Chrysler Losses Post-Buyout

DETROIT (AP) — Chrysler LLC lost about $2.7 billion in the two months after Daimler AG sold controlling interest in the U.S. automaker to a New York private equity firm, Daimler said in its annual report Wednesday.


The figure, for the period from Aug. 4, 2007 to Sept. 30, was calculated under international financial reporting standards used in Europe and not under U.S. accounting standards, Daimler said.


The net loss also includes about $466 million in expenses incurred in the fourth quarter of last year, including Chrysler restructuring costs and costs related to a new four-year contract with the United Auto Workers, Daimler said in its report, filed with the U.S. Securities and Exchange Commission.


Daimler reported that for the full year in 2007, Chrysler lost 870 million euros, or roughly $1.2 billion when converted at the euro-to-dollar exchange rate that Daimler reported for the third quarter. It was unclear how much of Chrysler's fourth-quarter results were included in the figure because neither Daimler nor Chrysler would answer questions about the report.


The figures, though, give a glimpse into how Chrysler has performed financially since Daimler sold 80.1 percent of the automaker to New York-based Cerberus Capital Management LP in August. Chrysler now is a privately held company and is no longer required to report its earnings.


Daimler also said in its report that former Chrysler Chief Executive Tom LaSorda received about $18.9 million from Daimler last year, including a roughly $14.3 million payment made after the sale to Cerberus took place.


Former Chief Operating Officer Eric Ridenour received about $7.5 million, including a $4.4 million payment made after the sale.


Chrysler spokesman David Barnas would not confirm or deny the loss figures as accurate, but said the automaker has ample cash and capital dollars to meet its present and future objectives.


“Since August and the return of Chrysler as an independent company, we have not only been meeting but in many cases exceeding all key metrics,” Barnas said. “We are making the tough decisions for the long-term health of the company.”


Daimler spokesman Thomas Frohlich deferred all questions to the annual report.


The difference between Daimler's use of international accounting standards and Chrysler's use of U.S. standards probably would not make a huge difference in the numbers, two accounting experts told The Associated Press.


Robert Willens, owner of a tax and accounting advisory firm in New York, said the two standards are getting closer.


“It's been converging over the years, so there are very few differences at this point,” he said.


Randy Paschke, chairman of the accounting department at Wayne State University's business school in Detroit, said there could be some exceptions in the way expenses are accrued, but in general the numbers should be close.


“I wouldn't think you're going to have huge differences unless there's a particular issue that came up in that period,” he said.


Much of Chrysler's loss likely was for restructuring costs related to separating the two companies, Paschke said.


“There must be a lot of nonrecurring stuff in there,” said Burnham Securities analyst David Healy. “I think they're probably hemorrhaging cash, but a lot less than the losses, which are probably asset re-valuations.”


The payments to LaSorda and Ridenour include salary, benefits, performance bonuses, company cars, security expenses and what Daimler described as “mid-term and long-term compensation.” Both men were members of the former DaimlerChrysler AG's Board of Management. LaSorda remains with the company as vice chairman and president, while Ridenor left.


The payments after the sale “were intended to facilitate a timely and successful transaction while at the same time defining the conditions for a retirement from the board by Mr. LaSorda and Mr. Ridenour,” the annual report said.


Cerberus hired Robert Nardelli, former CEO of The Home Depot Inc., as Chrysler's chairman and CEO, and it brought in former top Toyota Motor Corp. executive Jim Press as vice chairman and president. The company is in the midst of shedding thousands of jobs, consolidating its model lineup and thinning its dealer ranks as it tries to return to profitability.


Chrysler sales were down 3 percent last year as falling truck and SUV sales erased gains on the car side.