Chrysler LLC is a company that could use some good news, mired as it is in an industrywide sales slump and forced to cut leasing in an effort to preserve cash. So it is understandable the Cerberus Capital Management LP-owned automaker is crowing about internal data suggesting the quality of its new vehicles is improving, and eager to turn that progress into hard cash on its balance sheet.
Company chief customer officer Doug Betts told the Detroit Free Press that internal Chrysler numbers show a 29% decrease in the rate of warranty claims in new vehicles since February, when a new quality program was instituted. The decline allows Chrysler to shave "hundreds of millions of dollars" from reserves to pay for problems, according to Betts.
Betts attributes the improvement to the new system he instituted after coming over from Nissan Motor Co. Chrysler set up 18 teams to address key systems of a vehicle and to quickly address problems as they are identified.
The extra cash comes at a time when Chrysler could use it. The company has been shedding assets and cutting costs in an effort to boost its balance sheet and weather a more than 20% decline in year-to-date sales. Cerberus since taking over Chrysler last year has brought in industry veterans such as Betts in an effort to boost quality and results, and an optimist can point to the quality data as proof that a turnaround is underway at the automaker.
Of course the cynic might worry that Chrysler is being overly optimistic in its warranty assumptions in order to boost its cash balance in the near term, a penny-wise, pound-foolish approach that could spell trouble down the line if warranty claims increase. But given the depressing news flow coming out of Detroit these days, let's just hope for the best. - Lou Whiteman