the odd part is that the dealers really still don't know. The message we got from Nardelli only says that they did sign a non-binding agreement.
OPEN ST AKEHOL DER LETTER
Januar y 20, 2009
To All Chrysler Stakeholders:
In our continuing effort to build a profitable enterprise for the future, we are announcing today that
Cer ber us, Chr ysl er LLC and Fi at S. p. A. have ent er ed i nt o a non-bi ndi ng t er m sheet to establish a
global strategic alliance. Upon completion of a due diligence process that is now underway and
required approvals, the agreement is expected to be completed by April.
This represents a positive business strategy for Chrysler in today’s difficult economic environment.
Chrysler management believes the alliance provides significant strategic benefits that support our
vi abilit y and l ong-term competitiveness.
As a conditi on of t he U. S. gover nment l oan agr eement, all constit uent s will be asked to contribute to
Chrysler’s restructuring effort including: lenders, employees, the UAW, dealers, suppliers and
Chrysler Financial. We recognize that the financial crisis, which has brought hardship to Chrysler, has
created challenges for all of our dealers, suppliers and other constituents, and we are committed to
wor ki ng t oget her t o fi nd ways t o support our mut ual and sust ai ned l ong-term viability.
This alli ance would adhere to the conditions of the U.S. government loan, and help t he company
pr ovi de a r et ur n on i nvest ment f or t he Ameri can t axpayer by securi ng t he l ong-term viability of
Chr ysl er br ands i n t he mar ket pl ace. The alli ance woul d hel p sust ai n Chr ysl er’ s pr oduct development,
manuf act uri ng and sal es oper ati ons her e i n t he U. S., whi ch f urt her supports our viability plan and
preserves American jobs. Our partners at the UAW have announced their endorsement of the
proposed alliance.
Alli ance Conti nues Chr ysl er’ s Aggr essi ve Restr uct uri ng
Seeki ng part ner shi ps and alli ances has been a cor ner st one of our recent restructuring efforts.
Following the separation from Daimler in August 2007, Chrysler launched a comprehensive
restructuring to address declining market conditions and transform the business into an independent
Ameri can aut o company, ali gned with consumers’ emerging needs. Since 2007, Chrysler has:
Reduced dealer inventory by 19 percent/more than 90 t housand unit s
Di sconti nued f our vehi cl e model s
Eli mi nat ed 1. 2 milli on unit s, or 30 per cent of pr evi ousl y i nst all ed capacit y
Disposed of $700 milli on i n non-ear ni ng asset s
Reduced total employment 36 percent, to its lowest level since 1934
Reduced fi xed cost s by mor e t han $2. 4 billi on
As a result, Chrysler began 2008 running ahead of its targets six months into a conservative plan
bef or e t he unprecedented drop in vehicle sales caused by the financial crisis interrupted its business
transformation. As the economy declined in late 2008, Chrysler responded quickly and aggressively to
keep production and dealer inventory aligned with shrinking U.S. market demand, by making further
reductions in manufacturing schedules. The extensive restructuring, cost reduction, and productivity
enhancements support Chrysler’s competitive position in the continuing economic downturn.
The r estr uct uri ng Chr ysl er began in 2007 has already produced gains in new product quality and
reliability. Even in the toughest automotive market in more than two decades, we continue to improve
our value, safety, quality, warranty, fuel-economy and innovation for our customers. For the 2009
model year, over 88 percent of Chrysler’s vehicles achieved five stars for frontal crash tests, 86
percent achieved the highest rating for side impact protection and 73 percent of our product line up
off er s i mpr oved f uel economy compar ed t o l ast year’ s model s.
Using Design for Six Sigma, the Company focuses on the smallest details in order to delight
customers and is committed to flawless execution. A new Interior Design Studio is significantly raising
t he cr aft smanshi p and i mpr ovi ng t he mat eri als in all Chrysler interiors. The Company is also reducing
complexity and engineering changes to give customers better materials without increasing costs.
Refl ecti ng t he Company' s f ocus on desi gni ng and buil di ng i n qualit y fr om t he begi nni ng, Chr ysl er had
the industry's lowest number of recalls in 2008 as reported by NHTSA -- a total of 360,000, down from
2.2 million in 2007. In addition, internal warranty data show that Chrysler has achieved the lowest
warr ant y cl ai m r at e i n it s hi st or y, wit h a 30 per cent improvement in the last 12 months. Chrysler plans
to continue to set new records, month by month, during 2009.
Benefits of Chrysler / Fiat Alliance
Under the agreement, Chrysler will have access to all Fiat group vehicle platforms, wit h t he excepti on
of Ferrari, which would complement our current product portfolio with fuel-effi ci ent, envi r onment all yfriendly
small cars and powertrain technology. The alliance would greatly increase the global reach for
our Jeep®, Dodge and Chrysl er brands in markets outside of North America, and Fiat’s distribution
organization would provide Chrysler a strong partner to help build our brand’s presence in important
markets where we have little presence today.
Fi at woul d benefit fr om pr oduct and t echnol ogy shari ng as well, with access to our vehicle platforms
and our manufacturing capabilities in North America. In addition, Chrysler would assist Fiat to bring
their brands to the U.S. market.
Chrysler is committed to wor k t oget her wit h our owner s, l ender s, employees, dealers, suppli er s and
Chrysler Financial to implement our viability plan fully adhering to all conditions of our government
l oan. Today’s announcement is part of our continuing commitment to build a profitable enterprise for
the future, consistent with the viability plan we submitted to congress. The agreement announced
today is just the first step toward this prospective alliance, and we intend to keep all stakeholders
informed of key developments on an ongoing basis.
Bob Nardelli
Chair man and CEO, Chr ysl er LL C
