This was copied and pasted from a Dodge Sales Manager in Baltimore, MD.

The note below was sent to all Chrysler LLC employees last night from Bob Nardelli. The note provides an overview of “Chrysler’s Plan for Short – Term and Long – Term Viability” which was submitted yesterday to the U.S. Senate Committee on Banking, Housing and Urban Affairs. Full detail is available in the attached document.

Dear Employees,

This afternoon, Chrysler submitted to Congress an 18-page overview and a full 120-page plan detailing our plans for future viability as part of our request for a federal bridge loan to help us get through the current economic crisis and continue our transformation of Chrysler.

The plan addresses all the points spelled out in the letter we received from House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid. I will appear on your behalf before the Senate Banking Committee on Thursday and the House Financial Services Committee on Friday to discuss our plans and answer questions from the committees. I will drive one of the company’s fuel-efficient hybrid vehicles to get there.

The plans we submitted to Congress answer the questions we’ve heard most often over the past few weeks, and I’d like to share a brief overview with you.

What changes has Chrysler made to help itself?

Since Chrysler became an independent company in 2007 and started our recovery and transformation to return to profitability:
• We eliminated 1.2 million units of capacity, or 30 percent
• We reduced fixed costs by $2.4 billion and separated more than 32,000 employees

And at the same time:
• We invested in product improvement, including a half a billion dollars in our first 60 days
• We improved our latest J.D. Power quality scores and reduced our warranty claims by 29 percent
• We began transforming our business model through alliances and partnerships—including cooperative manufacturing agreements with VW and Nissan

As a result of the changes we made, Chrysler met or exceeded our operating plan through the first six months of the year, ending the first half with $9.4 billion in unrestricted cash.

In addition, as part of the shared sacrifice at all levels required of the plan, we are suspending the company match of 401(k) contributions. This is an action that we have taken before during tough times, and it is one we regrettably are forced to re-enact now

Why does Chrysler need the funding?

We need to address the unprecedented drop in vehicle sales caused by the financial crisis that interrupted our business transformation. U.S. sales are down from a 17 million unit selling rate in early 2007 to an annual selling rate of 11 units million for the fourth quarter in 2008—a 38 percent decline. We lost 20 percent of our sales virtually overnight when the financial market crisis forced us out of the consumer lease business. With customers not buying, with dealers not ordering, with our plants not producing, Chrysler’s cash inflow has suffered.

How will the bridge loan be used?

Cash will support ongoing operations as we continue to restructure the business, including in the first quarter alone:
• $8 billion in payments to parts suppliers
• $1.7 billion for other suppliers
• $900 million in wages
• $500 million in health care and legacy costs
• $500 million in capital expenditures

Without an immediate working capital bridge, Chrysler’s liquidity could fall below the level appropriate to ensure ordinary operations by the first quarter of 2009.

Who is contributing to saving Chrysler?

First and foremost, Chrysler and its extended enterprise will. That starts with me. I receive a salary of $1 a year. I have no employment contract, no change of control agreement, no “golden parachute” and receive no health care or life insurance benefits from the company.

The suspension of the 401(k) match is part of this shared sacrifice. In addition, we are committed to negotiate concessions from all our constituents. In total, we’ve identified more than $8 billion in potential savings over the four-year period. Conservatively, only half of that is included in our projections.

How does Chrysler plan to build cars and trucks that consumers want to buy and that support the country’s energy security and environmental goals?

Our product plan features 24 major launches from 2009 through 2012. For the 2009 model year, 73 percent of our products offer improved fuel economy compared with the 2008 models. We’re also launching new smaller, fuel-efficient vehicles in conjunction with business partners.

ENVI is our breakthrough family of all-electric and range-extended electric vehicles. Our first electric-drive vehicle is planned for 2010, with three additional models by 2013. Chrysler’s product plan also includes the introduction of the Ram Hybrid in 2010.

Does Chrysler have a viable plan?

With federal assistance, we absolutely have a viable plan. I also believe that further partnership, restructuring and consolidation would make the U.S. auto industry more viable and competitive in the long run. Further opportunities for technology sharing would provide fuel-efficient cars and trucks more cost effectively, and with greater speed to market.

The three-company alliance that developed the dual-mode hybrid is a good example. As a country, we should not trade our dependence on foreign oil for a new dependence on foreign technologies.

When will Chrysler pay back this loan?

We will be well positioned to begin repayment of the federal loans in 2012. We recognize that this is a significant amount of public money. However, this is the least costly alternative considering the depth of the economic crisis and the options we face.

In this critical time for the company, the industry and for America, we continue to ask for your help. The e-mail sent yesterday details how you can contact your senators and representatives at GrabDemocracyByTheHorns.com and how you can send letters and videos for posting to GrabDemocracy@gmail.com. In addition, you can get on Chrysler’s blog at VoicesofChrysler.com and post your support for our company.

More than ever, this is the time to make your voice heard! I will be proud to share that voice with our members of Congress on Thursday and Friday. Please continue to visit The Scoop and Video Scoop all this week for on-going updates on our activities in Washington, D.C.

 

I've read this plan before. I'm not convenience this is going to solve the problem. If this is going to work, they need to cut the labor costs as well. They also need to be able to get out of some of their contracts with Daimler who is selling them inferior parts and technology (transmissions, interior parts, etc). They need to find a solution other than badge engineering. That has been tired so many times and majority of the time it fails. They need to learn to be their own supplier and make that part of their business model. If they are going to take a loan, it needs to be something other than temporarily keeping the company afloat. The other problem is even if these models from VW and Nissan are a success, the underlying issue is they are not in a profitable enough segment, and even if they were, most of that money is going elsewhere to VW and Nissan. It will probably not work. It was not the Mitsubishi models that took Chrysler out of failure back in the 80s, it was the home designed and built K-cars and minivans. I'm not sold on this plan.

 

I'm guessing it'd probably end up costing more to get out of those contracts than it would be to honor them - they're probably stuck with them no matter what they do.

I'm kinda thinking that Chrysler and Mitsubishi should kiss and make up and become like they were in the 80s. While I'm generally not a fan of badge-engineering either, I think Chrysler and Mitsubishi struck nearly the perfect balance - and I don't see why they couldn't be like that again - lord knows Mitsubishi could certainly use all the help it can get too these days. Ford and Mazda have been relying on each other for decades and it's seemed to work well for them, alot better than GM and Isuzu ever did.

I dunno, it could probably be wishful thinking though. Right now I'm just praying for a miracle - ANY miracle.

 

Well that would be one of the nice things about if they filed for bankruptcy, they could get out of that garbage.

I hate to burst your bubble but that is a lot of what is wrong with Chrysler right now. The Caliber/Compass/Patriot, Avenger/Sebring, & Journey IS on a Mitsubishi platform and it isn't working. Also the I4 engine that they are using was a joint venture between them, Chrysler, and Hyundai and the press & Chrysler fans alike seem to hate that engine. More so, the Galant is extremely uncompetitive and would not work to use as a replacement. The most competitive offering that they could get their hands on would actually be through Nissan, but unfortunately that isn't what they've been seeking from Nissan, they want the Versa, which is a pointless car to pursue when they already have the Caliber. They could make this work if they were able to distinguish it from the Nissan version by using their own powertrain, interior, and styling.

Even back in the day, the formula that Mitsubishi and Chrysler shared wasn't all that successful. Most of the models didn't sell very well. I think what made Ford & Mazda work together better was that it was more an even effort. The Diamond Star Motors models were pretty much all Mitsubishi technology, using their engines majority of the time, their platforms, their interior components, their electronics, their paint formulas, etc. The only thing Chrysler ever got to contribute was occasionally providing the transmission. With models like the Escort that were on the same platform as the Mazda 323, the two were so different you wouldn't know they shared anything. They sometimes shared engines and other times didn't. The Fusion hasn't been a complete success, but that as an example still had technology from both companies having engines from both of them. The Probe didn't work out all that well either with mild success. The other thing is Ford isn't the best at making car platforms. The Contour was a failure. The Taurus fell behind as it was neither a sporty platform nor comfortable.

I think that the best option would be to take the JR and stretch it or LH platform and shrink it. Loose the 41TE line and go full force with the 62TE with a GDI version of the 2.4L for a base level, 3.5L H.O. in an SXT trim with a 3.06 axle ratio, and 4.0L SEMA output version for the R/T. Use the LH car's for interior and exterior styling cues.

Resurrect the Neon platform and use the modern engine and powertrains (except no CVTs) and add GDI for fuel economy and power.

I would loose the Nitro, round off the Liberty, and loose the 3.7L for the 3.8L and offer the 4.0L in it.

I would loose the Compass and add the 3.5L to the Patriot & loose the CVTs.

I would base a new Dakota off of the Grand Cherokee platform as it is more the correct size.

I would loose the 545RFE in favor of the 68RFE in the trucks.

I would loose the 42RLE for a 62RLE made from the 62TE.

I would take some of the interior parts from the previous minivans and use them on the new ones (softer dash materials, loose that stupid awkward shifter, bring some of the softer seats back).

I would take some interior parts from the Pacifica and donate it to the Journey (seats again)

This is my vision for the company.

 

For sure they have to pay their suppliers . No part's , no car's or truck's. But the same problem that the auto companys are facing is the same problem housing is facing . The contractor that built my new house two years ago is busted now . Not because he didn't build a good house . Not because he didn't cut his profit to zero to try and sale the normally priced $300,000.00 house across from me or the one down the street that aren't sold. People can't get the money to buy. I tried to trade my low mileage 07 Ram Quad Cab in on a SRT8 with 300 mile's on it. The Dealer didn't want it . With gas over $4.00 a gal. And couldn't sell new one's even with a big discount. Gas dropped below $2.00 a gal. in less than a month. Another dealer that had just got a truck load of new 6 speed R/Ts . Said a truck like mine would sale and made a deal with me . The economy has to improve . People know they are going to have a job. And loan's available to buy new car's and truck's. I don't have the answers . But like many home builder's that are busted . They will never come back or will be a long time . Too many job's at stake with the auto company's to go under . A chain effect with supplier's . I feel buying my new R/T is good for me and Dodge to stay afloat. The Challenger is a hot item . But take's money to buy one at any price. I think money from the goverment to help buy . Will be a trikle up effect you might say and keep people working . And provide more job's .

 

It might help slightly in the short term, but history shows that this will probably not work in the long run. The danger of what is being done is it could cause a repeat of the hyperinflation that plagued Germany pre-WWII. If you put too much money into the economy, it becomes worthless if people do not perceive an agreed value in the currency. I think it is way too early to say we are out of the red. Although some factors that were hurting the economy have been temporarily resolved, other factors have not been resolved yet. The Big Three have got to cut down on their costs. Some of these labor practices are just ridiculous. The executives also need to understand the difference between a necessity and a luxury. Some of the suppliers need to look more diligently at becoming more efficient to lower expenses. Chrysler needs to get out of these deals that Daimler put them into as they are getting inferior products and paying a premium for. You cannot survive if you have to pay a higher price than your competition for an inferior product. It just doesn't work, nor does it make sense. These banking laws need to be changed and some of these practices from the Government need to be adjusted or disposed of. On top of this, some of these regulations that the Government puts on the industry need to be disposed of so then building a car isn't so darn expensive. The steps to fixing things is going to be long and difficult, but it needs to be done instead of patching a leaking ship with Duct Tape which is essentially what we are doing.

 

More bad news for Chrysler:

DETROIT (Jan. 8, 2009)— Even by the standards of battered automakers, Chrysler is in dire shape.

Its sales in December were down a stunning 53 percent, far worse than Ford or General Motors, and analysts say it probably won't survive the year as an independent company despite $4 billion in government loans and the possibility of more.

Things were so bad last year that a single Toyota model, the Camry/Solara midsize car, outsold the entire fleet of Chrysler LLC's passenger cars.

"Basically they're done," said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight in Troy, Mich. "There is no real possibility of turning this thing around as an independent company in my opinion."

U.S. sales of Chrysler, Dodge and Jeep brand vehicles fell 30 percent last year, the worst decline of any major automaker. It lost more market share than any of its peers, down to 11 percent. Analysts say most of Chrysler's products, especially its cars, don't look, feel or drive as well as the competition's.

Chrysler plans to introduce an electric car in 2010, but until then, there are few promising models to boost sales. Many analysts predict that by 2010, Chrysler will be acquired by another automaker or sold in pieces by its majority owner, New York private equity firm Cerberus Capital Management.

Chrysler's chief financial officer has said the company needs $7 billion every 45 days to pay parts suppliers, and analysts question whether the company's meager sales are generating enough cash to make those payments.

Analysts also say an acquisition by General Motors Corp. is still possible. The two companies discussed it late last year before GM backed away to focus on its own cash issues.

Nissan Motor Co. could be interested in buying Chrysler's truck business. Chrysler is already signed up to make pickup trucks for the Japanese company.

Jonathan Macey, a Yale University law professor who has been critical of U.S. automakers' management, said Chrysler's sales numbers are "further evidence of an unviable entity."

When automakers went to Washington late last year, their aim was to get enough money to become viable again. They wound up with only enough help from the Bush administration to get them through March, when Barack Obama will be in office and might provide more aid.

Macey said giving the carmakers any money is burning cash.

"I'm a big fan of not throwing good money after bad," he said. "The idea that you would enter into a financing relationship like this without any parameters is more evidence of the complete insanity of all this."

A Treasury Department spokeswoman noted that the agreement for the government's automaker loans required that the administration designate someone to keep analyzing the companies' finances and viability.

Macey, author of a book on corporate governance, said it's too late for Chrysler and GM to solve their problems, including high labor costs and work rules that hinder competitiveness.

To get the loans, GM and Chrysler had to agree to negotiate concessions from creditors and the United Auto Workers , but the specifics have yet to be worked out. The government can call in the loans March 31.

Chrysler CEO Robert Nardelli, in a presentation to the Senate Banking Committee last month, said the company could stay alive in the long term with reasonable concessions, a $7 billion bridge loan and $6 billion more out of the $25 billion Congress allocated to develop new fuel-efficient technology.

The Bush administration provided a $4 billion loan. Now, Chrysler is counting on an additional $3 billion in aid for its financing arm, Chrysler Financial.

Some lawmakers say automakers need time to wring out the concessions, and point out that the recession and nearly frozen credit markets are at least partly to blame for poor sales.

"You could make a car that could run on air or could fly and people wouldn't buy it," said Senate Banking Chairman Christopher Dodd, D-Conn. "I'm hoping that we may see some of that investor consumer confidence come back."

Chrysler, based in Auburn Hills, Mich., and Ford Motor Co., in nearby Dearborn, are also waiting on a decision from the Federal Deposit Insurance Corp. on whether they can become industrial loan corporations. That would mean the government could guarantee their debt, making it more appealing to investors, whose cash Chrysler could use to make more car loans at better terms.

Some lawmakers have noted that foreign automakers, including Japan's Toyota Motor Corp. and Germany's BMW AG, have the industrial banks, placing the domestic auto industry at a disadvantage.

Sen. Carl Levin, D-Mich., whose state is home to Chrysler, GM and Ford, said much will depend on how the Obama administration executes the terms of the auto bailout.

In his presentation to Congress, Nardelli used charts that showed Chrysler could post an operating profit of $400 million this year if Americans buy about 11 million light vehicles overall. But in this economy, analysts predict the figure will come in smaller.

Nardelli said Chrysler will improve fuel economy on 19 models this year, about three-quarters of its product line. Besides the electric car, it also has a deal with Nissan to produce a Chrysler subcompact in 2010.

Last month, Chrysler showed off prototypes of a new 300 sedan, Charger performance car and Jeep Grand Cherokee, as well as new, more luxurious interiors under development for nearly all of its products.

The problem, says Bragman, is that significant new products don't arrive for another year. And Chrysler may not make it until then.

"The good stuff doesn't come in time," Bragman said. "They don't have any help coming really for 2009."