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Chrysler Stems Cash Losses After Restructuring, Marchionne Says


June 30 Chrysler Group LLC has slowed the pace at which it uses cash after emerging from bankruptcy June 10 as a slimmer company, Chief Executive Officer Sergio Marchionne said.

Chrysler, which reorganized around what it considered its best assets and $6 billion in fresh financing from the U.S. and Canadian governments, went through $9.6 billion in cash in 2008.

“We are still burning cash, but it’s slowed down by far,” Marchionne said in an interview in New York today. “The question is how quickly we can stop the bleeding. That is priority No. 1.” He declined to say how quickly the company is using cash.

Marchionne, also the CEO of Italian carmaker Fiat SpA, is seeking to fix Chrysler after two previous owners failed. He’s cutting inventory and adding new platforms and engine technology to redefine the product portfolio.

Fiat acquired 20 percent of the new Chrysler formed from the bankruptcy. Combined, they form the world’s sixth-largest carmaker with annual sales of 4.5 million vehicles.

Marchionne, who is pushing consolidation in the car industry because he expects only six global players to thrive in the long run, said he wants to disclose Chrysler’s financial information even though the automaker, based in Auburn Hills, Michigan, near Detroit, isn’t listed on any stock market.

“It would be very useful for the public, and the people who have funded us, including the taxpayers, to know how we’re doing,” he said. Marchionne said he is working with the U.S. Treasury to decide what information Chrysler might report and when.

Muscle Cars

By the end of the month, Marchionne wants to decide how the new company will manage its Dodge and Alfa Romeo brands, which he sees as American and European counterparts.

“The level of competition between these two brands is tremendous because they are both going after the same customer,” Marchionne said. “Dodge is the American muscle car, while Alfa Romeo is the European muscle car. How we dovetail these two brands is very important.”

One solution might be to sell Alfa Romeo models under the Dodge brand in the U.S. and Dodge cars as Alfa Romeos in Europe, Marchionne said. Executives at both Fiat and Chrysler have said they will build a new car in the U.S. based on the mechanical underpinnings of Alfa Romeo’s 149 that hasn’t gone on sale yet.

Meanwhile, Chrysler should be able to take control of its European dealer network, by September, Marchionne added. Certain operations are still controlled by Daimler AG, which owned Chrysler from 1998 to 2006, said Gualberto Ranieri, a Chrysler spokesman.

No Search

Marchionne, 57, said he isn’t searching for another partner in Europe or Asia even though his offer for General Motors Corp.’s Opel unit is coming up short. He said June 26 he won’t sweeten his bid to top front runner Magna International Inc.’s offer to buy the company, even though he’s still interested in the German brand.

“We don’t need to own the world,” he said.

The executive, who travels frequently between Detroit and Turin, Italy, where Fiat is based, said a plan to spin off or list the Italian company’s car-making operations has been put on hold since its bid for Opel isn’t moving forward.

‘We need a very clear industrial plan to get that done,’’ Marchionne said. “Opel would have been a real opportunity, which would have allowed us to get to 6 million units, but we’re not there yet.”

Managing Cash

Fiat doesn’t need cash, he said. The company met its operating profit and cash-generation objectives in the second quarter, Marchionne said. It plans to release results July 22, Ranieri said.

“We said our position was going to improve in the second quarter and it has,” said Marchionne. “We’re OK with operating profit, and we’re hopefully going to generate the level of cash flow that’s required.”

Marchionne said he expects Fiat to generate even more cash over the next 12 months as market conditions improve.

“These things are great cash machines when production runs,” Marchionne said. “When they don’t run, they are huge cash absorbers. One of the things we’ve shown we know how to do is manage operating leverage.”

If Fiat decides to issue bonds, it would be to lengthen maturities on its debt, not for getting fresh cash, he said. Fiat has about 4.5 billion euros of debt coming due this year.

Fiat gained 1 cent today to 7.16 euros. Its shares have risen 56 percent this year.

The Italian automaker is close to selecting a new candidate to replace former Mobil Corp. CEO Lucio Noto as its third representative on Chrysler’s board, Marchionne said. Noto had a conflict with his role as a director at Penske Automotive Group Inc., which has signed a memorandum of understanding to acquire the Saturn brand from GM, making it a potential competitor to Chrysler.

Marchionne said he is still interviewing candidates, and a choice could be made in the next day or two. Marchionne and another Fiat executive, Alfredo Altavilla, are the Italian automaker’s other two board representatives.

Article Link:Chrysler Stems Cash Losses After Restructuring, Marchionne Says - Bloomberg.com
 
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