DETROIT -- Executive pay restrictions imposed by the federal government as part of Chrysler's bailout have lifted with the company's exit from U.S. ownership last week. But CEO Sergio Marchionne says that does not mean the company will loosen the purse strings.
Assumptions that "we're going to start distributing cash indiscriminately are probably misplaced," Marchionne said today on a conference call discussing Chrysler's second quarter earnings with journalists and analysts.
The pay restrictions lifted on July 21 when Fiat acquired the government's remaining 6 percent stake in Chrysler.
Chrysler was restricted from paying executives more than $500,000 as part of a 2009 rescue package financed by the U.S. Department of Treasury's Troubled Asset Relief fund. General Motors Co. remains under similar restrictions as part of its government rescue.
"The compensation restrictions are all gone," Marchionne said. Chrysler intends to "remain competitive" on compensation, but will stay in line with an industry trend toward more restraint on pay, he said.
Chrysler reported a net loss of $370 million during the second quarter compared to a $172 million loss during the period a year ago. The loss followed a profit of $116 million in the first quarter.
Chrysler incurred a charge of $551 million related to the final payment of U.S. Department of Treasury and Canadian loans that kept the automaker afloat in 2009.
"Modified" operating profit nearly tripled from a year earlier to $507 million, while revenue climbed 30 percent to $13.7 billion, the company said today. Chrysler defines modified operating profit as profit before interest, taxes, pensions and certain special items.
Also on today's call:
- Marchionne revealed further details about an eight-speed automatic transmission that will be coming on the 2012 Chrysler 300 and Dodge Charger sedans. Versions of the 300 powered by the company's Pentastar V-6 engine, coupled with the eight-speed automatic, will get 31 mpg on the highway, Marchionne said. Initially, the transmission will be imported from a ZF Friedrichshafen AG plant in Germany. Chrysler will begin U.S. production of the new gearbox at its transmission factory in Kokomo, Ind., in 2012. Chrysler is licensing the technology from ZF. The transmission is designed for rear-wheel drive vehicles. Starting in 2013, Chrysler will also begin making a nine-speed transmission for front-wheel drive applications with technology licensed from ZF, he said.
- Chrysler confirmed its U.S. fleet mix has dropped to 32 percent of all sales, down from 40 percent a year ago. Retail market share increased to 9.2 percent at the end of June from 7.3 percent a year ago. Total market share, including fleet, stood at 10.6 percent through June, up from 9.4 percent a year ago.
- There will be just two truly global brands under the Chrysler-Fiat alliance, Marchionne said. Those are Jeep and Alfa Romeo. In China, Chrysler will have an "inescapable commitment" to produce Jeeps locally. "The Jeep Wrangler will continue to be made here in the U.S. It's too important,' Marchionne said. "Other things need to be looked at." Jeep will also increase its presence in Brazil, but the Brazilian market is still dominated by A and B segment cars, which could limit Jeep's appeal and sales penetration, said Marchionne, who was speaking from Fiat's Brazil headquarters in Belo Horizonte.
- Alfa Romeo's return to the U.S. now has been delayed until 2013.
New models drive results
Helped by new models and a big advertising push, Chrysler's second-quarter worldwide sales increased 19 percent to 486,000 units.
Cash reserves rose $300 million during the past three months to $10.2 billion.
"There is no doubt that Chrysler Group has taken a huge step forward this quarter," Marchionne said in a statement. "Refinancing our debt and repaying our government loans six years early reinforces our conviction that we are on the right path to rebuilding this company and restoring it to its rightful place on the global automotive landscape."