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Marchionne Says Chrysler Slows ‘Bleeding,’ Cash Loss (Update2)
By Sara Gay Forden and Mike Ramsey
July 1 (Bloomberg) -- Chrysler Group LLC has slowed the pace at which it uses cash after emerging from bankruptcy on June 10, Chief Executive Officer Sergio Marchionne said.
“The question is how quickly we can stop the bleeding. That is priority No. 1,” Marchionne, also CEO of Italian automaker Fiat SpA, said in an interview in New York yesterday. “We are still burning cash, but it’s slowed down by far.”
Chrysler, which reorganized around what it considered its best assets and $6 billion in fresh financing from the U.S. and Canadian governments, went through $9.6 billion in cash in 2008. Marchionne, who declined to say how quickly the U.S. carmaker is consuming cash, said he isn’t seeking another partner in Europe or Asia, even after Fiat lost out to Magna International Inc. in a bid for General Motors Corp.’s Opel division in Germany.
Marchionne, 57, is focusing on fixing Chrysler after two previous owners failed. He’s cutting inventory and adding new platforms and engine technology to redefine the product portfolio. Turin, Italy-based Fiat bought 20 percent of the new Chrysler formed from the bankruptcy. Combined, they’re the world’s sixth-largest auto manufacturer, with annual sales of 4.5 million vehicles.
The CEO, who is pushing consolidation in the car industry because he expects only six global players to thrive in the long run, said he wants to disclose Chrysler’s financial information even though the automaker, based in Auburn Hills, Michigan, near Detroit, isn’t listed on any stock exchange.
‘Muscle Cars’
“It would be very useful for the public, and the people who have funded us, including the taxpayers, to know how we’re doing,” he said. Marchionne said he’s working with the U.S. Treasury to decide what information Chrysler might report and when to release it.
Chrysler used $2.5 billion in cash to fund operations in May and posted a net loss of $1.48 billion for the month, according to a financial report made in court filings yesterday. The company received $3 billion in financing from the U.S. and Canada during the month, according to the report.
By the end of this month, Marchionne wants to decide how the partnership will manage its Dodge and Alfa Romeo brands, which he sees as American and European counterparts.
“The level of competition between these two brands is tremendous because they are both going after the same customer,” Marchionne said. “Dodge is the American muscle car, while Alfa Romeo is the European muscle car. How we dovetail these two brands is very important.”
‘Own the World’
One solution might be to sell Alfa Romeo models under the Dodge brand in the U.S. and Dodge cars as Alfa Romeos in Europe, Marchionne said. Executives at both Fiat and Chrysler have said they will build a new vehicle in the U.S. based on the mechanical underpinnings of Alfa Romeo’s 149-model car that hasn’t gone on sale yet.
Chrysler should be able to take control of its European dealer network by September, Marchionne said. Certain operations are still controlled by Daimler AG, which owned Chrysler from 1998 to 2006, said Gualberto Ranieri, a Chrysler spokesman.
Marchionne said June 26 he won’t sweeten his bid to top frontrunner Magna, Canada’s largest car-parts maker, to acquire Opel, even though he’s still interested in the German brand.
“We don’t need to own the world,” he said.
Fiat rose 13.5 cents, or 1.9 percent, to 7.30 euros in Milan trading, giving the carmaker a market value of 8.8 billion euros. The stock has gained 59 percent this year, the best performance on the nine-member Bloomberg Europe Autos Index.
Share Sale Halted
The executive, who travels frequently between Detroit and Turin, said a plan to spin off or list the Italian company’s carmaking operations separately has been put on hold since its bid for Opel isn’t moving forward.
‘We need a very clear industrial plan to get that done,” Marchionne said. “Opel would have been a real opportunity, which would have allowed us to get to 6 million units, but we’re not there yet.”
Fiat doesn’t need cash, and met operating profit and cash- generation objectives in the second quarter, he said. The company is scheduled to release earnings July 22.
“We said our position was going to improve in the second quarter and it has,” said Marchionne. “We’re OK with operating profit, and we’re hopefully going to generate the level of cash flow that’s required.”
Marchionne said he expects Fiat to generate even more cash over the next 12 months as market conditions improve.
“These things are great cash machines when production runs,” Marchionne said. “When they don’t run, they are huge cash absorbers. One of the things we’ve shown we know how to do is manage operating leverage.”
Bond Sale?
Any decision to sell bonds would be aimed at lengthening maturities on Fiat’s debt, not for getting fresh cash, he said. Fiat has about 4.5 billion euros of debt coming due this year.
The Italian automaker is close to selecting a candidate to replace former Mobil Corp. CEO Lucio Noto as its third representative on Chrysler’s board, Marchionne said. Noto had a conflict with his role as a director at Penske Automotive Group Inc., which has signed a memorandum of understanding to acquire GM’s Saturn brand, making it a potential competitor to Chrysler.
Marchionne said he is still interviewing candidates, and a choice could be made today or tomorrow. Marchionne and another Fiat executive, Alfredo Altavilla, are the Italian automaker’s other two board representatives.
Last Updated: July 1, 2009 11:50 EDT
