Chrysler's Financial Plan: Leveraged Assumptions

Edward Niedermeyer
by Edward Niedermeyer

Chrysler’s financial plan is where the rubber hits the road for Sergio Marchionne’s turnaround. It starts with a break-even projection for 2010 on net revenue of about $42.5b, which is more than double the projections for 2009 of $17b net revenue. As the previous sales projection chart and product plan analysis indicates, a short-term turnaround of this magnitude seems highly unlikely. Unfortunately, because Chrysler plans to spend $23b on R&D and other capital expenditures (capex) between 2010 and 2013 without injecting any fresh capital, this sales turnaround absolutely has to happen in order for the rest of the plan to move forward. Though this plan is said to be stress-tested for a zero-SAAR growth by 2011 scenario, there’s no indication that these projections consider the possibility that Chrysler’s market share won’t grow. In this weak-market/strong share growth scenario, Chrysler believes that despite a $7b drop in revenue, $.4b operating profit could be rescued through cost interventions. But it’s not specified where those cost interventions would come, leading to the inevitable assumption that product development (the crucial factor in any market share growth) would be drastically reduced. It’s worth noting again that Fiat does not plan on contributing any new capital to Chrysler.

More analysis on Chrysler’s financial plans are coming, but in the meantime, check out the complete presentation ( PDF).

Edward Niedermeyer
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  • Holydonut Holydonut on Nov 05, 2009

    @ amcurrie; I was thinking the same thing but that's why I normalize on a "per unit" basis. If they ignore the revenue pre-bankruptcy, then they'd also shed the claim of shipments pre-bankruptcy. So dividing total revenue by the # of units should somewhat limit the impact of the bankruptcy as regards to comparing numbers from one year to another year. Yes, there are still some differences. For example, vehicles shipped in the latter half of a year tend to have better net revenue per unit since they are the newer model year vehicles with less incentives. If you dig a bit deeper, Chrysler's expected 2010E revenue per vehicle of $25K is pretty high. On Page 1 of Ford's 2008 Annual Report they put their operating highlights: Ford's 2008 Revenues = $129.2B and 5.532M units shipped worldwide. That's a per-unit average of $23,355. So Chrysler has a $2,000 per unit advantage in pricing/incentives of the average vehicle versus the Blue-Oval average vehicle? Yes, Chrysler has a higher mix towards large vehicles, but the difference isn't that extreme. Couple this with foreign markets having higher revenues than NAFTA (especially with a weak US Dollar), and Chrysler doesn't have high penetration into foreign markets. There really are some aggressive assumptions coming from Auburn Hills once you start digging and thinking. $2,000 on Chrysler's expected 1.65M units isn't chump change. I wonder how the cost advantage stacks up.

  • Rix Rix on Nov 05, 2009

    Exactly whom will they be taking market share from with their fine new products? It's not like Toyota, Ford or Hyundai will roll over for them.

  • Juan Let's do an 1000 mile drive and see who gets there first.
  • Eliyahu CVT needed for MPG. Outback is indeed the legacy of, err, the Legacy.
  • Gayneu I can comment on these. My wife always thought the Minis were "cute" so I bought her a used 2005 (non-S, 5 speed) for one of her "special" birthdays. She loved it and I kinda did too. Somehow a hole developed in the transmission case and the fluid drained out, ruining the car (too expensive to fix). A local mechanic bought it for $800.We then bought a used 2015 S (6 speed) which we still have today (80k miles). Her sister just bought a used S as well (also manual). It has been a dependable car but BMW-priced maintenance and premium gas hurts for sure. I think the earlier generation (like in the article) were better looking with cleaner lines. The 2015 S rides too stiff for me (Chicago roads) but is a hoot on smooth ones. It does seem to shift weird - its hard to describe but it shifts differently from every other manual I have driven. No matter how hard I try, so won't let go of her Mini.
  • Crown Seems like they cut some cylinders too.A three cylinder...where are they planning on selling that??
  • Slavuta "There’s also the problem of climate change, and the more intense weather that comes along with it"How could one even write something like this? We don't have more intense weather. We have better weather. When Earth started, it was a fiery ball. We don't know what weather was in 1700. And even if we know some of it in Europe, we don't know what was happening in Africa, South America, Oceania, etc. We have people living in places where they did not live before. We have news that report weather related events minutes later or during. This did not happen before. There is no evidence that we have an increase in intensity. I looked into historical records in the area where I live - there is not much movement at all between 1970 and now. And remember - none of the previous weather predictions have materialized.