Chrysler is likely to incur further losses but is meeting its financial targets and has "ample" liquidity, according to the Detroit carmaker and its controlling shareholder.
Cerberus Capital Management, the hedge fund, and Chrysler made the comments in response to reports that Chrysler was in a crisis forcing it into a fire sale of assets and cost-cutting.
Cerberus bought an 80 per cent stake in Chrysler from Germany's Daimler in August. Daimler retains the remaining 20 per cent.
Cerberus has shaken up management, eliminated poorly-selling models and cut back production.
Chrysler expects to lose $1.6bn this year following a $1.1bn operating loss in 2006. Sales of its Chrysler, Dodge and Jeep brands were 3.4 per cent lower in the first 11 months than in the same period last year. Sales of the Dodge Ram pick-up, the company's top-selling vehicle, were 12 per cent lower in November than a year ago.
Besides the overall dip in US market, Chrysler has been hurt by its dependence on high-margin sport-utility vehicles, pick-up trucks, and minivans.
Chrysler said it was "doing what any other prudent company is doing during this challenging economic environment. We are trying to instill a sense of urgency throughout the workforce, putting our capital to work effectively and efficiently, streamlining inventory, improving current products and developing new and innovative vehicles". It noted that vehicle inventories shrank by 4 per cent in November.
Mark Neporent, Cerberus's chief operating officer, said that the fund remained "extremely enthusiastic about our investment". He said that while "our underwriting assumed, and fully planned, that Chrysler would incur losses in the near term . . . Chrysler is already on track to exceed its multi-year restructuring and recovery plan on virtually all key metrics".
