Chrysler Sees Sales Growth

Posted 08 January 2007 @ 08:43 am EET     Print     Reprint     E-Mail     Comments

DETROIT (Reuters) - Chrysler Group expects to reverse its recent sales slump in 2007 as it looks to clinch a cost-savings deal on heath-care with its major union and readies a restructuring plan to be announced in February, the automaker's chief executive said on Sunday.

Tom LaSorda, who heads DaimlerChrysler AG's Chrysler Group, told reporters on the sidelines of the Detroit auto show, that he expected to sell more than the roughly 2.7 million vehicles Chrysler sold in 2006 this year.

DaimlerChrysler's U.S. sales dropped almost 6 percent in 2006 and inventory built up as the company failed to react quickly enough to the consumer shift away from sport utility vehicles and pickup trucks.

LaSorda described 2006 as "not a stellar year," but said Chrysler would mount by reversing the downturn in sales and cutting its operating costs. "The intention is profitable growth. We definitely want to be above 2.7 (million units). But we'll do it in a profitable way. If somebody said, I could make a lot more money at 2.65 (million), I would consider it," he said.

Chrysler, which lost $1.5 billion in the third quarter, is readying a turnaround plan expected to include capacity reductions and job cuts that LaSorda said would be ready by February. Chrysler has cut some 44,000 jobs since 2000, and LaSorda indicated that the upcoming restructuring could not cut as deeply, he said. "If you took that kind of number out, you wouldn't have an enterprise," he said.

Expectations have been running high among analysts that Chrysler would look to close an assembly plant focused on SUVs as part of its restructuring. LaSorda declined to comment in detail on what the cost-cutting plan would involve, but said it would involve an update on the company's half-year old effort to cut $1,000 from the cost of the average car it produces.

LaSorda also said Chrysler was back in negotiations with the United Auto Workers on a deal that would mirror a similar set of concessions the union granted its larger competitors General Motors Corp. and Ford Motor Co.

The UAW rejected granting a similar deal for Chrysler in September on the basis of its better performance. In the wake of Chrysler's third-quarter loss, the talks were revived. Chrysler has said that its health care costs add about $1,400 to the cost of the average vehicle it sells.

"We have a competitive disadvantage with Ford and GM," LaSorda said on Sunday. "We'll work together (with the UAW) to get that gap closed." LaSorda said he was hopeful that a health care deal could be done with the UAW before both sides begin a new round of contract talks, an effort that will gather momentum this summer ahead of the September expiration of the current contract.

LaSorda said he expected the closely watched round of contract talks with the UAW and the Detroit-based automakers to follow the past practice of pattern bargaining, under which similar terms on wages, benefits and other issues applies to all of the traditional Big Three.

"Otherwise, in a hyper-competitive industry, how does the union decide at what point an automaker gets a better deal" LaSorda said. LaSorda also said he wanted to ensure that the automaker's 2007 marketing was aimed more at differentiating its brands: Chrysler, Dodge and Jeep.

LaSorda took over direct responsibility for the automaker's sales and marketing efforts last month when Joe Eberhardt, the executive who had the post, stepped down. Chrysler's marketing efforts in 2006 including a high-profile campaign starring DaimlerChrysler Chairman Dieter Zetsche proved unpopular with its own dealers, who complained that the advertising had failed to generate sales.

LaSorda also acknowledged that his leadership had come under fire since Chrysler plunged into a loss in 2006, but said he intended to stay on. "When your CEO, the buck stops here," he said. "People want to talk about it, but I have to look forward and I have my head held high and I want to lead the troops to a better future."

Chrysler had 126,000 before a restructuring effort that began in 2000 and now employs about 82,500, a spokesman said.