NEW ORLEANS (Reuters) - Chrysler LLC on Sunday urged its U.S. dealers to slash costs and order more of its vehicles as the automaker races to restructure in order to secure additional government aid.
Chrysler, widely seen as the weakest of Detroit’s three automakers, took $4 billion in loans from the U.S. government in December and is asking for another $3 billion in loans.
Chrysler, whose U.S. sales declined 30 percent in 2008 — the largest drop of any major automaker — faces a deadline of February 17 to prove to U.S. lawmakers it can be viable.
The automaker has been seeking concessions from all stakeholders, including creditors and the United Auto Workers union. Last week, it also unveiled an alliance with Fiat in which the Italian automaker would take a 35 percent stake in Chrysler in return for providing access to its small car platforms.
“They (dealers) understand the place where we are in regard to our plan and they understand the need for all parties to put some skin in the game,” Chrysler Vice Chairman Jim Press told reporters following a meeting with hundreds of its dealers at the National Automobile Dealers Association convention.
He said the automaker will start negotiations with dealers on Monday to discuss details of the cost cuts.
“They also realize they can help us save some money that will help preserve the future of the company and make us more successful,” he added.
Chrysler asked dealers to ramp up vehicle orders for the months of February and March, even after the average inventory of cars and trucks on its U.S. dealer lots totaled 115 days of supply at the end of December.
U.S. sales executive Steve Landry said Chrysler wants to sell 78,000 vehicles to dealers for the month of February. Dealers said orders for January were around 22,000 units.
Chrysler suspended production at all of its plants in late December and the automaker has not had any revenue for the past month.
Like its rivals, Chrysler books revenue when vehicles are produced and sold to dealers.
Wesley Lutz, who owns a Dodge dealership in Jackson, Michigan, said Press assured dealers that Chrysler would pass the federal oversight of its turnaround plans and make it through the second quarter and beyond.
Lutz added he will order vehicles when he returns home even though he already has a 100-day supply of vehicles on his lot.
“He promised us we’d still be open for business in April. That’s pretty powerful,” Lutz said.
Dealers have been also told to accept half a percentage point reduction in profit margins on vehicle sales and they will no longer be reimbursed for filling up gas tanks before vehicles are sold, Landry said.
Landry said Chrysler will announce steps dealers and other stakeholders are required to take to achieve turnaround later this week.