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A message to employees from Bob Nardelli
Posted Monday, Nov 3, 2008 at 12:17 pm in Company News, Messages From Our Leaders

Dear Colleagues:

First, I want to thank those who have written me and shared your ideas and concerns. I want to address some of those and offer you a perspective on some of the current automotive news, as well as economic and industrial indicators.

The latest U.S. auto industry sales figures will be released today and, unfortunately, the decline will continue. October sales are expected to be even lower than September, dropping 31 percent compared with last year, which is equivalent to an annual rate of 11 million units. This is compared with total industry sales of 16.2 million units last year. If this trend continues through the end of the year, the reduction in vehicle sales year-over-year would nearly equal the total U.S. sales of both Chrysler and Ford in 2007.

This year’s downturn in sales is unprecedented and has exceeded even the most conservative estimates and forecasts. Late last year, we, along with most in our automotive industry, believed that rising gasoline prices were going to be our biggest challenge as consumers shifted to smaller and more fuel efficient vehicles.

However, the largest factor driving down automobile sales today is the liquidity crisis in the financial markets — which far overshadows the influence of gas prices on consumer behavior. You can see evidence of this in the continued decline in automotive industry sales even though gas prices are below $2.30 per gallon at the pump. Specifically, the lack of liquidity in the financial markets has resulted in our dealers not being able to obtain the historic levels of support for financing their wholesale orders, nor the lease and loan finance offerings that consumers have come to expect.

The financial market crisis has created obstacles beyond our control, and yet our industry remains the backbone of the U.S. economy. Our industry represents 4 percent of our nation’s GDP, and so our economy depends on a viable automotive industry. To that end, the industry is in discussions with the federal government to obtain assistance to deal with the liquidity issues in the near term, and the need for technology investments in the long term.

The significant slowdown in U.S. sales is not limited to the domestic companies. Toyota, Honda and Nissan sales for this month are expected to be down more than 20 percent compared with October 2007. Every segment of the U.S. automotive industry — automobile manufacturers, suppliers, dealers and auto-finance companies — is experiencing the effects from the global financial crisis. The National Automobile Dealer Association (NADA) estimates that 700 dealers will go out of business by the end of the year.

The negative effect of the financial market crisis already seen in the mortgage, housing and automotive sectors now threatens to spread to other industries at a time when traditional economic indicators already are weak. The U.S. unemployment rate for September climbed to 6.1 percent, which was the highest rate seen in five years. Last week the Conference Board reported that U.S. consumer confidence dropped to a new all-time low. As a result of uncertainty, consumers have reduced their spending and increased their savings from negative numbers to as high as 2.8 percent in recent months according to Federal Reserve surveys.

In addition to the current economic conditions and competitive pressures, we at Chrysler also face the additional distraction of rumors concerning the future of our Company. I understand the anxiety that such speculation can cause for you and your families, as well as our dealers, suppliers and other business partners.

As I’ve said before, we have approached and have been approached by third parties who are interested in exploring future possibilities with Chrysler, however, we do not confirm or disclose the nature of our business meetings, as many times they may not come to fruition. Your leadership team is committed to informing you fully and directly regarding important business developments. If, and when, there are any changes in our business to announce, I assure you that we will communicate them to you as soon as possible.

I ask for your understanding and support as we work through these difficult economic times. As we have in the past, the leadership team is facing reality and doing everything possible to make Chrysler stronger. I want to make it very clear that the difficult actions we have taken in the past, and those that we have just announced, are for one purpose and one purpose only: helping Chrysler survive this economic trough. They are consistent with the actions we took in 2007 to return to profitability. Rumors and speculation that these actions are being taken for any other purpose are simply not true. Business conditions require us to resize Chrysler once again, and all of us must continue to focus on the value-added work that will sustain the company through this challenging period and serve as the foundation for growth when the economy inevitably recovers.

In the meantime, I want you to know how much I appreciate all you are doing. Today, in spite of some tough news in our industry , everyone at Chrysler should be proud to recognize the 25th anniversary of the minivan. This breakthrough, segment-creating product represents the best in Chrysler — the willingness to go out on a limb, and defy conventional wisdom in order to create something that is of real value to customers. We created the segment and today we still hold the number one position. In these tough times, it’s important to stop and remember what we have accomplished.

I’m extremely proud of this organization and firmly believe that we have the plan, the products and the people we need to succeed. Like every other company in our industry, we first must ride out this economic storm. I know I can count on you to continue to focus on your critical tasks at hand and continue to move Chrysler forward.


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