Chrysler to think globally
After the DaimlerChrysler breakup becomes official, a reborn Chrysler will look east for salvation.
Chrysler Group Chief Executive Tom LaSorda said the turnaround plan for the automaker -- which reported Tuesday that it lost almost $2 billion in the second quarter -- was international with an Asian twist.
“If you look around the world, we’re not big in Asia yet. We’re not big in Southeast Asia and we have virtually no presence yet in India or Russia,” LaSorda said at a news conference the day after Cerberus Capital Management announced it would invest $7.4 billion to take control of Chrysler.
“Obviously, these will be markets that we will need to pursue.”
LaSorda said he remained committed to keeping the company’s iconic Chrysler, Dodge and Jeep brands together and that he intended to look for partnership arrangements with global automakers to help the company grow overseas.
Burnham Securities analyst David Healy said it sounded like a good plan, “at least on paper.”
“But whether, with such a late start, Chrysler can get very big overseas remains to be seen,” he said. “They tried before, in the mid-1990s, but the models they had then just didn’t sell well.”
LaSorda took pains to dismiss “all the rumors” about Cerberus, “that a venture capitalist company was going to come in and tear things apart -- absolutely not.”
Instead, LaSorda described the deal, the first in which a private equity firm will take control of a U.S. automaker, as “kind of a dream come true” and a “win-win for us,” enabling the company to tap into Cerberus’ “great financial and operational expertise” while continuing to benefit from Daimler’s technological expertise, especially in gasoline-electric hybrid vehicle and diesel development.
With private owners, he said, Chrysler would no longer have to sacrifice long-term goals to meet short-term financial pressures.
“We’ll be able to run it the way we want to run it and not worry about quarterly numbers or what someone might think on the outside,” he said. “I’m pretty excited about this and time will tell and the story will unfold.”
The idea of expanding by finding markets overseas isn’t an unusual one these days. General Motors Corp. last year sold more than half of its cars and trucks outside of the U.S., and Ford Motor Co. executives have said that they are looking to Europe, Asia and Latin America for the company’s future growth.
All three U.S. automakers have been losing market share at home to foreign brands that have been enjoying their own overseas expansions by selling cars and trucks here.
Chrysler lost its longtime No. 3 status in U.S. sales to Japan’s Toyota Motor Corp. last year, and Toyota is expected to vault over Ford and into second place behind GM in the U.S. market this year.
DaimlerChrysler, which will continue to have a 19.9% stake in Chrysler and also sells many of its Mercedes-Benz vehicles in foreign markets -- including the U.S. -- said Tuesday that its first-quarter earnings more than doubled to 1.97 billion euros ($2.7 billion) despite growing losses at U.S.-based Chrysler Group.
Chrysler Group lost $1.98 billion before taxes and interest, in contrast with a profit of $857 million a year earlier. The loss included $1.2 billion in charges related to its restructuring plan, which calls for eliminating 13,000 hourly and salaried jobs and closing several plants.
LaSorda said Tuesday that Cerberus had assured him there were no plans “at this time” for additional job cuts.
Globally, DaimlerChrysler said, sales fell 5.3% in the first quarter to 35.4 billion euros before interest and taxes ($47.96 billion) from 37.4 billion euros a year earlier. The Stuttgart, Germany-based company is reporting its results using new international finance reporting standards and did not provide a breakdown of Chrysler Group’s net results.
The Mercedes car group earned 792 million euros ($1.07 billion) before interest and taxes in the quarter; that compares with a 735-million-euro loss a year earlier.
DaimlerChrysler said it expected full-year earnings to approach 7 billion euros, excluding the effects of its share of Chrysler Group restructuring charges.
The sale of a majority interest in Chrysler Group is subject to the approval of DaimlerChrysler’s supervisory board, which is scheduled to meet today.
The companies are expected to resume using their individual names -- Daimler and Chrysler Corp. -- after the sale closes.
Chrysler Group’s problems include the costs of previously negotiated healthcare and retirement plans that add more than $1,000 in cost to each of its vehicles, compared with those produced by Asian and European competitors.
Cerberus will shoulder more than $18 billion in pension and healthcare liabilities for Chrysler Group that Daimler would remove from its books as part of the deal.
john.odell@latimes.com
