Chrysler’s financial plan is where the rubber hits the road for Sergio Marchionne’s turnaround. It starts with a break-even projection for 2010 on net revenue of about $42.5b, which is more than double the projections for 2009 of $17b net revenue. As the previous sales projection chart and product plan analysis indicates, a short-term turnaround of this magnitude seems highly unlikely. Unfortunately, because Chrysler plans to spend $23b on R&D and other capital expenditures (capex) between 2010 and 2013 without injecting any fresh capital, this sales turnaround absolutely has to happen in order for the rest of the plan to move forward. Though this plan is said to be stress-tested for a zero-SAAR growth by 2011 scenario, there’s no indication that these projections consider the possibility that Chrysler’s market share won’t grow. In this weak-market/strong share growth scenario, Chrysler believes that despite a $7b drop in revenue, $.4b operating profit could be rescued through cost interventions. But it’s not specified where those cost interventions would come, leading to the inevitable assumption that product development (the crucial factor in any market share growth) would be drastically reduced. It’s worth noting again that Fiat does not plan on contributing any new capital to Chrysler.

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This graph is representative of a major assumption underlying the entire Chrysler Group turnaround plan: namely, that 2009 is a trough year and that (despite the lack of new mass-market product until 2012) 2010 will see Chrysler not only holding the line on plummeting sales, but actually increasing them dramatically. Where does this optimsim come from? In part, a projected rise in SAAR. Otherwise, the only rationale for this assumption is that the financial plan requires this kind of short-term growth to succeed. [Apologies for the giant images… like Chrysler, we’re doing what we can with what we have]

Are you seeing a pattern here? Although Olivier Francois is in charge of the most damaged brand in the Chrysler Group (and yes, that’s saying a lot), at least he’s been here before with Fiat’s problem brand Lancia. So it’s no surprise that Francois’s branding video for Chrysler is remarkably similar to a Lancia ad: it projects a kind of sophisticated sexyness, with lots of celebrities, architecture and passionate-sounding classical music. The only real difference is the copy that goes on and on about the good old days when Americans arrived in style. And unlike Ralph Gilles’ Dodge presentation, Francois’ vision of Chrysler’s brand actually works. But vision is only a tiny part of the battle for the Chrysler brand, and the rest is execution. On that front, things aren’t looking quite so good

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Surprise! There’s some good news coming out of Chrysler’s five-year plan presentation. Okay, the really surprising part first: Sergio Marchionne has revealed that Chrysler has $5.7B in cash, up from $4B when it exited bankruptcy in June. The somewhat less surprising part: Jeep is bringing a stop-start-equipped, diesel-powered Wrangler. How niche-tastic is that?

The problem with branding exercises like Chrysler’s decision to split Ram from Dodge, is that they tend towards abstraction. Luckily, the back-from-the-dead Nitro is a good case study for how this split will play out. You might think that based on its aggressive styling and upright stance that it would make sense as a Ram-branded vehicle. But you’d be wrong. It will actually be positioned as a youth-market vehicle, within the Dodge brand. Hit the jump for an official concept of the Nitro’s possible repackaging.
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Ram is brand. According to the new Ram CEO Frank Diaz, the Ram was “overshadowing” Dodge’s non-truck products… never mind that Dodge’s truck-cued car styling made that phenomenon unavoidable. There’s not much to say about the new Ram brand, except that it will include pickups, heavy-duty trucks and commercial vehicles (read: no SUVs), marketed with the usual John Wayne, hard-working, never quit attitude. Think of any truck ad you’ve ever seen, and you’ll understand everything there is to know about Ram’s branding.
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This is the interior of the Dodge Caliber that’s currently on sale in the US market. Not particularly attractive, is it?
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Dodge brand boss Ralph Gilles has made his presentation on the future of the Ram-head brand. First up: it’s not the Ram-head brand anymore. Beginning next year, Dodge will be represented by the word “Dodge” in black with red accents. According to Gilles, the de-Ramification of Dodge was due to the fact that trucks were dominating brand perceptions. “Mojo” seems to be Dodge’s new buzzword du jour, along with the tagline cool × fun=Dodge. In addition, Dodge will be getting away from the “base, mid, high” trim level ladder to a “lifestyle-based” trim level system. In the future, Dodges will be available in the following trims: “sweet and simple,” “fun and practical,” “uptown luxury,” “thrill seeker,” and “cool extroverted.”

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At the risk of sounding older and crankier than I feel, it can be hell trying to find a car with a unique identity anymore. As our four-wheeled friends have become more refined, they’ve also become more homogeneous. Especially when sampling mass-market sedans, the distinctions are often subtle to the point of solipsism, and a […]

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GM was given its last $30B of taxpayer money as it entered bankruptcy in early June of this year. By the time GM exited Chapter 11 protection on July 10, there was only $16.4B left in its bailout escrow account. According to an 8-K form filed today with the SEC, GM now has only $13.6B remaining in that account, less than one-third of GM’s $50B total bailout (not counting assistance to GMAC). GM’s rescue of its major supplier, Delphi, consumed $2.8 billion from its escrow account. According to the form:

Approximately $1.7 billion was utilized to acquire a membership interest in the new Delphi entity and approximately $1.1 billion was expended in the acquisition of Delphi’s global steering business, certain domestic facilities and other related payments

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Next up in today’s series “Selections from the GAO report on the auto bailout which closely resemble TTAC editorials of a year ago” we have the report’s discussion of a possible exit strategy. Or rather, the report’s disclosure that there’s so not an exit strategy it hurts. From the report’s conclusions:

While Treasury has stated that it plans to review all possible options for divesting itself of its ownership interest in Chrysler and GM, Treasury officials have focused primarily on an IPO for GM, both in our discussions with them and in their public statements. However, given the complexity of the economy and the financial markets, considering all of the options in the context of the companies’ financial progress and current financial conditions will be important for Treasury. The past year has indicated the extent to which a company’s financial situation can change within a period as short as a few months. Given the fluidity of conditions and the number of factors that will need to be considered when determining how and when to divest, it is important that Treasury identify the criteria it will use to evaluate the optimal method and timing for selling the government’s ownership stake. Determining when and how to divest the government’s ownership stake will be one of the most important decisions Treasury will have to make regarding the federal assistance provided to the domestic automakers, as this decision will affect the overall return on investment that taxpayers will realize from aiding these companies

Notice the use of future tense to describe these decisions? Not only is there no plan, there’s also no timeline and precious few staff to implement it. More importantly, there’s not much of a chance of a divestiture plan succeeding under any circumstances. Oh, and plenty of potential for unintended consequences. Hurray!

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More new information from today’s GAO post:

Moreover, whether enough time has passed for the impact of the structural changes to be seen is unlikely, especially given that the automakers have not completed restructuring, the economy is still recovering, and new vehicle purchases remain at low levels. For instance, although the federal Car Allowance Rebate System program resulted in a sales spike in August,16 September sales returned to historically low levels. These and other challenges are likely to delay the companies’ recovery beyond what it would be under more favorable economic circumstances.

As TTAC noted last Friday, “finding a real, sustainable bottom of the market from which to grow is not made easier by erratic bursts of stimulus frenzy.”

From the just-released GAO report (PDF) on the auto bailout:

Chrysler’s shareholders, including Treasury, have agreed that  Fiat’s equity stake in Chrysler will increase if Chrysler meets certain benchmarks, such as producing a vehicle that achieves a fuel economy of 40 miles per gallon or producing a new engine in the United States. Treasury officials stated that they established such up-front conditions not solely to protect Treasury’s financial interests as a creditor and equity owner but also to reflect the Administration’s views on responsibly utilizing taxpayer resources for these companies. While Treasury has stated it does not plan to manage its stake in Chrysler or GM to achieve social policy goals, these requirements and covenants to which the companies are subject indicate the challenges Treasury has faced and likely will face in balancing its roles.

Well, it turns out that October sales won’t be released until tomorrow, but luckily we have a hot-and-sweaty-fresh report by the Government Accountability Office (PDF) to keep things interesting. And we’re learning all kinds of new things about the auto bailout. To wit:

Chrysler must either manufacture 40 percent of its U.S. sales volume in the United States or its U.S. production volume must be at least 90 percent of its 2008 U.S. production volume. GM agrees to use its commercially reasonable best efforts to ensure that the volume of manufacturing conducted in the United States is consistent with at least 90 percent of the level envisioned in GM’s business plan.

Who knew? Not us! And as surprising as it is to find that GM and Chrysler face federally-mandated production quotas, we’re almost more surprised that the most the UAW (or whomever) could negotiate was 40 percent of Chrysler’s US sales volume. Especially since the UAW owns a majority stake in Chrysler. But wait, there’s more!

As we wait for October sales to come rolling in, I’d like to take advantage of the calm before the storm to update our faithful readers on the wild week to come. Tomorrow I’ll be flying to Detroit to cover Chrysler’s five-year product and business plan. Luckily though, the trip will not be limited to a six hour presentation on “Fiat’s fuel-efficient engine technology” and sundry Pentastarred optimism. We’re also getting the opportunity to interview a certain Mr Ian Callum, chief designer for Jaguar. Do you have any burning questions about the new XJ, the XF or Jaguar’s new styling direction? Let us know and we’ll be sure to ask for you. We will also be covering the roast of Bob Lutz, so be sure to tune in for a report on the best jokes of the evening (although really, nobody expects them to improve on Farago’s effort). Though we’re thrilled to be able to offer a week of fresh reporting, interviews and jokes about GM’s Vice-Chairman, making it happen might require a slightly slower pace of content this week. Luckily Robert Farago, Bertel Schmitt, Paul Niedermeyer, Sajeev Mehta and other TTAC faves will be stepping up to keep the flow of news, commentary and analysis steady. So get ready for a big week, and take a moment to tell us what you most want to hear from Mr Callum, and the New New Chrysler. And thanks, as always, for your tips, comments and support.