Chrysler Cool to Executive Pay Hikes; Wrangler Output to Remain in U.S.

Expect Chrysler to hold the purse strings on executive compensation, even though the auto maker now is unencumbered by government-imposed pay restrictions, CEO Sergio Marchionne says.

Despite promising financial results and strong sales, Marchionne says Chrysler has no plans to issue across-the-board raises to executives whose compensation effectively was frozen as part of 2009’s $12.5 billion emergency-loan deal with the U.S. Treasury Dept.

The loans, of which $11.2 billion was repaid under the tutelage of Chrysler’s alliance-partner Fiat, rescued Chrysler from bankruptcy.

The pay restrictions no longer apply because of Fiat’s acquisition last week of the Treasury’s remaining stake in Chrysler, which also was part of the loan agreement.

Today’s announcement by Marchionne, who also leads Fiat, comes as Chrysler enters critical contract negotiations with the United Auto Workers union, which represents some 23,000 hourly employees.

The auto maker today reports a second-quarter net loss of $370 million, blaming a $551 million outlay to pay down debt.

Minus the one-time charge, Chrysler earned $181 million in the second quarter, a $353 million swing from like-2010. “That’s the figure that really matters to us,” Marchionne tells journalists and industry analysts in a conference call from Brazil.

The financials come hard on the heels of June’s U.S. sales results, which saw Chrysler record a 24.5% gain, compared with like-2010, the largest of any high-volume auto maker, according to Ward’s data.

Jeep Wrangler “too important,” says Sergio Marchionne.

Through the first six months of 2011, Chrysler deliveries were tracking 21.1% ahead of prior-year, good for second place among volume players behind Hyundai-Kia.

Meanwhile, Marchionne says he is making “final adjustments” to a combined Fiat-Chrysler management organization and will reveal details “in a few days.”

He declines comment when asked by Ward’s if he will remain CEO of Chrylser.

However, Marchionne is more candid about production plans for the Jeep Wrangler. Despite Chrysler’s ambitions for the brand in China’s vibrant new-vehicle market, the “iconic” SUV is “too important” to be assembled anywhere but the U.S., he says.

Chrysler’s assembly complex in Toledo, OH, is the sole source of Wrangler production. The site also is expected to produce an Alfa Romeo cross/utility vehicle based on a Fiat-derived platform dubbed C-U.S. Wide.

Jeep and Alfa Romeo are the only brands in the Fiat-Chrysler stable with sufficient appeal to be sold globally, with Jeep “first and foremost,” Marchionne says.

Chrysler now is launching the Jeep Compass cross/utility vehicle in China, where the Wrangler already is on sale, along with its platform-mate Jeep Patriot; the Jeep Grand Cherokee SUV; Chrysler Town & Country and Dodge Grand Caravan minivans; and the Dodge Journey CUV.

The Journey, Marchionne adds, is being sold in Europe and South America as the Fiat Freemont. Its performance in those markets – more than 13,000 orders since its second-quarter launch – serves as “a great lesson” for Chrysler in the U.S., where deliveries were slightly less, according to Ward’s data.

Marchionne suggests Journey sales in the U.S. would benefit from more aggressive marketing, but says later he has no intention of returning to the pre-bankruptcy “heyday” of discount pricing.

Chrysler leaves its full-year guidance unchanged. The auto maker expects an adjusted net income of $200 million to $500 million on net revenues in the range of $55 billion.

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