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A message to employees from Bob Nardelli

Posted Tuesday, Nov 25, 2008 at 4:47 pm in Company News

Dear Employees,

As the automotive industry continues to be a topic of hot political news from Washington, I want to bring you up to date and share a few thoughts on some of the recent events.

But first, I think it is important to acknowledge that many of our co-workers have made the difficult and personal decision to retire or pursue opportunities outside of Chrysler. Those who are leaving have worked hard and made tremendous contributions to the Company over the years. On behalf of the entire leadership team, I want to express our heartfelt appreciation for all they have done, and wish them all the best in their future endeavors.

As many of you know, I joined my counterparts from GM and Ford in Washington recently to make a request for a working capital loan totaling $25 billion. This was not our first trip to Congress — in fact, Ron Kolka had gone there the week before to brief some committee members about the issues facing U.S.-based automakers. And based on current events, it won’t be our last trip to the nation’s capital.

During a news conference last Thursday, Congressional leaders requested that the three domestic automakers return to Washington in early December and present more detailed plans to demonstrate what they called “a path to viability and accountability.” Voting on federal assistance could take place the following week. Importantly, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid both said they support assistance.

I was proud to represent the Company and all of you before the Senate and the House of Representatives, and we are looking forward to returning to present our plans in more detail. The Company is prepared to meet the “accountability and viability” criteria requested and is ready to share our plans for returning Chrysler to profitability as we move beyond this unprecedented financial crisis. Chrysler is changing and will continue to change.

In addition to the televised Congressional hearings held last week, I had conversations with members of the U.S. Senate and House of Representatives concerning the importance of helping the domestic auto industry get through the current economic and financial crisis. In addition, Jim Press and Steven Landry joined members of our National Dealer Council and dealers from around the country who were in Washington talking with legislators to explain how important federal assistance to Chrysler would be for local dealerships and their communities.

During the week, there were two questions that I was most frequently asked. The first was, “What do you plan to do with the money?” — referring to the joint request by the domestic automakers for a $25 billion loan. In short, the money would be used to support our ongoing operations. During this credit market crisis that has depressed auto sales, Chrysler still has obligations every month to pay wages, to pay suppliers, to fund health care and pensions, and to continue future product development. In making the request for federal assistance, it was necessary for me to be very forthright in answering questions about our current situation. This included disclosure that Chrysler spent $3 billion more in cash than we took in during the third quarter, which left us with a balance of about $6.1 billion in cash. This situation shows the urgency of our need to control costs and continue to find ways to increase revenues.

The second question most often asked was, “What will you do differently in the future?” Since becoming an independent company last year, we have begun to transform our business – investing in quality and new products, resizing our organization, taking out capacity, eliminating four nameplates, reducing costs and making other tough decisions to enable our company to survive a downturn. Our goal is to emerge as a company that is leaner and more agile, and committed to relentlessly improving the quality of our products and our focus on customers.

Today, Chrysler has a very strong product pipeline, with a product renaissance for 2010 that includes a new Chrysler 300, Jeep Grand Cherokee, Dodge Charger and hybrid version of the Dodge Ram. In September we revealed our electric-vehicle strategy, and announced that we will begin producing an electric-drive model for North American consumers in 2010 as part of a full-scale commitment to delivering environmentally friendly, fuel-efficient vehicles to customers.

We also plan to continue to look for alliances and partnerships with other OEMs and suppliers. Early last week, Tom LaSorda announced that Chrysler and ZF Friedrichshafen AG have formed an axle manufacturing alliance that will use Chrysler’s new Marysville (Mich.) Axle Plant to build three families of state-of-the-art axles for improved fuel efficiency.

I shared with Congress my belief that more cooperation within our industry is essential, and that a collaborative approach could help government dollars go further and help achieve important national policy objectives related to energy security and environmental improvement. For example, instead of the government giving each company a dollar to separately spend on technology, there should be ways to pool the investment to develop a shared technology that would benefit all three domestic automakers (much as we’ve already done with hybrid technology working with GM and others).

I was also able to tell Congress that our private equity owner, Cerberus Capital Management, L.P., supports our recovery efforts and has made it clear that it will forgo any benefit from the upside that would, in part, be created from any government assistance that Chrysler may obtain.

While we requested money for automotive operations, we also stressed the importance of getting the credit markets working. At Chrysler, 75 percent of our dealers rely on Chrysler Financial to finance their business, and 50 percent of all customers finance their vehicle purchases through Chrysler Financial. Normally, these loans and leases are securitized and sold in the secondary market to generate fresh liquidity and financing capacity.

Today, there is virtually no secondary market and, therefore, no way to raise capital. Money is not available for dealers to finance their wholesale orders, invest in their facilities, and hire and train employees. Competitive loans for the average working American — our customers — are virtually nonexistent. To help improve this situation, Chrysler Financial already has applied for funds set aside to inject capital into the nation’s financial institutions under the federal TARP (Troubled Assets Relief Program).

Thankfully, this morning, the U.S. Treasury announced new actions designed to support small business and consumer credit. I am encouraged by this action and trust it will be helpful to Chrysler Financial.

In recent days you may have read about plans by suppliers and other groups to organize a caravan to Washington to show support for the industry. While we appreciate this initiative, Chrysler is totally focused on putting together our loan request presentation as we concentrate on the critical business issues at hand. From a financial perspective, we are not able to be involved as a participant or sponsor.

Without question, 2008 has been a year of challenge and change, and next month will be no different. With a smaller team to face this difficult business environment, the Company must once again adapt to its new realities. Beginning in December, more information regarding changes to how we will organize and operate will be available. Until then, I ask each of you to come back after the Thanksgiving holiday with a strong sense of focus and passion, both of which will be essential to move the Company forward in this difficult time.

Have a blessed holiday, and thank you very much for your continued support.

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