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Employee Letter 05/20/09

Nardelli discusses dealer network, new Chairman


Last modified on Wednesday, May 20, 2009, 5:08 pm.

Dear Employees,

There is a lot of news to pass on to you today, including an important announcement regarding the leadership of the new company and updates on motions filed in U.S. Bankruptcy Court.

First, however, I would like to share some thoughts about the reorganization of our dealer network, which has received a great deal of media coverage. As you know, last week we began the difficult and painful process of realigning our dealer network. We filed a motion with the U.S. Bankruptcy Court seeking to retain 2,392 Chrysler, Jeep® and Dodge dealers that will continue with the new company in a global alliance with Fiat once the sale is complete. Pending the court’s approval, another 789 current U.S. dealers will see their agreements with Chrysler LLC rejected and will discontinue selling new Chrysler, Jeep and Dodge vehicles effective on or about June 9.

The rationale for this reorganization is that strong, profitable dealers are essential to our success. Successful dealers are able to invest in their facilities, their equipment and their people, which allows them to satisfy and delight our customers. Over the past several days, I’ve received many letters and e-mails of support from dealers who recognize the need to reorganize our dealer network in terms of number and location. They understand that this resizing of the network is a tough but necessary action to support Chrysler’s viability for the long term. Here are just a few samples of the messages of support our dealers are sending:

“My father and I wanted to drop you a note to tell you we are behind you and everything you’ve done all the way. I know these last few months have not been easy for any of us in the auto industry and some of the decisions you have made have been tough but necessary.”
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Mr.Nardelli, Mr.Press, & Mr. Landry,

“I can only imagine that the past few days have probably been the hardest of all as you have had to make some very tough decisions. Decisions that impact some for the better others for the worse. Through all of this your steady hand of leadership has shown itself. It is evident to me that you have a clear vision of where you want Chrysler to be in the next 100 years and have taken the painful steps to put us all on the right path. The next few days may be tough, however knowing who is guiding this ship gives me confidence in the ultimate destination.”
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“We recently became a Genesis dealer in one of our 2 locations here … by stepping up and purchasing an existing franchise … While many called this move foolish, the past several months have proven them wrong. Our business is strong, vibrant and most importantly, growing! We are also looking forward to the possibility of acquiring a Chrysler Jeep franchise to add to our Dodge only point … and complete our own project Genesis.

I know that there is much pressure being leveled upon you and your entire team, but I want you to know that your core group of dealers, like my family, are 100% behind you and we know that the actions that we have seen in the past 30 days and what we will continue to see throughout our court supervised restructuring will lead to brighter, more prosperous days for us all.
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Gentlemen
I want to thank you for all of your efforts. Without you our company would not be here today. My family and my family of employees owe you all a debt of gratitude.
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Moving forward with 75 percent of our dealer network is far better than the alternative of liquidation, which we will face if the sale of assets is not quickly approved. Under liquidation, 3,181 U.S. dealerships would close, which would have a devastating effect on both local and national economies.

With the ongoing support of the U.S Treasury since our April 30 filing for protection under Chapter 11 of the bankruptcy code, our efforts to market and sell new vehicles continue thanks to the commitment of our dealers and to the loyalty of our Chrysler, Jeep® and Dodge customers. Even during these tough times for the industry, these sales have had a positive effect on our inventory balance, which will leave us in a stronger position for the future.

Yesterday, I represented Chrysler at the White House as President Obama announced a framework for a single national approach for fuel economy and greenhouse gas standards. This is an important step forward, and we are pleased that state and federal fuel economy programs will be harmonized, providing us clarity and certainty as we plan our future product portfolio.

A result of cooperation between the Department of Transportation, the Environmental Protection Agency and the state of California, the new framework would ultimately deliver California-like performance with federal compliance flexibilities to give us a workable program going forward. This new standard works well with our product and viability plans presented to the U.S. Treasury, which include our receiving continued funding for the development and deployment of advanced technology vehicles from the DOE section 136 fund. Together with our alliance partner, we will focus our resources on how to use Fiat’s fuel-saving technologies and our ENVI electric-drive program to meet the regulations, support our revitalization, benefit American consumers and help the country achieve energy security and environmental sustainability.

As we move quickly through the restructuring process, we have received interim approval for an additional $860 million in debtor-in-possession (DIP) financing today from the U.S. government. Of this additional loan amount, $600 million will support GMAC to provide a seamless transition as it begins providing floor-plan financing for our dealerships as well as consumer loans to our customers immediately upon the close of the transaction. An additional $260 million is to replace funds transferred to Chrysler Canada, as agreed upon in the pre-petition funding from the Canadian government.

Finally, when we emerge from bankruptcy and complete our alliance with Fiat, it will be under the leadership of a new chairman. As I mentioned to you before, when the new company emerges, it will be an appropriate time for me to step aside and return to Cerberus as an advisor. Today, we announced that C. Robert Kidder, the former chairman of Borden Chemical Inc. and of Duracell International Inc., will become chairman of Chrysler Group LLC, which is the name our organization will go by once we emerge from bankruptcy and complete our strategic global alliance with Fiat SpA. With his broad expertise serving on numerous world-class boards and his accomplished business background, Bob Kidder will provide the leadership and strategic counsel that will help to create a strong global competitor moving forward.

I want to end this note by telling you how much I appreciate your hard work and continued focus during this turbulent time. Thanks to your efforts, Chrysler will be positioned for long-term success when it emerges from this restructuring process.

Bob
 
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