BY TIM HIGGINS
Spending is outpacing revenues at Chrysler LLC, which has kept its financial information secret since going private in August. It appears the company will spend $1 billion more than it is to take in this year.
That revelation was not delivered to industry analysts but reportedly to business students in Nova Scotia.They also apparently learned that the automaker, which already has announced plans to slash as many as 25,000 jobs and four nameplates, could be making plans to cut deeper into its vehicle lineup -- axing maybe another four models, though no timeline was given.
Steven Landry, Chrysler's executive vice president of North American sales, gave the students a window into Chrysler as the automaker is remaking itself rapidly under Cerberus Capital Management's control.
The Auburn Hills automaker is on target to generate $64 billion in revenue this year -- $1 billion short of what the company plans to spend.
That's according to the Daily News in Halifax, Nova Scotia, where Landry delivered a talk Wednesday at St. Mary's University in his hometown.
Landry is said to have talked about what efforts Chrysler is making to become profitable.
"You can't stand around and complain about the yen or the manipulation of currency around the world. You've got to roll up your sleeves, do some hard work and build cars people want to drive," he said, according to the Daily News.
Landry was at the university to donate $100,000 from the company for scholarships at the school from which he graduated in 1982.
The last clear snapshot of Chrysler's finances was given in May when then-owner DaimlerChrysler AG said its U.S. division lost $2 billion in the first three months of the year.
Of that amount, $1.2 billion was from restructuring costs associated with the company's turnaround plan, launched after the Chrysler division lost $680 million in 2006, a figure initially announced as a $1.5-billion loss before accounting changes.
"You have to come to the realization that in some instances, you've got to stop spending. You've got to right-size what you do to the revenue that comes into the company," Landry reportedly told the students.
The Canadian newspaper said Chrysler plans to reduce its nameplate lineup from 28 to about 20.
Earlier this month, the automaker, which sells vehicles under the Chrysler, Dodge and Jeep brands, announced plans to eliminate the Dodge Magnum, Chrysler Pacifica, Chrysler Crossfire and the convertible version of the Chrysler PT Cruiser.
Chrysler representatives cautioned against reading too much into Landry's comments, noting that he was speaking in general terms to a group of students.
"He's not saying we want to be at 20 tomorrow or next year. He's saying an ideal. When looking at three brands like this, it makes some sense to get to that point, and we are moving in that direction," said Chrysler spokesman Mike Aberlich. "I know he didn't specify a timeframe."
"I wouldn't be looking for another four announced tomorrow, or next week or next month," he added.
On Monday, new Chrysler Chief Executive Officer Bob Nardelli warned employees that 2008 could be tough. He indicated the company could cut more jobs.
Landry gave the group a simple rundown on Chrysler's game plan: Lose a little money this year, break even next and rake it in during 2009 and 2010, according to the Daily News report.
That's a nice summary of the turnaround plan first announced in February by then-Chrysler CEO Tom LaSorda, who now is a president and vice chairman.
Chrysler's new majority owner, Cerberus, had said it approved of LaSorda's plan, which called for cutting only 13,000 jobs over three years.
After taking over, Nardelli indicated that Chrysler as a private company would be paying greater attention to cash flow.
In October, he said the company was in the process of selling land to generate $1 billion, saying the auto industry "has an insatiable appetite for cash."
In November, the company announced that, along with the nameplate reductions, as many as 12,000 more jobs would be eliminated.
Today is the last day for some white-collar workers taking buyout packages.
When Chrysler launched new minivan models late last summer, Landry said the automaker was lowering the sticker price in hopes of getting closer to the actual sale price and reducing the amount of incentives on the Dodge Grand Caravan and Chrysler Town & Country.
At the time, Landry said Chrysler wanted to reduce incentives on the minivans, which were around $4,500, by about $2,000. The new models were billed as having about $2,000 of added value.
But this month Chrysler is offering $1,500 cash incentives nationwide, except in Michigan, Ohio and parts of Indiana, where incentives include $1,000 in consumer cash. "This is in line competitively with products in the marketplace," said company spokeswoman Lori Pinter.
According to early estimates by automotive Web site Edmunds.com, the Toyota Sienna minivans had $882 worth of incentives per vehicle sold this month, and the Honda Odyssey had $1,510.
"New models, even if they are fresh and redesigned, they're coming to dealerships with incentives already attached to them," said Jesse Toprak, executive director of industry analysis for Edmunds.com.
In general, "we can see this as a little bit concerning, perhaps because incentives traditionally are as the last measure to get some interest going at the end of a model year. Now it seems like consumers are taking it for granted, and if you don't have anything, you're not going to get as much attention."