While a lot of the legwork was done for them by Lotus, we still have to give Chrysler a little credit for getting an electric vehicle prototype on the road so quickly. When we first saw the Dodge EV a couple of months ago, it looked like it was ready to roll, with a Tesla-like blend of Lotus platform and electric powerpack. Soon after we heard that the car was likely to make it to production, with a delivery date that would challenge the Chevrolet Volt. While it had appeared that Chrysler was way behind its domestic rivals in developing an electric car, we know that through their GEM subsidiary, Chrysler has actually accumulated a lot of EV expertise and become the nation’s leading electric car seller in the process.

The Dodge EV is essentially a Lotus Europa, but uses lithium batteries and a 268 hp electric motor in place of the standard 2.0L four cylinder engine and transmission. It promises a range of 150-200 miles and a 0-60 time of under 5 seconds. It’s a full-blown, plug-in EV, just like the Tesla Roadster, and should require a 4-hour recharge from a 220V outlet or 8 hours on a 110. To help launch Chrysler’s new ENVI electric car division, the Dodge EV has been traveling the show circuit, but today we spotted it at one of our favorite local cruise-ins.

Chrysler LLC’s three advanced production-intent electric vehicle prototype vehicles are headed to California, where they will make their worldwide auto show debut at the 2008 Los Angeles Auto Show.

The vehicles — the Dodge EV, Jeep(R) EV and Chrysler EV — will be on display during press days (Nov. 19-20), and throughout the show’s public days (Nov. 21-30). Frank Klegon, Executive Vice President - Product Development, Chrysler LLC, will attend the show tomorrow to discuss the vehicles with journalists.

Chrysler recently announced that at least one of these models will be produced in 2010 for consumers in North American markets, and European markets after 2010. Additionally, the Company will have close to one hundred electric vehicles on the road in government, business and development fleets in 2009.

Chrysler is well into the development of advanced production-intent electric vehicles, and will apply its electric-drive technology to its front-wheel-drive, rear-wheel-drive and body-on-frame four-wheel-drive platforms in the next several years.

“We have a social responsibility to our consumers to deliver environmentally friendly, fuel efficient, advanced electric vehicles, and our intention is to meet that responsibility quickly and more broadly than any other automobile manufacturer,” said Bob Nardelli, Chairman and CEO - Chrysler LLC. “The introduction of the Chrysler, Jeep and Dodge electric vehicles provides a glimpse of the very near future, and demonstrates that we are serious and well along in the development of bringing electric vehicles to market.”

Electric Vehicle Technology

Chrysler’s Electric Vehicles utilize just three primary components. These include an electric motor to drive the wheels, an advanced lithium-ion battery system to power the electric-drive motor, and a controller that manages energy flow. The electric-drive system is being developed for front-wheel-drive, rear-wheel-drive, and body-on-frame four-wheel-drive vehicle applications.

Source

Mr. Chairman, members of the Committee, I appreciate this opportunity to address the current economic and financial crisis, the impact it is having on the automotive industry, and the need for immediate action.

During the 15 months I’ve been part of Chrysler, and since we’ve emerged as the first privately held American auto company in 50 years, I’ve been proud to work with a team of dedicated men and women determined to restore this 83-year old, iconic American brand to its rightful place in the automotive industry.

We are asking for assistance for one reason: to address the devastating automotive industry recession caused by our nations’ financial meltdown, and the current lack of consumer credit, which has resulted in the critical lack of liquidity within our industry.

With credit markets frozen, our customers – average working Americans – do not have access to competitive financing to purchase or lease vehicles…our dealers do not have access to market competitive funding to place wholesale orders for new vehicles…resulting in the constriction of cash inflows to auto manufacturers. At the same time, Chrysler has billions of dollars in cash payment obligations every month to pay wages, to pay suppliers, to fund health care and pensions, all in the range of $4 to $5 billion per month.

This crisis has already driven U.S. sales to a 25-year low. In 2008 alone, our volume domestically has dropped from 17 million units to 11 million – a 38 percent decline. That volume drop is more than the total U.S. sales of Ford and Chrysler combined.

Therefore without immediate bridge financing support, Chrysler’s liquidity could fall below the level necessary to sustain operations in the ordinary course. This would put at risk health care coverage for retirees, which is part of Chrysler’s nearly $20 billion total health care obligation, $2 billion in annual pension payments to our retirees and surviving spouses, approximately $7 billion in current payables, $35 billion in future annual supplier business, and 56,600 direct Chrysler employees earning $6 billion in wages.

Independent research firms have quantified the fallout of a domestic auto maker bankruptcy to the overall economy, and the impact is devastating: 2.3 – 3 million in lost jobs, $275-$400 billion in lost wages, and $100-$150 billion in lost government revenue.

But this is not a good option for Chrysler, and more importantly, for the auto industry or the broader economy – for the following reasons:

1. We believe that retail sales would be impacted materially as a result of declining consumer confidence, and we will be forced to heavily discount existing inventory to move our product.

2. Given our common supplier base - at Chrysler, 96 of our top 100 suppliers are common to Ford and GM - the bankruptcy of any one domestic automaker would place enormous pressure on the supply chain and, consequently, that company’s competitors.

3. Our factories would likely be idled for a significant period of time while we renegotiate contracts with each of our thousands of individual suppliers.

4. Restructuring and reorganization costs and expenses will be materially higher in connection with a Chapter 11 process: supplier and dealer support and marketing costs will increase, general economic dislocation will follow and significant fees and expenses will be paid to an army of bankruptcy professionals.

5. The overall amount and cost of financing the restructuring will be significantly higher in a Chapter 11 process than the working capital bridge we are requesting here today.

6. And finally, we cannot be confident that we will able to successfully emerge from bankruptcy.

That’s why as an industry we are requesting a $25 billion working capital bridge to survive this liquidity crisis. However, both our private equity owner and I believe that while the immediate bridge financing is critical, the long-term solution to the industry’s problems and challenges requires industry consolidation and cost rationalization to eliminate excess industry capacity and redundant costs.

I would expect Congress to insist that the American taxpayer be protected. We are willing to provide full financial transparency, and welcome the government as a stakeholder – including as an equity holder. We are fully prepared to comply with the current conditions and policies already put in place as mandated by the government, under the recently enacted Emergency Economic Stabilization Act.

Our private equity owner, Cerberus Capital Management, L.P., has made it clear that it will forgo any benefit from the upside that would, in part, be created from any government assistance that Chrysler LLC may obtain. The principal of Cerberus Capital has stated that he will enter into legally binding agreements requiring the contribution to the government of the General Partner’s future profits interest related to Chrysler LLC which he might receive if any are ever earned.

Immediately on the separating from Daimler in August 2007, and being new to the automotive industry, I recognized the need to question and sometimes challenge the status quo, and seek significant opportunities to improve performance throughout the business. We began an aggressive restructuring and transformation of our business as an independent American auto company.

During the first 60 days, we approved more than 400 line item design changes, representing an investment of half a billion dollars in improvements to our products’ reliability, durability, fit and finish, and consumer appeal. We offered our customers a lifetime powertrain warranty to build their confidence. Due to a focused product quality improvement effort during the past year, we’ve seen our warranty claim rates drop by
29 percent and the improvement trend continues.

We made tough decisions to reduce operating costs and adjusted production schedules immediately. We prioritized every product investment with a strong emphasis on improving energy security and environmental sustainability by introducing advanced powertrain technologies, while at the same time we discontinued four vehicle models. We also identified over $1 billion in non-earning assets to sell and we’re more than 75 percent toward achieving that goal.

Since 2007, Chrysler has reduced 1.2 million units of capacity, which represents over 30 percent of our previous installed capacity, and which resulted in the elimination 12 production shifts. Over the past 10 months alone, we’ve reduced our fixed costs by $2.2 billion, and unfortunately, by the end of the year, we will have furloughed over 32,000 employees. That is the most gut-wrenching part of this job, to see the effect on the lives of good men and women who lose their jobs through no fault of their own, but because of the actions the Company is forced to take in these difficult times.

We have increased our manufacturing productivity to equal Toyota as America’s most productive automaker in terms of hours of assembly per vehicle, and our recently negotiated labor agreement was an important step in making our cost structure more competitive with transplants by 2010.

To further enhance our product portfolio, support growth and improve our cost structure, we continue to aggressively pursue strategic alliances and partnerships with other companies. I believe more restructuring and consolidation is required for the industry to be viable in the long-run. We would welcome the opportunity to have an open discussion with the new Administration and Congress on a collaborative approach to restructuring that would ensure any Government resources invested in the industry are used efficiently and help achieve important national public policy objectives.

It is equally important that the lack of liquidity to provide loans and leases to customers and financing to dealers is addressed immediately. It is imperative that our affiliated financial companies receive access to competitive liquidity and financing capacity. They must in order to provide credit to our customers - average working Americans - and support wholesale orders from our dealers.

Historically, over 90 percent of all new vehicles were purchased or leased with financing assistance, and the lack of readily available financing has simply frozen sales. A perfect example of this consumer credit crisis is that 20 percent of our revenue disappeared overnight when our finance company was unable to offer leases. These sales literally vanished.

At Chrysler, 75 percent of our dealers rely on Chrysler Financial to finance their business, and 50 percent of all customers finance their vehicle purchases through the Chrysler Financial. Normally, these loans and leases are securitized and sold in the secondary market to generate fresh liquidity and financing capacity.

Today, there is virtually no secondary market, and therefore, no way to raise capital. Money is not available for dealers to finance their wholesale orders, invest in their facilities, and hire and train employees. Competitive loans for the average working American – our customers – are virtually nonexistent. This has directly and dramatically depressed vehicle sales, putting at risk not only auto manufacturers but also the widespread network of suppliers, vendors. In Chrysler’s case, 3,200 entrepreneurs…small businesses owners called dealers, and the approximately 140,000 people they employ in every state across the country. The National Automobile Dealers Association estimates more than 700 of them will go out of business by year end. If we don’t secure a bridge loan, all 13,600 dealers are at risk.

There are 4.5 million people depending on this industry, and without assistance, nearly three million of them could lose their jobs in the next 12 months, according to a research memorandum published November 4, 2008, by the Center for Automotive Research. Failing to act now will hurt many American families and undermine our country’s economic recovery, far outweighing the costs related to supporting an industry that touches every district in every state of the nation.

The crippling of the industry would have severe and debilitating ramifications for the industrial base of the United States, would undermine our nation’s ability to respond to military challenges and would threaten our national security. Chrysler has long contributed to our national defense. Our Jeep® was an indispensable part of our nation’s efforts in World War II and Korea.

Immediate financial assistance will serve the country and the economy directly in two key ways. First, the lifeblood of the U.S. economy will continue to flow. The industry will be able to continue to pay at its current levels $22 billion in annual wages to our employees, $13 billion in annual pensions to our retirees and surviving spouses, and meet our current commitment of $102 billion in healthcare costs to employees. We will continue to pay $156 billion annually to our suppliers and work to keep them strong by providing significant additional financial relief for distressed suppliers fighting to stay in business.

Second, America’s auto companies are investing in innovation. Capital investment in new technologies, improved operations, and future product will be able to continue, including a combined $12 billion in annual spending for research and development. As an industry, we are moving full speed ahead to make the transition to advanced propulsion vehicles that will help support national energy security and environmental sustainability goals.

Chrysler plans to emerge from the current downturn as a lean, agile company. We are, and will continue to be the quintessential American car company. Currently, 73 percent of our sales are in the U.S., 61 percent of our vehicles are produced in the United States, 74 percent of employees work in the U.S., 78 percent of our materials are purchased in the U.S. and 62 percent of our dealers are based in the U.S.

Today, Chrysler has a very strong pipeline, with a product renaissance for 2010. In September we revealed our ENVI electric vehicle program, and announced that we will begin producing one of these electric-drive models for North American consumers in 2010. This underscores our commitment to deliver environmentally friendly, fuel-efficient vehicles to customers, and to meet this social responsibility faster and more broadly than any other manufacturer.

Today we are asking you to help us bridge a chasm created by an unprecedented financial meltdown. We are also asking you to consider investing in a company that will deliver real results for the American taxpayer.

I recognize that this is not an insignificant amount of money. However, we believe this request is the least costly alternative considering the options we face… with less impact on human capital, and would provide stimulus, as opposed to further depress the economy.

Thank you very much.

While showing off Chrysler’s electric vehicles at the Rose Bowl last Friday, ENVI head Lou Rhodes (driving an electric Dodge eV concept car) and Doug Quigley of engineering (in the Challenger SRT8), raced down the Pasadena stadium’s massive parking lot. You can see the video.

Source: allpar

Cerberus Capital Management LP, wading into the politics of a U.S. auto-industry bailout, would give up any profit on a future sale of Chrysler LLC should the company receive federal financial aid.

Chrysler also expects the U.S. government to take a stake in the company in any rescue, CEO Bob Nardelli said yesterday. Federal backing for a merger between Chrysler and General Motors Corp. was discussed before GM ended talks last week, people familiar with the matter said.

The no-profit pledge may help ease opposition in Congress to helping the industry, because Cerberus is a buyout firm. Cerberus founder Stephen Feinberg “has basically gone on record saying he would forfeit” profit from a sale under a bailout, Nardelli said at a conference in Palm Desert, California.

“This is a sign they need the money and are willing to do anything to get it,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. Taxpayers won’t want to let “a private-equity fund reap the profit,” he said.

Chrysler, which isn’t required to report financial results, has indicated it lost at least $1.08 billion in the first half. Cerberus acquired 80.1 percent of the automaker from Daimler AG in 2007 for a $7.4 billion investment, about a fifth of what the Germany company paid for Chrysler nine years earlier.

Source: Bloomberg

chrysler ev

A while back we reported that the Dodge EV had a good chance of being the vehicle that Chrysler puts into production in 2010.  Eventually all three will be in production, but only one of them will get there in 2010, the others will be a bit further off.  We’re now seeing reports that the minivan could be the first EV into production.  And the more we think about it the more it makes perfect sense.

“We’ve certainly got the possibility of electrifying our vehicles now,” said Reid Bigland, president of Chrysler Canada Inc. “It’s not pie-in-the-sky.”

The only competition for the minivan ev would be the Chevy Volt, a four seater car.  If the Chrysler EV can get the same 40 miles without using any gas, and if it will get decent mileage while using gas (Chevy claims that the Volt will get 50 on gas), the minivan could steal a few customers of the Volt and a few that were waiting for a bigger vehicle. 

There are plenty of people that would like to get something like the Volt but they either have too big a family or they need to haul too much stuff around on a regular basis for the Volt to be practical for them.  The Chrysler EV is the perfect solution for them.  They get 40 miles of gas free driving and pretty good (great for a minivan) mileage after that. 

The other reason for the Chrysler EV to be the first is the simplicity of it.  The Chrysler Town and Country already has a lot of storage in the middle of the vehicle for the stow and go seating.  If the owner opts for swivel and go instead of the stow and go that storage space isn’t used for the seats (since the swivel and go can’t fold into the floor), it’s just storage.  The batteries needed to make the Chrysler EV will go there, so the owner will get the swivel and go seats but they lose the storage capacity.  A small price to pay for the ability to use no gas.

“We didn’t have to do much tear-up,” Quigley says of the conversion process: engineers simply filled the second-row seat tubs with batteries intead of foldaway seats, and put Swivel ‘N Go seats in the van instead.

The location of the storage is optimal for the batteries.  It’s low to the ground and in the middle of the vehicle.  Nothing needs to be done to tune the suspension for handling with the extra 400ish pounds of weight.  Since it’s under the body of the vehicle is should also be easier to keep the batteries cool.

Once you put the batteries in all you have to do is hook up an electric motor to them, provide a small 4 cylinder engine to power it when the batteries are low and you have yourself and EV.  Of course it’s not that simple, some of the components in the EV need to be redesigned, extensive testing needs to be done to make sure that the EV is safe and reliable.  But it’s a lot easier and quicker to do the minivan than it would be to do the Wrangler or the Dodge EV.

A few days ago the leaders of the three Detroit automakers sat down with Democratic leaders to discuss their dire situation.  It seems that they’ve done what they intended to do.  The leaders sent a letter to the treasury asking it to use part of the 700 billion bailout for financial institutions to help out GM/Ford/Chrysler.  However, given that GM has already asked the treasury and been told no, I doubt that this will work.  Still, it means that congress will probably do something, whether it be now or when Obama takes office.  The transcript of the letter is below:

Dear Secretary Paulson:

We are writing to request that you review the feasibility of invoking the authority Congress provided you under the Emergency Economic Stabilization Act of 2008 (EESA) for the purpose of providing temporary assistance to the automobile industry during the current financial crisis. Under EESA, Congress granted you broad discretion to purchase, or make commitments to purchase, financial instruments you determine necessary to restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s workforce.

The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its workforce. On Thursday, we separately met with the leaders of the automobile industry, and its top union representative, to discuss the financial challenges confronting the industry and its workforce, and possible actions to address these challenges. We left the meetings convinced that our nation’s automobile industry - the heart of our manufacturing sector - and the jobs of tens of thousands of American workers are at risk. Friday’s news of the automobile industry’s record low sales figures only reaffirm the need for urgent action.

Were you to determine that the automobile industry is eligible for assistance under EESA, we would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximize the potential for the industry’s recovery. An automobile industry that is forward-looking and focused on ingenuity, competitiveness, and the creation of green jobs for the future is essential to its long-term viability. Other taxpayer protections should mirror those required of financial institutions currently participating in the Troubled Assets Relief Program (TARP), such as limits on executive compensation and equity stakes to provide taxpayers a return on their investment upon the industry’s recovery. Any assistance to the automobile industry should reflect the principles contained in EESA that guard against the need to recoup costs to the taxpayers.

We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy. It is our hope that the actions that Congress has taken, and that the Administration may take, will restore the preeminence of our domestic manufacturing industry so that it can emerge as a global, competitive leader in fuel efficiency and in new and path-breaking energy-efficient technologies that protect our environment. We appreciate your serious consideration of this request, and look forward to your response.

Best regards,

NANCY PELOSI       HARRY REID
Speaker of the       House Senate Majority Leader

Source: AP

For that guy elected yesterday, a puzzle is how Detroit’s auto makers should be reshaped by the hand of government — with a taxpayer bailout or by letting bankruptcy judges take charge? Both fixes have their fans, yet neither would really solve the industry’s essential problem.

Here’s a better idea, one you haven’t heard before, involving a contemporary curse word seldom used in the debate over the auto makers: “deregulation.”

No, Washington wouldn’t have to find the courage to amend the labor laws to end the Detroit Three’s captivity by the UAW. Nor would it have to repeal the CAFE rules that are now a sacred cow. It would simply have to allow auto makers to meet the fuel economy standards with any mix of autos made in domestic or overseas factories.

Under the nonsensical “two fleet” rule that now applies, manufacturers meet the standards separately with their “domestically” and “nondomestically” produced fleets. What does this have to do with making sure U.S. consumers get good mileage? Nothing. It’s a naked handout to the UAW at the expense of the companies and their customers.

How dumb is the two-fleet rule? Nissan, in a petition for its removal, points out foreign brands may actually minimize the domestic content in their U.S. cars so they can continue to count as “nondomestic.”

How dumb is the rule? Chrysler might not be unraveling today if not for the two-fleet rule, the real genesis of the Hail Marys it’s been throwing in all directions to find an electric car or a small-car partner or to merge with GM. Chrysler has a perfectly salvageable business making trucks, minivans, muscle cars and Jeeps — doomed only by the lack of enough small, fuel-efficient cars to roll out of a UAW factory with a Chrysler emblem slapped on.

For 30 years, to make and sell the large vehicles that earn their profits, the Detroit Three have been effectively required to build small cars in high-wage, UAW factories, though it means losing money on every car. (That — not some perverse desire to make bad cars — is why they skimped for decades on styling, engineering and materials in their family sedans.)

Sure, this bullet would be far from silver and would still cause pain. The UAW might declare war to stop production from being shifted offshore. The Big Three might have to pay billions in job buyouts to use their new freedom. Since 2005, they’ve had some leeway under Nafta to shift “domestic” production to Mexico and haven’t done much about it.

But here’s the key: Detroit would finally get what every foreign competitor and just about every other business has — normal leverage over labor costs. Auto jobs wouldn’t automatically flee offshore. The Big Three would rather hire high-quality U.S. workers — but on the same terms that Toyota or Nissan or BMW do.

Source: WSJ

So it would seem that Cerberus has no intention of not selling most of their stake in chrysler.  If Nissan had some to the table with more than 20% in their offer Cerberus probably would have taken more time to consider that deal.  For now we’ll have to settle for Chrysler making Nissan’s Titan and Nissan making a small car for Chrysler - if Chrysler is still around.

The US Treasury has told GM that no, it can’t have anymore billions of dollars, not yours.  GM was hoping that the bailout money would come before the election (or is it Cerberus that is on an accelerated time table?) in the amount of 10 billion.  So far the US has bailed out financial institutions (both GMAC and Chrysler Financial qualify) but has yet to aid any other sector.

The reason for the bank bailout is clear, if the banks fail then no more credit is available and no one can spend any money and we all get to see how our grandparents lived back in the 30s.  Even that bailout is not popular among many in the US, indeed, much of the money is going to bonuses to already really rich guys that ran their bank into the ground.  So when another big corporation like GM comes to the US government and asks for some money the US is reluctant to say the least.

GM is a more sympathetic recipient than banks are, but not by much.  One could argue that the bailout would save manufacturing jobs in the US at a time when outsourcing is the norm.  Even though GM would have to slash about 50,000 jobs from Chrysler immediately, in the long run it saves the biggest automaker in the world.  Better to see one absorbed than both die off.

There are two problems with giving taxpayer money to GM.  First, it is not clear that GM and Chrysler will both fail if left separate.  No one has made a convincing argument there.  And (still part of the first reason) it is not clear that the combined company will succeed.  I have yet to see a convincing argument that shows me the combined GM/Chrysler company make it through the next few years of poor sales.

The second problem with US aide here is if they give it to GM/Chrysler for a merged company they also have to give it to Ford, and eventually anyone that comes begging.  The line of companies in trouble will never end, better to draw the line at the banks and be done with it than see the government as a partial owner in every sector in the US market.