US automakers plight – Chrysler strategy

Chrysler auto manufacturer’s Vice Chairman has said US automakers are entering a new era in which they can be competitive with foreign brands, and it can be predicted the auto market will improve around 2010, when the company plans to offer seven new models.

Among other US manufacturers production cuts Chrysler has cut 1 million units of production in the past year to match the U.S. market, which has shrunk amid economic worries and higher gas prices. Auto sales are off up to 24 percent so far this year, while the overall market is down 11 percent.

It still will take time for car makers to fix their entire business models, but companies are making progress albeit gradually. They are spending a few billion dollars in developing plants and new vehicles each year and plan seven some new vehicles by 2010. The vehicles planned may include new Jeep Grand Cherokee and a subcompact car jointly produced with Nissan Motor Co. by Chrysler.

The credit crunch is the biggest issue, more than that of $4 per gallon gasoline. The automakers financial units last month were only able to renew 80% in lines of credit. The auto leasing business also saw big drops in the values of trucks and SUVs at the end of their leases.

But it can be predicted things will get better in 2010. Somewhere in 2010, in that area, there should be some improvement in the market.

Meanwhile, a proposed government loan package for auto industry would allow companies to work on future propulsion technologies such as new batteries to power electric cars.

Additional loans are not to bailout but can act as an acceleration of technology into the hands of consumers who couldn’t afford it.
It will have a much faster impact on environmental footprint and dependence on foreign oil. And it will allow US and even other countries to be economically much more competitive in the global fight for future technology.

Auto manufacturer Chrysler is working on a new midsize car that is completely innovative and will make the automaker competitive in the mainstream market.

Chrysler may dump one of its similar minivan models _ the Chrysler Town & Country and the Dodge Grand Caravan _ to cut parallel costs. One of them can be morphed into a model that attracts a different market such as younger buyers, while the other continues to appeal to the traditional minivan customer base.

The company met internal performance targets for the first six months of the year. Even though July was difficult, the company is within a very short distance of reaching those goals for the year.

Chrysler is performing ahead of its own expectations, with $11.7 billion in cash on hand at the end of June and earnings of $1.1 billion in the first half of the year before interest, taxes, depreciation and amortization. That means it is making money from its core business of making and selling cars, but before financial obligations like paying taxes, servicing debt, deducting the value of aging assets and recording expenses that are taken over time.

As a privately held company, Chrysler isn’t required to release financial information, and it didn’t provide its net income or other details.

Private-equity firm Cerberus Capital Partners LP bought 80.1 percent of Chrysler from Germany’s Daimler in August 2007 in a $7.4 billion transaction, ending a stormy nine-year partnership. Daimler AG, which owns the remaining 19.9 percent, indicated through its own financial results last month that Chrysler lost an estimated $510 million in the first quarter.