after the Italian automaker bought out the U.S. and Canadian governments, which bailed out a bankrupt Chrysler in 2009, according to The Detroit News.

“Marchionne’s decision to keep the role of overseeing the business in North America shows that the center of gravity of the combined entity will be in the U.S.,” said Gianluca Spina, chairman of the business school at the Polytechnic University of Milan.

“The integration process is going extremely fast, as is Marchionne’s style.”

Fiat-Chrysler will now be led by a 22-member global executive council. The group’s operations will be divided into four global regions.

In assembling his leadership team, Marchionne said he was only interested in picking the most talented person for each position. But the group he selected is a balance of Americans and Europeans, Fiat executives and Chrysler managers.

Marchionne, 59, was himself born in Italy, raised in Canada and lives in Switzerland. He has a condo in Metro Detroit.
His team includes eight Italians, five Americans, two Germans, two Britons, a Brazilian, a Frenchman, a Canadian and a Swiss. Eleven of the executives currently work for Fiat, nine for Chrysler and one for CNH Global NV, which is part of Fiat Industrial SpA.

“These appointments are the result of an extensive process of evaluation of the technical and leadership skills of the individuals who have been appointed to the GEC. But equally important is the fact that they reflect the multicultural geographically diverse nature of our businesses,” Marchionne said.

“We recognize in these leaders the future of Fiat-Chrysler as an efficient, multinational competitor in a global automotive marketplace.”

Fiat’s approach is a sharp contrast to Daimler AG’s approach to working with Chrysler after it purchased the Auburn Hills automaker in 1998.

Most senior positions in DaimlerChrysler AG, as the combine was known, were held by Germans and major decisions were made in Stuttgart. American executives reported being excluded from important conversations when their counterparts shifted to German. Relations soon soured and the marriage fell apart in 2007, when Daimler sold Chrysler to the private equity firm Cerberus Capital Management LP.

Marchionne seems determined not to repeat that mistake. When one recently arrived executive started speaking to his boss in Italian in the elevator in Auburn Hills, Marchionne told him to speak English while in the presence of the other employees.

One of the most important positions on the new council, chief financial officer, went to Chrysler Group CFO Richard Palmer.

“The Daimler thing never worked,” said Jay Baron, chairman of the Center for Automotive Research in Ann Arbor. “This has been incredibly amicable.”

Fiat and Chrysler are better partners because they both are rebounding from financial crises and both compete in the lower half of the automobile market, he said. Neither company had a truly global reach until now.

Fiat Purchasing Chief Gianni Coda will run the group’s operations in Europe, Africa and the Middle East. Cledorvino Belini, the current head of Fiat’s Brazilian operations, will lead the South American division. Michael Manley, currently in charge of the Jeep brand, will head the Asian division.

Marchionne will remain CEO of both Fiat and Chrysler. The other regional chiefs will hold the title of chief operating officer for their respective business units. Other COOs include Pietro Gorlier, who will be in charge of parts, service and Mopar; Eugenio Razelli, who will head the components division and parts subsidiary Magneti Marelli SpA; and Riccardo Tarantini, who will lead the Teksid SpA and Comau SpA subsidiaries.

“We have now reached the right moment to step on the accelerator of the Fiat-Chrysler integration,” Marchionne said Thursday.

But a formal, legal merger is likely at least a year away, he said in a conference call earlier this week. That is because of an ongoing dispute with the United Auto Workers over the valuation of Chrysler.

Fiat was given control of the company in 2009 as part of a deal brokered by the Obama administration. A union-run retiree health care trust known as a voluntary employee beneficiary association, or VEBA, also received a stake in the new Chrysler. Fiat, which is now the only other shareholder in Chrysler, would like to buy out the UAW, but the two sides haven’t agreed on a price.

Marchionne said the solution is to take Chrysler public again, let the union sell its shares on the open market and allow Fiat to consolidate its control of the company. It already controls 53.5 percent of Chrysler and is on track to increase that to 58.5 percent by the end of the year.

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Chrysler Reports $370M Loss for Q2 Due to Government Loan Payoff

AUBURN HILLS — Chrysler Group LLC today reported a net loss of $370 million for the second quarter of 2011, but the automaker’s operating profit increased 177 percent over the same three-month period a year ago.

The loss was explained by a one-time charge of $551 million that Chrysler took during the quarter to repay money it borrowed from the governments of the United States and Canada in 2009. Without that charge, the company would have made $181 million, reported The Detroit News.

“There is no doubt that Chrysler Group has taken a huge step forward this quarter,” said Chrysler CEO Sergio Marchionne.

“Refinancing our debt and repaying our government loans six years early reinforces our conviction that we are on the right path to rebuilding this company and restoring it to its rightful place on the global automotive landscape.”

Crosstown rival Ford Motor Co. today reported a slight dip from last year in second quarter earnings, to $2.4 billion, as it, too, further cleaned up its balance sheet and reported higher costs.

Chrysler’s net revenues were $13.7 billion, up 30 percent from $10.5 billion in the second quarter of 2010. Chrysler’s U.S. market share increased to 10.6 percent from 9.4 percent, while its Canadian market share increased to 14.9 percent from 12.9 percent.

Worldwide, Chrysler’s sales increased 19 percent to 486,000 units in April, May and June. July sales will be announced next week.

“Chrysler has been making a remarkable recovery over the last several months, and it’s proving to be an important and valuable asset for Fiat,” said analyst Michelle Krebs of Edmunds.com, an online automotive research firm.

The Italian automaker took over bankrupt Chrysler as part of deal brokered by the Obama administration in 2009.

Chrysler ended the quarter with $10.2 billion in cash and $12.3 billion in debt.

The company expects total net revenue for the year will exceed $55 billion and predicts adjusted net income of between $200 million and $500 million, excluding the one-time loan repayment charge reported during the second quarter.

“We are changing both the image and substance of our company in order to regain the faith of consumers,” Marchionne said.

Last week, the U.S. and Canadian governments sold their Chrysler stakes to Fiat, giving it a controlling share of the Auburn Hills automaker. Marchionne is expected to announce an operational merger of the two companies in the next few days.

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Chrysler Wild Card in Talks with UAW

AUBURN HILLS – Chrysler Group LLC will not sign any contract with the United Auto Workers that includes cost-of-living adjustments or similar automatic pay increases, according to sources familiar with the company’s position.

“It won’t happen. Not here,” said one person briefed on the matter, who said the automaker was prepared to go into arbitration with the union over the issue if necessary.

Instead, Chrysler wants to offer workers a more generous profit-sharing deal that would pay between $4,000 and $5,000 annually, assuming the company continues to make money. But it also wants to tie that sum to personal performance metrics like attendance and productivity, reported The Detroit News.

If there is a wild card in this year’s labor negotiations between the UAW and the Detroit Three automakers, Chrysler is it.

The Auburn Hills automaker is in a very different position from its cross-town rivals. Like General Motors Co., it went bankrupt and was bailed out by the American taxpayers. But the U.S. government turned Chrysler over to Italy’s Fiat SpA because Chrysler was too weak to stand on its own. Ford Motor Co. restructured itself without Washington’s help. Chrysler says it needs a deal that meets its needs — not GM’s or Ford’s.

“They can go and cut whatever deal they want over there. It doesn’t matter. It has to make sense here or it won’t get signed,” one source said. “What we have to focus on is what’s good for this business here — what’s good for Chrysler.”

What makes sense to Chrysler is a deal that maintains the competitiveness gains the automaker won in 2009 and does not add to its fixed costs. Those gains included a freeze on cost-of-living increases, more flexible work rules and the elimination of some holiday pay. Ford and GM are looking for the same thing, and all indications are that the union and the companies are not far apart. The difference is that Chrysler has drawn a sharper line in the sand on issues like cost-of-living adjustments.

The other difference is Sergio Marchionne.

He has been the CEO of both Chrysler and Fiat since the latter took over the U.S. carmaker in 2009. The unconventional executive is known for his hands-on management style and is expected to play a direct role in this year’s bargaining.

Marchionne is still new to Detroit. He has a different perspective on labor relations born out of the often confrontational relations between Fiat and the volatile Italian unions. He is also unencumbered by the baggage of Chrysler’s history with UAW. He does not know how things were done, and he does not care.

“There is a profound difference in the unions that Marchionne has dealt with in Europe,” said labor expert Harley Shaiken of the University of California, Berkeley. “He is facing a different set of challenges here.”

Formal negotiations between Chrysler and the UAW will not begin until Monday, but the two sides have been meeting almost every day for months.

Union President Bob King welcomed the Italian’s presence at the table, noting Fiat’s major investments in Chrysler.

“I’m really pleased with our relationship with Marchionne. I’m really pleased with the new product investment that’s going into our UAW-represented plants — plants like Sterling that were scheduled to close,” King told The Detroit News. “I feel like we’ve got a good relationship.”

Those investments, which have totaled about $3 billion, have already translated into 2,000 new jobs at Chrysler plants in the United States. And the automaker is prepared to do more, provided it gets the contract it says it needs from the UAW.

“When labor costs get competitive, we look for ways to bring work in,” one source said. “How serious is the UAW about job growth? That’s what this comes down to.”

Adding jobs is critical to the UAW’s survival. The union’s membership has fallen from more than 700,000 in 2001 to less than 377,000 in 2010. That is creating real financial challenges for the organization itself.

Last fall, King and Wayne County Executive Robert Ficano traveled to Italy to meet with Fiat suppliers and urge them to set up shop in Michigan. King promised the UAW would work with them, not against them, if they did. Those companies are now watching the negotiations between Chrysler and the UAW closely.

Helping to craft a deal that works for both the company and the union without drama would prove King’s sincerity, said one person familiar with the situation. The alternative would be arbitration.

The U.S. government forced the UAW to give up its right to strike Chrysler and GM at Fiat’s insistence. If they cannot agree on contract terms, their difference must be resolved through binding arbitration.

Marchionne personally helped draft the arbitration language in the 2009 agreement, so it is not surprising that Chrysler is more willing to consider the option. But sources say it hopes to avoid any confrontation.

“It’s not something we’re going to carry around like a hammer,” one said, adding that Chrysler hopes the UAW will see the benefit in working together.

“If they’re interested in job growth and job retention, then labor cost competitiveness and world-class work practices are no longer a negotiable consideration.”

Those sources said arbitration would make the union look worse than Chrysler, and they believe that is a powerful incentive for King to negotiate a competitive deal with the carmaker.

“The last thing any one of us wants to do is go into arbitration,” King said.

“We all want to be masters of our own destiny. We don’t want to go to a third party.”

Chrysler said its “all-in” labor costs are now about $51 an hour. That includes everything from base wages and overtime to health insurance and pension costs. It is on par with what workers at Japanese transplant factories in the United States are paid, too. Workers at those companies get higher bonuses, but also pay more of their own health care costs. Chrysler would like to adopt a similar model.

The Auburn Hills automaker’s U.S. hourly workers are responsible for about 7 percent of their own heath care costs. The national average is closer to 30 percent, and Chrysler salaried employees pay 33 percent. Workers at the Japanese transplants are responsible for between 10 percent and 15 percent of theirs.

While other automakers have expressed concern about the competitive gap with foreign transplants, Chrysler is more worried about fending off the looming threat of new competition from China.

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Fiat Boosts Chrysler Stake to Majority

Fiat SpA took a majority stake in Chrysler Group LLC when it completed the purchase of a 6 percent stake from the U.S. Treasury and a 1.5 percent holding from Canada that ended taxpayer ownership in the automaker.

Fiat, which paid $625 million for the holdings, increased its stake in Chrysler to 53.5 percent on a fully diluted basis, Chrysler said in a U.S. regulatory filing. Fiat also paid $75 million for governments’ right to buy the remaining stake held by the United Auto Workers union’s retiree health-care trust, of which $15 million goes to Canada, reported Bloomberg.

“With today’s closing, the U.S. government has exited its investment in Chrysler at least six years earlier than expected,” Timothy Massad, the Treasury Department’s acting assistant secretary for financial stability, said in a separate statement. Loans to Chrysler were set to mature in 2017.

Fiat consolidated Chrysler’s results from June 1, a sign of the rapid integration of the two carmakers since the Auburn Hills, Michigan-based manufacturer exited bankruptcy in June 2009. Fiat is scheduled to report its second-quarter earnings July 26, the first one to include Chrysler results.

Fiat, based in Turin, Italy, and Chrysler will have a single management structure soon, Sergio Marchionne, chief executive officer of both companies, said last week.

Marchionne, 59, is working on management changes as he moves to integrate the two companies. He plans to merge the carmakers to reduce costs and achieve a target of more than 100 billion euros ($140 billion) in combined revenue by 2014. The executive said in May that the timing of a merger hasn’t been decided, adding that a combination isn’t likely this year.

“With the business strategies of Fiat and Chrysler irrevocably linked, we believe a merger is a logical next step,” Stefan Burgstaller. a Goldman Sachs Group Inc. analyst wrote in a note to clients July 20.

Fiat, initially granted a 20 percent stake in Chrysler by the U.S. government, expects to hold 58.5 percent of the third- biggest U.S. automaker by the end of 2011, after getting 5 percent in return for developing a fuel-efficient car for Chrysler. The United Auto Workers union’s trust will have the remaining 41.5 percent of Chrysler at that time.

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