CHICAGO, Chrysler, which has received a $4 billion government loan, is on track to complete a required government submission outlining its plan to become viable, the automaker's product development chief said on Wednesday.
"We are wrapping up the viability package right now, putting the final touches on it," Frank Klegon told reporters on the sidelines of the Chicago Auto Show. "Matter of fact it has to be submitted actually two days ahead of that."
Chrysler, 80 percent held by private equity firm Cerberus Capital Management [CBS.UL], and larger rival General Motors Corp (GM.N: Quote, Profile, Research) must present restructuring plans to the government next week as part of the agreement to accept loans.
"We are in the fine-tuning phase of what we have to submit, answering the questions required by Treasury and Congress," Klegon said. "There is still a lot of activity that needs to go on ... whether it is finance guys working through the banks, labor guys working on labor, and purchasing, those guys working on the supplier front."
Klegon said Chrysler has had an ongoing dialogue within Treasury and has been showing a capital plan that runs out several years, and a long-range product development plan that addresses fuel efficiency investments.
"The other side, they know where they have to get to but they are still working on how to get there," Klegon said of the negotiations with bankers and labor.
CHICAGO: Chrysler LLC's product development chief said Wednesday that the automaker is preparing two plans to show the U.S. government how it will become viable and repay billions in federal loans: one as a stand-alone company and the other joined with Italian automaker Fiat SpA.
Frank Klegon, a Chrysler executive vice president, said in an interview at the Chicago Auto Show that as the company races against a Tuesday deadline to submit its viability plan, another team is working with Fiat on product sharing, getting into details of what products each company might be build and sell.
Chrysler is surviving on a $4 billion government loan, and it is hoping for $3 billion more after it shows the Treasury Department it can repay the loans and generate positive cash flow.
Under an agreement reached in January, Fiat would take a 35 percent stake in Chrysler in exchange for its small-car technology, but the deal hinges on Chrysler getting the remaining $3 billion.
"We will be presenting what a Chrysler plan looks like and how a Chrysler-Fiat plan is augmented to that," he said, adding that both plans will show the government that Chrysler can survive.
Several industry analysts have said Chrysler cannot make it through the year as a stand-alone company, largely because of depressed U.S. auto sales.
Chrysler is working on gaining concessions from its bondholder by swapping debt for equity, and it also is in talks with the United Auto Workers union to make its labor costs competitive with Japanese automakers with U.S. factories.
Chrysler officials told dealers that part of the viability plan was for them to help the company generate cash by ordering 78,000 vehicles in the month of February. Vice Chairman Jim Press told dealers in a conference call last week that they needed to make the orders by Monday, but the company was short by around 10,000 vehicles.
Klegon said Monday was not a hard deadline, and the company is still working toward its goals.
"I think they're out there still pressing the flesh so to speak, and working on it. We have a little leeway, obviously, to manage our volume," he said.
Falling a small amount short of the goal will not make or break the viability plan, Klegon said, but it could mean further expense cuts if revenue targets are not reached.
"At the end of the day, if you don't achieve your revenue targets, you have to look for other places on the cost side to offset that," Klegon said. "So we'd much rather make it on the revenue side and get the market and the financial liquidity going."
Klegon would not say exactly which products Fiat and Chrysler have talked about sharing, although the company has stated in the past it's interested in Fiat's small engines and compact and subcompact cars. They could be built in the U.S. using excess Chrysler factory capacity. Klegon said Fiat also is interested in getting access to Chrysler's truck products, emissions control technology and its new fuel-efficient Phoenix V-6 engine.
"Nothing's settled by product, by brand or any of that kind of stuff yet," he said.
Before the Fiat deal emerged, Chrysler had a pact with Nissan Motor Co. to build a Chrysler-badged subcompact called the Hornet that Chrysler would distribute in the U.S. While Klegon conceded the Nissan deal would duplicate some of Fiat's products, he said Chrysler is still working with the Japanese automaker.
He said no contract has been signed with Nissan.
"We are still working through that. That stuff is still active," he said, adding that he hopes the Nissan deal goes through so Chrysler has more options for products.
Chrysler, with almost no presence in overseas markets, would benefit greatly from Fiat's worldwide distribution network, while Fiat could use Chrysler's dealer network to sell products in the U.S.
Aaron Bragman, an analyst for the consulting firm IHS Global Insight in Troy, Mich., said the only way Chrysler can prove its viability alone is to cut itself down to its best products, minivans, pickup trucks, SUVs and large cars.
"I don't understand how they can have a viability plan that does not include a foreign partner," he said Wednesday, predicting a tough sell to the government.
"This is going to be the ultimate sales job, quite frankly. They've got their work cut out for them."
CHICAGO -- Chrysler LLC is not planning further headcount reductions as part of its long-term viability plan to be submitted to the U.S. government Tuesday, a top company executive said Wednesday.
The plan is nearly complete and should be ready Friday, Frank Klegon, Chrysler executive vice president for product development, told the Free Press in an interview at the Chicago Auto Show.
"The functional groups that have finance guys working with the banks, purchasing guys working with the suppliers and you've got labor guys working with labor, I don't think they're all done ... closing all of the deals but I think everybody recognizes where they have to get to," Klegon said.
"We'll be done by Friday," he added.
On the heels of General Motors' announcement that it will cut 10,000 salaried workers worldwide, Klegon said Chrysler will not have job cuts in its plan.
"We did a huge one in November," Klegon said.
Last year, Chrysler reduced about 25% of its salaried workers through buyout and early retirement offers, amounting to about 5,000 job cuts.
Chrysler has shed 38% of its workforce since the end of 2006, ending 2008 with 54,007 workers.
The company's salaried workforce in the United States alone has fallen 42% to 10,691 employees.
Automotive and restructuring experts said Chrysler likely has reached the point where it can cut no further.
"You need a certain critical mass of people to operate day-to-day," said Sheldon Stone, a managing partner and restructuring expert at Amherst Partners LLC. "They are either at or very near that point and cutting below that point or to the bone, would mean suspending various operations within the company."
Chrysler, which shut down production for most of January, launched a new round of buyout and retirement offers last week to most of its UAW members.
Klegon said Wednesday Chrysler has a conservative market plan and has been making cuts based on those projections.
"We're hopeful that the market stabilizes and maybe comes up a little bit from that point, then our costs are absolutely in line," Klegon said.
Chrysler received a $4-billion federal loan at the beginning of the year and must present a viability plan in connection with that loan.
The automaker is also seeking an additional $3 billion in federal loans.
Chrysler and GM received a total of $17.4 billion in direct loans from the government. Chrysler and GM were told to bring labor costs in line with those at Japanese automakers in the United States, trade a third of their debt for equity and eliminate their jobs banks.
Analysts have said Chrysler's viability plan is strengthened by its plan to share technologies, factories and dealership networks with Italian automaker Fiat SpA.
