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Chrysler CEO: Staff cuts aren't sign of sale soon

DETROIT -- Chrysler LLC's chief executive acknowledges that the company's plan for new vehicles has a hole in it for 2009, but he and other executives say the company will make it through the year and to 2010, when it will roll out important new models.

Speaking the reporters at the North American International Auto Show on Sunday, CEO Robert Nardelli said 2009 is a concern for the automaker, which saw its sales decline 30 percent in 2008 and 53 percent in December.

The hole in the plan, he said, was left by the company's prior owner, Daimler AG. Cerberus Capital Management LP, a New York private equity firm, bought an 80.1 percent stake in the Auburn Hills automaker in 2007.

Daimler AG Chief Executive Dieter Zetsche told reporters Sunday that when future product decisions were made about five years ago, "we tried to do everything to go for a very broad and rich product pipeline."

"We always were investing heavily into the future of Chrysler," Zetsche said.

Chrysler Vice Chairman Jim Press said dealers are reporting they are losing 25 percent of sales in showrooms due to a lack of available credit. He also said the December sales drop was due to an intentional cut in low-profit sales to rental car companies and other fleet buyers.

Nardelli said the company came out with the new Dodge Ram pickup, Journey crossover and Challenger sports car in 2008, all excellent products that should sell in a better economic environment.

The company, Press said, is confident that it hasn't gotten the potential sales out of its existing products.

"It validates what we can do with products," he said.

The company has spent $500 million improving its vehicles' interiors, and its quality has improved so much that its warranty costs are at their lowest level ever, the executives said.

But quality concerns still haunt Chrysler. The company's vehicles, including the Chrysler, Dodge and Jeep brands, saw their scores fall sharply from 2007 in Consumer Reports' annual vehicle reliability rankings last year. Nearly two-thirds of its model lineup were below average, and the Chrysler Sebring sedan was the worst-rated car.

"We've got a plan. We're viable. We're alive and well," Press said

Nardelli also said a 25 percent reduction in white-collar staff last year is not a sign that the company is preparing itself for sale.

The company, he said, has adequate cash flow and a solid plan to remain viable as an independent company.

Chrysler Chief Financial Officer Ron Kolka said the company is counting on another $3 billion in government loans to implement a four-year plan. Chrysler received $4 billion in government loans Jan. 2 after finishing the year with $2 billion to $2.5 billion in cash, Kolka said, right at the minimum amount needed to run the company.

The company currently has about $13 billion in debt. That figure includes $7 billion in first-lien debt, $2 billion in second-lien debt from Cerberus and Daimler, and the $4 billion from the government.

Nardelli said that even though Chrysler's plants have been idled in January, the automaker is hard at work restructuring and readying new products to stay viable. He conceded the company has cut capital spending but said he didn't think it would affect the long-term product development plan.

Nardelli also said there are no current merger discussions with General Motors Corp.

Chrysler and GM discussed a possible merger late last year before GM backed away to focus on its own cash issues.


Associated Press Writer Ken Thomas contributed to this report.
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