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Chrysler says sales are OK despite bankruptcy

Chrysler LLC’s Chapter 11 filing so far doesn’t appear to be affecting May sales, a top executive said Wednesday.
/ Source: The Associated Press

Chrysler LLC’s Chapter 11 filing so far doesn’t appear to be affecting May sales, a top executive said Wednesday.

Early sales data shows Chrysler is on pace to sell 60,000 to 70,000 vehicles to individuals this month, better than expected considering its April 30 bankruptcy filing, Executive Vice President for Sales and Marketing Steven Landry said in an interview Wednesday.

Also Wednesday, Chrysler announced that former Borden Chemical and Duracell Chairman C. Robert Kidder will become chairman of the new company once it acquires old Chrysler’s assets and joins with Fiat.

Kidder will succeed Robert Nardelli, who will step down when Chrysler emerges from Chapter 11 bankruptcy protection.

Chrysler’s retail sales — cars and trucks sold to individuals — totaled about 61,600 in April, and about 77,000 including fleet buyers such as rental car companies.

Landry said data provided by J.D. Power and Associates shows retail sales for the full U.S. market down 35 percent so far in May, with Chrysler’s sales down around 40 percent.

“It’s respectable compared to where we had been,” Landry said. Considering the bankruptcy “and the fact that we’re only five or so percentage points off of the industry, we can’t complain,” he said.

Chrysler and General Motors Corp. have received a combined $21.2 billion in government loans to stay afloat. When seeking government aid last year, both companies resisted going into bankruptcy for fear that it would chase away customers.

Landry also said he’s confident Chrysler can find homes for the remaining 40,000 cars and trucks sitting on the lots of 789 dealers across the country that the company wants to shed.

Chrysler told the dealers last week that it plans to terminate their franchise agreements in an effort to shrink its dealer network so remaining dealers can be more profitable and invest more in their businesses.

Chrysler is awaiting bankruptcy court approval of the dealer cuts, but plans to end the agreements around June 9. The company then will stop paying the dealers incentives such as rebates and low-interest loans, and it will stop reimbursing them for warranty repairs.

Industry analysts say the shunned dealers need to sell the cars and trucks by June 9 so they can still use incentives. Without the incentives, the dealers would have to sell at a higher price than those dealers Chrysler wants to keep. Analysts have said the move could put bargains on the market.

But Landry said the company has plans to transfer the cars and trucks to remaining dealers and has arranged for its new financial arm, GMAC Financial Services, to make loans to dealers taking on the inventory.

“Our plan is to move all 40,000 pieces,” he said.

The 789 dealers had 44,000 vehicles as of last week, but 4,000 have been sold, Landry said. Initially Chrysler’s transfer program did not include about 4,000 2008 models, but it was expanded to include them, Landry said.

All of Chrysler’s factories are currently shut down, so many of the remaining dealers have a need to replenish their inventory, Landry said.

Many of the dealers picked for closure have said they don’t trust the company to take the inventory and they’re worried about selling it.

Landry says Chrysler has about 300,000 vehicles in its inventory, and that could drop below 250,000 in June. Chrysler has not announced when it will reopen the factories but had planned to keep them closed throughout a quick bankruptcy reorganization.

The company did hint at when the factories might reopen when it announced plans to lay off 992 workers at its Belvidere, Ill., assembly plant and make it a one-shift operation. The layoffs are to begin July 27, a potential restart date for the plant, which has 2,600 workers and makes the Dodge Caliber and Jeep Patriot and Compass.

Also Wednesday, a bankruptcy judge ruled that Chrysler can use $4.96 billion in government loans to keep operating and create a bridge to the sale of its most valuable assets to Italy’s Fiat Group SpA.

Judge Arthur Gonzalez also ruled Wednesday that the Auburn, Mich.-based automaker can pay its dealers and essential suppliers for pre-bankruptcy obligations.

He denied a motion from a group of Indiana state pension funds to delay the proposed sale of most of Chrysler’s assets, saying that the group’s plans to challenge the legality of the sale in another court wasn’t enough of a reason to push back the proceedings.

Kidder, the company’s new chairman, has more than 40 years of experience and and currently serves on the boards of Morgan Stanley, Schering-Plough Corp. and Microvi Biotech Inc., according to a statement issued by Chrysler LLC. He now serves as chairman and CEO of investment firm 3Stone Advisors LLC.

In the past he has been chairman and CEO of both Duracell International Inc. and Borden Chemical Inc., as well as a director of Electronic Data Systems Corp. and General Signal Corp.

“I am pleased to join Chrysler at a time when Chrysler is poised to launch an exciting new era,” Kidder said in the statement. “I am confident that Chrysler will emerge from Chapter 11 a lean and powerful competitor.”

Nardelli, appointed CEO in August of 2007, announced on April 30 that he would step down after the bankruptcy proceedings. Fiat CEO Sergio Marchionne will replace Nardelli.