Tuesday, May 15, 2007

Chrysler CEO Finds Assurance (Wall Street Journal)


DETROIT -- Chrysler Chief Executive Tom LaSorda said Tuesday he is looking forward to running the U.S. auto maker as a privately held enterprise that doesn't have to disclose quarterly financial reports or chase short-term targets.

Mr. LaSorda, speaking to reporters at Chrysler headquarters one day after DaimlerChrysler AG announced a deal to sell Chrysler to Cerberus Capital Management LP, said he is convinced Cerberus sees Chrysler as a "long-term" investment. He said the U.S. auto maker needs a patient approach in order to strike sustainable levels of profitability.

The Chrysler executive said, "Daimler looked long and hard for the right partner [and] we're confident that this transaction will create a Chrysler that is financially stronger."

Chrysler posted a $2 billion loss in the first quarter due to heavy restructuring charges. The company bled $1.5 billion in 2006 and is looking to cut 13,000 jobs and return to black ink by 2008.

"We're on our way to a standalone company, and guess what? I won't have to divulge quarterly corporate earnings," Mr. LaSorda said "We'll run [the business] the way we want to run it."

The executive, who has been at the Chrysler helm since September 2005, said he expects Cerberus to be a part of Chrysler five years from now, even though there is a perception that private-equity players are looking for a quick buck.

Focus On Labor Costs

Still, Mr. LaSorda preached a sense of urgency when it comes to turning around money-losing Chrysler. "They have deep pockets, but we've go to deliver. We've got to deliver. It's not an endless bank.

One of the first areas Chrysler plans to attack is what Mr. LaSorda refers to as a labor-cost "gap" that it carries -- not only compared to foreign rivals, but also against General Motors Corp. and Ford Motor Co. "We need to close the gap beyond the other two [domestic] companies," he said.

In 2005, the United Auto Workers granted health-care concessions to GM and Ford, but refused to extend those cost cuts to Chrysler.

Mr. LaSorda said Chrysler officials who are already in place will negotiate the next master labor contract with the UAW this summer. There has been speculation that Cerberus will take a heavy hand in labor negotiations, but Mr. LaSorda insisted "all negotiations will go through us."

He declined to discuss specific negotiating points related to labor talks, other than to agree that the company needs to cut its long-term health-care cost obligations.

Cerberus Calms Fears

Cerberus, which is a leading U.S. private-equity firm, has in recent days made attempts to relieve fear that it is going to chop up Chrysler and sell it for a quick profit. The normally private Cerberus founder Stephen Feinberg met with Chrysler executives Monday night and made remarks that Mr. LaSorda said "calmed people down."

Mr. Feinberg and other Cerberus officials met Tuesday with labor unions in order to assure them that no additional job cuts will result directly from Chrysler's new ownership structure.

DaimlerChrysler's supervisory board will meet Wednesday to discuss the Cerberus transaction and it is expected to affirm the deal. Winning labor support was essential for DaimlerChrysler and Cerberus given that 10 of the 20 DaimlerChrysler supervisory board members are from unions.

While there are several governance issues still to be decided on, Mr. LaSorda insisted Chrysler will remain close with Daimler after the two companies separate in the third quarter. He said the auto makers will share vehicle technology and purchasing activities, for instance.

One thing that is certain, at least according to Mr. LaSorda, is that longtime DaimlerChrysler executive Wolfgang Bernhard will not be on his executive team, even though Mr. Bernhard currently works as a Cerberus consultant specifically for the purposes of shaping the Chrysler investment.

Mr. LaSorda also said he will be meeting with Mr. Bernhard on Tuesday, but he insisted Mr. Bernhard -- a former chief operating officer at Chrysler -- "will not be on the executive team." Mr. LaSorda added that Mr. Bernhard "is a great guy," and that they are "close friends."

In addition, Mr. LaSorda said the company will not break up its three brands -- Chrysler, Dodge and Jeep -- under any circumstances. He said the company will not use Cerberus's money to buy out dealers, but said the company will press forward with a plan to reduce its U.S. dealer count.

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