By Soyoung Kim and David Bailey
NEW ORLEANS/DETROIT (Reuters) - The viability of Chrysler hinges on winning $3 billion of additional government aid and cost savings through concessions by creditors and employees, Chief Executive Bob Nardelli said on Friday.
Nardelli called Chrysler's proposed alliance with Fiat a key step along its path to proving to lawmakers the car company can be viable, but just one necessary part of its recovery.
"Our viability still depends on receiving the remaining $3 billion in government funding and concessions from each of our constituent groups ...," Nardelli said in a letter addressed to Chrysler's employees, dealers and suppliers. A copy of the letter was obtained by Reuters.
The automaker received a $4 billion U.S. government loan to avert collapse and is seeking $3 billion more. It has a short deadline to prove to U.S. lawmakers it can be viable.
Nardelli said Chrysler was working to meet all requirements to receive the additional funds, including the concessions.
Chrysler announced the planned alliance with Fiat
Also on Friday, Chrysler Vice Chairman Jim Press said the automaker and Fiat were working through the details of a proposed alliance that leaves open the possibility that Chrysler also could link up with other partners.
Chrysler, 80-percent owned by Cerberus Capital Management
Press said the deal had the potential to slash development costs for Chrysler by giving it access to Fiat's fuel-efficient small car technology.
"We have no expertise and don't have tens of billions of dollars to gain that expertise," Press said at a J.D. Power and Associates event in New Orleans.
Press said the Fiat alliance would preserve jobs in the United States. He said the automaker also has been talking to a number of different potential partners.
The alliance with Chrysler would give the Italian automaker a sales foothold in the United States. Press said Fiat-brand cars could be in Chrysler showrooms within two years.
Nearly all of Chrysler's sales are generated in North America and its Chrysler, Dodge and Jeep lineup has been weighted toward larger SUVs and pickups. Those segments have fared the worst in the economic downturn.
The J.D. Power conference comes just ahead of the annual National Automobile Dealers Association convention where car makers meet with the thousands of dealers that make up the vast network that sell cars throughout the United States.
Press said Chrysler is well on its way to paring operations to fit demand, but dealership consolidation would be necessary. He also said Chrysler was not planning to eliminate brands.
The automaker has eliminated slow-selling models. Chrysler halted production of its Dodge Durango and Chrysler Aspen SUVs in December and has no plans to restart that output.
A year ago, Press told dealers Chrysler had the model and dealership network to support 4 million per year in U.S. sales, but had retail sales of about 1.5 million and needed to be sized to sell about 2.5 million vehicles.
U.S. auto sales fell 18 percent to about 13.2 million units in 2008 and most automakers expect a further decline in 2009. Chrysler's U.S. sales fell 30 percent in 2008 to about 1.45 million.
Chrysler's sales dropped even more sharply toward the end of the year as credit availability tightened, capped by a 53-percent drop in December.
(Reporting by Soyoung Kim; Editing by Tim Dobbyn and Carol Bishopric)
