2nd UPDATE: Chrysler To Invest $1.8 Billion To Retool For Small SUV
Wednesday August 13rd, 2008 / 16h01
(Adds confirmation the new vehicle will retain the Cherokee name in the third paragraph and information on Cherokee's fuel-economy in the sixth paragraph.) By Jeff Bennett Of DOW JONES NEWSWIRES TRAVERSE CITY, MICH. -(Dow Jones)- Chrysler LLC, seeking to revamp its product portfolio amid a U.S. consumer shift, will build a new car-based sport-utility vehicles aimed at responding to consumer shifts away from larger, less fuel-efficient vehicles. The auto maker will invest $1.8 billion to retool and expand its Detroit assembly plant that currently makes the truck-based Jeep Grand Cherokee, Chrysler President Tom LaSorda said Wednesday on the sidelines of the Center for Automotive Research Management Conference. The investment will keep about 400 jobs in Michigan. LaSorda said the new vehicles will retain the Grand Cherokee name and will hit dealer showrooms in 2010. This is the first major product move Chrysler has made as industry sales of pickup trucks and SUVs continue to fall as gasoline prices remain near $4 a gallon. Ford Motor Co. (F) has already announced plans to build six new small cars in North America based on its European models. Those vehicles are scheduled to roll into showrooms starting in 2010. General Motors Corp. (GM) is also boosting its car output and will close some North America pickup truck and SUV plants. "The segment the Grand Cherokee competes in has seen some of the most decline (because of the) high gas prices," said Global Insight analyst Rebecca Lindland. "This new product will allow the consumer to keep all attributes of the Jeep Grand Cherokee. They won't be able to navigate the Rubicon trail but they will get to the grocery store on less fuel." The Grand Cherokee averages 15 miles per gallon in the city and 19 miles per gallon on highways, according to specifications on the Jeep Web site. LaSorda also said the auto maker has identified more than $1 billion in assets it plans to sell to both cut costs and generate cash. About half of those assets, which includes unused real estate, have been sold. "Chrysler is meeting or exceeding its financial targets," LaSorda said. "Operationally we've made tough but necessary decisions to align our capacity and work force with today's realities." This is the second time this month that the auto maker, now privately owned by Cerberus Capital Management LP, has shared financial data as it tries to restore banker faith in the company and halt continued debt rating downgrades. Chrysler said earlier this month that it posted $1.1 billion in pre-tax earnings for the first six months of the year and has $11.7 billion in cash. The news didn't stop Moody's Investors Service and Standard & Poor's Ratings Services from cutting Chrysler's credit ratings further into junk-bond territory. "It has a lot to do with the media," LaSorda said. "They like to write about us and other auto makers who post $15.5 billion or an $8.7 billion loss just to get a few headlines." Ford posted a second-quarter $8.7 billion loss while GM had a $15.5 billion loss. LaSorda's comments also underscore that Cerberus is leaving nothing off the table when it comes to trimming costs as Chrysler struggles through a downturn in the U.S. market that had dragged its new car sales down 29% in July compared with the same period a year earlier. The Auburn Hills, Mich., auto maker relies on the North America market for more than 90% of its sales. Frank Ewasyshyn, Chrysler's manufacturing chief, said the auto maker is now in talks with the United Auto Workers union about putting five of its U.S. plants on four-day work weeks to cut costs. Chrysler also stopped offering leases through its financial arm on Aug. 1 because of falling pickup truck and sport-utility vehicle residual values. Chrysler has also cut 29,000 jobs during the past 18 months and is in the process of shaving 1,000 salaried workers. -By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=0%2FrQL3N4W%2FiSVov66NFA3w%3D%3D. You can use this link on the day this article is published and the following day.
