Chrysler Seeking $7 Billion in Loans

Joshua Duval
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Chrysler Crossfire

Chrysler revealed its plan to return to profitability in a press release yesterday, a day before the December 3 congressional hearings with the Detroit Three were set to begin. Central to the success of the restructuring plan is an immediate $7 billion loan from the government to fund operations, in addition to $8.5 million requested from the $25 billion loan already approved for the domestic automakers by the Department of Energy.

According to the release, 24 new major product releases are scheduled through 2012, including "a wide portfolio of hybrid electric vehicles." Chrysler is splitting these hybrid electric vehicles into four categories: Neighborhood Electric Vehicles (NEVs), City Electric Vehicles (CEVs), Range-extended Electric Vehicles (ReEVs) and Battery Electric Vehicles (BEVs). Chrysler cites no specific vehicles currently in development, but claims it will introduce its first full function electric-drive model in 2010, with others following in 2013. All of Chrysler's electric vehicle development plans hinge on using $6 billion of the $8.5 billion loan from the Department of Energy.

Chrysler cites several statistics from its current restructuring program, which began in 2007 after Daimler sold its controlling share in the ailing domestic automaker. Since 2007, Chrysler has discontinued four unprofitable models (PT Cruiser Convertible, Pacifica, Crossfire and Dodge Magnum), sold $700 million in unprofitable assets, eliminated 1.2 million units of capacity (cutting 12 production shifts) and cut 37,000 jobs in total-including 5,000 white collar jobs.

Chrysler expects it could start repaying its loans by 2012, with a cash balance at the end of that year totaling $12.5 billion. This assumes that the number of units sold in U.S. automotive market in 2009 is 12.1 million, 13.1 million in 2010, and 14.7 million in 2011 and 2012. Chrysler expects to take 10.4 percent of the market share in 2009, and 10.7 percent in 2010, 2011, and 2012.

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