Chrysler Begs Dealers to Buy More Cars

Pleas from Chrysler executives for dealers to order more vehicles took on a more urgent tone Thursday as Vice Chairman Jim Press prodded them in a conference call to take more vehicles, dealers said.

Press and Executive Vice President Steven Landry urged dealers at the National Automobile Dealers Association convention in New Orleans on Jan. 25 to order 78,000 vehicles in February to help the company prove its viability and qualify for additional government loans.

Dealers said that on Thursday, the executives told them in the conference call that they needed to order 15,000 more cars and trucks by Monday to meet the goal, and that 70 percent of the company's 3,300 dealers had participated.

"You have two choices," Press told the group, according to the trade publication Automotive News. "You can either help us or burn us all down."

Chrysler, which is 80.1 percent owned by New York private equity firm Cerberus Capital Management LP, would have run out of cash in January were it not for a $4 billion low-interest loan from the U.S. Treasury Department. The company must prove its viability by Feb. 17 in order to get another $3 billion that it needs to survive the worst U.S. auto sales slump in 26 years.

General Motors Corp. also got loans totaling $9.4 billion, with the possibility of $4 billion more.

Dale Early, owner of Deerbrook Forest Chrysler-Jeep in Kingwood, Texas, said Press' tone wasn't more dire than it was at the convention or in subsequent visits with dealers around the country.

"I've heard that speech. I think this has been about the fourth or fifth time. It's pretty much the same to me. He's always made it pretty clear we need orders and revenue to support the viability plan," Early said Thursday night.

He confirmed that Press told dealers that by successfully keeping the doors open in January and February, Chrysler will get the remaining $3 billion loan. With the money, Chrysler and dealers can benefit from its long-term investments, Press said, according to Early.

"We've got to get the cash flow coming in so we can get to March 31 as a viable company," Press reportedly said.

Chrysler spokesman Rick Deneau would not comment about the conference call and said it was meant to be a private internal discussion between the company and dealers.

According to Early, Press appealed to the remaining 30 percent of dealers who haven't ordered their February allocations.

"We were short and we knew that we were getting down to the wire," said Early, adding that he placed an order for 50 vehicles.

Carl Galeana, vice president of a group of dealers including a Dodge facility in the Detroit suburb of Warren, said he did not listen to the call because he, too, already put in his February order.

But he said the urgent tone of sales talks is nothing new during the 15 years he has had a Chrysler dealership.

"The dire stuff is pretty much normal," he said. "They're trying to get people to finish up their ordering."

Landry said last month the 78,000 orders is still 12 percent fewer than February of last year.

Under the GM and Chrysler loan terms issued last year by the Bush administration, the companies must show an ability to repay the government money and to achieve "positive net present value," which means that the present value of a company's expected net cash flows exceeds the initial investment that must be made in the company.

The government also is asking for concessions from unions and debtholders, including swapping part of the companies' debt for equity and achieving labor cost parity with Japanese automakers that have U.S. factories.

The companies are negotiating for the concessions but are awaiting the appointment of a "car czar" to oversee their restructuring efforts. The United Auto Workers union has said it will appeal to the Obama administration to change the terms of the loans, which it says are unfair to workers.

Chrysler sales were down 55 percent in January and 30 percent in 2008 as the U.S. auto market continues its slump.

The company has a nonbinding preliminary agreement with Fiat Group SpA for Fiat to provide small-car technology in exchange in exchange for a 35 percent stake in Chrysler.