Chrysler CEO says company’s sales won’t improve until June, auto industry must cut capacity

Chrysler CEO: Sales won’t improve until June

DETROIT — Chrysler Group LLC’s sales will continue to slump until around June when compared with last year’s numbers because the company used big incentives early in 2009 to move cars and trucks as it headed toward bankruptcy protection, the company’s CEO said Wednesday night.

But Sergio Marchionne, who also is CEO of Italy’s Fiat Group SpA, said Chrysler will survive until its product lineup is refreshed with new designs because it has $5 billion to $6 billion in cash reserves and is being frugal.

“You know the concept of hibernation Canadian bears use?” he asked when fielding a question about how the company will make it through a sales slump with no new products coming in the immediate future.

Chrysler sales were down 36 percent last year as consumers shunned its aging model lineup that was not updated by the previous owners, Cerberus Capital Management LP.

Marchionne said Chrysler used heavy incentives to drive up sales during the first four or five months of last year around its April bankruptcy protection filing, and until it cycles past those numbers, it will not show a year-over-year monthly sales increase.

He also predicted sales will start to rise as soon as the new Jeep Grand Cherokee hits the market, which is scheduled for sometime during the second quarter.

Marchionne conceded that the only new thing Chrysler is displaying at the Detroit auto show is a new interior in the Dodge Caliber compact. But he said the Fiat 500 minicar will be in Chrysler’s U.S. showrooms in December.

Fiat was granted a 20 percent stake in the company by the U.S. government and could get more depending on whether it hits goals such as producing fuel-efficient vehicles.

Chrysler lost $8 billion in 2008 and has received about $15.5 billion in U.S. government aid, but Marchionne has said it will be profitable on an operating basis this year and will have a net profit in 2011.

Speaking to the Automotive News World Congress in Detroit, Marchionne said the global auto industry must reduce factory capacity in order to survive, especially in Europe.

World automakers can build 94 million cars and trucks a year, but that’s 30 million more than it can sell, he said.

Bankruptcies and economic struggles have forced cuts in North America, but European manufacturers have not closed plants, often because they are paid by governments not to, he said.

He predicted further consolidation in the global auto business, with five or six people running the industry.

Marchionne’s speech was interrupted twice by protesters. One man yelled “Shame!” in Italian, and Marchionne later said the man was protesting Fiat’s plan to close a factory in Sicily.

Another said her mother was killed by a defective Chrysler product. Both were escorted out of the room.

Other protesters unveiled a banner that said the Fiat Chrysler tieup was damaged when delivered. The banner rose to the ceiling attached to white helium balloons.

Marchionne said Fiat loses money on every car built at the Termini Imerese plant in Sicily, because costs at the plant are too high due to lack of infrastructure in the area. He said Fiat is willing to work with the government and unions to find another use for the plant. Production will cease at the end of 2011.

Marchionne did not respond to the woman’s statement. Consumer groups and crash victims have protested a provision in the Chrysler sale agreement to Fiat that releases Fiat from product-related liability for vehicles sold before the company entered bankruptcy protection.

Marchionne also said Chrysler has not decided if it will challenge Congress’ decision to require arbitration for 789 dealers whose franchises were revoked during the company’s passage through bankruptcy protection.