Chrysler Asks Congress for $7 Billion to Survive

Dec. 3, 2008
Chrysler estimated that it would have operating profit of $400 million in 2009, if given loans.

Chrysler told lawmakers on Dec. 2 it needs a $7 billion loan by year-end to survive a perfect storm of a global credit crisis, falling demand for large vehicles and a global economic slump.

Chrysler, the smallest of the ailing Big Three Detroit automakers, said it will have an estimated $2.5 billion in cash on hand by December 31 after a "significant downturn" of the sector in the second half of the year. Two weeks ago, the privately owned automaker said it expected to burn between $5 -$7 billion in cash in 2009.

"Without an immediate working capital bridge, Chrysler's liquidity could fall below the level necessary to sustain the company through the first quarter of 2009," the company said.

Chrysler estimated that it would have operating profit of $400 million in 2009, which would substantially increase in 2010 to $2.6 billion . Those estimates took into account a $7 billion loan from the federal government, which would raise the company's cash coffers to $7.5 billion by the end of 2009, and to $9.8 billion a year later.

The company said it hopes to sell 1.19 million vehicles in the U.S. market in 2009 and 1.72 million worldwide.

Chrysler stressed that it had reduced operating costs and adjusted production schedules immediately after being spun off from Germany's Daimler in August 2007.
"Chrysler has already embarked upon, and is accelerating, a plan to overhaul its cost structure, streamline its operations, redirect its product mix to meet CAFE (Corporate Average Fuel Economy) standards and 'greener' product demands, rationalize its dealer network and partner with its supplier base and workforce to return the company to health," it said.

The downturn amid the global credit crunch in the past six months has been steep, the company said, noting it had approximately $9.4 billion in cash at the end of the first six months of the year. "Attempting to impose change by a bankruptcy filing will be less likely to garner long-term success than engaging each of the constituencies in negotiations to achieve consensus," the company said.

Earlier the automaker reported U.S. sales plummeted by 47% in November amid one of the sharpest recorded drops in demand for U.S. automobiles.Chrysler blamed the collapse on tight credit and poor consumer confidence due to the worsening economic conditions.

Year-to-date sales were down 28% to nearly 1.4 million vehicles.

Copyright Agence France-Presse, 2008

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