With slow sales, Chrysler conserves cash to live to fight another day

Peter Brown is publisher and editorial director of Automotive News
Yes, Chrysler sales are down this year, even though the U.S. market is up 10 percent from the miserable start of 2009.

And no, Sergio Marchionne doesn't care.

Well, I suppose he cares, kind of. But the Fiat/Chrysler CEO is not running any sales races. Like a hibernating bear, he is conserving body fat -- in Chrysler's case, money.

"We're not burning cash," Marchionne repeated last night in a talk to a group of Canadian and U.S. suppliers.

And that's the key to understanding Marchionne's leadership of Chrysler in this early phase of an economic recovery. As long as Chrysler doesn't run out of cash -- and its cash horde is only something above $5 billion, which is chicken feed for an automaker -- the company will live to fight another day.

Some dealers are frustrated that the company isn't marketing its cars and trucks more aggressively. But emptying the piggy bank to move the metal could destroy the company.

"Mainstream car advertising is totally ineffective," Marchionne said. And he knows that Chrysler's aging vehicle lineup would require tremendous pricing incentives to fly off dealers' lots.

So he's being realistic about his place in the marketplace.

"Our share numbers today reflect a non-drug-induced value of our brands," he told the suppliers. Of course, Toyota's sudden flood of incentives to overcome safety problems presents a new challenge to Chrysler's market discipline.

Chrysler's marketing spending is geared to a much lower volume than the company used to spend. Said the thrifty Marchionne: "If you can avoid bleeding cash at these levels," you'll make a lot of money when the economy gets healthy and new vehicles join the lineup.

He said Chrysler is studying designs for a new mid-market car, based on Fiat underpinnings, that will fight in the huge middle of the market.

Meantime, he reiterated that Chrysler needs to break even on operations this year: Red ink will indicate failure.

So when you see Chrysler's sales numbers, remember the hibernating bear. Conserve cash.