Chrysler Group LLC, the closely held U.S. automaker operated by Fiat SpA, said global sales in 2010 rose to 1.6 million cars and trucks and that the company can now turn a profit with fewer deliveries.
Chrysler needs to sell about 1.5 million vehicles annually to break even on an operating basis, down from 1.65 million, Chief Executive Officer Sergio Marchionne said in the prepared text of a speech in Detroit.
Marchionne is more than a year into a five-year turnaround plan that includes making Auburn Hills, Michigan-based Chrysler profitable this year. He wants to use new models and Fiat’s distribution network to more than double Chrysler’s worldwide sales to 2.8 million and produce $5 billion in operating income by 2014. Chrysler sold 1.32 million vehicles in 2009.
Lowering the breakeven point is “a true sea-change from the break-even levels prior to the bankruptcy,” Marchionne said in the text.
Chrysler would have reported a net profit for 2010 if its assistance from the U.S. and Canadian governments had come as equity instead of debt, Marchionne said, reiterating earlier statements. He said that the company will seek to change the terms of those loans.
‘Refinance This Debt’
“Our goal is to refinance this debt at more favorable rates, as the level of interest we are currently paying has kept us from posting better net results,” he said in the text.
Chrysler is talking with a number of banks, including Goldman Sachs Group Inc., about working on its initial public offering, which may occur in the second half of the year, Marchionne said.
Chrysler is willing to talk to the United Auto Workers union about tying compensation to the company’s performance when the two sides negotiate new labor agreements this year, Marchionne said, adding that he brought up the issue in 2009.
A good system would allow the company to protect itself if the industry experiences lower demand, he said.
“The discussion that needs to be had with the UAW is one that recognizes that we need to avoid all of the pitfalls that made this industry unviable in the past,” Marchionne said.
UAW President Bob King, speaking to reporters at a Detroit event before Marchionne’s speech, praised the CEO for expanding Chrysler’s transmission factory in Kokomo, Indiana, and reviving its vehicle assembly plant in Sterling Heights, Michigan. King said Marchionne has “a real desire to work together on common goals.”
“What’s important is both through the profit-sharing checks and through 2011 bargaining, the members feel they are being respected and that they’re getting their fair share of the upside and have a system to do that long term,” King said. “It’s a huge challenge. And being very blunt about it, I don’t know the exact best way to do it now.”
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