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Chrysler: What Happens Under Cerberus?


The new Chrysler is cobbling together a strategy that will depend on protecting its own turf, rapid expansion abroad and continued access to the automotive technology produced inEurope.

Tom LaSorda, chief executive officer of the Chrysler Group who will take over as CEO of Chrysler LLC once DaimlerChrysler AG complete the sale of his company to Cerberus Capital Management, told reporters Tuesday that the new owners expect the company to execute the turnaround plan outlined in February.

“The Chrysler, Dodge and Jeep brands will not be broken up,'' LaSorda said. “This should be great news for our dealers,” he emphasized.

The transformation plan outlined in February calls for the elimination of 13,000 hourly and salaried jobs over the next two to three years and the closure of an assembly plant in Wilmington, Del. The reduction in the workforce is picking up steam as more employees than expected have signed up for buyout and retirement packages.

LaSorda added that Chrysler’s strategy will be to look for new partners throughout Asia in an effort to expand its international sales. Chrysler also will explore ways to expand its budding partnership with Chery, the Chinese company that will supply subcompact cars for Chrysler brands in North America and Europe.


“I also look forward to pursuing other partnerships that will be in the best interest of Chrysler. We aren't big in Asia and we have no presence in India and we would like to grow in those two areas.''

The transformation plan also calls for a concerted effort to bolster the company’s overseas sales. The Chrysler Group sold about 200,000 units overseas in 2006 and is anticipating a double-digit increase again this year, he said.

Chrysler also will maintain its close working relationship with Daimler AG, which will continue to own 19.9 percent of the new company, he said. Chrysler will continue to have access to Daimler's technological resources, LaSorda said. For instance, the companies will continue to develop a new line of clean-burning diesel engines.

Bernhard’s shadow


LaSorda also will be able to utilize the guidance of Wolfgang Bernhard, its former chief operating officer who recently joined Cerberus as a senior executive.

Under private ownership, LaSorda said he can now concentrate on making longer-term decisions that he said were sometimes sacrificed to meet the financial demands on a public company.

“It's a new chapter,'' he added. “Cerberus is a great fit and I feel confident they will make Chrysler financially stronger.''

"We're going to rebound and come back,'' he said. “We're on our way as a stand-alone company.''

The Chrysler Group posted a $1.98 billion operating loss in the first quarter as it slashed production to reduce inventories and as prices for its finished vehicles declined. The loss was inflated, however, by a $1.22 billion restructuring charge to cover the ongoing cost of changes inside the company, DaimlerChrysler AG reported Tuesday.

LaSorda said while Cerberus had agreed to allow Chrysler to execute the transformation plan, which anticipates a $2.1 billion loss in 2007, it also will expect the company to make serious progress towards its objectives of making a profit in 2009.

“We’ve got to make this thing work,” he said. “We’re still up against the same competition,” he said.

LaSorda, however, also said the company will still need healthcare concessions from the United Auto Workers. “I’ve been very consistent about that for the past year,” he said.

Before the press conference, Cerberus founder Stephen Feinberg and Bernhard held a series of meetings with union officials. Buzz Hargrove, president of the Canadian Auto Workers union, said he walked out of the meeting with a favorable impression of Feinberg. “He certainly gave us a comfort level he’s in here for the long term,” Hargrove told The Oakland Press.

“He’s very impressive. He understands the problems of the industry. He is the only CEO, I’ve met, so far, that understands the crisis we face because of these imports and closed markets in Asia. He agreed something has to be done. He also gave us a letter, stating there will be no layoffs because of the ownership change,” Hargrove said.

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