q2 2010 results review - fca groupq1 2009 q2 2009 q3 2009 q4 2009 q1 2010 q2 2010 u.s. retail...

August 9, 2010

Q2 2010 Results Review

Gearing up for a guidance upgrade

____________

1 August 9, 2010 (Refer to Appendix for definition of non-U.S. GAAP financial measures )

Forward-Looking Statement

This document contains forward-looking statements that reflect management's current views with respect to future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project” and “should” and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: the effective implementation of the Chrysler 2010 – 2014 Business Plan outlined on November 4, 2009, including timely vehicle launches; industry SAAR levels; slower than expected economic recovery in Europe or North America, including continued high unemployment levels and lack of available credit to consumers and dealers; introduction of competing products; and supplier insolvencies. If any of these or other risks and uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made.


Q2 2010 Financial Highlights Steady improvement over Q1 2010

• Net Revenues up 8% to $10.5B in Q2 2010 (Q1 2010: $9.7B) in a gradually recovering US market

Overall shipments up 53k (+14%) over Q1 2010 to 433k

Fourth consecutive quarter of increased shipments since Company formation

• Operating Profit of $183M, an improvement of $40M versus Q1 2010

Operating performance increased from higher volumes and manufacturing efficiencies, offset partially by mix impact of Jeep® Grand Cherokee changeover and higher ER&D expenses to support new products development

Operating profit margin of 1.7% of net revenues, an increase from 1.5% achieved in Q1 2010

• EBITDA of $855M (8.2% of net revenues), a $68M increase from Q1 2010

• Net Loss of $172M (net loss of $197M in Q1 2010)

• Net Industrial Debt improved by $0.4B to $3.4B

• Strong liquidity at $10.1B, including $2.3B of undrawn credit facilities under UST & EDC loans

• 2010 guidance remains unchanged (including a minimum of operating breakeven), but will probably be revised upwards on the basis of Q3 2010 performance


Q2 2010 Operating, Product and Business Highlights

• Worldwide sales up 73k (+22%) to 407k over Q1 2010

Steady month-over-month growth as brand repositioning efforts and marketing campaigns continuing to drive increased customer showroom traffic

Improved U.S. market share, now at 9.4% (up 30 b.p. in the quarter)

• Continued strict inventory discipline with U.S. dealer inventory at 222k units, or 60 days of supply

• Successfully launched all-new Jeep® Grand Cherokee in U.S. and Canada – Awarded Insurance Institute for Highway Safety (IIHS) Top Safety Pick

• Chrysler Group vehicles improved by an average of 10 points year-over-year in JD Power Initial Quality Survey, while industry average deteriorated by 1 point

• World Class Manufacturing on track to FY target (8% reduction in operating costs, 15% improvement in first-time quality)

• Began distribution of Chrysler Group vehicles in select European countries through Fiat Group Automobiles’ distribution organization (full roll-out by year-end), with FGA providing financial services to Chrysler Group’s European activities

• Announced investments in Indiana Transmission and Kokomo Casting plants

$343M to retool and modernize the plants for a new, highly-efficient, 8-speed automatic transmission and to support production of World Gas Engine

• Established agreement with Santander Consumer USA to provide new vehicle financing for consumers with non-prime credit scores, complementing existing relationships with financial service providers

• Finalized (July) $400M loan to Chrysler de Mexico from Bancomext and Nafin; proceeds to partially finance production of Fiat 500 at Toluca, Mexico plant


Q2 2010 Q1 2010 Q2 2010

B/(W) Q1 2010

H1 2010

Net Revenues 10,478 9,687 791 20,165

Operating Profit 183 143 40 326

EBITDA 855 787 68 1,642

Net Loss (172) (197) 25 (369)

Cash flow 474 1,490 (1,016) 1,964

Cash 7,841 7,367 474 7,841

Gross Industrial Debt 11,226 11,192 (34) 11,226

Net Industrial Debt (3,385) (3,825) 440 (3,385)

Worldwide Shipments - Units (000) 433 380 53 813

Q2 2010 Financial Highlights

$ Millions


EBITDA and Operating Profit to Net Loss Walk

Q2 2010 Q1 2010 H1 2010

EBITDA 855 787 1,642

Depreciation and Amortization 1) (672) (644) (1,316)

Operating Profit 183 143 326

Provision for Income Taxes (33) (35) (68)

Net Interest Expense (296) (295) (591)

Other Employee Benefit Costs 2) 13 14 27

Restructuring Expense & Other (39) (24) (63)

Net Loss (172) (197) (369)

1) Depreciation and amortization expense net of depreciation and amortization expense for vehicles held for lease 2) Represents interest cost and expected return on plan assets

$ Millions


Q1 2010 Volume Mix and Netprice

IndustrialCosts

SG&A Other Q2 2010

Operating Profit Walk Q1 2010 to Q2 2010

143 (18) (5)

183 (75)

$ Millions

(64)

202

+40 • Shipment volumes increased

to 433k units from 380k units, offset by seasonal increase in GDP fleet (13k units increase in Q2 vs. Q1)

• Mix / pricing changes driven primarily by the impact of the Grand Cherokee changeover and moderate increases in incentive programs

• Industrial costs increased due to the ramp-up of ER&D expenses, partially offset by manufacturing efficiencies

• SG&A driven by increased advertising spend to support the pre-marketing launch of the all-new Grand Cherokee

1.5% 1.7%

Profitability impacted by non-recurring industrial costs of $50+M in the quarter associated to Jeep® Grand Cherokee changeover


Cash

(Mar 31, 2010)

EBITDA Working

Capital

Capital

Expenditure

Pension/OPEB Interest /

Taxes

Other Cash

(Jun 30, 2010)

+0.4

$ Millions

• Capital expenditures and debt service funded by EBITDA

• Interest payments

primarily relate to UST/EDC loans

(0.6) (0.2)

7.8 (0.1)

7.4

0.9

0.6

Cash Walk – 1Q 2010 to 2Q 2010 Additional cash flow continued to strengthen liquidity

(0.2)


Fixed Costs and Capital Spending Continued fixed cost discipline while investing in new products

2.2 2.3

• Q2 fixed costs driven by ER&D ramp-up

• Fixed cost trend for total year remains on track

Plant / Corporate

Depreciation & Amortization

Sales & Marketing

ER&D

$ Billions

~9.5

Fixed Costs

Q1 2010 Q2 2010 FY '10E

Capital Expenditures

0.6

2.7

0.6

Capital spending will accelerate in H2 2010 to reach a total of $2.7 billion for the year in support

of the near term product renewals


* Excludes $400M Mexico loan

+2.3

10.1*

US Treasury Loan

Availability

7.8

$ Billions

1.7 0.6

Canada / EDC Loan

Availability

Cash June 30, 2010

Total Liquidity June 30, 2010

Total Available Liquidity


Leverage Analysis Gross Industrial Debt stable while cash improves

Carrying Value as of

June 30, 2010

Carrying Value as of March 31,

2010

June 30 B/(W)

March 31

Cash 7.8 7.4 0.4

UST Loan – Tranche B 2.1 2.1 0.0

UST Loan – Tranche C 3.5 3.5 0.0

U.S. Treasury Zero Coupon Note 0.1 0.1 0.0

UAW VEBA Trust Note 3.9 3.9 0.0

EDC Loan 1.2 1.2 0.0

Other Financial Liabilities 1) 0.5 0.5 0.0

Gross Industrial Debt 11.2 11.2 0.0

Net Industrial Debt 3.4 3.8 0.4

1) Excludes Gold Key Lease (GKL) self-liquidating debt Note: Numbers may not add due to rounding

• Gross Industrial Debt remained at $11.2B with Net Industrial Debt improving as a result of positive cash flow of $0.4B

Note: Pension and OPEB liabilities reduced Unfunded pension liability

down by $0.3B to $3.5B Unfunded OPEB liability

down by $0.1B to $3.7B

$ Billions


Business Overview

Sales performance & Dealer Inventory

Pricing and Incentives

Network development and Financing Activities

2011 all-new Jeep® Grand Cherokee Launch

Plant Investments

2010 product launches

2010 Outlook


Industry Units (000s)

Chrysler Group performance (Q2 vs. Q1)

Sales Market share Best performers

Quarterly sales increase (+25%)

Up 30 b.p. to 9.4%

• Jeep® Wrangler up 40% to ~27k units while being named “Best & Most Significant 4x4 Vehicle of the Decade“ by Four Wheeler magazine

• Minivan sales up 41% to ~65k units, maintaining leadership in the segment

Quarterly sales increase (+32%)

Strong market share at 12.9% ,

slightly down due to fleet

timing

• Ram 1500 Pickup (+40% to 11k units)

• Dodge Grand Caravan (+26% to 16k units)

• Dodge Journey (+10% to 5,500 units)

Sales Performance North America highlights

2,588 3,115

Q1 Q2

332

465

Q1 Q2


Worldwide Sales Q1 and Q2 2010 Sales on track to FY target, all brands contributing to the improvement

235 292

527 45

60

105

19

17

36

35

38

73

Q1 Q2 H1

334

93 94

187

124 169

293

57

72

129

60

72

132

Q1 Q2 H1

334

407 407

U.S.

Canada

Mexico

Int’l

Q2 2010 B/(W) Q1 2010

3

15

57

(2)

Q2 2010 B/(W) Q1 2010

12

45

1

15

By Market By Brand

+73 (+22%)

741

+73 (+22%)

741

Units (000s)


U.S. Dealer Inventory Inventory level consistent with higher sales performance

90

58 58 60

Jun 10th Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Days Supply

2009 2010

Units (000s)

“Cash for Clunkers” Program 246

179

222

208

Dealer Inventory will build in Q4 to support sales of new products in early 2011


~5,000 ~4,600

~4,200

~3,600 ~3,700 ~$4,100

25,400 25,700

24,800

27,90027,300 27,100

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

U.S. Retail Average Transaction Price Average transaction price remains strong at over $27,000 per unit

$/Unit

Source: Company calculation based on J.D. Power & Associates (at constant Q2 2010 sales nameplate mix)

Average Transaction

Price

Average Incentive


U.S. Dealer Network Development Q2 update

Project “Genesis” proceeding apace, completion by 2011

• Through June 2010, 85% of dealers consolidated (all brands under one roof)

• About 80% of dealers now profitable, a level not seen since 2002-03

Dealer selection process started for reintroduction of Fiat brand in the U.S.

• 125 markets in ~40 states Identified for growth potential in small-car segment

Dealer arbitration process completed in July 2010

• Out of 418 cases, 310 settled or withdrawn

• 108 court arbitrations concluded with 32 cases in favor of dealers, representing ~4% of total dealers terminated

• The 32 dealers that prevailed were offered letters of Intent to join Chrysler Group’s dealer network, contingent upon meeting certain financial and operational prerequisites


Distribution Channel Integration Status update (Europe)

• Integration of sale and service activities of Chrysler, Jeep® and Dodge branded products with Fiat Group Automobiles started in April

• Reorganization and integration of Chrysler and Lancia brand sales networks

• Aiming at creating an integrated network of 1,000+ dealerships across Europe by 2014

• Creating synergies by fully exploiting potential of two networks, including more efficient sales and quality in distribution of new products, spare parts and service

• FGA Capital already providing financing services for Chrysler, Jeep® and Dodge product distributors in Europe

April 2010

May 2010

June 2010

July 2010

Remainder of 2010

Italy France

Sweden

Denmark

Germany

Belgium

Netherlands

Switzerland

Spain

UK

Poland

Czech R.

Austria

Hungary

Status In progress


•Beginning of July, finalized a loan arrangement of $400M to Chrysler de Mexico from Bancomext and Nafin to partially finance production of Fiat 500 at Toluca, Mexico plant

•Facility fully drawn in July 2010

Chrysler de Mexico – Bancomext/Nafin Loan

•Floor plan financing for U.S. dealers increased to ~$5B in the quarter

•Canadian dealer financing totaled over $1B at Q2-end

•Chrysler Group represented ~50% of Ally’s retail contracts origination

Ally Financial

•Santander Consumer USA now to provide new car financing at attractive rates to consumers with credit scores below 650

•Ally Financial included in Chrysler Group’s non-prime program Non-Prime Program (US)

•Sale completed in June

•Opens new financing opportunities for consumers and dealers Sale of Chrysler Financial

(Mexico) to Inbursa

Financing Activities Q2 update


2011 Jeep® Grand Cherokee Successful launch

• Launched in May 2010, with a promising market reception Commercial performance to date (Aug 6): ~70k dealer

orders and ~4,000 units sold to customers

• Advertising and positive media buzz is driving higher showroom traffic (+8%) and purchase intention activity through internet (+28%)

• Top Safety Pick award from Insurance Institute for Highway Safety (IIHS)

• All-new Pentastar 3.6L V6 engine (first introduction) 290 hp, 260 lb-ft. Torque 23 MPG (2WD), 22 MPG (4WD) estimated EPA highway

fuel economy

From the "Rumble seat" column

“The 2011 Grand Cherokee is excellent kit—hardy, well sorted,

handsome, agile, with a level of seriousness and interior

refinement that in places outpoints Mercedes-Benz and Cadillac

…The Overland edition is an absolute steal.” – June 26, 2010

“Roomier, more powerful,

more fuel-efficient than

its predecessor, the 2011

Jeep Grand Cherokee

becomes a worthy

contender among premium

midsize SUVs….Top four-

wheel-drive systems were

terrific off-road. At

long last, adult-size

room in back seat.” – July 10, 2010

“Contents Under Pressure: Jeep’s Big New Thing Won’t Disappoint the Faithful On-road, the ’11 Jeep Grand Cherokee is more refined and more efficient, and doesn't give up anything for its slightly larger size. Off-road at Moab, it’s hard to imagine how it could get any better. … Pressure relieved.” – June 20, 2010


Indiana Transmission Plant and Kokomo Casting

Plant

• $300M investment to retool and modernize Indiana Transmission Plant I and Kokomo Casting Plant to accommodate a new highly efficient 8-speed automatic transmission

• $43M investment in new equipment and tooling to expand operations to support production of World Gasoline Engine and improve processes for related 62TE transmission program

• WCM implementation update ~150 projects completed

Transformation of manufacturing operations continuing

Jefferson North Assembly Plant

• Assembly of all-new Jeep® Grand Cherokee and 3-row Dodge CUV (to be launched in Q4 2010)

• Nearly $700M investment in new facilities and equipment

• Production capacity* of 250k units/year

• 2-shift production facility with 2nd shift added in July

• WCM implementation update All major assembly systems /

conveyance built on-site (a Chrysler first)

500+ projects completed

Trenton & Saltillo Engine Plants

• Production of 3.6L V6 Engine

• Production capacity* of 440k units per year (increasing to 500k units in 2012) at each plant

• Over $400M investment in new facilities and equipment at each plant

• WCM implementation update 700+ projects completed

* As per Harbour definition


2010 Calendar Year Launches Program scope / improvement

Start of production

Chassis Interior Exterior Powertrain

Ram Chassis Cab Q1

Jeep® Grand Cherokee (*) Q2

Jeep® Wrangler Q3

Jeep® Patriot Q3

Jeep® Compass Q4

Dodge CUV (*) Q4

Dodge Journey Q4

Dodge Avenger Q4

Dodge Grand Caravan / Chrysler T&C Q4

Dodge Charger (*) Q4

Chrysler Sebring replacement Q4

Chrysler 300 (*) Q4

Fiat 500 (*) Q4

Robust product offensive in H2 2010 with 75% of vehicle lines renewed or significantly refreshed by year-end

Extensive Upgrade

* New architecture


Worldwide Sales (units) 1.6 – 1.7 M

Net Revenue $40 - $45 B

Operating Profit $0.0 - $0.2 B

EBITDA $2.5 - $2.7 B

Free Cash Flow $(1) B

2010 Outlook

2010 guidance unchanged, but will probably be revised upwards on the basis of Q3 performance


Appendix


Gross Industrial Debt

As of June 30, 2010

Carrying Value

Face Value

UST Loan – Tranche B 2.1 2.1

UST Loan – Tranche C 3.5 3.6

U.S. Treasury Zero Coupon Note 0.1 0.1

UAW VEBA Trust Note 3.9 4.6

EDC Loan 1.2 1.6

Other Financial Liabilities1 0.5 0.7

Gross Industrial Debt 11.2 12.7

1 Excluding Gold Key Lease (GKL) self-liquidating debt Note: Numbers may not add due to rounding

$ Billions


Reconciliation of Total U.S. GAAP Financial Liabilities to Gross Industrial Debt

June 30, 2010

March 31, 2010

Dec. 31, 2009

U.S. GAAP Financial Liabilities (Carrying Value) 12,367 12,956 9,551

VEBA Trust Note (Reclassified Jan 1, 2010 – pro-forma only for Dec 31, 2009)

- - 3,854

Gold Key Lease Debt

Short Term ABS

Long Term ABS

GKL Credit Facility

Total

(580)

(115)

(446)

(1,141)

(759)

(132)

(873)

(1,764)

(922)

(291)

(953)

(2,166)

Gross Industrial Debt 11,226 11,192 11,2391

$ Millions

1 Pro-forma due to inclusion of UAW VEBA Trust Note.


Gross Industrial Debt Maturity Schedule

Note: Excluding accrued and accreted interest

2010 2011 2012 2013 2014 2015+Gross Industrial Debt March 31, 2010 (Carrying Value)

11.2

0.1 0.3 0.2

8.2

2.3

0.1

Annual Maturities Gross

Industrial Debt

$ Billions

0.1 2.7 0.1 0.3 0.3 9.2

Face Value 12.7


Condensed Consolidated Balance Sheets

CURRENT ASSETS:

June 30, 2010

March 31, 2010

December 31, 2009

Cash 7,841 7,367 5,877

Trade Receivables, Net 1,436 1,423 1,752

Inventories 3,114 2,986 2,783

Other Current Assets 2,134 2,459 2,542

Total Current Assets 14,525 14,235 12,954

Property, Plant and Equipment, Net 13,779 13,937 13,960

Equipment on Operating Leases, Net 2,407 2,481 2,576

Other Intangible Assets, Net 3,442 3,416 3,444

Goodwill 1,361 1,361 1,361

Other Long –Term Assets 943 1,245 1,128

Total Other Assets 21,932 22,440 22,469

Total Assets 36,457 36,675 35,423

CURRENT LIABILITIES Trade Liabilities 6,813 6,832 5,564

Other Current Liabilities 9,707 8,868 12,847

Current Portion of Financial Liabilities 653 830 1,092

Total Current Liabilities 17,173 16,530 19,503

LONG-TERM LIABILITIES Financial Liabilities 11,714 12,126 8,459

Other Long-Term Liabilities 11,179 11,502 11,691

Total Long-Term Liabilities 22,893 23,628 20,150

Total Members’ Deficit (3,609) (3,483) (4,230)

Total Liabilities and Members’ Deficit 36,457 36,675 35,423

$ Millions


Pension Disclosure

$ Millions

NET PERIODIC BENEFIT COST

Q1 2010 Q2 2010 YTD 2010

Service Cost 61 63 124

Interest Cost Net of Expected Return (61) (63) (124)

Special Early Retirement Costs - - -

Total Net Periodic Benefit Cost - - -

WORLDWIDE PENSION FUND CONTRIBUTIONS 55 252 307

FUNDED / UNDER FUNDED STATUS

U.S. (3,538) (3,328) (3,328)

Canada and Mexico (276) (222) (222)

Worldwide Total (3,814) (3,550) (3,550)

U.S. ASSUMPTIONS (Year End)

Expected Long-Term Asset Return 7.4% 7.4% 7.4%

Discount Rate – Weighted Average 5.5% 5.5% 5.5%


OPEB Disclosure

$ Millions

NET PERIODIC BENEFIT COST

Q1 2010 Q2 2010 YTD 2010

Service Cost 9 9 18

Interest Cost Net of Expected Return 46 49 95

Amortization of Actuarial Loss 1 1 2

Total Net Periodic Benefit Cost 56 59 115

BENEFITS PAID 97 59 156

FUNDED / UNDER FUNDED STATUS

U.S. (2,298) (2,286) (2,286)

Canada (1,470) (1,411) (1,411)

Total (3,768) (3,697) (3,697)

U.S. ASSUMPTIONS (Year End)

Expected Long-Term Asset Return 7.5% 7.5% 7.5%

Discount Rate – Ongoing Benefits (Weighted Average)

5.4% 5.4% 5.4%


Non-GAAP Financial Information

The following Non-GAAP Financial definitions apply when the presentation is referring to Net Profit /(Loss), EBITDA, Cash, and Industrial Debt

(a) A reconciliation of U.S. GAAP Net Profit/(Loss) from EBITDA and Operating Profit/(Loss) for the three

and six months ended June 30, 2010, as well as the three months ended March 31, 2010, is detailed on

Page 5

(b) Modified EBITDA (referred to as EBITDA in the presentation) is computed starting with net income

(loss) and then adjusting the amount to (i) add back income taxes, (ii) add back net interest expense

(excluding interest expense related to Gold Key Lease financing activities), (iii) add back depreciation

and amortization expense (excluding depreciation and amortization expense of vehicles held for lease),

(iv) add back all pension, OPEB and other employee benefit costs other than service costs, (v) add back

restructuring expense, (vi) add back other financial loss, (vii) add back losses and exclude gains due to

cumulative change in accounting principles, and (viii) add back all other non-recurring costs, charges

and expenses. The reconciliation of U.S. GAAP Net Profit/(Loss) from Modified EBITDA for the three

and six months ended June 30, 2010, as well as the three months ended March 31, 2010, is detailed on

Page 5

(c) Cash is defined as Cash, Cash Equivalents and Marketable Securities

(d) A reconciliation of U.S. GAAP Financial Liabilities to Pro-Forma Gross Industrial Debt at June 30, 2010,

March 31, 2010 and December 31, 2009 is detailed on Page 26


Contacts

Chrysler Investor Relations

Timothy Krause phone: 248-512-2923

email: [email protected]

Chrysler Communications

Gualberto Ranieri phone: 248-512-2226

email: [email protected]

Website

www.chryslergroupllc.com

q2 2010 results review - fca groupq1 2009 q2 2009 q3 2009 q4 2009 q1 2010 q2 2010 u.s. retail...

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