Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 125± 548K
2: EX-12 Computation of Earnings 2± 9K
3: EX-21 Subsidiaries 5 30K
4: EX-23 Consent of Deloitte & Touche LLP 2± 8K
5: EX-24 Powers of Attorney 12 23K
6: EX-27 Financial Data Schedule 1 6K
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FORM 10-K -- ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-9161
CHRYSLER CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
(State or other jurisdiction of
incorporation or organization)
1000 CHRYSLER DRIVE, AUBURN HILLS, MICHIGAN
(Address of principal executive offices)
38-2673623
(I.R.S. Employer
Identification No.)
48326-2766
(Zip Code)
(248) 576-5741
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on
Title of each class which registered
------------------------------- --------------------------
Common Stock, $1.00 par value; New York Stock Exchange
Rights to Purchase Junior Participating Chicago Stock Exchange
Cumulative Preferred Stock, $1.00 Pacific Stock Exchange
par value Philadelphia Stock Exchange
7.45% Debentures Due 2097 New York Stock Exchange
7.40% Debentures Due 2097 New York Stock Exchange
7.45% Debentures Due 2027 New York Stock Exchange
Auburn Hills Trust Guaranteed
Exchangeable Certificates Due 2020 New York Stock Exchange
The Common Stock of the Registrant is listed for trading on the following
additional stock exchanges:
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Montreal Stock Exchange Montreal, Quebec, Canada
Toronto Stock Exchange Toronto, Ontario, Canada
The Stock Exchange, London London, England
Frankfurt Stock Exchange Frankfurt, Germany
Berlin Stock Exchange Berlin, Germany
Munich Stock Exchange Munich, Germany
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No . [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant was approximately $22.82 billion as of December 31, 1997.
The registrant had 648,429,715 shares of Common Stock outstanding as of
December 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in Chrysler Corporation's definitive Proxy Statement
for its 1998 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year, is incorporated by reference in Part
III (Items 10, 11, 12 and 13) of this Form 10-K.
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CHRYSLER CORPORATION
FORM 10-K
---------
YEAR ENDED DECEMBER 31, 1997
INDEX
-----
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Page No.
--------
PART I.
Item 1. Business.......................................... 3 - 14
Item 2. Properties........................................ 15
Item 3. Legal Proceedings................................. 16 - 17
Item 4. Submission of Matters to a Vote
of Security Holders............................... 17
Executive Officers of the
Registrant (Unnumbered Item)................................................. 18
PART II.
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.................... 19
Item 6. Selected Financial Data............................ 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 21 - 28
Item 8. Financial Statements and Supplementary Data........ 29 - 61
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............. 62
PART III.
Items 10, 11, 12 and 13. (Incorporated by reference from Chrysler
Corporation's definitive Proxy Statement which will
be filed with the Securities and
Exchange Commission, pursuant to
Regulation 14A, not later than 120 days
after the end of the fiscal
year).............................................. 62
PART IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................ 62 - 76
SIGNATURES................................................................................. 77 - 78
2
PART I
------
ITEM 1. BUSINESS
----------------
CHRYSLER CORPORATION
--------------------
GENERAL
-------
Chrysler Corporation was incorporated under the laws of the State of
Delaware on March 4, 1986, and is the surviving corporation following mergers
with a number of its operating subsidiaries, including a predecessor
corporation, which was originally incorporated in 1925.
Chrysler Corporation and its consolidated subsidiaries ("Chrysler") operate
in two principal industry segments: Automotive Operations and Financial
Services. Automotive Operations include the research, design, manufacture,
assembly and sale of cars, trucks and related parts and accessories.
Substantially all of Chrysler's automotive products are marketed through retail
dealerships, most of which are privately owned and financed. Financial Services
include the operations of Chrysler Financial Corporation and its consolidated
subsidiaries ("CFC"), which are engaged principally in providing consumer and
dealer automotive financing for Chrysler's products. Prior to December 23, 1997,
Chrysler participated in short-term vehicle rental activities through certain of
its subsidiaries. Chrysler's principal executive offices are located at Chrysler
World Headquarters, 1000 Chrysler Drive, Auburn Hills, Michigan 48326-2766. The
telephone number of those offices is (248) 576-5741.
AUTOMOTIVE OPERATIONS
---------------------
Chrysler manufactures, assembles and sells cars and trucks under the brand
names Chrysler, Dodge, Plymouth, Eagle and Jeep(R), and related automotive parts
and accessories, primarily in the United States, Canada and Mexico ("North
America"). Passenger cars are offered in various size classes and models.
Chrysler produces trucks in pickup, sport-utility and van/wagon models, which
constitute the largest segments of the truck market. Chrysler also purchases and
distributes certain passenger cars manufactured in the United States by
Mitsubishi Motors Corporation's ("MMC") subsidiary, Mitsubishi Motor
Manufacturing of America ("MMMA").
Although Chrysler currently sells most of its vehicles in North America,
Chrysler also participates in other international markets through its wholly
owned subsidiaries in Argentina, Brazil, Venezuela, Taiwan, Korea, Egypt,
Austria, Italy, France, Belgium, the Netherlands and Germany, a majority-owned
distributor in Japan, a joint venture in Austria, and through minority-owned
affiliates located in China, Thailand and Egypt. Chrysler sells vehicles and
parts, and provides related services, to independent distributors and dealers
in various other markets throughout the world.
Chrysler's strategy is to focus on its core automotive business. As part of
this strategy, in December 1997, Chrysler completed an initial public offering
("IPO") of the common stock of its subsidiary Dollar Thrifty Automotive Group,
Inc. ("DTAG", formerly known as Pentastar Transportation Group, Inc.). Through
its DTAG subsidiary, Chrysler owned Thrifty Rent-A-Car System, Inc. and Dollar
Rent A Car Systems, Inc., which operate separate daily vehicle rental
businesses. In addition, in 1996, Chrysler sold Electrospace Systems, Inc. and
Chrysler Technologies Airborne Systems, Inc., which are principally engaged in
the manufacture of defense electronics and aircraft modification, respectively.
Also, in January 1997, Chrysler completed the sale of Pentastar Electronics,
Inc., which produces automatic test equipment for military applications. During
the past several years, Chrysler also sold other assets and businesses which
were not related to its core automotive business.
NORTH AMERICAN OPERATIONS
-------------------------
The automotive industry in North America is highly competitive with respect
to a number of factors, including vehicle quality, pricing, development and
introduction time, appearance, size, special options, distribution organization,
warranties, reliability, safety, fuel economy, dealer service and financing
terms. As a result, Chrysler's ability to change vehicle prices and to use
retail sales incentives effectively is significantly affected by the pricing
actions and sales programs of its principal competitors. Moreover, the
introduction of new products by other manufacturers may adversely affect the
market shares of competing products made by Chrysler. Recently, Chrysler has
been very successful in bringing new products to market in greatly reduced
vehicle development time. However, several of Chrysler's competitors have larger
worldwide sales volumes and greater financial resources, which may, over time,
place Chrysler at a competitive disadvantage in responding to its competitors'
offerings, substantial changes in consumer preferences, governmental
regulations, or adverse economic conditions in North America.
3
ITEM 1. BUSINESS - CONTINUED PART I -- CONTINUED
--------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
NORTH AMERICAN OPERATIONS -- CONTINUED
--------------------------------------
Chrysler's long-term profitability will depend significantly on its ability
to continue its capital expenditure and vehicle development programs and to
market its products successfully in an increasingly competitive automotive
environment. The success of Chrysler's new vehicles will depend on a number of
factors, including general economic conditions, competition, consumer
acceptance, product quality, new product development, the effect of governmental
regulation and the strength of Chrysler's marketing and dealer networks. As both
Chrysler and its competitors plan to introduce new products, Chrysler cannot
predict the market shares its new products will achieve. Moreover, Chrysler is
substantially committed to its product plans and would be adversely affected by
events requiring a major shift in product development.
Chrysler's principal competitors in North America are General Motors
Corporation and Ford Motor Company. In addition, a number of foreign automotive
companies, principally Toyota Motor Corporation, Honda Motor Co., Ltd. and
Nissan Motor Co., Ltd., own and operate manufacturing and/or assembly facilities
in North America ("transplants"), and there are a number of other foreign
manufacturers that distribute cars and light-duty trucks in North America.
UNITED STATES
-------------
The tables below set forth comparative market share data for retail sales
of cars and trucks in the United States for the U.S. manufacturers (including
cars and trucks imported by them) and for foreign-based manufacturers, and unit
sales of passenger cars and trucks (including imports) by Chrysler.
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YEAR ENDED DECEMBER 31
---------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(PERCENT OF TOTAL INDUSTRY)
U.S. Car Market Share (1):
--------------------------
U.S. Manufacturers (Including Imports):
General Motors........................................... 32.2% 32.3% 33.9% 34.0% 34.1%
Ford..................................................... 19.5 20.3 20.7 21.6 22.1
Chrysler................................................. 8.9 9.7 9.1 9.0 9.8
----- ----- ----- ----- -----
Total U.S. Manufacturers............................. 60.6 62.3 63.7 64.6 66.0
Foreign-Based Manufacturers (2):
Japanese................................................. 31.0 30.1 29.7 29.5 29.1
All Other................................................ 8.4 7.6 6.6 5.9 4.9
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers.................... 39.4 37.7 36.3 35.4 34.0
----- ----- ----- ----- -----
Total........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
U.S. Truck Market Share (1) (3):
--------------------------------
U.S. Manufacturers (Including Imports):
General Motors........................................... 28.8% 29.0% 29.9% 30.9% 31.4%
Ford..................................................... 31.1 31.0 31.9 30.1 30.5
Chrysler................................................. 21.7 23.4 21.3 21.7 21.4
All Other................................................ 1.9 1.8 2.0 2.0 1.9
----- ----- ----- ----- -----
Total U.S. Manufacturers............................. 83.5 85.2 85.1 84.7 85.2
Foreign-Based Manufacturers (2):
Japanese................................................. 14.1 12.8 12.7 13.5 13.2
All Other................................................ 2.4 2.0 2.2 1.8 1.6
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers.................... 16.5 14.8 14.9 15.3 14.8
----- ----- ----- ----- -----
Total........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
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Unit Sales (1):
--------------- (IN THOUSANDS OF UNITS)
U.S. Industry Retail Sales:
Cars..................................................... 8,272 8,527 8,635 8,990 8,518
Trucks (3)............................................... 7,226 6,929 6,481 6,421 5,681
------ ------ ------ ------ ------
Total................................................ 15,498 15,456 15,116 15,411 14,199
====== ====== ====== ====== ======
Chrysler U.S. Retail Sales (Including Fleet):
Cars..................................................... 737 833 786 812 834
Trucks (3)............................................... 1,567 1,618 1,378 1,392 1,214
------ ------ ------ ------ ------
Total................................................ 2,304 2,451 2,164 2,204 2,048
====== ====== ====== ====== ======
----------------------------
(1) All U.S. retail sales data are based on publicly available information on
manufacturers from the American Automobile Manufacturers Association and
data on foreign company imports from Ward's Automotive Reports, a trade
publication.
(2) "Foreign-Based Manufacturers" include imports and vehicles assembled and
sold in the United States by foreign companies.
(3) U.S. truck retail sales and market share data include minivans.
4
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
NORTH AMERICAN OPERATIONS -- CONTINUED
--------------------------------------
UNITED STATES -- CONTINUED
--------------------------
Competition from foreign car and truck manufacturers, in the form of both
exports to the United States and sales by transplants, is substantial. The
market share for passenger cars sold in the United States (including
transplants) by foreign-based manufacturers was 39.4 percent in 1997, compared
to 37.7 percent in 1996. The market share for trucks sold in the United States
(including transplants) by foreign-based manufacturers was 16.5 percent in
1997, compared to 14.8 percent in 1996. Vehicles assembled in the United States
by Japanese manufacturers and, in recent years, the strengthening of the U.S.
dollar against the Japanese yen and most European currencies, have contributed
to the increase in the car market share obtained by foreign-based manufacturers.
Japanese transplant sales accounted for approximately 22.3 percent of the U.S.
passenger car market and 5.4 percent of the U.S. truck market in 1997, compared
to 21.8 percent and 5.3 percent, respectively, in 1996.
Chrysler's vehicle shipments in the United States in 1997 were 2,312,417
units, which represent 80 percent of Chrysler's 1997 worldwide shipments of
2,886,981 units. Chrysler's vehicle shipments in the United States in 1996 were
2,445,820 units, which represent 83 percent of Chrysler's 1996 worldwide
shipments of 2,958,800 units.
CHRYSLER CANADA LTD.
--------------------
Chrysler's wholly owned subsidiary, Chrysler Canada Ltd. ("Chrysler
Canada"), operates manufacturing and assembly facilities and sales and
distribution networks in Canada. Chrysler Canada, whose operations are
substantially integrated with Chrysler's U.S. operations, manufactures
components and assembles minivans, large sedans and full-size vans.
In 1997 and 1996, Chrysler Canada shipped 625,079 vehicles and 690,948
vehicles, respectively, the majority of which were sold outside of Canada. The
decrease in shipments from 1996 was primarily due to the changeover to
Chrysler's all-new Dodge Intrepid and Chrysler Concorde sedans, which are
produced in Canada. Chrysler Canada's retail sales totaled 256,162 vehicles in
1997 and 239,514 vehicles in 1996, the majority of which were manufactured
outside of Canada. Chrysler Canada's retail unit sales of cars accounted for
11.8 percent and 13.1 percent of the Canadian car market in 1997 and 1996,
respectively. In 1997, retail unit sales of trucks accounted for 24.7 percent
of the Canadian truck market compared with 28.2 percent in 1996. In 1997,
Chrysler Canada ranked third in the Canadian industry in retail unit sales for
both cars and trucks.
CHRYSLER DE MEXICO S.A.
-----------------------
Chrysler's wholly owned subsidiary, Chrysler de Mexico S.A. ("Chrysler
Mexico"), operates manufacturing and assembly facilities in Mexico, producing
vehicles and components for both Mexican and export markets. In addition,
Chrysler Mexico provides certain major automobile components to Chrysler,
including engines and transmissions.
Chrysler Mexico shipped 347,739 vehicles in 1997 and 359,444 vehicles in
1996. Of these totals, 50,294 vehicles and 36,283 vehicles were sold in Mexico
in 1997 and 1996, respectively. Sales of vehicles exported to Mexico were 20,573
vehicles and 17,221 vehicles in 1997 and 1996, respectively.
Chrysler Mexico's retail unit sales accounted for 13.8 percent of the
Mexican car market and 14.5 percent of the Mexican truck market in 1997,
compared with 14.4 percent and 19.9 percent, respectively, in 1996. Within the
Mexican industry, Chrysler Mexico's retail unit sales ranked fifth in cars and
third in trucks in 1997. Retail industry sales in Mexico are estimated to have
been approximately 480,000 units in 1997, 332,000 units in 1996, and 232,600 in
1995. The Mexican economy had been growing until late 1994, when the Mexican
peso suffered a significant devaluation. In 1996, the Mexican economy began to
recover. However, retail industry sales have not returned to predevaluation
levels. Although Chrysler expects the economic conditions in Mexico to continue
to improve in 1998, Chrysler cannot predict when Mexican automotive industry
sales will return to predevaluation levels. Chrysler's operating results, when
compared to operating results prior to the devaluation of the peso, will
continue to be adversely affected to the extent that the unfavorable economic
conditions in Mexico continue.
INTERNATIONAL OPERATIONS
------------------------
Outside of North America, the automotive industry consists of numerous
manufacturers, with no single dominant producer. However, certain manufacturers
account for a majority of total vehicle sales within specific countries. Many of
the factors that impact sales volumes and profitability in the North American
automotive market are also prevalent outside of North America.
5
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
INTERNATIONAL OPERATIONS -- CONTINUED
-------------------------------------
Chrysler shipments in markets outside of North America in 1997 were 189,536
units, an increase of 2,479 units from 1996. Retail sales in European markets in
1997 were 105,918 units, compared to 102,139 units in 1996. Retail sales in
other world markets, primarily Japan, Taiwan, Australia, Brazil and the Middle
East, were 131,142 units in 1997, compared to 119,896 units in 1996. In
addition, Chrysler exported 42,780 kits to worldwide affiliates for assembly in
1997, compared to 36,600 kits in 1996. The majority of the kits were Jeep
products shipped to Venezuela, China and Argentina.
Chrysler's international operations are divided primarily into three
regions: Europe, Asia-Pacific, and Latin America-Middle East-Africa.
EUROPE
------
Outside of North America, Europe is the largest market for the sale of
Chrysler vehicles. Chrysler's automotive operations in Europe consist primarily
of manufacturing operations in Austria, where Jeep Grand Cherokees are assembled
under an assembly contract with Steyr-Daimler-Puch Fahrzeugtechnik ("Steyr") and
Chrysler Voyagers are assembled by Eurostar Automobilwerk Ges.mb.H & Co. KG
("Eurostar"), a joint venture between Chrysler and Steyr. Chrysler vehicles
assembled in Austria are sold in Europe and exported to other markets. Chrysler
also exports finished vehicles produced in North America and Mexico to wholly
owned distribution companies in Austria, Italy, France, Belgium, the Netherlands
and Germany and to independent distributors and dealers. In addition, Chrysler
has its European headquarters in Brussels, Belgium. During 1997, Chrysler
established wholly owned distribution companies in Austria, Belgium, the
Netherlands and Germany.
ASIA/PACIFIC
------------
Chrysler's automotive operations in the Asia-Pacific region include the
assembly in China of Jeep Cherokees for distribution in China by Beijing Jeep
Corporation, Ltd., a minority-owned joint venture. In addition, Chrysler has
agreements for the assembly of right-hand-drive Jeep vehicles in Malaysia,
Indonesia and Thailand. Chrysler sells vehicles in this region through wholly
owned distributors in Taiwan and Korea, a majority-owned distributor in Japan
and independent distributors and dealers. During 1997, Chrysler established its
regional headquarters in Singapore.
LATIN AMERICA-MIDDLE EAST-AFRICA
--------------------------------
Chrysler's operations in the Latin America-Middle East-Africa region
include manufacturing facilities in Venezuela, where Chrysler Neons and Jeep
Cherokees and Grand Cherokees are assembled, and in Argentina, where Jeep Grand
Cherokees are assembled, and wholly owned distribution companies in Brazil,
Argentina, Venezuela, and Egypt. Chrysler also has a minority interest in a
company with assembly facilities in Egypt. Chrysler sells vehicles in this
region through its wholly owned distribution companies and through independent
distributors and dealers. In January 1997, Chrysler entered into an agreement to
form a joint venture with Bayerische Motoren Werke ("BMW") to manufacture a
small gasoline engine in Brazil for use in vehicles of both Chrysler and a
subsidiary of BMW. In addition, in 1997, Chrysler began construction of a
manufacturing facility in Brazil, where Dodge Dakota pickup trucks will be
assembled beginning in 1998. Also in 1997, Chrysler established its wholly owned
distribution company in Egypt.
INTERNATIONAL STRATEGY
----------------------
Chrysler's international expansion strategy is based primarily on the
integration of international and North American product development which
enables Chrysler to satisfy market demands for right-hand-drive versions shortly
after left-hand-drive versions debut in North America. In 1997, five
right-hand-drive models (Chrysler Neon and Voyager, and Jeep Cherokee, Grand
Cherokee and Wrangler) were available for sale in certain international
markets. Also as part of its international expansion strategy, Chrysler expects
to continue to focus on growth opportunities in major markets in Western
Europe, Japan and China and explore developing markets in South America,
Eastern Europe and the Asia-Pacific region. New manufacturing and joint venture
operations could be established if market conditions, sales levels and
profitability opportunities are consistent with Chrysler's corporate
objectives.
FOREIGN CURRENCY EXCHANGE RATE RISK
-----------------------------------
A discussion of Chrysler's risks related to foreign currency exchange rate
changes and how Chrysler manages that risk is included in Part II, Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Derivative Financial Instruments.
6
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
SEGMENT INFORMATION
-------------------
Industry segment and geographic area data for 1997, 1996 and 1995 are
summarized in Part II, Item 8, Notes to Consolidated Financial Statements, Note
18.
SEASONAL NATURE OF BUSINESS
---------------------------
Reflecting retail sales fluctuations of a seasonal nature, production
varies from month to month in the automotive business. In addition, the
changeover period related to model-year introductions has traditionally occurred
in the third quarter of each year. Accordingly, third-quarter operating results
are generally less favorable than those in the other quarters of the year.
AUTOMOTIVE PRODUCT PLANS
------------------------
Chrysler's automotive design and development activities are organized into
cross-functional product development groups called "platform teams." The
platform team system is designed to improve communications, reduce the design
and development time of new vehicles, improve product quality, and reduce the
cost of developing new vehicle lines. The platform team concept has contributed
significantly to Chrysler's success in recent years.
In 1997, Chrysler began production of the Plymouth Prowler convertible, the
Dodge Ram Quad Cab and the improved Viper RT/10 Roadster. For the 1998 model
year, Chrysler introduced completely redesigned Chrysler Concorde and Dodge
Intrepid sedans as successor models to the cars that began Chrysler's
distinctive "cab-forward" passenger car designs. No major body components were
carried over from the previous models. Also new for the 1998 model year are the
Jeep Grand Cherokee 5.9 Limited and the Dodge Durango. For the 1999 model year,
Chrysler intends to add to its product lineup a redesigned Chrysler LHS sedan, a
new luxury model named the Chrysler 300M and an all-new Jeep Grand Cherokee.
During 1997, Chrysler announced the discontinuation of the Eagle brand at
the end of the 1998 model year.
AUTOMOTIVE MARKETING
--------------------
New passenger cars and trucks are sold at retail by dealers who have sales
and service agreements with Chrysler. The dealers purchase cars, trucks, parts
and accessories from Chrysler for sale to retail customers. In the United
States, Chrysler had 4,552 dealers at December 31, 1997, compared with 4,612 at
December 31, 1996. Chrysler Canada had 588 dealers at December 31, 1997,
compared with 598 dealers at December 31, 1996.
The quality and strength of Chrysler's dealer organization will have a
significant impact on future sales. Chrysler maintains programs to provide
dealership operating capital through equity investments where sufficient private
capital is not available. The programs anticipate that the dealer receiving such
assistance will eventually use its share of the dealership profits to purchase
Chrysler's equity investment. Chrysler's equity interest in U.S. and Canadian
dealerships totaled $14 million in 38 dealerships as of December 31, 1997,
compared with $17 million in 43 dealerships as of December 31, 1996.
Chrysler continues to focus on quality customer service. A customer
satisfaction survey process provides Chrysler and its franchised dealers
continuous customer feedback regarding dealer sales, service and parts
operations. In addition, the Chrysler Customer Center is designed to promote
customer satisfaction and communicate customer concerns to dealers and
internally to vehicle platform teams.
MANUFACTURED AND PURCHASED PRODUCTS, COMPONENTS AND MATERIALS
-------------------------------------------------------------
Chrysler manufactures most of its requirements for engines, transmissions
and transaxles, certain body stampings, electronic components, and fabricated
glass parts.
7
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
MANUFACTURED AND PURCHASED PRODUCTS, COMPONENTS AND MATERIALS-CONTINUED
-----------------------------------------------------------------------
Chrysler purchases materials, parts and other components from numerous
unaffiliated suppliers. Chrysler used approximately 972 suppliers of productive
materials in 1997, compared to approximately 1,050 in 1996. Interruptions in
production or delivery of these productive materials could adversely affect
Chrysler. Chrysler purchases a larger portion of its productive materials from
unaffiliated suppliers than do its principal competitors and expects to continue
purchasing these items rather than manufacturing them.
MITSUBISHI MOTORS CORPORATION
-----------------------------
In 1996, Chrysler and Mitsubishi Motors Corporation ("MMC") terminated the
United States Distribution Agreement ("USDA") under which Chrysler imported and
distributed selected models of passenger cars manufactured by MMC in Japan. A
similar distribution agreement covering the Canadian market was also terminated
in 1996. During 1996, Chrysler sold 4,692 MMC-manufactured vehicles in the
United States. Chrysler will continue to purchase 3.0-liter and 2.5-liter V-6
engines from MMC for use in certain minivans and other vehicles through the 1998
and 2000 model years, respectively. Chrysler purchased approximately 309,000
such engines during 1997, compared to 308,000 engines in 1996.
Mitsubishi Motor Manufacturing of America ("MMMA") produces small sporty
cars in the United States for Chrysler and Mitsubishi Motor Sales of America.
Pursuant to a distribution agreement that was recently extended through the
2005 model year, Chrysler retains the right to purchase vehicles up to
a specific maximum allocation that has been agreed to by the parties for each
model year. In addition, Chrysler will provide engines and transmissions for
use in certain MMMA vehicles through the 1999 model year. Chrysler's sales of
MMMA-manufactured vehicles in 1997 and 1996 represented 3.4 percent and 3.3
percent, respectively, of Chrysler's U.S. retail unit sales volume in each
period.
GOVERNMENT REGULATION
---------------------
Various governmental standards and regulations relating to emissions
controls, fuel economy, safety and recalls are applicable to new motor vehicles,
engines and equipment manufactured for sale in the United States, Canada, Europe
and other countries. In addition, Chrysler's assembly, manufacturing and other
operations are subject to substantial environmental regulation.
VEHICLE REGULATION
------------------
Fuel economy, safety, and emissions regulations and standards applicable to
motor vehicles have been issued from time to time under a number of federal
statutes, including the National Traffic and Motor Vehicle Safety Act of 1966
(the "Safety Act"), the Clean Air Act, Titles I and V of the Motor Vehicle
Information and Cost Savings Act and the Noise Control Act of 1972. In addition,
the State of California has promulgated exhaust emission standards, some of
which are more stringent than the federal standards. Other states that have
areas with air quality problems are permitted, under the Clean Air Act, to adopt
vehicle emissions standards identical to those adopted by the State of
California. The States of New York, Massachusetts, Connecticut, Maine, Rhode
Island, Vermont and New Jersey have adopted California standards with various
effective dates, and a few other states are considering similar action.
Vehicle Emissions Standards
Under the Clean Air Act, auto manufacturers are required, among other
things, to significantly reduce emissions from cars and light trucks and are
obligated to recall vehicles for failure to meet emission standards for a period
of ten years or 100,000 miles, whichever occurs first. The Clean Air Act imposes
standards for model years through 2003 and directs the U.S. Environmental
Protection Agency ("EPA") to study the need for much more stringent emissions
standards beginning as early as the 2004 model year. Recently, the EPA reviewed
the federal test procedure used to measure vehicle tailpipe emissions and has
imposed additional test requirements that increase both the stringency of the
test and the related standard.
8
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
VEHICLE REGULATION -- CONTINUED
--------------------------------
Vehicle Emissions Standards -- Continued
The California Air Resources Board ("CARB") has received federal approval,
pursuant to the Clean Air Act, for its Low Emission Vehicle Program ("LEV") for
a series of passenger car and light truck emission standards that are more
stringent than those prescribed by the Clean Air Act for the corresponding
periods of time. These California standards are intended to promote the
development of various classes of low-emission vehicles. CARB is currently
reviewing its LEV standards and will likely adopt more stringent requirements
late in 1998 for model years beginning with the 2004 model year. Of particular
concern are proposals to require light-duty trucks and sport-utility vehicles
and minivans to meet passenger car standards.
Included in the CARB's LEV program was a requirement that a specified
percentage of each manufacturer's California light-duty production volume,
beginning at 2 percent in 1998 and increasing to 10 percent in 2003, be
zero-emission vehicles ("ZEVs") that produce no tailpipe or evaporative
emissions of regulated pollutants. On March 29, 1996, the CARB repealed the ZEV
mandate for model-years 1998 - 2002. Chrysler and six other major vehicle
manufacturers have entered into a voluntary agreement with the CARB involving
market-based action, continued research and development on ZEVs, and a ZEV
demonstration program in California through the 2002 model year. Chrysler also
has entered into a consortium of vehicle manufacturers, electric utilities and
the U.S. Department of Energy to develop new battery technology for use in
electric vehicles which would qualify as ZEVs and has built a limited number of
experimental prototype electric vehicles using existing advanced battery
technology. Development of an electric vehicle that meets consumer demands and
is commercially viable will require further intensive research. Electric
vehicles using currently available battery technology would have a range of
less than 100 miles under optimal conditions and a reduced range in lower
temperatures, require a recharge time of up to eight hours, lack substantial
infrastructure support for battery recharging and cost significantly more than
conventional vehicles.
Attempts by New York and Massachusetts to impose ZEV mandates have been
challenged by the American Automobile Manufacturers Association ("AAMA") (of
which Chrysler is a member) and the Association of International Automobile
Manufacturers ("AIAM"). On August 5, 1997, the Federal District Court in Albany
upheld the State of New York's right to impose a 2 percent ZEV mandate beginning
in the 1998 model year. AAMA and AIAM have appealed this decision. On October
15, 1997, the Federal District Court in Boston held that Massachusetts could not
impose a ZEV program during model-years 1998 - 2002. The State of Massachusetts
has appealed that decision. Chrysler has programs in place to build ZEVs for New
York. Failure to sell the required number of ZEV vehicles could result in
substantial civil penalties and might require restricting the sale of
conventional passenger cars in New York.
AAMA, including Chrysler Corporation, and AIAM have advocated a voluntary
low emission vehicle program whereby vehicle manufacturers would provide
vehicles meeting California LEV standards in the Northeast beginning in
model-year 1999, and in all states except California beginning in model-year
2001, in lieu of individual states adopting or enforcing California Standards.
On June 16, 1997, the EPA promulgated a voluntary National Low Emission Vehicle
("NLEV") program somewhat similar to the program advocated by AAMA and AIAM; and
on December 17, 1997, the EPA promulgated a Supplemental Rulemaking completing
the NLEV rulemaking. On December 18, 1997, Chrysler indicated it would
participate in the NLEV program if all 13 Northeast jurisdictions and all
vehicle manufacturers agreed to participate. It is uncertain whether all 13
jurisdictions and all vehicle manufacturers will participate and it is,
therefore, uncertain whether the NLEV program will go into effect. If it becomes
effective, the NLEV program would result in vehicles cleaner than the EPA could
require prior to model-year 2004 and would eliminate the spread of California
standards.
Canada, Mexico, countries comprising the European Union and other countries
also have vehicle emissions standards. In Canada, vehicle emissions standards
generally parallel U.S. standards, whereas in Mexico the standards are generally
less stringent than U.S. standards. However, it is likely that more stringent
standards paralleling U.S. or California vehicle emissions standards will be
adopted in Mexico in the future. In the European Union and other countries,
vehicle emissions standards are generally no more restrictive than U.S.
standards.
9
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS - CONTINUED
---------------------------------
GOVERNMENT REGULATION - CONTINUED
---------------------------------
VEHICLE REGULATION - CONTINUED
------------------------------
Vehicle Fuel Economy
The Motor Vehicle Information and Cost Savings Act, as amended by the
Energy Policy and Conservation Act, requires vehicle manufacturers to provide
vehicles that comply with federally mandated Corporate Average Fuel Economy
("CAFE") standards. Under this Act, a manufacturer earns credits for exceeding
the applicable fuel economy standards; however, fuel economy credits earned on
cars may not be used for trucks. Failure to meet the average fleet fuel economy
standards could result in the imposition of penalties unless a manufacturer has
sufficient fuel economy credits from the preceding three years or projects that
it will generate sufficient credits over the succeeding three years. Chrysler is
in compliance with passenger car CAFE requirements and anticipates continued
compliance with such requirements. Chrysler anticipates compliance with
light-duty truck CAFE through the use of carryback and carryforward credits. A
substantial increase in demand for larger light-duty trucks could jeopardize
Chrysler's ability to comply with light-duty truck CAFE and require Chrysler to
take additional steps to assure compliance, including the sale of ethanol
flexible fuel vehicles. In addition, the Energy Tax Act of 1978 imposes a
graduated "Gas Guzzler" tax on automobiles with a fuel economy rating below
specified levels. Chrysler cannot control or predict with certainty its ability
to meet increased CAFE standards, as such standards are contingent upon various
future economic, market, legislative and regulatory factors. If Chrysler does
not meet new CAFE standards, it will be subject to sizeable civil penalties and
could result in the closure of plants and a restriction in product offerings to
remain in compliance. Chrysler is selling flexible fuel vehicles capable of
operating on both gasoline and ethanol blend fuels, as well as developing
vehicles capable of operating on compressed natural gas, liquid petroleum gas or
electricity.
The Kyoto Protocol to the United Nations Framework Convention on Climate
Change (the "Protocol"), signed December 10, 1997, is a source of great concern.
The Protocol, if ratified by the United States Senate and adopted by the United
Nations, would require a reduction in United States fossil energy use of 31
percent based on U.S. Department of Energy energy growth projections for the
2008-2012 time frame. The United States government is developing policy options
to address the greenhouse gas issues covered by the Protocol. These options may
include more stringent CAFE standards, higher fuel costs, and restrictions on
fuel usage, as well as other options that may adversely impact the auto
industry. A significant increase in CAFE requirements would be costly to
Chrysler and could result in significant restrictions on the products Chrysler
offers.
Vehicle Safety
Under the Safety Act, National Highway Traffic Safety Administration
("NHTSA ") is required to establish federal motor vehicle safety standards that
are practicable, meet the need for motor vehicle safety and are stated in
objective terms. NHTSA has announced its intention to upgrade certain existing
standards and to establish additional standards in the future. Chrysler expects
to be able to comply with those standards.
In Canada, safety standards generally parallel U.S. standards. While
European safety standards vary from U.S. standards, Chrysler does not anticipate
any compliance problems.
Vehicle Recalls
Under the Clean Air Act, the EPA may require manufacturers to recall and
repair vehicles that fail to meet emission standards established under that Act.
Similarly, the Act authorizes the State of California to require recalls for
vehicles that fail to meet its emissions standards.
The Safety Act authorizes NHTSA to investigate reported vehicle problems
and to order a recall if it determines that a safety-related defect exists.
During 1997 Chrysler voluntarily recalled approximately 8.5 million
vehicles worldwide for a wide variety of safety, emissions and customer
satisfaction issues. Most significant among these were: 2 million 1984-1995 Jeep
Cherokees and 1993-1995 Jeep Grand Cherokee sport utility vehicles to have an
interlock installed to prevent pedal misapplication at start up; 1.3 million
1991-1993 minivans to repair seat belt buckles and anchor hooks that may not
perform as intended in certain crash situations; and 1 million 1994-1997 Dodge
Ram pickup trucks to replace a fluid connector in the automatic transmission
cooling system which could leak during extreme duty and temperature situations.
10
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
VEHICLE REGULATION -- CONTINUED
-------------------------------
Vehicle Recalls -- Continued
A lawsuit filed in late 1996 by NHTSA in the U.S. District Court for the
District of Columbia to compel Chrysler to recall approximately 90,000 Chrysler
Cirrus and Dodge Stratus vehicles built during the 1995 model year remains
before the court. NHTSA has alleged that these vehicles failed the agency's
compliance testing under Federal Motor Vehicle Safety Standard 210 which sets
the strength requirements for rear seat belt assembly anchorages. Chrysler
believes that the anchors satisfy the standard and that NHTSA tested the
vehicles in a manner that is not specified in its regulations or test
procedures. A decision is expected by the end of the second quarter of 1998.
An increase in the incidence of air bag related fatalities in low speed
crashes, particularly among small children, has prompted NHTSA to propose
changes in the occupant crash protection safety standards. In March 1997, NHTSA
issued a final rule permitting manufacturers to depower all air bags in current
vehicles and future production so that they "inflate less aggressively", thereby
reducing the likelihood of injury. Chrysler has actively participated in these
proceedings by providing technical support to NHTSA and Congress in an effort to
promptly develop the most effective means of promoting the safe use of passive
restraints. All Chrysler-built vehicles will offer at least one depowered airbag
for the 1998 model year, with most offering both. Air bag deactivation switches
are standard on some 1998 models and will be offered on a limited basis on other
vehicles for retrofit by mid-1998, as permitted by NHTSA in a November 1997
final rule. Further, Chrysler has undertaken a separate child-oriented
educational air bag safety campaign directed at child-care providers and
elementary school teachers and their students.
Chrysler establishes reserves for product warranty, including the estimated
cost of these emission, safety and customer satisfaction recall actions, when
the related sale is recognized. The estimated future costs of these actions is
based primarily on prior experience. Estimates of the future costs of these
actions are inevitably imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the number of vehicles affected, and the
nature of the corrective action which may result in adjustments to the
established reserves. It is reasonably possible that the ultimate cost of these
actions may require Chrysler to make expenditures, in excess of established
reserves, over an extended period of time and in a range of amounts that cannot
be reasonably estimated. Although the ultimate cost of these actions could have
a material effect on Chrysler's consolidated operating results for the
particular reporting period in which an adjustment of the estimated reserve is
recorded, Chrysler believes that any such adjustment should not materially
affect its consolidated financial position.
STATIONARY SOURCE REGULATION
----------------------------
Chrysler's assembly, manufacturing and other operations are subject to
substantial environmental regulation under the Clean Air Act, the Clean Water
Act, the Resource Conservation and Recovery Act, the Pollution Prevention Act of
1990 and the Toxic Substances Control Act, as well as a substantial volume of
state legislation paralleling and, in some cases, imposing more stringent
obligations than the federal requirements. These regulations impose severe
restrictions on air and water-born discharges of pollution from Chrysler
facilities, the handling of hazardous materials at Chrysler facilities and the
disposal of wastes from Chrysler operations. Chrysler is faced with many similar
requirements in its operations in Europe and Canada and is facing increased
governmental regulation and environmental enforcement in Mexico.
While Chrysler is unable to predict the exact level of expenditures that
will be required to develop and implement new technology in its facilities,
since federal and state requirements are not fully defined, Chrysler expects its
capital requirements for the period 1998 through 2002 will be approximately $390
million. Of this total, Chrysler estimates that approximately $46 million will
be spent in 1998 and approximately $50 million in 1999. Substantially all of
these expenditures are included in Chrysler's planned disbursements for new
product development and the acquisition of productive assets over the 1998 to
2002 period. In addition, the extensive federal-state permit program established
by the Clean Air Act may reduce operational flexibility and cause delays in
upgrading Chrysler's production facilities in the United States.
Clean Air Act
Pursuant to the Clean Air Act, states are required to amend their
implementation plans to require more stringent limitations and other controls on
the quantity of pollutants which may be emitted into the atmosphere to achieve
national ambient air quality standards established by the EPA. In addition, the
Clean Air Act requires reduced emissions of substances that are classified as
hazardous, toxic or that contribute to acid deposition, imposes comprehensive
permit requirements for manufacturing facilities in addition to those required
by various states, and expands federal authority to impose severe penalties and
criminal sanctions. The Clean Air Act also allows states to adopt standards more
stringent than those required by the Act.
11
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
STATIONARY SOURCE REGULATION -- CONTINUED
-----------------------------------------
Clean Air Act -- Continued
The EPA recently promulgated more stringent National Ambient Air Quality
Standards for Ozone and Particulate Matter and is defining strategies needed to
attain the new standards. Increased pressure to further control emissions from
motor vehicles and manufacturing facilities is expected. Implementation is
likely to occur over the next several years.
Environmental Matters
The EPA and various state agencies have notified Chrysler that it may be a
potentially responsible party ("PRP") for the cost of cleaning up hazardous
waste storage or disposal facilities pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and other federal and state
environmental laws. A number of lawsuits allege that Chrysler violated CERCLA or
other environmental laws and seek to recover costs associated with remedial
action. In most instances, Chrysler is only one of a number of PRPs who may be
found to be jointly and severally liable for remediation costs at the 104 sites
involved in the foregoing matters at December 31, 1997. Chrysler may also incur
remediation costs at an additional 46 of its active or deactivated facilities.
Chrysler's reserves for these environmental matters totaled $231 million and
$238 million as of December 31, 1997 and 1996, respectively. Chrysler
periodically evaluates and revises estimates for environmental liabilities based
on expenditures against established reserves and the availability of additional
information.
Estimates of future costs of such environmental matters are inevitably
imprecise due to numerous uncertainties, including the enactment of new laws and
regulations, the development and application of new technologies, the
identification of new sites for which Chrysler may have remediation
responsibility and the apportionment and collectibility of remediation costs
among responsible parties. Chrysler establishes reserves for these environmental
matters when the loss is probable and reasonably estimable. It is reasonably
possible that final resolution of some of these matters may require Chrysler to
make expenditures, in excess of established reserves, over an extended period of
time and in a range of amounts that cannot be reasonably estimated. Although the
final resolution of any such matters could have a material effect on Chrysler's
consolidated operating results for the particular reporting period in which an
adjustment of the estimated reserve is recorded, Chrysler believes that any
resulting adjustment should not materially affect its consolidated financial
position.
FINANCIAL SERVICES
------------------
CFC, Chrysler's wholly owned subsidiary, is a financial services
organization that provides retail and lease financing for vehicles, dealer
inventory and other financing needs, dealer property and casualty insurance and
dealership facility development and management, primarily for Chrysler dealers
and their customers. CFC, a Michigan corporation, is the continuing corporation
resulting from a merger on June 1, 1967 of a financial services subsidiary of
Chrysler into a newly acquired, previously unaffiliated finance company
incorporated in 1926.
CFC's portfolio of finance receivables managed includes receivables owned
and receivables serviced for others. Receivables serviced for others include
securitized automotive receivables and retail leases. At December 31, 1997,
receivables serviced for others accounted for 72 percent of CFC's portfolio of
receivables managed. Total finance receivables managed at the end of each of the
five most recent years were as follows:
[Download Table]
DECEMBER 31
--------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
(IN MILLIONS OF DOLLARS)
Automotive............... $ 36,655 $ 36,858 $ 35,696 $29,962 $25,011
Nonautomotive............ 2,715 2,204 2,391 2,775 3,251
-------- -------- -------- ------- -------
Total financing..... $ 39,370 $ 39,062 $ 38,087 $32,737 $28,262
======== ======== ======== ======= =======
Due to the significant and increasing portion of CFC's business that
relates to Chrysler, lower levels of production and sales of Chrysler automotive
products would likely result in a reduction in the level of finance operations
of CFC.
12
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
FINANCIAL SERVICES -- CONTINUED
-------------------------------
Automotive Financing
CFC is the major source of wholesale and retail financing for Chrysler
vehicles throughout North America. CFC also offers dealers working capital
loans, real estate and equipment financing and financing plans for fleet buyers,
including daily rental car companies. The automotive financing operations of CFC
are conducted through 29 zone offices in the United States and Canada (Chrysler
Credit Canada Ltd.). CFC also provides automotive financial products and
services in Europe and Asia.
During 1997, CFC financed or leased approximately 870,000 new and used
vehicles at retail in the United States, including approximately 611,000 new
Chrysler passenger cars and light-duty trucks, representing 27 percent of
Chrysler's U.S. retail and fleet deliveries. During 1997, CFC financed or leased
approximately 114,000 vehicles at retail in Canada, including approximately
102,000 new Chrysler cars and trucks, representing 40 percent of Chrysler's
Canadian retail and fleet deliveries. The average monthly payment for new
vehicle retail installment sale contracts acquired in the United States was $376
in 1997. The average new contract balance was $20,801 and the average original
term was 55 months. CFC also financed approximately 1,625,000 and 175,000 new
Chrysler passenger cars and light-duty trucks at wholesale in the U.S. and
Canada, respectively, representing 70 percent and 66 percent of Chrysler's U.S.
and Canadian vehicle shipments, respectively, in 1997.
Automotive Insurance
Chrysler Insurance Company and its subsidiaries ("Chrysler Insurance")
provide specialized insurance coverages for automotive dealers and their
customers in the United States and Canada. Chrysler Insurance's property and
casualty business includes physical damage, garage liability, workers'
compensation and property and contents coverage provided directly to automotive
dealers. Chrysler Insurance also provides vehicle collateral protection and
single interest insurance to retail customers and their financing sources.
Automobile Dealership Management
Chrysler Realty Corporation ("Chrysler Realty"), which is engaged in the
ownership, development and management of Chrysler automotive dealership
properties in the United States, typically purchases, leases or options
dealership facilities and then leases or subleases these facilities to Chrysler
dealers. At December 31, 1997, Chrysler Realty controlled 776 sites (of which
225 were owned by Chrysler Realty).
Nonautomotive Financing
CFC conducts its nonautomotive finance business through its subsidiary,
Chrysler Capital Corporation. At December 31, 1997, the nonautomotive
receivables managed throughout the United States consisted of $2.6 billion of
leveraged leases.
Funding
Receivable sales are a significant source of funding. Net proceeds from the
sale of automotive retail receivables were $9.0 billion during 1997 compared to
$8.1 billion in 1996. Securitization of revolving wholesale account balances
provided funding which aggregated $6.1 billion and $6.8 billion at December 31,
1997 and 1996, respectively. During 1997 CFC issued $4.0 billion of term debt
(primarily medium-term notes) and repaid $3.1 billion of term debt.
During the second quarter of 1997, CFC entered into new revolving credit
facilities which replaced its existing U.S. and Canadian credit facilities. The
new facilities, which total $8 billion, consist of a $2 billion facility
expiring in April 1998 and a $6 billion facility expiring in April 2002. As of
December 31, 1997, no amounts were outstanding under these facilities.
A discussion of CFC's primary market risks related to fluctuations in
interest rates and foreign currency exchange rates and how CFC manages those
risks is included in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, Derivative Financial Instruments.
13
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
FINANCIAL SERVICES -- CONTINUED
-------------------------------
Funding -- Continued
CFC's outstanding debt at the end of each of the five most recent years was
as follows:
[Enlarge/Download Table]
DECEMBER 31
------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- ------
(IN MILLIONS OF DOLLARS)
Short-term debt (primarily commercial paper) $ 3,351 $ 2,795 $ 2,514 $ 4,495 $3,197
Long-term debt payable within one year........................ 2,619 2,975 1,612 624 883
------- ------- ------- ------- ------
Total debt payable within one year....................... 5,970 5,770 4,126 5,119 4,080
------- ------- ------- ------- ------
Senior notes and debentures................................... 6,716 5,462 7,625 5,475 4,335
Mortgage notes, capital leases and other...................... 32 13 18 77 20
------- ------- ------- ------- ------
Total long-term debt..................................... 6,748 5,475 7,643 5,552 4,355
------- ------- ------- ------- ------
Total......................................................... $12,718 $11,245 $11,769 $10,671 $8,435
======= ======= ======= ======= ======
RESEARCH AND DEVELOPMENT
------------------------
For the years ended December 31, 1997, 1996 and 1995, Chrysler spent $1.7
billion, $1.6 billion, and $1.4 billion, respectively, for company-sponsored
research and development activities. These activities relate to the development
of new products and services and the improvement of existing products and
services, as well as compliance with standards that have been and are being
promulgated by various governments and governmental agencies.
EMPLOYEES
---------
At December 31, 1997, Chrysler had a total of approximately 121,000
employees worldwide. Of this total, approximately 70,000 hourly workers and
25,000 salaried workers were employed in the United States and approximately
13,000 hourly workers and 2,000 salaried workers were employed in Canada. In the
United States and Canada, substantially all of Chrysler's hourly employees and
21 percent of its salaried employees are represented by unions. Of these
represented employees, 98 percent of hourly and 91 percent of salaried employees
are represented by the United Automotive, Aerospace, and Agricultural Implement
Workers of America ("UAW") or the National Automobile, Aerospace and
Agricultural Implement Workers of Canada ("CAW").
In 1996, Chrysler negotiated three-year national agreements with the UAW
and CAW in the United States and Canada, respectively, without an interruption
of production. The UAW and CAW contracts provide for essentially the same level
of wages and benefits as Chrysler's major domestic competitors. In 1997,
Chrysler reached a separate agreement on a five-year contract for the Toledo
Assembly Plant that provides improvements comparable to those under the national
agreement. In addition, a local agreement was settled at the Mound Road Engine
Plant after a 29-day strike. Local plant agreements are now in place at all of
Chrysler's major production facilities.
Chrysler's pension plans, group life, and health care benefits for active
and retired employees generally follow the structure of benefits common to the
automotive industry. See Part II, Item 8, Notes to Consolidated Financial
Statements, Note 12 for further information on pension and nonpension
postretirement benefits.
INTELLECTUAL PROPERTY
---------------------
Chrysler has intellectual property rights, including patents, proprietary
technology, trademarks, trade dress, service marks, copyrights, and licenses
under such rights of others, relating to its businesses, products, and
manufacturing equipment and processes. Chrysler grants licenses to others under
its intellectual property rights and receives fees and royalties under some of
these licenses. While Chrysler does not consider any particular intellectual
property right to be essential, it does consider the aggregate of such rights
very important to the overall conduct of its businesses.
14
ITEM 2. PROPERTIES PART I -- CONTINUED
----------
AUTOMOTIVE OPERATIONS
---------------------
The statements concerning ownership of Chrysler's properties are made
without regard to taxes or assessment liens, rights of way, contracts, easements
or like encumbrances or questions of survey and are based on the records of
Chrysler. Chrysler knows of no material defects in title to, or adverse claims
against, any of such properties, nor any existing material liens or encumbrances
against Chrysler or its properties.
Chrysler's manufacturing plants include a foundry, machining plants, metal
stamping plants, engine plants, transmission plants, electronic parts plant, air
conditioning equipment plants, a glass fabricating plant and other component
parts plants. In addition to Michigan, manufacturing plants in the United States
are located in Alabama, Indiana, New York, Ohio and Wisconsin.
Chrysler's U.S. passenger car assembly plants are located in Sterling
Heights and Detroit, Michigan; and Belvidere, Illinois. The U.S. truck assembly
plants are located in Warren and Detroit, Michigan; Fenton, Missouri; Toledo,
Ohio; and Newark, Delaware. Parts depots, warehouses and sales offices are
located in various areas of the United States, while Chrysler's principal
engineering and research facilities and its general offices are located in
Auburn Hills, Michigan.
Automotive properties outside the U.S. are owned or leased principally by
Chrysler Canada and Chrysler Mexico. Other manufacturing and assembly plants of
subsidiaries outside the U.S. are located in Austria, Venezuela and Argentina.
In the opinion of management, Chrysler's properties include facilities
which are suitable and adequate for the conduct of its present assembly and
component plant requirements. The annual productive capacity of Chrysler's
worldwide automotive operations was approximately 3.1 million units in 1997 and
1996. Chrysler's worldwide assembly plants operated at 90 percent of capacity in
1997, compared to 93 percent of capacity in 1996 (with capacity determined based
on a maximum overtime assumption).
FINANCIAL SERVICES
------------------
CFC conducts its business through 31 offices in various states throughout
the United States, 4 offices in Canada, and 4 offices in Belgium, France, Italy
and Japan, all of which are leased by CFC. In addition, at December 31, 1997, a
total of 225 automobile dealership properties, generally consisting of land and
improvements, were owned by a subsidiary of CFC and leased primarily to Chrysler
franchised dealers.
15
ITEM 3. LEGAL PROCEEDINGS PART I -- CONTINUED
-----------------
Chrysler and its subsidiaries are parties to various legal proceedings,
including some purporting to be class actions, and some which demand large
monetary damages or other relief which, if granted, would require significant
expenditures. Chrysler believes that each of the product and environmental
proceedings described below constitutes ordinary routine litigation incidental
to the business conducted by Chrysler. See also Part II, Item 8, Notes to
Consolidated Financial Statements, Note 9.
PRODUCT MATTERS
---------------
Many of the legal proceedings seek damages for personal injuries claimed to
have resulted from alleged defects in the design or manufacture of products
distributed by Chrysler. The complaints filed in those matters specify
approximately $778 million in compensatory and $376 million in punitive damages
in the aggregate as of December 31, 1997. These amounts represent damages sought
by plaintiffs and, therefore, do not necessarily constitute an accurate measure
of Chrysler's ultimate cost to resolve those matters. Further, many complaints
do not specify a dollar amount of damages or specify only the jurisdictional
minimum. These amounts may vary significantly from one period to the next
depending on the number of new complaints filed or pending cases resolved in a
given period.
These complaints seek compensatory and punitive damages for personal
injuries sustained in accidents involving alleged defects in door and liftgate
latches, occupant restraint systems, seats, fuel systems, and various other
components in several different vehicle models, or alleged design defects
relating to vehicle stability (rollover propensity), pedal misapplication
(sudden acceleration), or crashworthiness. Other legal proceedings seek repair
or replacement of the vehicles or compensation for their alleged reduction in
value.
On October 8, 1997, a jury awarded $12.5 million in compensatory damages
and $250 million in punitive damages against Chrysler in Jimenez vs Chrysler
Corporation, a case filed in the U.S. District Court in South Carolina. The
complaint alleged that the liftgate of a 1985 Dodge Caravan was defective and
opened when the Caravan was struck by another vehicle resulting in the ejection
and death of an occupant. Chrysler has filed motions challenging the verdict and
the damage awards, and believes that it has meritorious grounds upon which to
base an appeal. A number of other complaints are pending against Chrysler
involving latches that were the subject of a service action for minivans built
before the 1996 model year. These complaints also allege that occupants were
injured when ejected through liftgates that opened upon impact in collisions.
These complaints represent approximately $56 million of the compensatory and
$0.4 million of the punitive damages specified above in the aggregate as of
December 31, 1997. As indicated above, these amounts represent damages sought
by plaintiffs and, therefore do not necessarily constitute an accurate measure
of Chrysler's ultimate cost to resolve these complaints.
As previously reported, the U.S. District Court for the Northern District
of California entered a judgment in May 1996 approving the settlement of certain
class action lawsuits involving rear liftgate latches in Chrysler's minivans
built during the 1984-1995 model years. An appeal of that judgment by certain
class members is pending before the U.S. Court of Appeals for the Ninth Circuit.
Four class action lawsuits allege that airbags in Chrysler's 1993-1996
model year minivans are defective. These actions are based, in part, on NHTSA's
decision to allow owners to arrange for the deactivation of the airbags. Two of
the actions are pending in the U.S. District Court for the Eastern District of
Louisiana, one is pending in the U.S. District Court for the Western District of
Texas, and one in Circuit Court in Coosa County, Alabama. Plaintiffs seek
compensatory damages and costs of repair or replacement, attorney's fees and
costs.
Two previously reported class action lawsuits alleging defects in the
antilock braking systems (ABS) found in certain model year vehicles have been
consolidated in the U.S. District Court in New Jersey. An additional ABS class
action is pending in the Sumter County Circuit Court in Alabama. Chrysler
announced voluntary recalls of those systems in 1996 and 1997 to test and, if
necessary, repair the systems. Plaintiffs seek compensatory and punitive
damages, restitution, repair and/or profits from vehicle sales.
Four class action lawsuits allege that the paint applied to all vehicles
manufactured by Chrysler between 1982 and 1997 delaminates, peels or chips as
the result of defective paint, paint primer, or application processes. They are
pending in the U.S. District Court for the Southern District of Texas, the U.S.
District Court for the Southern District of Illinois, the U.S. District Court
for the Eastern District of Louisiana, and the Superior Court in King County,
Washington. Plaintiffs seek compensatory and punitive damages, costs of repair
or replacement, attorneys' fees and costs.
Litigation is subject to many uncertainties, and the outcome of individual
matters is not predictable with assurance. It is reasonably possible that the
final resolution of some of these matters may require Chrysler to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. Although the
final resolution of any such matters could have a material effect on Chrysler's
consolidated operating results for the particular reporting period in which an
adjustment of the estimated reserve is recorded, Chrysler believes that any
resulting adjustment should not materially affect its consolidated financial
position.
16
ITEM 3. LEGAL PROCEEDINGS -- CONTINUED PART I -- CONTINUED
------------------------------
ENVIRONMENTAL MATTERS
---------------------
The EPA and various state agencies have notified Chrysler that it may be a
PRP for the cost of cleaning up hazardous waste storage or disposal facilities
pursuant to the CERCLA and other federal and state environmental laws. A number
of lawsuits allege that Chrysler violated CERCLA or other environmental laws and
seek to recover costs associated with remedial action. In most instances,
Chrysler is only one of a number of PRPs who may be found to be jointly and
severally liable for remediation costs at the 104 sites involved in the
foregoing matters at December 31, 1997. Chrysler may also incur remediation
costs at an additional 46 of its active or deactivated facilities. Chrysler's
reserves for these environmental matters totaled $231 million and $238 million
as of December 31, 1997 and 1996, respectively. Chrysler periodically evaluates
and revises estimates for environmental reserves based on expenditures against
established reserves and the availability of additional information.
As previously reported, the Indiana Department of Environmental Management
initiated an administrative proceeding in August 1985 alleging improper disposal
of waste at a facility in Indianapolis. This proceeding, which seeks to require
Chrysler to conduct a site assessment and undertake remedial action, may result
in the imposition of civil penalties in excess of $100,000.
The State of Wisconsin filed a lawsuit in February 1995 against Chrysler
Outboard Corporation, a Chrysler subsidiary subsequently merged into Chrysler,
alleging improper disposal of hazardous waste in 1969. As previously reported,
the lawsuit was dismissed in 1996. An appeal of that dismissal is pending before
the Supreme Court of the State of Wisconsin.
Estimates of future costs in connection with these environmental matters
are inevitably imprecise due to numerous uncertainties, including the enactment
of new laws and regulations, the development and application of new technologies
and the apportionment and collectibility of remediation costs among responsible
parties. Chrysler establishes reserves for these environmental matters when the
loss is probable and reasonably estimable. It is reasonably possible that final
resolution of some of these matters could require Chrysler to make significant
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. Although the
final resolution of any such matters could have a material effect on Chrysler's
consolidated operating results for the particular reporting period in which an
adjustment of the estimated liability is recorded, Chrysler believes that any
resulting liability should not materially affect its consolidated financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS
----------------
None during the three months ended December 31, 1997.
17
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
(AS OF JANUARY 23, 1998)
[Enlarge/Download Table]
OFFICER
NAME AGE SINCE PRESENT POSITION
---------------------- --- ---------------------- ----------------------------------------------------------------------
R. J. Eaton 57 March 14, 1992 Chairman of the Board and Chief Executive Officer (1)
R. A. Lutz 65 June 3, 1986 Vice Chairman of the Board (1)
T. T. Stallkamp 51 May 1, 1990 President
G. C. Valade 55 June 7, 1990 Executive Vice President and Chief Financial Officer
T. R. Cunningham 51 September 3, 1987 Executive Vice President -- International
T. C. Gale 54 April 4, 1985 Executive Vice President -- Product Strategy, Design and External
Affairs and General Manager -- Jeep Operations
J. P. Holden 46 May 6, 1993 Executive Vice President -- Sales and Marketing and General
Manager -- Minivan Operations
D. K. Pawley 56 April 11, 1991 Executive Vice President -- Manufacturing
T. W. Sidlik 48 September 3, 1992 Executive Vice President -- Procurement and Supply and General
Manager -- Small Car Operations
R. R. Boltz 52 June 11, 1987 Vice President -- Product Strategy and Regulatory Affairs and
General Manager -- Large Car Operations
T. P. Capo 46 November 7, 1991 Vice President and Treasurer
D. L. Davis 58 January 1, 1998 Vice President -- Chrysler Corporation and Chairman of the Board --
Chrysler Financial Corporation
J. D. Donlon, III 51 January 1, 1992 Vice President and Controller
F. J. Ewasyshyn 45 October 6, 1994 Vice President -- Advance Manufacturing Engineering
W. F. Fountain 53 August 1, 1995 Vice President -- Government Affairs
R. L. Franson 43 January 18, 1996 Vice President -- Chrysler Corporation and President - Chrysler
Financial Corporation
T. Gallagher 55 September 3, 1992 Vice President -- Employee Relations
S. J. Harris 52 January 1, 1998 Vice President -- Communications
G. L. Henson 55 August 1, 1994 Vice President -- Large and Small Car, Jeep and Truck Assembly
and Stamping Operations
J. E. Herlitz 55 April 7, 1994 Vice President -- Product Design
R. G. Liberatore 48 January 1, 1993 Vice President -- Washington Affairs
A. C. Liebler 55 May 17, 1990 Vice President -- Marketing
C. Lobo S. 49 July 9, 1992 Vice President -- Power Train Manufacturing
M. J. MacDonald 53 May 16, 1996 Vice President -- Sales and Service
W. J. O'Brien 54 September 3, 1987 Vice President, General Counsel and Secretary
K. M. Oswald 48 October 6, 1994 Vice President -- Human Resources
E. T. Pappert 58 November 5, 1981 Vice President -- Dealer Relations
B. I. Robertson 55 February 6, 1992 Vice President -- Engineering Technologies and General Manager --
Truck Operations
S. T. Rushwin 50 October 6, 1994 Vice President -- International Manufacturing and Minivan
Assembly Operations
R. O. Schaum 51 January 1, 1998 Vice President -- Quality and Serviceability and General Manager --
Power Train Operations
C. P. Theodore 47 January 1, 1998 Vice President -- Platform Engineering
----------------------------
(1) Also a member of the Board of Directors.
There are no family relationships, as defined for reporting purposes,
between any of the executive officers named above and there is no arrangement or
understanding between any of the executive officers named above and any other
person pursuant to which he was selected as an officer. All of the executive
officers named above, except Mr. Henson have been in the employ of Chrysler
Corporation or its subsidiaries for more than five years. During the last five
years, and immediately preceding employment by Chrysler Corporation, Mr. Henson
was a high level executive at General Motors Corporation.
18
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
---------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
Chrysler's common stock is listed on the stock exchanges specified on pages
1 and 2 of this Form 10-K under the trading symbol (C). There were approximately
135,000 shareholders of record of Chrysler's common stock at December 31, 1997.
The following table sets forth the high and low sale prices of Chrysler's common
stock as reported on the composite tape and the quarterly dividends declared for
the last two years. The common stock high and low prices and dividends declared
have been adjusted to reflect the two-for-one stock split in 1996.
[Download Table]
DIVIDENDS
1997 HIGH LOW DECLARED
------------------ ------------- ------------- -------------
First Quarter $36.250 $29.000 $0.40
Second Quarter 33.438 28.125 0.40
Third Quarter 38.563 32.375 0.40
Fourth Quarter 38.250 32.000 0.40
[Download Table]
DIVIDENDS
1996 HIGH LOW DECLARED
------------------ ------------- ------------- -------------
First Quarter $31.813 $25.688 $0.30
Second Quarter 35.000 29.563 0.35
Third Quarter 32.063 26.250 0.35
Fourth Quarter 36.375 28.250 0.40
Dividends on the common stock are payable at the discretion of Chrysler's
Board of Directors out of funds legally available therefor. Chrysler's ability
to pay dividends in the future will depend upon its financial results, liquidity
and financial condition and its ability to continue its capital expenditure and
vehicle development programs and market its vehicles successfully. Chrysler's
ability to pay dividends is also affected by the provision in its credit
agreement that it must maintain a ratio of indebtedness to total capitalization
(each as defined) at the end of each quarter at a specified level.
19
ITEM 6. SELECTED FINANCIAL DATA PART II -- CONTINUED
-----------------------
The table below summarizes recent financial information for Chrysler. For
further information, refer to Chrysler's consolidated financial statements and
notes thereto presented under Item 8 of this Form 10-K.
[Enlarge/Download Table]
1997(1) 1996(2) 1995(3) 1994(4) 1993(5)
----------- ------------- ------------ ------------ -----------
(DOLLARS AND SHARES IN MILLIONS
EXCEPT PER-COMMON-SHARE DATA)
Total revenues.............................. $61,147 $61,397 $53,195 $52,235 $43,600
Earnings before extraordinary item and
cumulative effect of changes in
accounting principles.................. 2,805 3,720 2,121 3,713 2,415
Basic earnings per common share * 4.15 5.09 2.81 5.13 3.38
Net earnings (loss)......................... 2,805 3,529 2,025 3,713 (2,551)
Basic earnings (loss) per common
share *............................. 4.15 4.83 2.68 5.13 (3.81)
Diluted earnings (loss) per common
share *............................. 4.09 4.74 2.56 4.55 (3.19)
Dividends declared per common share *....... 1.60 1.40 1.00 0.55 0.33
Total assets................................ 60,418 56,184 53,756 49,539 43,679
Total debt.................................. 15,485 13,396 14,193 13,106 11,451
Convertible preferred stock (in shares)..... 0.02 0.04 0.14 1.72 1.72
* Per share data have been adjusted to reflect the two-for-one stock split in
1996. In addition, per share data have been restated to reflect the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share," which replaces the presentation of primary earnings
per share ("EPS") and fully diluted EPS with a presentation of basic EPS
and diluted EPS, respectively.
(1) Earnings for the year ended December 31, 1997, reflect the unfavorable
impact of a 29-day strike which reduced earnings by an estimated $590
million ($364 million after taxes) after considering partial recovery of
production losses from the strike, and a $41 million charge ($25 million
after taxes) for costs related to the decision to discontinue Chrysler's
Eagle brand at the end of the 1998 model year. The effect of these
unfavorable items was partially offset by the recognition of $97 million
($60 million after taxes) of previously deferred profits from the sale of
vehicles from Chrysler to Dollar Thrifty Automotive Group, Inc. ("DTAG",
formerly Pentastar Transportation Group, Inc.) as a result of the December
1997 initial public offering ("IPO") of Chrysler's common stock interest in
DTAG.
(2) Earnings for the year ended December 31, 1996, include a charge of $97
million ($61 million after taxes) for costs associated with a voluntary
early retirement program for certain salaried employees, a charge of $77
million ($51 million after taxes) related to a write-down of Pentastar
Electronics, Inc., a charge of $65 million ($100 million after taxes)
related to a write-down of Thrifty Rent-A-Car System, Inc., a charge of $50
million ($31 million after taxes) for lump-sum retiree pension costs
related to the 1996 UAW collective bargaining agreement, and a gain of $101
million ($87 million after taxes) from the sale of Electrospace Systems,
Inc., and Chrysler Technologies Airborne Systems, Inc.
(3) Earnings for the year ended December 31, 1995, were reduced by a $263
million charge ($162 million after taxes) for costs associated with
production changes at Chrysler's Newark assembly plant and a $115 million
charge ($71 million after taxes) for a voluntary minivan owner service
action. Net earnings in 1995 also include an after-tax charge of $96
million for the cumulative effect of a change in accounting principle
related to the consensus reached on Emerging Issues Task Force ("EITF")
Issue 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale
Value."
(4) Earnings for the year ended December 31, 1994, include favorable
adjustments to the provision for income taxes aggregating $132 million.
These adjustments related to: (1) the recognition of tax credits related to
expenditures in prior years for qualifying research and development
activities, in accordance with an Internal Revenue Service settlement which
was based on U.S. Department of Treasury income tax regulations issued in
1994, and (2) the reversal of valuation allowances related to tax benefits
associated with net operating loss carryforwards.
(5) Results for the year ended December 31, 1993, include a pretax gain of $205
million ($128 million after taxes) on the sale of Chrysler's remaining 50.3
million shares of Mitsubishi Motors Corporation stock, a pretax gain of $60
million ($39 million after taxes) on the sale of Chrysler's plastics
operations, a $4.7 billion after-tax charge for the adoption of SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," and a $283 million after-tax charge for the adoption of SFAS No.
112, "Employers' Accounting for Postemployment Benefits."
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto.
FINANCIAL REVIEW
----------------
1997 COMPARED WITH 1996
Chrysler reported earnings before income taxes, extraordinary item and the
cumulative effect of a change in accounting principle of $4,557 million in 1997,
compared with $6,092 million in 1996. Net earnings for 1997 were $2,805 million,
or $4.15 per common share, compared with $3,529 million, or $4.83 per common
share, in 1996. Chrysler also reported earnings before income taxes and
extraordinary item of $1,316 million in the fourth quarter of 1997, compared
with $1,591 million in the fourth quarter of 1996. Net earnings for the fourth
quarter of 1997 were $852 million, or $1.30 per common share, compared with $807
million, or $1.14 per common share, in the fourth quarter of 1996.
Earnings decreased for calendar-year 1997 as compared with calendar-year
1996 primarily as a result of an increase in average sales incentives per
vehicle, a decrease in vehicle shipments and an increase in warranty costs,
partially offset by lower profit-based employee compensation costs. The increase
in average sales incentives per vehicle reflects an increasingly competitive
automotive environment in 1997 resulting primarily from new product offerings
from competitors and greater flexibility in vehicle pricing by Japanese
manufacturers who have benefited from currency exchange rate changes between the
Japanese yen and U.S. dollar. The decrease in shipments for calendar-year 1997
was primarily due to the changeover to Chrysler's all-new Dodge Intrepid and
Chrysler Concorde sedans and the unfavorable impact of a 29-day strike. The
increase in warranty costs was primarily related to customer service and recall
actions, partially offset by lower average warranty costs on 1997 and 1998
model-year vehicles.
Earnings before income taxes, extraordinary item and the cumulative effect
of a change in accounting principle for 1997 reflected the unfavorable impact of
a 29-day strike which reduced earnings by an estimated $590 million ($364
million after taxes) after considering partial recovery of production losses
from the strike, and a $41 million charge ($25 million after taxes) for costs
related to the decision to discontinue Chrysler's Eagle brand at the end of the
1998 model year. The effect of these unfavorable items was partially offset by
the recognition of $97 million ($60 million after taxes) of previously deferred
profits from the sale of vehicles from Chrysler to Dollar Thrifty Automotive
Group, Inc. ("DTAG", formerly Pentastar Transportation Group, Inc.) as a result
of the December 1997 initial public offering ("IPO") of Chrysler's common stock
interest in DTAG.
Earnings before income taxes, extraordinary item and the cumulative effect
of a change in accounting principle for 1996 reflected a charge of $97 million
($61 million after taxes) for costs associated with a voluntary early retirement
program for certain salaried employees, a charge of $77 million ($51 million
after taxes) related to a write-down of Pentastar Electronics, Inc. ("PEI"), a
charge of $65 million ($100 million after taxes) related to a write-down of
Thrifty Rent-A-Car System, Inc. ("Thrifty"), a charge of $50 million ($31
million after taxes) for lump-sum retiree pension costs related to the 1996 UAW
collective bargaining agreement, and a gain of $101 million ($87 million after
taxes) from the sale of Electrospace Systems, Inc. ("ESI") and Chrysler
Technologies Airborne Systems, Inc. ("CTAS"). In addition, in 1996, Chrysler
extinguished $550 million, or 50 percent, of the outstanding principal amount of
its Auburn Hills Trust Guaranteed Exchangeable Certificates Due 2020 (the
"Certificates") at a cost of $859 million. The extinguishment of the
Certificates resulted in an extraordinary after-tax loss of $191 million (net of
income tax benefit of $118 million).
Chrysler's worldwide vehicle shipments in 1997 were 2,886,981 units, a
decrease of 71,819 units or 2 percent compared with 1996 levels. Chrysler's
vehicle shipments outside of the U.S., Canada and Mexico ("North America") in
1997 were 237,439 units, an increase of 13,782 units or 6 percent compared with
1996 levels.
Chrysler's revenues and results of operations are principally derived from
the U.S. and Canada automotive marketplaces. Retail industry sales (including
fleet) of new cars and trucks in the U.S. and Canada were 16.9 million units in
1997, compared with 16.6 million units in 1996, an increase of 2 percent.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
FINANCIAL REVIEW -- CONTINUED
-----------------------------
Chrysler's U.S. and combined U.S. and Canada retail sales and market share
data for 1997 and 1996 were as follows:
[Download Table]
1997 1996 DECREASE
---------- ---------- ----------
U.S. Retail Market (1):
Car sales 736,530 832,633 (96,103)
Car market share 8.9% 9.7% (0.8)%
Truck sales (including minivans) 1,567,258 1,618,193 (50,935)
Truck market share 21.7% 23.4% (1.7)%
Combined car and truck sales 2,303,788 2,450,826 (147,038)
Combined car and truck market share 14.9% 15.9% (1.0)%
U.S. and Canada Retail Market (1):
Combined car and truck sales 2,559,950 2,690,340 (130,390)
Combined car and truck market share 15.1% 16.1% (1.0)%
--------------------------
(1) All retail sales and market share data include fleet sales.
The decrease in Chrysler's 1997 U.S. car market share was primarily due to
the changeover to Chrysler's all-new Intrepid and Concorde sedans and decreased
sales of Neons. The decrease in Chrysler's 1997 U.S. truck market share was
primarily due to decreased sales of its Dodge Ram pickup trucks and Jeep(R)
Grand Cherokees, which primarily reflects the effect of the 29-day strike.
Chrysler Financial Corporation ("CFC") reported earnings before income
taxes of $637 million in 1997, compared with $586 million in 1996. CFC's net
earnings were $419 million in 1997, compared with $376 million in 1996. The
increase in 1997 net earnings primarily reflects an increase in net gains and
servicing fees from sales of receivables, higher levels of vehicles leased and
lower operating expenses, partially offset by higher credit loss provisions.
For the past several years, Chrysler has benefitted from the following
factors: (1) favorable economic conditions in the U.S. and Canada, where
Chrysler's sales are concentrated, and (2) a continuing shift in U.S. and Canada
consumer preferences toward trucks, as Chrysler manufactures a higher proportion
of trucks to total vehicles than its principal competitors in the U.S. and
Canada. A significant deterioration in either of these factors could adversely
affect Chrysler's consolidated operating results. Further, Chrysler has
benefitted from a strategy of focusing resources on its core automotive business
and an aggressive capital expenditure and vehicle development program that has
resulted in the replacement of substantially all of its car and truck offerings
over the last five years. Chrysler's long-term profitability will depend
significantly on its ability to continue its capital expenditure and vehicle
development programs and to market its vehicles successfully in an increasingly
competitive automotive environment.
1996 COMPARED WITH 1995
-----------------------
Chrysler reported earnings before income taxes, extraordinary item and the
cumulative effect of a change in accounting principle of $6.1 billion in 1996,
compared with $3.4 billion in 1995. Net earnings for 1996 were $3.5 billion, or
$4.83 per common share, compared with $2.0 billion, or $2.68 per common share,
in 1995. Earnings before income taxes, extraordinary item and the cumulative
effect of a change in accounting principle for 1996 included a charge of $97
million ($61 million after taxes) for costs associated with a voluntary early
retirement program for certain salaried employees, a charge of $77 million ($51
million after taxes) related to a write-down of PEI, a charge of $65 million
($100 million after taxes) related to a write-down of Thrifty, a charge of $50
million ($31 million after taxes) for lump-sum retiree pension costs related to
the 1996 UAW collective bargaining agreement, and a gain of $101 million ($87
million after taxes) from the sale of ESI and CTAS. Earnings before income
taxes, extraordinary item and the cumulative effect of a change in accounting
principle for 1995 included a charge of $263 million ($162 million after taxes)
for costs associated with production changes at Chrysler's Newark assembly plant
and a charge of $115 million ($71 million after taxes) for a voluntary minivan
owner service action.
Pretax earnings excluding the items noted above increased for calendar-year
1996 as compared with calendar-year 1995 primarily as a result of an increase in
vehicle shipments and improved vehicle margins due to pricing actions and a
reduction in average sales incentives per vehicle, partially offset by increased
profit-based employee compensation costs. The increase in shipments for
calendar-year 1996 was primarily due to increased shipments of minivans and
Dodge Ram pickup trucks. Minivan shipments for calendar-year 1995 were adversely
affected by the changeover and launch of Chrysler's all-new minivans. The
increase in shipments of Dodge Ram pickup trucks primarily reflects a full year
of production in 1996 at two additional assembly plants.
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
FINANCIAL REVIEW -- CONTINUED
-----------------------------
Effective January 1, 1995, Chrysler changed its accounting treatment for
certain vehicle sales (principally to non-affiliated rental car companies) in
accordance with Emerging Issues Task Force ("EITF") Issue 95-1, "Revenue
Recognition on Sales with a Guaranteed Minimum Resale Value." This change in
accounting principle resulted in the recognition of an after-tax charge of $96
million (net of income tax benefit of $59 million).
Chrysler's worldwide vehicle shipments in 1996 were 2,958,800 units, an
increase of 285,261 units or 11 percent from 1995 levels. Chrysler's vehicle
shipments outside of North America in 1996 were 223,657 units, an increase of
15,385 units or 7 percent from 1995 levels.
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES
--------------------------------------------------------
Chrysler's total revenues were as follows:
[Enlarge/Download Table]
1997 VS. 1996 1996 VS. 1995
INCREASE/ INCREASE/
1997 1996 (DECREASE) 1995 (DECREASE)
------- ------- ------------- ------- -------------
(In millions of dollars)
Sales of manufactured products........ $56,986 $57,587 (1)% $49,601 16 %
Finance and insurance revenues........ 1,636 1,746 (6)% 1,589 10 %
Other revenues........................ 2,525 2,064 22 % 2,005 3 %
------- ------- -------
Total revenues................... $61,147 $61,397 -- $53,195 15 %
======= ======= =======
The decrease in Sales of manufactured products in 1997 as compared with
1996 primarily reflects a 2 percent decrease in vehicle shipments, partially
offset by an increase in average revenue per unit, net of sales incentives, from
approximately $19,400 to $19,600. The increase in Sales of manufactured products
in 1996 as compared with 1995 primarily reflects an 11 percent increase in
vehicle shipments and an increase in average revenue per unit, net of sales
incentives, from approximately $18,300 to $19,400. The increase in average
revenue per unit in 1996 as compared with 1995 was principally due to pricing
actions and an increased proportion of truck shipments to total vehicle
shipments.
The decrease in Finance and insurance revenues in 1997 as compared with
1996 was primarily attributable to the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." Prior to 1997, earnings
from sales of wholesale receivables was included in Finance and insurance
revenues. Effective January 1, 1997, gains from sales of wholesale receivables
are reported in Other revenues in accordance with SFAS No. 125. The increase in
Finance and insurance revenues in 1996 as compared with 1995 was primarily
attributable to higher average automotive finance receivables outstanding and
vehicles leased.
Chrysler's ability to market its products successfully depends
significantly on the availability of vehicle financing for its dealers and, to a
lesser extent, the availability of financing for retail and fleet customers,
both of which are provided by CFC. Financing support provided in the United
States by CFC for new Chrysler vehicle retail deliveries (including fleet) and
wholesale vehicle sales to dealers and the number of vehicles financed during
the last three years were as follows:
[Download Table]
1997 1996 1995
----- ----- -----
U.S. Penetration:
Retail...................................... 27 % 20 % 27 %
Wholesale................................... 70 % 72 % 74 %
Number of New Chrysler Vehicles Financed in
the U.S. (in thousands):
Retail...................................... 611 485 594
Wholesale................................... 1,625 1,771 1,632
The increase in retail penetration was primarily due to new marketing
programs to customers and dealers initiated during 1997.
The increase in Other revenues in 1997 as compared with 1996 was primarily
attributable to higher gains from sales of retail and wholesale receivables at
CFC and increased revenues by DTAG.
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES -- CONTINUED
---------------------------------------------------------------------
Chrysler's total expenses were as follows:
[Enlarge/Download Table]
1997 VS. 1996 1996 VS. 1995
INCREASE/ INCREASE/
1997 1996 (DECREASE) 1995 (DECREASE)
------------ ------------ --------------- ---------------- -------------
(IN MILLIONS OF (IN MILLIONS OF
DOLLARS) DOLLARS)
Costs, other than items below......... $46,743 $45,842 2 % $41,304 11%
Depreciation and special tools
amortization........................ 2,696 2,312 17 % 2,220 4%
Selling and administrative expenses... 4,957 4,730 5 % 4,064 16%
Employee retirement benefits.......... 1,188 1,414 (16)% 1,163 22%
Interest expense...................... 1,006 1,007 -- 995 1%
------- ------- -------
Total expenses................... $56,590 $55,305 2 % $49,746 11%
======= ======= =======
Costs, other than items below increased in 1997 as compared with 1996
primarily as a result of increases in the proportion of truck shipments to total
vehicle shipments, vehicle content, warranty costs and DTAG cost of sales,
partially offset by a 2 percent decrease in vehicle shipments. Costs, other than
items below increased in 1996 as compared with 1995 primarily as a result of an
11 percent increase in vehicle shipments. Costs, other than items below as a
percent of sales of manufactured products were 82 percent, 80 percent and 83
percent in 1997, 1996 and 1995, respectively.
Depreciation and special tools amortization increased in 1997 as compared
with 1996 primarily as a result of higher levels of property and equipment in
use, including vehicles under purchased operating leases.
Selling and administrative expenses increased in 1996 as compared with
1995 primarily as a result of increased advertising expenses, increased
profit-based employee compensation costs, and increased expenses associated with
Chrysler's expanding international operations.
Employee retirement benefits decreased in 1997 as compared with 1996
primarily as a result of higher expected returns on pension plan assets in 1997
and costs associated with a voluntary early retirement program for certain
salaried employees in 1996. Employee retirement benefits increased in 1996 as
compared with 1995 primarily as a result of a decrease in the discount rates
used to determine 1996 pension expense and nonpension postretirement benefit
expense, costs associated with the voluntary early retirement program in 1996
and increased pension benefits related to Chrysler's 1996 collective bargaining
agreements. This increase was partially offset by the favorable effect of higher
expected returns on pension plan assets in 1996. Chrysler contributed $74
million, $941 million and $838 million to the pension funds during 1997, 1996
and 1995, respectively.
During December 1997, Chrysler completed an IPO of its common stock
interest in DTAG for net proceeds of $387 million. The IPO of the common stock
interest resulted in a pretax and after-tax gain of $73 million. The gain was
deferred and will be recognized over the remaining term of the vehicle supply
agreements with DTAG, which end in 2001. The tax effect on this transaction
reflects the difference between the book and tax basis of Chrysler's stock
interest in DTAG for which deferred taxes were not provided, in accordance with
SFAS No. 109, "Accounting for Income Taxes." In addition, fourth-quarter 1997
earnings include the recognition of $97 million ($60 million after taxes) of
previously deferred profits from the sale of vehicles from Chrysler to DTAG.
In 1996, Chrysler committed to a plan of disposal for Thrifty, a subsidiary
of DTAG, and recognized a $65 million pretax loss ($100 million after taxes) to
write down Thrifty's carrying value to estimated fair value less cost to sell.
The pretax loss is included in Costs, other than items below in the consolidated
statement of earnings for 1996. The after-tax loss includes the effect of not
being able to claim a tax deduction for the capital loss on Chrysler's
investment in Thrifty.
24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES -- CONTINUED
---------------------------------------------------------------------
In 1996, Chrysler sold ESI and CTAS for net proceeds of $476 million. ESI
and CTAS were engaged principally in the manufacture of defense electronics and
aircraft modification, respectively, and represented substantially all of the
operations of Chrysler Technologies Corporation ("CTC"), a wholly owned
subsidiary of Chrysler. The sale resulted in a pretax gain of $101 million ($87
million after taxes). In the fourth quarter of 1996, Chrysler signed an
agreement to sell PEI for net proceeds of $17 million, which resulted in the
recognition of a pretax loss of $77 million ($51 million after taxes) to write
down PEI's carrying value to estimated fair value less cost to sell. PEI
represented the remaining operations of CTC. The sale of PEI was completed on
January 10, 1997. The pretax gain on the sale of ESI and CTAS and the pretax
loss on the write-down of PEI are included in Costs, other than items below in
the consolidated statement of earnings for 1996.
In 1995, Chrysler recorded a $263 million provision ($162 million after
taxes) for costs associated with production changes at its Newark assembly
plant. Newark production of the Chrysler Concorde and Dodge Intrepid was reduced
to one shift in August 1995 and terminated in July 1996. Production of an
all-new sport-utility vehicle, the Dodge Durango, began at the Newark assembly
plant in the fall of 1997. The provision reflects the recognition of
supplemental unemployment benefits, job security benefits and other related
employee costs, and the write-down of certain equipment and tooling. The
provision is included in Costs, other than items below in the consolidated
statement of earnings for 1995.
Chrysler's effective tax rates in 1997, 1996 and 1995 were 38.4 percent,
38.9 percent and 38.5 percent, respectively.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $7.8 billion at December 31, 1997 (including $0.8 billion
held by CFC), $7.8 billion at December 31, 1996 (including $0.8 billion held by
CFC and DTAG), and $8.1 billion at December 31, 1995 (including $1.2 billion
held by CFC and DTAG).
Chrysler's long-term profitability will depend significantly on its ability
to continue its capital expenditure and vehicle development programs and to
market its vehicles successfully in an increasingly competitive environment.
Chrysler's expenditures for new product development and the acquisition of
productive assets were approximately $19 billion for the three-year period ended
December 31, 1997. Expenditures for these items during the succeeding three-year
period are expected to be at similar or higher levels. At December 31, 1997,
Chrysler had commitments for capital expenditures, including commitments for
assets currently under construction, totaling approximately $1.3 billion.
During 1997, Chrysler repurchased 63 million shares of its common stock at
a cost of $2.1 billion. Chrysler plans to repurchase an additional $1.8 billion
of its common stock in 1998 as part of a $2 billion repurchase plan which began
in November 1997. The planned 1998 common stock repurchases are subject to
market and general economic conditions. Since beginning its common stock
repurchase program in 1995, Chrysler has repurchased 175 million shares of its
common stock at a cost of $5.2 billion.
In February 1997, Chrysler sold $500 million of 7.45% Debentures due 2097
and $600 million of 7.45% Debentures due 2027 for net proceeds of $485 million
and $592 million, respectively. In July 1997, Chrysler sold $500 million of
7.40% Debentures due 2097 for net proceeds of $495 million.
In August 1997, Chrysler extinguished its $267 million 10.95% Debentures
due 2017 and $245 million 10.40% Notes due 1999 for $529 million.
In December 1997, Chrysler prepaid certain 1998 nonpension employee
benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary
Association trust and other employee benefit plans.
At December 31, 1997, Chrysler (excluding CFC) had aggregate debt
maturities of $606 million through 2000. At December 31, 1997, Chrysler had a
$2.6 billion revolving credit agreement which expires in April 2002. The
revolving credit agreement was not drawn upon at December 31, 1997. Chrysler
believes that cash from operations and its cash position will be sufficient to
enable it to meet its capital expenditure, debt maturity, common stock
repurchase, dividend payment and other funding requirements.
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
--------------------------------------------
Term debt, commercial paper and receivable sales are CFC's primary funding
sources. CFC increased its term debt outstanding by $0.9 billion during 1997 and
decreased its term debt outstanding by $0.8 billion during 1996. CFC's
commercial paper outstanding increased by $0.4 billion in 1997 and by $0.2
billion in 1996. CFC realized $9.0 billion and $8.1 billion of net proceeds from
the sales of automotive retail receivables during 1997 and 1996, respectively.
In addition, securitization of revolving wholesale account balances provided
funding for CFC which aggregated $6.1 billion and $6.8 billion at December 31,
1997 and 1996, respectively.
At December 31, 1997, CFC had debt maturities of $6.0 billion in 1998
(including $3.0 billion of short-term notes), $3.3 billion in 1999, and $2.3
billion in 2000. CFC expects that 1998 debt maturities will be funded from
continued access to term debt markets, issuance of commercial paper, receivable
sales (including approximately $1.5 billion in eligible wholesale receivables
held by securitization trusts) and operating cash flows. CFC's U.S. and Canadian
revolving credit facilities, which total $8 billion, consist of a $2 billion
facility expiring in April 1998 and a $6 billion facility expiring in April
2002. Neither of the revolving credit facilities was drawn upon at December 31,
1997. CFC believes that cash provided by operations, receivable sales, and the
issuance of term debt and commercial paper will provide sufficient liquidity to
meet its debt maturity and other funding requirements.
During December 1997, Chrysler completed an IPO of its common stock
interest in DTAG for net proceeds of $387 million. In 1996, Chrysler sold ESI
and CTAS for net proceeds of $476 million.
OUTLOOK
-------
The statements contained in this Outlook section are based on management's
current expectations. With the exception of the historical information contained
herein, the statements presented in this Outlook section are forward-looking
statements that involve numerous risks and uncertainties. Actual results may
differ materially.
Chrysler's average sales incentives per vehicle increased during 1997 as a
result of an increasingly competitive automotive environment, including the
continued unfavorable effects of changes in the Japanese yen to U.S. dollar
exchange rate. Chrysler expects to continue to face an increasingly competitive
automotive environment, which is likely to continue to limit vehicle pricing
flexibility in the near term. In addition, the weakness of the Japanese yen
against the U.S. dollar and the recent deterioration in the Asian economies,
could result in substantial decreases in exports to Asia from the U.S. and
Canada and substantial increases in imports from Asia to the U.S. and Canada.
The Asian economic difficulties could result in more intense competition in the
automotive industry and have an unfavorable effect on overall economic
conditions in the U.S. and Canada where Chrysler's sales are concentrated.
In the third quarter of 1997, Chrysler began production of the all-new
Dodge Intrepid sedan and Dodge Durango sport-utility vehicle, and the new Dodge
Ram Four Door Club Cab pickup truck. In the fourth quarter of 1997, Chrysler
began production of the all-new Chrysler Concorde. In the spring of 1998,
Chrysler will begin production of the all-new Chrysler LHS and 300M sedans. In
the second quarter of 1998, Chrysler will cease production of its current Jeep
Grand Cherokee and begin the changeover to its all-new Jeep Grand Cherokee.
Production of the all-new Jeep Grand Cherokee will begin in the third quarter of
1998.
Chrysler's worldwide vehicle production in the fourth quarter of 1997 was
732,995 units, an increase of 21,778 units or 3 percent as compared with the
fourth quarter of 1996. Worldwide vehicle production for the first quarter of
1998 is expected to be approximately 805,300 units, an increase of 43,200 units
or 6 percent as compared with the first quarter of 1997. This expected
production level is heavily dependent on Chrysler's ability to maintain its
competitive position, continued favorable economic conditions in the U.S. and
Canada, the avoidance of work stoppages by represented employees, and the
successful launch of Chrysler's new products.
Chrysler projects that 1998 retail (including fleet) industry sales for the
U.S. will range from 15.0 million to 15.5 million units and that 1998 retail
(including fleet) industry sales for Canada will range from 1.4 million to 1.6
million units. Retail (including fleet) industry sales in 1997 were 15.5 million
units and 1.4 million units in the U.S. and Canada, respectively. Actual levels
of industry retail (including fleet) sales will depend on, among other things,
economic conditions in the U.S. and Canada. Accordingly, there can be no
assurance that Chrysler's estimates will be accurate.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
OUTLOOK -- CONTINUED
--------------------
Chrysler's business plan for 1998 is predicated on several broad economic
assumptions, including, among others, that 1998 inflation and interest rates in
the U.S. will remain stable and will be comparable to 1997 rates; there will be
a moderate expansion in the U.S. economy during 1998, with real economic growth
between 2.5 percent and 3.0 percent; and average 1998 gasoline and oil prices in
the U.S. will be comparable to, or below 1997 prices. As with most economic
projections, actual conditions in 1998 could vary substantially from Chrysler's
assumptions.
In addition, Chrysler wishes to caution readers that several factors, as
well as those factors described elsewhere in this discussion or in other
Securities and Exchange Commission filings, in some cases have affected, and in
the future could affect, Chrysler's actual results, and could cause Chrysler's
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, Chrysler. Those factors include: government
regulations as they may affect Chrysler's ability to produce and sell the kinds
of vehicles that consumers demand, business conditions and growth in the
automotive industry and general economy; changes in gasoline and oil prices;
changes in consumer debt levels and interest rates; changes in consumer
preferences away from pickup trucks, sport-utility vehicles and minivans;
competitive factors, such as domestic and foreign rival car and truck offerings,
price pressures and sales incentives, and acceptance of new products; excess or
shortage of manufacturing capacity; risks and uncertainties associated with
Chrysler's expansion into international markets; and changes in foreign currency
exchange rates and the resulting impact on pricing strategies of major foreign
competitors. Additionally, several of Chrysler's competitors have larger
worldwide sales volumes and greater financial resources, which may, over time,
place Chrysler at a competitive disadvantage in responding to its competitors'
offerings, substantial changes in consumer preferences, government regulations,
or adverse economic conditions in the U.S. and Canada. Finally, the automotive
industry historically has been highly cyclical and the duration of these cycles
has been difficult to predict.
DERIVATIVE FINANCIAL INSTRUMENTS
--------------------------------
Chrysler's primary market risks include fluctuations in interest rates and
currency exchange rates. Chrysler manages these market risks by using derivative
financial instruments in accordance with established policies and procedures.
Several techniques, including market value, sensitivity analysis and value at
risk, are used to monitor Chrysler's exposure to market risks. Chrysler does not
use derivative financial instruments for trading purposes.
When Chrysler sells vehicles or purchases components outside the United
States, transactions are frequently denominated in currencies other than U.S.
dollars. To the extent possible, sales and purchases in specific currencies are
offset against each other. The foreign currencies in which Chrysler has the most
significant exchange rate exposure are the British pound, Austrian schilling,
Japanese yen, Spanish peseta, French franc, Taiwan dollar, German mark, Italian
lira, Canadian dollar and Mexican peso. To manage these exposures, Chrysler
periodically initiates hedging activities by entering into currency exchange
agreements, consisting primarily of currency forward contracts, to minimize
revenue and cost variations which could result from fluctuations in currency
exchange rates. The currency exchange agreements which provide hedge coverage
typically mature within three years of origination, consistent with the
underlying purchase or sales commitment.
CFC's primary market risks include fluctuations in interest rates,
variability in interest rate spread relationships (i.e., Prime to LIBOR
spreads), mismatches of repricing intervals between finance receivables and
related funding obligations, and exchange rate variability. CFC enters into
securitization transactions, issues debt with appropriate price and term
characteristics and utilizes derivative financial instruments to manage its
exposure to fluctuations in earnings due to changes in interest rates,
variability in spread relationships and mismatches of repricing intervals.
Derivative financial instruments consist primarily of interest rate swaps. CFC
uses interest rate swap agreements to change the characteristics of its fixed
and variable rate exposures and to manage its asset/liability match. CFC's
interest rate swap portfolio is an integral part of its risk management strategy
and as such, all swaps are linked to an underlying debt or securitization
obligation. Exposure to variability in foreign exchange rates is mitigated
through the use of natural hedges, whereby the lending and funding requirements
are both managed in the home currency of such countries. In the past, CFC
entered into currency exchange agreements to manage its exposure arising from
fluctuations in exchange rates related to specific funding transactions.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS -- CONTINUED
---------------------------------------------
Chrysler uses a historical simulation model in its calculation of value at
risk, which measures the potential loss in fair value that could arise from
changes in market conditions, using a 95 percent confidence level and assuming a
three-month time horizon. The model takes into account actual observed
correlations and diversification across market factors, including interest rates
and currencies. Included in the value at risk calculation are anticipated
transactions related to purchase and sales commitments. Based on its calculation
of value at risk at December 31, 1997, fluctuations in interest rates and
currency exchange rates in the near term would not materially affect Chrysler's
consolidated operating results, financial position or cash flows. Chrysler's
management believes that its hedging activities have been effective in reducing
Chrysler's limited risks related to interest rate and currency exchange rate
fluctuations.
For more information on derivative financial instruments, see Part II, Item
8, Notes to Consolidated Financial Statements, Notes 1, 7 and 16.
YEAR 2000 DATE CONVERSION
-------------------------
In 1995, Chrysler began the process of identifying, evaluating and
implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have time-sensitive programs
that may not properly recognize the year 2000. This could result in major system
failures or miscalculations. Chrysler is currently addressing its internal year
2000 issue with modifications to existing programs and conversions to new
programs. Chrysler is also communicating with dealers, suppliers, financial
institutions and others with which it conducts business to help them identify
and resolve the year 2000 issue. If necessary modifications and conversions by
Chrysler and those with which it conducts business are not completed timely, the
year 2000 issue may have a material adverse effect on Chrysler's consolidated
results of operations. The total cost associated with the required modifications
and conversions is not expected to be material to Chrysler's consolidated
results of operations and financial position and is being expensed as incurred.
NEW ACCOUNTING STANDARDS
------------------------
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. This
Statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This Statement further requires that an entity display an
amount representing total comprehensive income for the period in that financial
statement. This Statement also requires that an entity classify items of other
comprehensive income by their nature in a financial statement. For example,
other comprehensive income may include foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments in
debt and equity securities. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. Based on current
accounting standards, this Statement is not expected to have a material impact
on Chrysler's consolidated financial statements. Chrysler will adopt this
accounting standard effective January 1, 1998, as required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," effective for fiscal years beginning
after December 15, 1997. This Statement establishes standards for reporting
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. This Statement requires reporting segment profit or loss, certain
specific revenue and expense items and segment assets. It also requires
reconciliations of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to corresponding
amounts reported in the consolidated financial statements. Restatement of
comparative information for earlier periods presented is required in the initial
year of application. Interim information is not required until the second year
of application, at which time comparative information is required. Chrysler has
not determined the impact that the adoption of this new accounting standard will
have on its consolidated financial statement disclosures. Chrysler will adopt
this accounting standard effective January 1, 1998, as required.
28
Item 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA
------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------------
1997 1996 1995
-------- -------- --------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products..................................... $56,986 $57,587 $49,601
Finance and insurance revenues..................................... 1,636 1,746 1,589
Other revenues..................................................... 2,525 2,064 2,005
------- ------- -------
TOTAL REVENUES 61,147 61,397 53,195
------- ------- -------
Costs, other than items below (Notes 13 and 14).................... 46,743 45,842 41,304
Depreciation and special tools amortization (Notes 1 and 5)........ 2,696 2,312 2,220
Selling and administrative expenses................................ 4,957 4,730 4,064
Employee retirement benefits (Note 12)............................. 1,188 1,414 1,163
Interest expense................................................... 1,006 1,007 995
------- ------- -------
TOTAL EXPENSES 56,590 55,305 49,746
------- ------- -------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE..... 4,557 6,092 3,449
Provision for income taxes (Note 8)................................ 1,752 2,372 1,328
------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE............................ 2,805 3,720 2,121
Extraordinary item - Loss on early extinguishment of debt, net of
taxes (Note 7)................................................... -- (191) --
Cumulative effect of a change in accounting principle, net of
taxes (Note 1)................................................... -- -- (96)
------- ------- -------
NET EARNINGS $ 2,805 $ 3,529 $ 2,025
Preferred stock dividends (Note 11)................................ 1 3 21
------- ------- -------
NET EARNINGS ON COMMON STOCK $ 2,804 $ 3,526 $ 2,004
======= ======= =======
(IN DOLLARS OR MILLIONS OF
SHARES)
BASIC EARNINGS PER COMMON SHARE (Notes 1, 7, 11, 17):
Earnings before extraordinary item and cumulative effect
of a change in accounting principle........................... $ 4.15 $ 5.09 $ 2.81
Extraordinary item............................................... -- (0.26) --
Cumulative effect of a change in accounting principle............ -- -- (0.13)
------- ------- -------
Net earnings per common share.................................... $ 4.15 $ 4.83 $ 2.68
======= ======= =======
Average common shares outstanding................................ 675.5 730.3 748.4
DILUTED EARNINGS PER COMMON SHARE (Notes 1, 7, 11, 17):
Earnings before extraordinary item and cumulative effect
of a change in accounting principle........................... $ 4.09 $ 5.00 $ 2.68
Extraordinary item............................................... -- (0.26) --
Cumulative effect of a change in accounting principle............ -- -- (0.12)
------- ------ -------
Net earnings per common share.................................... $ 4.09 $ 4.74 $ 2.56
======= ====== =======
Average common and dilutive equivalent shares outstanding........ 685.3 743.8 791.7
DIVIDENDS DECLARED PER COMMON SHARE................................ $ 1.60 $ 1.40 $ 1.00
See notes to consolidated financial statements.
29
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
[Enlarge/Download Table]
DECEMBER 31
------------------------
1997 1996
------- -------
(IN MILLIONS OF DOLLARS)
ASSETS:
Cash and cash equivalents (Note 1) ................................................ $ 4,898 $ 5,158
Marketable securities (Note 2)..................................................... 2,950 2,594
------- -------
Total cash, cash equivalents and marketable securities.......................... 7,848 7,752
Accounts receivable - trade and other (less allowance for doubtful
accounts: 1997 and 1996- $52 million and $44 million, respectively)............. 1,646 2,126
Inventories (Notes 1 and 3)........................................................ 4,738 5,195
Prepaid employee benefits, taxes and other expenses (Note 12)...................... 2,193 1,929
Finance receivables and retained interests in sold receivables (Note 4)............ 13,518 12,339
Property and equipment (Note 5).................................................... 17,968 14,905
Special tools (Note 1)............................................................. 4,572 3,924
Intangible assets (Note 1)......................................................... 1,573 1,995
Other noncurrent assets (Note 12).................................................. 6,362 6,019
------- -------
TOTAL ASSETS $60,418 $56,184
======= =======
LIABILITIES:
Accounts payable.................................................................. $ 9,512 $ 8,981
Accrued liabilities and expenses (Note 6)......................................... 9,717 8,864
Short-term debt (Note 7).......................................................... 3,841 3,214
Payments due within one year on long-term debt (Note 7)........................... 2,638 2,998
Long-term debt (Note 7)........................................................... 9,006 7,184
Accrued noncurrent employee benefits (Note 12).................................... 9,841 9,431
Other noncurrent liabilities...................................................... 4,501 3,941
------- -------
TOTAL LIABILITIES 49,056 44,613
------- -------
SHAREHOLDERS' EQUITY (Note 11): (shares in millions)
Preferred stock - $1 per share par value; authorized 20.0 shares; Series
A Convertible Preferred Stock; issued and outstanding: 1997 and 1996 -
0.02 and 0.04 shares, respectively (aggregate liquidation
preference $8 million and $21 million, respectively)........................... * *
Common stock - $1 per share par value; authorized 1,000.0 shares;
issued: 1997 and 1996 - 823.1 and 821.6 shares, respectively.................. 823 822
Additional paid-in capital........................................................ 5,231 5,129
Retained earnings................................................................. 10,605 8,829
Treasury stock - at cost: 1997 and 1996 - 174.7 and 119.1 shares, respectively.... (5,297) (3,209)
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,362 11,571
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $60,418 $56,184
======= =======
---------------------------
* Less than $1 million
See notes to consolidated financial statements.
30
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
----------------------------------
1997 1996 1995
------- ------- -----
(IN MILLIONS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................... $ 2,805 $ 3,529 $ 2,025
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and special tools amortization........................... 2,696 2,312 2,220
Provision for credit losses........................................... 444 373 372
Deferred income taxes................................................. 279 1,120 186
Extraordinary item - Loss on early extinguishment of debt (Note 7).... -- 191 --
Cumulative effect of a change in accounting principle (Note 1)........ -- -- 96
Change in receivables................................................. (364) (224) 848
Change in inventories................................................. (706) (691) (435)
Change in prepaid expenses and other assets........................... (1,249) (1,394) (681)
Change in accounts payable and accrued and other liabilities.......... 2,119 2,143 2,092
Other................................................................. 404 (58) 231
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,428 7,301 6,954
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities.................................... (2,778) (4,346) (5,160)
Sales and maturities of marketable securities......................... 3,350 5,294 6,122
Finance receivables acquired.......................................... (28,335) (19,906) (24,437)
Finance receivables collected......................................... 9,089 3,062 3,795
Proceeds from sales of finance receivables............................ 18,967 16,809 17,602
Proceeds from sales of nonautomotive assets........................... -- 701 94
Expenditures for property and equipment............................... (3,419) (3,271) (2,597)
Expenditures for special tools........................................ (1,703) (1,364) (1,049)
Purchases of vehicle operating leases................................. (2,028) (794) (460)
Other................................................................. 652 248 179
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (6,205) (3,567) (5,911)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt............................................. 627 410 (1,971)
Proceeds under long-term borrowings and revolving lines of credit..... 5,868 1,390 4,731
Payments on long-term borrowings and revolving lines of credit........ (3,897) (2,167) (1,687)
Payment for early extinguishment of debt.............................. -- (853) --
Repurchases of common stock (Note 11)................................. (2,130) (2,041) (1,047)
Dividends paid........................................................ (1,096) (963) (710)
Other................................................................. 145 105 39
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (483) (4,119) (645)
------- ------- -------
Change in cash and cash equivalents........................................ (260) (385) 398
Cash and cash equivalents at beginning of year............................. 5,158 5,543 5,145
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................... $ 4,898 $ 5,158 $ 5,543
======= ======= =======
See notes to consolidated financial statements.
31
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of Chrysler Corporation and its
consolidated subsidiaries ("Chrysler") include the accounts of all significant
majority-owned subsidiaries and entities. Affiliates that are 20 percent to 50
percent owned and subsidiaries where control is expected to be temporary,
primarily investments in certain dealerships, are generally accounted for on an
equity basis. Intercompany accounts and transactions have been eliminated in
consolidation. Certain amounts for 1996 and 1995 have been reclassified to
conform with current period classifications.
ESTIMATES
The preparation of Chrysler's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Vehicle and parts sales are generally recognized when such products are
shipped to dealers, except for sales under which Chrysler conditionally
guarantees the minimum resale value of the vehicles. Provisions for sales
incentives, returns and allowances are recognized at the time the related sale
is recognized and are treated as revenue reductions.
In 1995, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") reached a consensus on EITF Issue 95-1,
"Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." The
consensus on EITF Issue 95-1 (the "consensus") affects Chrysler's accounting
treatment for vehicle sales (principally to non-affiliated rental car companies)
for which Chrysler conditionally guarantees the minimum resale value of the
vehicles. In accordance with the consensus, these vehicle sales are accounted
for as operating leases with the related revenues and costs deferred at the time
of shipment. A portion of the deferred revenues and costs is recognized over the
corresponding guarantee period, with the remainder recognized at the end of the
guarantee period. The average guarantee period for these vehicles is
approximately nine months. Chrysler changed its accounting treatment in
accordance with the consensus effective January 1, 1995, which resulted in the
recognition of an after-tax charge of $96 million (net of income tax benefit of
$59 million), or $0.13 per common share, for the cumulative effect of this
change in accounting principle.
Finance revenue from finance receivables of Chrysler Financial Corporation
("CFC"), a wholly owned subsidiary, is recognized using the interest method.
Finance revenue from operating leases of vehicles is recognized on a
straight-line basis. Certain loan and lease origination costs are deferred and
amortized to finance revenue over the contractual terms. Recognition of finance
revenue is generally suspended when a loan or lease becomes contractually
delinquent for periods ranging from 60 to 90 days. Finance revenue recognition
is resumed when the loan or lease becomes contractually current, at which time
all past due finance revenue is recognized.
CFC sells significant amounts of automotive retail and wholesale
receivables in transactions subject to limited credit risk. CFC generally sells
its receivables to a trust and remains as servicer, for which it is paid a
servicing fee. Servicing fees are earned on a level yield basis over the
remaining terms of the related sold receivables. In a subordinated capacity, CFC
retains residual cash flows, a limited interest in the principal balances of the
sold receivables and certain cash deposits provided as credit enhancements for
investors. Gains or losses from the sales of finance receivables are recognized
in the period in which such sales occur. In determining the gain or loss for
each qualifying sale of finance receivables, the investment in the sold
receivable pool is allocated between the portion sold and the portion retained,
based on their relative fair values. Effective January 1, 1997, Chrysler adopted
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which requires retail and wholesale receivable sales occurring after December
31, 1996, to be accounted for as sales when legal and effective control over
transferred receivables is surrendered. The adoption of this new accounting
standard did not have a material impact on Chrysler's consolidated financial
statements.
32
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
----------------------------------------------------------------
DEPRECIATION AND SPECIAL TOOLS AMORTIZATION
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is generally provided on a straight-line basis. Special tooling
costs are amortized over the years that a model using that tooling is expected
to be produced and within each year based on the units produced. Amortization is
deducted directly from the asset account and totaled $3.7 billion and $3.4
billion at December 31, 1997 and 1996, respectively. During any given model
year, special tools will contain tooling with varying useful lives.
PRODUCT-RELATED COSTS
Expenditures for research and development, advertising, sales promotion and
other product-related costs are expensed as incurred. Provisions for product
warranty are recognized at the time the related sale is recognized. Research and
development costs were $1.7 billion, $1.6 billion and $1.4 billion in 1997, 1996
and 1995, respectively. Advertising expense was $1.5 billion, $1.5 billion and
$1.2 billion in 1997, 1996 and 1995, respectively.
EARNINGS PER COMMON SHARE
Effective for Chrysler's consolidated financial statements for the year
ended December 31, 1997, Chrysler adopted SFAS No. 128, "Earnings per Share,"
which replaces the presentation of primary earnings per share ("EPS") and fully
diluted EPS with a presentation of basic EPS and diluted EPS, respectively.
Basic EPS excludes dilution and is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS assumes conversion of
the convertible preferred stock, the elimination of the related preferred stock
dividend requirement, and the issuance of common stock for all other potentially
dilutive equivalent shares outstanding. All prior-period EPS data have been
restated. The adoption of this new accounting standard did not have a material
effect on Chrysler's reported EPS amounts.
CASH AND CASH EQUIVALENTS
Highly liquid investments with a maturity of three months or less at the
date of purchase are classified as cash equivalents.
ALLOWANCE FOR CREDIT LOSSES
An allowance for credit losses is generally established during the period
in which retail receivables or vehicles leased are acquired. The allowance for
credit losses is maintained at a level deemed appropriate, based primarily on
loss experience. Other factors affecting collectibility are also evaluated, and
appropriate adjustments are recorded. Retail automotive receivables and vehicles
leased are charged to the allowance for credit losses net of the estimated value
of repossessed collateral at the time of repossession. Nonautomotive finance
receivables are reduced to the estimated fair value of the collateral when such
loans are deemed to be impaired.
INVENTORIES
Inventories are valued at the lower of cost or market. The cost of
approximately 43 percent and 39 percent of inventories at December 31, 1997 and
1996, respectively, was determined on a Last-In, First-Out ("LIFO") basis. The
balance of inventory cost was determined primarily on a specific identification
basis.
INTANGIBLE ASSETS
The purchase price of companies in excess of the fair value of net
identifiable assets acquired ("goodwill") is amortized on a straight-line basis
over periods of up to 40 years, with a weighted-average period of 38 years. The
amount reported is net of accumulated amortization totaling $642 million and
$778 million at December 31, 1997 and 1996, respectively. Chrysler periodically
evaluates the carrying value of goodwill for impairment. Such evaluations are
based principally on the projected, undiscounted cash flows of the operations to
which the goodwill relates. Intangible assets also include intangible pension
assets of $147 million and $161 million at December 31, 1997 and 1996,
respectively.
33
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
----------------------------------------------------------------
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Effective January 1, 1996, Chrysler adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used, and long-lived assets and certain identifiable
intangibles to be disposed of. The Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition, the Statement
requires that certain long-lived assets and identifiable intangibles to be
disposed of be reported at the lower of carrying amount or fair value less cost
to sell. The initial adoption of this new accounting standard did not have a
material effect on Chrysler's consolidated operating results or financial
position. See also Note 13.
FOREIGN CURRENCY TRANSLATION
The financial statements of foreign subsidiaries are translated to U.S.
dollars using the period-end exchange rate for assets and liabilities and a
weighted-average exchange rate for each period for revenues and expenses. The
U.S. dollar is the functional currency for most of Chrysler's foreign
subsidiaries. Translation gains and losses are included in earnings for those
foreign subsidiaries whose functional currency is the U.S. dollar. Where the
local currency is the functional currency, translation adjustments are recorded
as a separate component of shareholders' equity. Also, transaction gains and
losses arising from fluctuations in currency exchange rates on transactions
denominated in currencies other than the functional currency, except those
transactions which hedge purchase or sale commitments, are recorded in earnings
as incurred.
DERIVATIVE FINANCIAL INSTRUMENTS
Chrysler manages risk arising from fluctuations in interest rates and
currency exchange rates by using derivative financial instruments. Chrysler
manages exposure to counterparty credit risk by entering into derivative
financial instruments with highly rated institutions that can be expected to
fully perform under the terms of such agreements. Chrysler does not use
derivative financial instruments for trading purposes.
When Chrysler (excluding CFC) sells vehicles outside the United States or
purchases components from suppliers outside the United States, transactions are
frequently denominated in currencies other than U.S. dollars. Periodically,
Chrysler initiates hedging activities by entering into currency exchange
agreements, consisting principally of currency forward contracts, to minimize
revenue and cost variations which could result from fluctuations in currency
exchange rates. These instruments, consistent with the underlying purchase or
sale commitments, typically mature within three years of origination. The
currency exchange agreements are treated as off-balance-sheet financial
instruments, with the related gains and losses recognized in earnings upon the
settlement of the underlying transactions. In the event of an early termination
of a currency exchange agreement designated as a hedge, the gain or loss
continues to be deferred and is included in the settlement of the underlying
transaction. Forward contracts are used to manage exposure to fluctuations in
funding costs for the anticipated issuance of debt. Gains or losses on forward
contracts that qualify for hedge accounting treatment are deferred and recorded
as an adjustment to interest expense over the term of the new debt. In the
event of an early termination of a forward contract designated as a hedge, the
gain or loss is deferred and recorded as an adjustment to interest expense over
the remaining term of the underlying debt.
CFC uses derivative financial instruments to reduce the sensitivity of
earnings to various market risks and manage funding costs. CFC's primary market
risks include: fluctuations in interest rates, variability in spread
relationships (i.e., Prime to LIBOR spreads), mismatches of repricing intervals
between finance receivables and related funding obligations, and variability in
currency exchange rates. The derivative financial instruments consist primarily
of interest rate swap agreements. Interest differentials resulting from interest
rate swap agreements used to change the interest rate characteristics of CFC's
debt are recorded on an accrual basis as an adjustment to interest expense.
Interest rate swaps related to debt are either matched with specific term debt
obligations or with groups of commercial paper on a layered basis. In the event
of an early termination of an interest rate swap agreement designated as a
hedge, the gain or loss is deferred, recorded in Other noncurrent assets, and
recognized as an adjustment to interest expense over the remaining term of the
underlying debt. In addition, CFC enters into currency exchange agreements,
consisting primarily of currency swaps, to manage its exposure
34
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
----------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS -- CONTINUED
to fluctuations in currency exchange rates related to specific borrowings
denominated in currencies other than the local currency of the borrowing entity.
As a result, such borrowings are translated in the consolidated balance sheet at
the rates of exchange established under the related currency exchange agreement.
Cash flows related to currency swaps are reflected in financing activities
and cash flows related to all other derivative financial instruments are
reflected in operating activities in the consolidated statement of cash flows.
NOTE 2. MARKETABLE AND OTHER SECURITIES
----------------------------------------
Available-for-sale securities are carried at their fair values. Changes in
the fair values of available-for-sale securities are recognized as a component
of shareholders' equity until such securities are sold. Held-to-maturity
securities are carried at cost adjusted for amortized premium or discount.
Chrysler does not hold securities for trading purposes.
Investments in marketable securities were as follows:
[Enlarge/Download Table]
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------- ----------------- ----------------- -----------------
DECEMBER 31
----------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------ ------- ------- ------
(IN MILLIONS OF DOLLARS)
AVAILABLE-FOR-SALE SECURITIES:
U.S. and Canadian government
and agency securities....... $1,056 $1,454 $ 6 $ 6 $(4) $(11) $1,058 $1,449
Corporate debt securities...... 1,787 965 11 8 (2) (5) 1,796 968
Other marketable securities.... 77 162 7 2 (1) -- 83 164
------ ------ --- --- --- ---- ------ ------
Total available-for-sale
securities.................. 2,920 2,581 24 16 (7) (16) 2,937 2,581
------ ------ --- --- --- ---- ------ ------
HELD-TO-MATURITY SECURITIES:
Corporate debt securities...... 1 -- -- -- -- -- 1 --
Other marketable securities.... 12 13 -- -- -- -- 12 13
------ ------ ---- --- --- --- ------ ------
Total held-to-maturity
securities.................. 13 13 -- -- -- -- 13 13
------ ------ ---- --- --- ---- ------ ------
Total $2,933 $2,594 $24 $16 $(7) $(16) $2,950 $2,594
====== ====== === === === ==== ====== ======
At December 31, 1997, contractual maturities of marketable debt securities
were as follows (in millions of dollars): within one year - $254; after one year
through five years - $1,692; after five years through ten years - $388; and
after ten years - $535.
Proceeds from sales of available-for-sale securities were $648 million,
$860 million and $757 million in 1997, 1996 and 1995, respectively. The gross
gains and losses realized related to these sales were immaterial. Chrysler uses
the specific identification method as a basis for determining cost and
calculating realized gains or losses.
Other securities classified as cash equivalents were $4.3 billion at
December 31, 1997 and 1996, and consisted primarily of repurchase agreements,
commercial paper, and certificates of deposit.
NOTE 3. INVENTORIES AND COST OF SALES
--------------------------------------
Inventories, summarized by major classification, were as follows:
[Enlarge/Download Table]
DECEMBER 31
----------------------
1997 1996
------ ------
(IN MILLIONS OF DOLLARS)
Finished products, including service parts................................... $1,883 $1,569
Raw materials, finished production parts and supplies........................ 1,445 1,540
Vehicles held for short-term lease........................................... 1,410 2,086
------ ------
Total $4,738 $5,195
====== ======
35
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. INVENTORIES AND COST OF SALES -- CONTINUED
---------------------------------------------------
Inventories valued on the LIFO basis would have been $415 million and $439
million higher than reported had they been valued on the FIFO basis at December
31, 1997 and 1996, respectively.
Vehicles held for short-term lease include the carrying value of vehicles
(principally sold to non-affiliated rental car companies) for which Chrysler
conditionally guarantees the minimum resale value of the vehicles. The carrying
value of these vehicles was $1,003 million and $900 million at December 31, 1997
and 1996, respectively.
Total manufacturing cost of sales aggregated $47.1 billion, $46.5 billion
and $41.7 billion for 1997, 1996 and 1995, respectively.
NOTE 4. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SOLD RECEIVABLES
-----------------------------------------------------------------------
Finance receivables and retained interests in sold receivables were as
follows:
[Download Table]
DECEMBER 31
--------------------
1997 1996
------ ------
(IN MILLIONS OF
DOLLARS)
Automotive financing..................................... $ 6,369 $ 6,517
Nonautomotive financing.................................. 2,715 2,204
Retained senior interests in wholesale receivables held
in trusts............................................. 1,511 677
------- -------
Total finance receivables.......................... 10,595 9,398
Retained interests in sold receivables................... 3,488 3,488
Allowance for credit losses.............................. (565) (547)
------- -------
Total.............................................. $13,518 $12,339
======= =======
Retained interests in sold receivables are generally restricted and subject
to credit risk.
Contractual maturities of total finance receivables as of December 31,
1997, were as follows (in millions of dollars): 1998 - $5,001; 1999 - $954;
2000 - $1,151; 2001 - $516; 2002 - $455; and 2003 and thereafter - $2,518.
Actual cash flows will vary from contractual maturities due to future sales of
finance receivables, prepayments and charge-offs.
Changes in the allowance for credit losses were as follows:
[Download Table]
YEAR ENDED DECEMBER 31
-------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS OF DOLLARS)
Balance at beginning of year......................... $ 547 $ 617 $ 522
Provision for credit losses.......................... 444 373 372
Net credit losses.................................... (415) (398) (252)
Other adjustments.................................... (11) (45) (25)
----- ----- -----
Balance at end of year............................... $ 565 $ 547 $ 617
===== ===== =====
Nonearning finance receivables, including receivables sold subject to
credit risk, totaled $248 million and $278 million at December 31, 1997 and
1996, respectively, which represented 0.7 percent and 0.8 percent of such
receivables outstanding, respectively.
36
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. PROPERTY AND EQUIPMENT
-------------------------------
Property and equipment, summarized by major classification, were as
follows:
[Enlarge/Download Table]
DECEMBER 31
WEIGHTED-AVERAGE -----------------------------
SERVICE LIVES 1997 1996
----------------- ------------ -----------
(YEARS) (IN MILLIONS OF DOLLARS)
Land....................................................... -- $ 358 $ 405
Buildings.................................................. 31 5,973 5,467
Machinery and equipment.................................... 14 14,538 12,364
Furniture and fixtures..................................... 9 624 630
Vehicles under purchased operating leases.................. 3 3,053 1,311
Construction in progress................................... -- 2,536 2,875
------- -------
27,082 23,052
Accumulated depreciation................................... (9,114) (8,147)
------- -------
Total................................................. $17,968 $14,905
======= =======
Depreciation of property and equipment was $1,657 million, $1,317 million
and $1,100 million in 1997, 1996 and 1995, respectively.
NOTE 6. ACCRUED LIABILITIES AND EXPENSES
-----------------------------------------
Accrued liabilities and expenses consisted of the following:
[Enlarge/Download Table]
DECEMBER 31
------------------------
1997 1996
------ ------
(IN MILLIONS OF
DOLLARS)
Customer and dealer allowances and claims........................................ $2,865 $2,660
Employee compensation and benefits............................................... 2,158 2,477
Deferred revenue related to vehicles sold with guaranteed
minimum resale values......................................................... 1,375 1,190
Other............................................................................ 3,319 2,537
------ ------
Total......................................................................... $9,717 $8,864
====== ======
37
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. DEBT
------------
Debt consisted of the following:
[Enlarge/Download Table]
DECEMBER 31
------------------------------------------------------------------
WEIGHTED
AVERAGE
INTEREST
MATURITY RATE (1)
----------- --------------------------
1997 1997 1996 1997 1996
----------- ---- ---- ------ -------
(IN MILLIONS OF
DOLLARS)
Chrysler, excluding CFC:
Short-term debt........................... 8.0% 6.8% $ 490 $ 419
Long-term debt payable within one year.... 19 23
------- -------
Total debt payable within one year.... 509 442
------- -------
Debentures................................ 2027 - 2097 7.4% 11.0% 1,588 265
Notes and other debt...................... 1999 - 2020 10.9% 9.2% 670 1,444
------- -------
Total long-term debt.................. 2,258 1,709
------- -------
Total.......................... 2,767 2,151
------- -------
CFC:
Short-term debt (primarily commercial
paper).................................... 5.6% 5.1% 3,351 2,795
Long-term debt payable within one year.... 2,619 2,975
------- -------
Total debt payable within one year.... 5,970 5,770
------- -------
Senior notes and debentures............... 1999 - 2018 6.7% 6.9% 6,716 5,462
Mortgage notes, capital leases and other.. 32 13
------- -------
Total long-term debt.................. 6,748 5,475
------- -------
Total.......................... 12,718 11,245
------- -------
Total Chrysler:
Total long-term debt...................... $ 9,006 $ 7,184
======= =======
Total debt..................... $15,485 $13,396
======= =======
------------------------
(1) The weighted-average interest rates include the effects of interest
rate swap agreements.
At December 31, 1997, aggregate annual maturities of consolidated debt
were as follows (in millions of dollars): 1998 - $6,479; 1999 - $3,423;
2000 - $2,363; 2001 - $431; and 2002 - $470.
In December 1996, Chrysler extinguished $550 million, or 50 percent, of the
outstanding principal amount of its Auburn Hills Trust Guaranteed Exchangeable
Certificates Due 2020 (the "Certificates") at a cost of $859 million. The
extinguishment of the Certificates resulted in an extraordinary after-tax loss
of $191 million (net of income tax benefit of $118 million), or $0.26 per common
share. At December 31, 1997, $550 million of the Certificates remained
outstanding. The remaining Certificates outstanding are not redeemable prior to
maturity and carry a current interest rate of 12 percent.
Prior to 1997, CFC entered into currency exchange agreements to manage its
exposure to fluctuations in currency exchange rates related to specific
borrowings denominated in currencies other than the local currency of the
borrowing entity. As a result, such borrowings were translated in the
consolidated balance sheet at the rates of exchange established under the
related currency exchange agreement. The reported amount of such borrowings was
$105 million at December 31, 1996. If CFC had not entered into currency exchange
agreements, the amount would have been $52 million higher at December 31, 1996.
To mitigate risks associated with changing interest rates on certain of its
debt, CFC has entered into interest rate swap agreements. CFC manages exposure
to counterparty credit risk by entering into such agreements only with highly
rated institutions that are expected to fully perform under the terms of such
agreements. The notional amounts are used to measure the volume of these
agreements and do not represent exposure to credit loss. The impact of interest
rate swap agreements on interest expense was immaterial in 1997, 1996 and 1995.
38
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. DEBT -- CONTINUED
--------------------------
The following table summarizes CFC's interest rate derivatives related to
its debt and securitizations:
[Enlarge/Download Table]
NOTIONAL AMOUNTS
OUTSTANDING AND
WEIGHTED-AVERAGE
RATES
-------------------------
DECEMBER 31
-------------------------
VARIABLE MATURING
UNDERLYING FINANCIAL INSTRUMENTS RATE INDICES THROUGH 1997 1996
--------------------------------------- ------------ ------------- ----------- ---------
(IN MILLIONS OF
DOLLARS)
PAY FIXED INTEREST RATE SWAPS
Short-term notes..................... 1998 $ 250 $ 250
Weighted-average pay rate......... 9.1% 9.1%
Weighted-average receive rate..... Money Market 5.7% 5.6%
Senior notes and debentures.......... 2000 $1,055 $ 369
Weighted-average pay rate......... 5.9% 5.4%
Weighted-average receive rate..... LIBOR 5.9% 4.4%
RECEIVE FIXED INTEREST RATE SWAPS
Senior notes and debentures.......... 2012 $ 508 $1,436
Weighted-average pay rate......... LIBOR 6.0% 8.1%
Weighted-average receive rate..... 7.0% 9.0%
VARIABLE INTEREST RATE SWAPS
Senior notes and debentures/
securitizations...................... 2000 $1,616 $1,611
Weighted-average pay rate......... LIBOR 5.8% 5.5%
Weighted-average receive rate..... Federal Funds 5.8% 5.6%
CFC's U.S. and Canadian revolving credit facilities, which total $8
billion, consist of a $2 billion facility expiring in April 1998 and a $6
billion facility expiring in April 2002. Neither of the revolving credit
facilities was drawn upon at December 31, 1997.
At December 31, 1997, Chrysler (excluding CFC) had a $2.6 billion revolving
credit agreement which expires in April 2002. The revolving credit agreement was
not drawn upon at December 31, 1997.
NOTE 8. INCOME TAXES
---------------------
Earnings before income taxes, extraordinary item and the cumulative effect
of a change in accounting principle were attributable to the following sources:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
--------------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS OF DOLLARS)
United States................................................ $3,853 $5,631 $3,179
Foreign...................................................... 704 461 270
------ ------ ------
Total................................................... $4,557 $6,092 $3,449
====== ====== ======
The provision for income taxes included in the consolidated statement of
earnings was as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
--------------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS OF DOLLARS)
Provision for income taxes before extraordinary item
and the cumulative effect of a change in accounting
principle.................................................. $1,752 $2,372 $1,328
Income tax benefit of the extraordinary item................. -- (118) --
Income tax benefit of the cumulative effect of a change
in accounting principle.................................... -- -- (59)
------ ----- ------
Total................................................... $1,752 $2,254 $1,269
====== ====== ======
39
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES -- CONTINUED
----------------------------------
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------------------
1997 1996 1995
----------- ----------- ----------
(IN MILLIONS OF DOLLARS)
Currently payable:
United States................................................... $1,134 $ 963 $ 879
Foreign......................................................... 167 52 63
State and local................................................. 172 119 200
------ ------ ------
1,473 1,134 1,142
------ ------ ------
Deferred:
United States................................................... 187 883 116
Foreign......................................................... 48 76 48
State and local................................................. 44 161 (37)
------ ------ ------
279 1,120 127
------ ------ ------
Total........................................................ $1,752 $2,254 $1,269
====== ====== ======
Chrysler does not provide for U.S. income taxes or foreign withholding
taxes on $2.6 billion in cumulative undistributed earnings of foreign
subsidiaries because these earnings are intended to be permanently reinvested in
those operations. It is not practicable to estimate the amount of unrecognized
deferred tax liability for these undistributed foreign earnings.
A reconciliation of income taxes determined using the statutory U.S. rate
of 35 percent to actual income taxes provided was as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
--------------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS OF DOLLARS)
Tax at U.S. statutory rate......................................... $1,595 $2,132 $1,207
State and local taxes, net of federal tax benefit.................. 150 197 116
Adjustments to reflect assessment of realizability of
deferred tax assets........................................... -- -- (29)
Other.............................................................. 7 43 34
------ ------ ------
Provision for income taxes before extraordinary item and the
cumulative effect of a change in accounting principle......... $1,752 $2,372 $1,328
====== ====== ======
Effective income tax rate..................................... 38.4% 38.9% 38.5%
====== ====== ======
The tax-effected temporary differences and carryforwards which comprised
deferred tax assets and liabilities were as follows:
[Enlarge/Download Table]
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------------- -------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES
----------- ---------------- ----------- ----------------
(IN MILLIONS OF DOLLARS)
Nonpension postretirement benefits............... $3,386 $ -- $3,251 $ --
Pensions......................................... 10 1,810 14 1,911
Accrued expenses................................. 3,283 -- 2,692 2
Lease transactions............................... -- 1,980 -- 1,828
Depreciation..................................... -- 2,323 -- 2,056
Prepaid employee benefits........................ -- 762 -- 394
Tax credit carryforwards......................... 181 -- 211 --
Alternative minimum tax credit carryforwards..... 101 -- 107 --
State and local taxes............................ 105 141 105 129
Net operating loss ("NOL") carryforwards......... 16 -- 42 --
Other............................................ 120 996 160 845
------ ------ ------ ------
7,202 8,012 6,582 7,165
Valuation allowance.............................. (8) -- (8) --
------ ------ ------ ------
Total......................................... $7,194 $8,012 $6,574 $7,165
====== ====== ====== ======
40
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES -- CONTINUED
----------------------------------
Chrysler's tax credit carryforwards expire at various dates through the
year 2011 and alternative minimum tax credit carryforwards have no expiration
dates. NOL carryforwards totaled $52 million at December 31, 1997, of which $25
million may be used through the year 2002, and $27 million of which have no
expiration date. The valuation allowance was principally related to
subsidiaries' NOL carryforwards. Changes in the valuation allowance were as
follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
----- ------ -----
(IN MILLIONS OF DOLLARS)
Balance at beginning of year ................................... $ 8 $ 3 $ 77
Utilization of NOL carryforwards................................ -- -- (45)
Adjustments to reflect assessment of realizability of
deferred tax assets........................................ -- -- (29)
Other........................................................... -- 5 --
---- ---- -----
Balance at end of year.......................................... $ 8 $ 8 $ 3
==== ==== =====
NOTE 9. COMMITMENTS AND CONTINGENCIES
--------------------------------------
LITIGATION
Various claims and legal proceedings have been asserted or instituted
against Chrysler, including some purporting to be class actions, and some which
demand large monetary damages or other relief which could result in significant
expenditures. Litigation is subject to many uncertainties, and the outcome of
individual matters is not predictable with assurance. It is reasonably possible
that the final resolution of some of these matters may require Chrysler to make
expenditures, in excess of established reserves, over an extended period of time
and in a range of amounts that cannot be reasonably estimated. The term
"reasonably possible" is used herein to mean that the chance of a future
transaction or event occurring is more than remote but less than likely.
Although the final resolution of any such matters could have a material effect
on Chrysler's consolidated operating results for the particular reporting period
in which an adjustment of the estimated reserve is recorded, Chrysler believes
that any resulting adjustment should not materially affect its consolidated
financial position.
ENVIRONMENTAL MATTERS
Chrysler is subject to potential liability under government regulations and
various claims and legal actions which are pending or may be asserted against
Chrysler concerning environmental matters. Estimates of future costs of such
environmental matters are inevitably imprecise due to numerous uncertainties,
including the enactment of new laws and regulations, the development and
application of new technologies, the identification of new sites for which
Chrysler may have remediation responsibility and the apportionment and
collectibility of remediation costs among responsible parties. Chrysler
establishes reserves for these environmental matters when a loss is probable and
reasonably estimable. Chrysler's reserves for these environmental matters
totaled $231 million and $238 million as of December 31, 1997 and 1996,
respectively. It is reasonably possible that the final resolution of some of
these matters may require Chrysler to make expenditures, in excess of
established reserves, over an extended period of time and in a range of amounts
that cannot be reasonably estimated. Although the final resolution of any such
matters could have a material effect on Chrysler's consolidated operating
results for the particular reporting period in which an adjustment of the
estimated reserve is recorded, Chrysler believes that any resulting adjustment
should not materially affect its consolidated financial position.
VOLUNTARY SERVICE ACTIONS AND RECALL ACTIONS
Chrysler periodically initiates voluntary service actions and recall
actions to address various customer satisfaction, safety and emissions issues
related to vehicles it sells. Chrysler establishes reserves for product
warranty, including the estimated cost of these service and recall actions, when
the related sale is recognized. The estimated future costs of these actions is
based primarily on prior experience. Estimates of the future costs of these
actions are inevitably imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the number of vehicles affected by a
service or recall action, and the nature of the corrective action which may
result in adjustments to the established reserves. It is reasonably possible
that the ultimate cost of these service and recall actions may require Chrysler
to make expenditures, in excess of
41
ITEM 8. FINANCIAL STATEMENTS AND
------------------------ PART II -- CONTINUED
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. COMMITMENTS AND CONTINGENCIES -- CONTINUED
---------------------------------------------------
VOLUNTARY SERVICE AND RECALL ACTIONS -- CONTINUED
established reserves, over an extended period of time and in a range of amounts
that cannot be reasonably estimated. Although the ultimate cost of these service
and recall actions could have a material effect on Chrysler's consolidated
operating results for the particular reporting period in which an adjustment of
the estimated reserve is recorded, Chrysler believes that any such adjustment
should not materially affect its consolidated financial position.
OTHER MATTERS
The majority of Chrysler's lease payments are for operating leases. At
December 31, 1997, Chrysler had the following minimum rental commitments under
operating leases with noncancelable lease terms in excess of one year (in
millions of dollars): 1998 - $225; 1999 - $165; 2000 - $125; 2001 - $65; 2002 -
$51; and 2003 and thereafter - $184. Future minimum lease commitments have not
been reduced by minimum sublease rentals of $180 million due in the future under
noncancelable subleases.
Rental expense under operating leases was $469 million, $470 million and
$436 million in 1997, 1996 and 1995, respectively. Sublease rentals of $54
million, $58 million and $58 million were received in 1997, 1996 and 1995,
respectively.
At December 31, 1997, Chrysler had commitments for capital expenditures,
including commitments for assets currently under construction, totaling
approximately $1.3 billion.
At December 31, 1997, Chrysler had guaranteed obligations of others in the
amount of $113 million, none of which were secured by collateral.
NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION
---------------------------------------------------
STOCK-BASED COMPENSATION
Effective January 1, 1996, Chrysler adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees." Under the fair value based
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value based method, compensation cost is the
excess, if any, of the quoted market price of the stock at the grant date or
other measurement date over the amount an employee must pay to acquire the
stock.
Chrysler accounts for stock option grants and awards under its two
stock-based compensation plans in accordance with APB Opinion No. 25 and related
interpretations. Accordingly, no compensation cost has been recognized for fixed
stock option grants since the options have exercise prices of not less than the
market value of Chrysler common stock at the date of grant. However,
compensation cost was recognized for performance-based stock unit awards
("Performance Shares") since the awards have no exercise price. Compensation
cost recognized for Performance Share awards was $20 million, $30 million and
$19 million for 1997, 1996 and 1995, respectively.
If compensation cost for stock option grants and Performance Share awards
had been determined based on fair value at the grant dates for 1997, 1996 and
1995 in accordance with SFAS No. 123, the pro forma effects on Chrysler's
consolidated net earnings and earnings per share would not have been material.
As required by SFAS No. 123, the pro forma amounts were determined based on
stock option grants and Performance Share awards beginning in 1995. Since
Chrysler's fixed stock option grants do not vest, except upon retirement from
Chrysler, compensation cost is recognized over the expected life of the option
(i.e., five years). In addition, Performance Share awards are recognized over
performance cycles of two to three years. Therefore, the pro forma amounts for
compensation cost may not be indicative of the effects on net earnings and
earnings per share for future years.
42
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION - CONTINUED
---------------------------------------------------------------
Fixed Stock Option Compensation Plans
-------------------------------------
In accordance with Chrysler's stock-based compensation plans, Chrysler may
grant stock options, stock appreciation rights and other stock-related
incentives to officers, executives and nonemployee directors of Chrysler.
Outstanding options, consisting of ten-year nonqualified stock options,
become exercisable on up to 40 percent, 70 percent and 100 percent of the shares
after one year, two years and three years, respectively, from the date of grant.
The outstanding options do not vest, except upon retirement from Chrysler, and
are contingent upon continued employment during the applicable ten-year period.
Shares available for granting options at the end of 1997, 1996 and 1995 were
30.9 million, 11.6 million and 22.4 million, respectively.
Under SFAS No. 123, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997, 1996 and 1995:
[Download Table]
1997 1996 1995
-------- --------- -------
Dividend yield................................. 4.7% 4.8% 4.8%
Expected volatility............................ 26% 31% 36%
Risk-free interest rate........................ 6.2% 6.7% 5.8%
Expected lives (in years)...................... 5 5 5
A summary of the status of fixed stock option grants under Chrysler's
stock-based compensation plans as of December 31, 1997, 1996 and 1995, and
changes during the years ending on those dates is presented below (shares in
millions):
[Enlarge/Download Table]
1997 1996 1995
----------------------------- ---------------------------- ----------------------------
SHARES SHARES SHARES
UNDER WEIGHTED-AVG. UNDER WEIGHTED-AVG. UNDER WEIGHTED-AVG.
OPTION EXERCISE PRICE OPTION EXERCISE PRICE OPTION EXERCISE PRICE
---------- -------------- ------- -------------- ------ ---------------
Outstanding at beginning of year..... 28.5 $23.68 29.4 $19.40 26.2 $15.61
Granted.............................. 10.1 33.72 9.2 28.66 7.3 24.42
Exercised............................ (7.8) 20.92 (7.2) 16.11 (3.7) 10.58
Forfeited............................ (0.1) 26.70 (2.9) 14.79 (0.4) 14.56
----- ----- -----
Outstanding at end of year........... 30.7 27.71 28.5 23.68 29.4 19.40
===== ===== =====
Options exercisable at year end ..... 13.4 $23.43 13.3 $20.12 17.0 $17.20
Weighted-average fair value of
options granted during the year.... $6.79 $6.87 $6.49
The following table summarizes information about fixed stock options
outstanding at December 31, 1997 (shares in millions):
[Enlarge/Download Table]
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- -----------------------------------
SHARES SHARES
RANGE OF UNDER WEIGHTED-AVG. WEIGHTED-AVG. UNDER WEIGHTED-AVG.
EXERCISE PRICES OPTION REMAINING LIFE EXERCISE PRICE OPTION EXERCISE PRICE
--------------------- --------- --------------- ---------------- ------------------ ---------------
$5.87 to $20.00 1.8 3.1 years $10.16 1.8 $10.16
20.01 to 25.00 10.2 6.3 23.99 8.1 23.88
25.01 to 30.00 8.1 7.9 28.48 2.9 28.45
30.01 to 35.00 10.2 8.8 33.56 0.5 32.38
35.01 to 37.25 0.4 4.7 35.70 0.1 35.35
---- ----
$5.87 to $37.25 30.7 7.3 27.71 13.4 23.43
==== ====
43
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION -- CONTINUED
----------------------------------------------------------------
PERFORMANCE-BASED STOCK COMPENSATION PLAN
------------------------------------------
Chrysler's stock-based compensation plans also provide for the awarding of
Performance Shares, which reward attainment of performance objectives.
Performance Shares are awarded at the commencement of a performance cycle (two
to three years) to each eligible executive (officers and a limited number of
senior executives). At the end of each cycle, participants may earn no
Performance Shares or a number of Performance Shares, ranging from a set minimum
to a maximum of 150 percent of the award for that cycle, as determined by a
committee of the Board of Directors based on Chrysler's performance in relation
to the performance goals established at the beginning of the performance cycle.
Under SFAS No. 123, the fair value of each Performance Share award is
estimated at the date of grant based on the market value of a share of Chrysler
common stock on the date of grant.
Unearned Performance Share awards outstanding as of December 31, 1997, 1996
and 1995 were 0.9 million, 0.8 million and 1.1 million, respectively. As of
December 31, 1997, the 0.9 million Performance Share awards outstanding have a
weighted-average remaining life of 1.6 years.
PROFIT-BASED COMPENSATION
Chrysler has programs under which additional incentive compensation and
profit sharing is paid to certain hourly and salaried employees based primarily
on Chrysler's profitability.
44
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. SHAREHOLDERS' EQUITY
------------------------------
Information with respect to shareholders' equity was as follows (shares in
millions):
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
------------------------------------------
1997 1996 1995
----------- ---------- ----------
(IN MILLIONS OF DOLLARS)
PREFERRED STOCK:
Balance at beginning of year................................. $ * $ * $ 2
Conversions into common stock............................ * * (2)
------- ------- -------
Balance at end of year....................................... $ * $ * $ *
======= ======= =======
COMMON STOCK:
Balance at beginning of year................................. $ 822 $ 408 $ 364
Effect of two-for-one stock split........................ -- 410 --
Conversions of preferred stock........................... 1 4 44
------- ------- -------
Balance at end of year....................................... $ 823 $ 822 $ 408
======= ======= =======
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year................................. $ 5,129 $ 5,506 $ 5,536
Effect of two-for-one stock split........................ -- (410) --
Conversions of preferred stock........................... (1) (4) (42)
Shares issued under employee benefit plans............... 103 37 12
------- ------- -------
Balance at end of year....................................... $ 5,231 $ 5,129 $ 5,506
======= ======= =======
RETAINED EARNINGS:
Balance at beginning of year................................. $ 8,829 $ 6,280 $ 5,006
Net earnings............................................. 2,805 3,529 2,025
Dividends declared....................................... (1,076) (1,016) (777)
Adjustment of additional minimum pension liability....... 3 24 (42)
Net unrealized gains (losses) on investments
in certain debt and equity securities............... 11 (23) 44
Other adjustments........................................ 33 35 24
------- ------- -------
Balance at end of year....................................... $10,605 $ 8,829 $ 6,280
======= ======= =======
TREASURY STOCK:
Balance at beginning of year................................. $(3,209) $(1,235) $ (214)
Shares of common stock repurchased (1997 - 63;
1996 - 66 and 1995 - 23 (on a pre-split basis))..... (2,130) (2,041) (1,047)
Shares issued under employee benefit plans (1997 - 8;
1996 - 7 and 1995 - 2 (on a pre-split basis))....... 42 67 26
------- ------- -------
Balance at end of year....................................... $(5,297) $(3,209) $(1,235)
======= ======= =======
-----------------------
* Less than $1 million
In May 1996, Chrysler declared a two-for-one stock split in the form of a
100 percent stock dividend. All per-share data and the average common and
dilutive equivalent shares outstanding have been adjusted to reflect this stock
split for all periods presented. The number of common shares issued, outstanding
and held in treasury for 1996 has been adjusted to reflect this stock split. In
addition, the par value of the new shares issued as a result of the two-for-one
stock split has been transferred from additional paid-in capital to common
stock. Additional paid-in capital, common stock balances and common shares
issued, outstanding and held in treasury for 1995 have not been restated for the
two-for-one stock split.
During 1997, Chrysler repurchased 63 million shares of its common stock at
a cost of $2.1 billion. Chrysler plans to repurchase an additional $1.8 billion
of its common stock in 1998 as part of a $2 billion repurchase plan which began
in November 1997. The planned 1998 common stock repurchases are subject to
market and general economic conditions. Since beginning its common stock
repurchase program in 1995, Chrysler has repurchased 175 million shares of its
common stock at a cost of $5.2 billion.
45
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. SHAREHOLDERS' EQUITY - CONTINUED
------------------------------------------
As of December 31, 1997, 15,336 shares of Series A Convertible Preferred
Stock ("Preferred Stock") were outstanding and convertible into 0.9 million
shares of Chrysler common stock. The annual dividend on the Preferred Stock is
$46.25 per share. The Preferred Stock is convertible at a rate (subject to
adjustment in certain events) of 55.56 shares of common stock for each share of
Preferred Stock. The Preferred Stock is redeemable at Chrysler's option, in
whole or in part, at $518.50 per share of Preferred Stock for the period ending
December 31, 1998, and thereafter declining ratably annually to $500.00 per
share after December 31, 2001, plus accrued and unpaid dividends.
In February 1988, the Board of Directors declared and distributed a
dividend of one Preferred Share Purchase Right (a "Right") for each then
outstanding share of Chrysler's common stock and authorized the distribution of
one Right with respect to each subsequently issued share of common stock. Each
Right, as most recently amended and as adjusted to reflect the May 1996
two-for-one stock split, entitles a shareholder to purchase one two-hundredth of
a share of Junior Participating Cumulative Preferred Stock of Chrysler at a
price of $60. The Rights are attached to the common stock and are not
represented by separate certificates or exercisable until the earliest to occur
of (i) 10 days following the time (the "Stock Acquisition Time") of a public
announcement or communication to Chrysler that a person or group of persons has
acquired or obtained the right to acquire 15 percent or more of Chrysler's
outstanding common stock, other than as a result of a "Qualifying Offer"- an
all-cash, fully-financed tender offer for all shares of Chrysler's common stock
that is held open for at least 60 business days and is accompanied by an
investment banker's fairness opinion-- and (ii) 10 business days after a person
or group of persons announces or commences a tender offer that would result, if
successful, in the bidder owning 15 percent or more of Chrysler's outstanding
common stock, other than as a result of a Qualifying Offer. If the acquiring
person or group acquires 15 percent or more of the common stock (except pursuant
to a tender offer made for all of Chrysler's common stock, and determined by
Chrysler's independent directors to be fair and in the best interests of
Chrysler and its shareholders), then each Right (other than those held by the
acquiror) will entitle its holder to buy, for $60, a number of shares of
Chrysler's common stock having a market value of $120. Similarly, if after the
Stock Acquisition Time, Chrysler is acquired in a merger or other business
combination and is not the surviving corporation, or 50 percent or more of its
assets, cash flow or earning power is sold, each Right (other than those held by
the surviving or acquiring company) will entitle its holder to purchase, for
$60, shares of the surviving or acquiring company having a market value of $120.
Chrysler's directors may redeem the Rights at $0.025 per Right, and may amend
the Rights or extend the time during which the Rights may be redeemed, only
prior to the Stock Acquisition Time. Additionally, at any time after a person or
group acquires 15 percent or more, but less than 50 percent, of Chrysler's
common stock, Chrysler's directors may exchange the Rights (other than those
held by the acquiror), in whole or in part, at an exchange ratio of one share of
common stock (or a fractional share of preferred stock with equivalent voting
rights) per Right. The Rights will expire on February 22, 1998.
Of the 1.0 billion shares of authorized common stock at December 31, 1997,
64 million shares were reserved for issuance under Chrysler's various employee
benefit plans and the conversion of the Preferred Stock.
NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS
-----------------------------------------------
PENSION PLANS
Chrysler's pension plans provide noncontributory and contributory benefits.
The noncontributory pension plans cover substantially all of the hourly and
salaried employees of Chrysler and certain of its consolidated subsidiaries.
Benefits are based on a fixed rate for each year of service. Additionally,
contributory benefits are provided to substantially all salaried employees of
Chrysler and certain of its consolidated subsidiaries under the Salaried
Employees' Retirement Plan. This plan provides benefits based on the employee's
cumulative contributions, years of service during which employee contributions
were made, and the employee's average salary during the consecutive five years
in which salary was highest in the 15 years preceding retirement.
Contributions to the pension trust fund for U.S. plans are in compliance
with the Employee Retirement Income Security Act of 1974, as amended. All
pension trust fund assets and income accruing thereon are used solely to pay
pension benefits and administer the plans. Chrysler contributed $74 million,
$941 million and $838 million to the pension funds during 1997, 1996 and 1995,
respectively.
At December 31, 1997, plan assets were invested in a diversified portfolio
that consisted primarily of debt and equity securities, including 2.1 million
shares of Chrysler common stock with a market value of $73 million. During 1997,
dividends of $6 million were received on Chrysler common stock.
46
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED
------------------------------------------------------------
The components of pension expense were as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------------------------------------------------------------
1997 1996 1995
--------------------------- -------------------------- ---------------------------
NON- NON- NON-
U.S. U.S. U.S. U.S. U.S. U.S.
PLANS PLANS TOTAL PLANS PLANS TOTAL PLANS PLANS TOTAL
------- ------- -------- ------- --------- ------ -------- -------- --------
(IN MILLIONS OF DOLLARS)
Service cost - benefits earned
during the year............... $ 278 $ 33 $ 311 $ 305 $ 29 $ 334 $ 233 $ 20 $ 253
Interest on projected benefit
obligation.................... 991 102 1,093 915 99 1,014 903 90 993
Return on plan assets:
Actual return................. (2,677) (271) (2,948) (1,953) (249) (2,202) (2,572) (168) (2,740)
Deferred gain................. 1,288 155 1,443 687 139 826 1,465 67 1,532
------- ----- ------- ------- ------- ------- ------- ----- -------
Expected return............... (1,389) (116) (1,505) (1,266) (110) (1,376) (1,107) (101) (1,208)
Net amortization and
other......................... 387 67 454 523 62 585 328 39 367
------- ----- ------- ------- ------ ------- ------- ----- -------
Total...................... $ 267 $ 86 $ 353 $ 477 $ 80 $ 557 $ 357 $ 48 $ 405
======= ===== ======= ======= ====== ======= ======= ===== =======
Pension expense is determined using assumptions at the beginning of the
year. The projected benefit obligation ("PBO") is determined using the
assumptions at the end of the year. Assumptions used to determine pension
expense and the PBO were:
[Enlarge/Download Table]
DECEMBER 31
-----------------------------------------------------------------------------------
U.S. PLANS NON-U.S. PLANS
-------------------------------------- ---------------------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
Discount rate................... 6.75% 7.25% 7.00% 8.63% 6.50% 7.50% 8.25% 9.75%
Rate of increase in future
compensation levels........ 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Long-term rate of return on
plan assets................ 10.00% 10.00% 10.00% 10.00% 9.00% 9.00% 9.00% 9.00%
The decrease in the discount rate for U.S. Plans from 7.25 percent as of
December 31, 1996, to 6.75 percent as of December 31, 1997, resulted in a $708
million increase in the PBO at December 31, 1997, and is expected to result in a
$38 million increase in 1998 pension expense.
47
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED
------------------------------------------------------------
The following table presents a reconciliation of the funded status of the
plans with amounts recognized in the consolidated balance sheet:
[Enlarge/Download Table]
DECEMBER 31, 1997
------------------------------------------------------------------------
U.S. PLANS NON-U.S. PLANS
------------------------------ -----------------------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED U.S. ACCUM. EXCEED NON-U.S.
BENEFITS ASSETS TOTAL BENEFITS ASSETS TOTAL TOTAL
---------- -------- -------- ---------- -------- -------- --------
(IN MILLIONS OF DOLLARS)
Actuarial present value of benefits:
Vested........................................ $ 11,967 $ 395 $12,362 $ 1,506 $ 1 $ 1,507 $ 13,869
Nonvested..................................... 2,352 81 2,433 31 1 32 2,465
-------- ------ ------- ------- ---- ------- --------
Accumulated benefit obligation................... 14,319 476 14,795 1,537 2 1,539 16,334
Effect of projected future salary increases...... 387 6 393 22 4 26 419
-------- ------ ------- ------- ---- ------- --------
PBO.............................................. 14,706 482 15,188 1,559 6 1,565 16,753
Plan assets at fair value........................ 16,850 328 17,178 1,665 2 1,667 18,845
-------- ------ ------- ------- ---- ------- --------
PBO less than/(in excess of) plan assets......... 2,144 (154) 1,990 106 (4) 102 2,092
Unrecognized net loss/(gain)..................... (80) 38 (42) 430 1 431 389
Unrecognized prior service cost.................. 1,695 147 1,842 137 -- 137 1,979
Unamortized net obligation at date of adoption... 570 1 571 5 -- 5 576
Adjustment required to recognize
minimum liability............................. -- (183) (183) -- -- -- (183)
-------- ------ ------- ------- ---- ------- --------
Net prepaid pension asset/(liability) recognized
in the consolidated balance sheet............. $ 4,329 $ (151) $ 4,178 $ 678 $ (3) $ 675 $ 4,853
======== ====== ======= ======= ==== ======= ========
[Enlarge/Download Table]
DECEMBER 31, 1996
--------------------------------------------------------------------------
U.S. PLANS NON-U.S. PLANS
------------------------------- --------------------------------
ASSETS ACCUM. ASSETS ACCUM.
EXCEED BENEFITS EXCEED BENEFITS
ACCUM. EXCEED U.S. ACCUM. EXCEED NON-U.S.
BENEFITS ASSETS TOTAL BENEFITS ASSETS TOTAL TOTAL
-------- --------- -------- ---------- -------- ------- -------
(IN MILLIONS OF DOLLARS)
Actuarial present value of benefits:
Vested.......................................... $ 11,055 $ 336 $ 11,391 $ 1,363 $ -- $ 1,363 $ 12,754
Nonvested....................................... 2,270 91 2,361 28 -- 28 2,389
-------- ------- --------- ------- ------- -------- ----------
Accumulated benefit obligation..................... 13,325 427 13,752 1,391 -- 1,391 15,143
Effect of projected future salary increases........ 319 6 325 19 -- 19 344
-------- ------- --------- ------- ------- -------- ----------
PBO................................................ 13,644 433 14,077 1,410 -- 1,410 15,487
Plan assets at fair value.......................... 15,107 279 15,386 1,481 -- 1,481 16,867
-------- ------- --------- ------- ------- -------- ----------
PBO less than/(in excess of) plan assets........... 1,463 (154) 1,309 71 -- 71 1,380
Unrecognized net loss.............................. 489 41 530 492 -- 492 1,022
Unrecognized prior service cost.................... 1,847 160 2,007 166 -- 166 2,173
Unamortized net obligation at date of adoption 713 1 714 6 -- 6 720
Adjustment required to recognize
minimum liability............................... -- (200) (200) -- -- -- (200)
-------- ------- --------- ------- ------- -------- ----------
Net prepaid pension asset/(liability) recognized
in the consolidated balance sheet............... $ 4,512 $ (152) $ 4,360 $ 735 $ -- $ 735 $ 5,095
======== ======= ========= ======= ======= ======== ==========
Included in Other noncurrent assets on the consolidated balance sheet as of
December 31, 1997 and 1996, was noncurrent prepaid pension expense of $4.8
billion and $4.9 billion, respectively.
48
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED
-------------------------------------------------------------
NONPENSION POSTRETIREMENT BENEFITS
Chrysler provides health and life insurance benefits to substantially all
of its hourly and salaried employees and those of certain of its consolidated
subsidiaries. Upon retirement from Chrysler, employees may become eligible for
continuation of these benefits. However, benefits and eligibility rules may be
modified periodically.
The components of nonpension postretirement benefit expense were as
follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
-------------------------------------------------
1997 1996 1995
------------- ------------- ----------
(IN MILLIONS OF DOLLARS)
Benefits attributed to employees' service................. $175 $191 $136
Interest on accumulated nonpension
postretirement benefit obligation....................... 654 671 670
Net amortization.......................................... 6 (5) (48)
---- ---- ----
Total.............................................. $835 $857 $758
==== ==== ====
The following table reconciles the components of the accumulated nonpension
postretirement benefit obligation with amounts recognized in the consolidated
balance sheet:
[Enlarge/Download Table]
DECEMBER 31
--------------------------
1997 1996
-------- --------
(IN MILLIONS OF DOLLARS)
Accumulated nonpension postretirement benefit obligation
("ANPBO") attributable to:
Retirees ............................................ $ 5,102 $4,976
Active employees fully eligible for benefits......... 2,101 1,935
Other active employees............................... 3,131 3,010
------- ------
Total ANPBO........................................ 10,334 9,921
Unrecognized prior service cost...................... (43) (36)
Unrecognized net loss................................ (819) (760)
------- ------
Net Postretirement Benefit Obligation....... $ 9,472 $9,125
======= ======
Nonpension postretirement benefit expense is determined using assumptions
at the beginning of the year. The ANPBO is determined using the assumptions at
the end of the year. Assumptions used to determine nonpension postretirement
benefit expense and the ANPBO for U.S. Plans were:
[Enlarge/Download Table]
DECEMBER 31
---------------------------------------------
1997 1996 1995
---------- ------------- --------
Discount rate.................................................... 6.75% 7.25% 7.00%
Health care inflation rate in following (or "base") year......... 6.50% 7.00% 7.52%
Ultimate health care inflation rate (2002) (1)................... 5.00% 5.00% 5.35%
Average health care inflation rate (base year through 2002) 5.67% 5.36% 5.82%
(1) Rate decreases annually through the year 2002................
The decrease in the discount rate for U.S. Plans from 7.25 percent as of
December 31, 1996, to 6.75 percent as of December 31, 1997, resulted in a $568
million increase in the ANPBO in 1997, and is expected to result in a $18
million increase in nonpension postretirement benefit expense in 1998.
A one percentage point increase in the assumed health care inflation rate
in each year would have increased the ANPBO at December 31, 1997, by $1.2
billion and would have increased the aggregate of the service and interest cost
components of nonpension postretirement benefit expense in 1997 by $115 million.
VOLUNTARY EARLY RETIREMENT PROGRAMS
During 1997, 1996 and 1995, the cost of voluntary early retirement
programs, which are periodically offered to certain salaried and hourly
employees, was $13 million, $97 million and $22 million, respectively, and is
included in employee retirement benefit expense.
49
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED
-------------------------------------------------------------
PREPAID EMPLOYEE BENEFITS
In December 1997, Chrysler prepaid certain 1998 nonpension employee
benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary
Association ("VEBA") trust and other employee benefit plans. In December 1996,
Chrysler prepaid certain 1997 nonpension employee benefits by contributing $1.1
billion to a VEBA trust and other employee benefit plans.
NOTE 13. DISPOSITION OF ASSETS
-------------------------------
During December 1997, Chrysler completed an initial public offering
("IPO") of its common stock interest in Dollar Thrifty Automotive Group, Inc.
("DTAG", formerly Pentastar Transportation Group, Inc.) for net proceeds of
$387 million. The IPO of the common stock interest resulted in a pretax and
after-tax gain of $73 million. The gain was deferred and will be recognized
over the remaining term of the vehicle supply agreements with DTAG, which end
in 2001. The tax effect on this transaction reflects the difference between the
book and tax basis of Chrysler's stock interest in DTAG for which deferred
taxes were not provided, in accordance with SFAS No. 109, "Accounting for
Income Taxes." In addition, fourth-quarter 1997 earnings include the
recognition of $97 million ($60 million after taxes) of previously deferred
profits from the sale of vehicles from Chrysler to DTAG.
In 1996, Chrysler committed to a plan of disposal for Thrifty, a subsidiary
of DTAG, and recognized a $65 million pretax loss ($100 million after taxes) to
write down Thrifty's carrying value to estimated fair value less cost to sell.
The pretax loss is included in Costs, other than items below in the consolidated
statement of earnings for 1996. The after-tax loss includes the effect of not
being able to claim a tax deduction for the capital loss on Chrysler's
investment in Thrifty.
In 1996, Chrysler sold Electrospace Systems, Inc. ("ESI") and Chrysler
Technologies Airborne Systems, Inc. ("CTAS") for net proceeds of $476 million.
ESI and CTAS were engaged principally in the manufacture of defense electronics
and aircraft modification, respectively, and represented substantially all of
the operations of Chrysler Technologies Corporation ("CTC"), a wholly owned
subsidiary of Chrysler. The sale resulted in a pretax gain of $101 million ($87
million after taxes). In the fourth quarter of 1996, Chrysler signed an
agreement to sell Pentastar Electronics, Inc. ("PEI") for net proceeds of $17
million, which resulted in the recognition of a pretax loss of $77 million ($51
million after taxes) to write down PEI's carrying value to estimated fair value
less cost to sell. PEI represented the remaining operations of CTC. The sale of
PEI was completed on January 10, 1997. The pretax gain on the sale of ESI and
CTAS and the pretax loss on the write-down of PEI are included in Costs, other
than items below in the consolidated statement of earnings for 1996.
Also in 1996, CFC sold certain nonautomotive assets for net proceeds of
$225 million, which approximated the net book value of the assets.
NOTE 14. SPECIAL PLANT PROVISION
---------------------------------
In 1995, Chrysler recorded a $263 million provision ($162 million after
taxes) for costs associated with production changes at its Newark assembly
plant. Production of the all-new sport-utility vehicle, the Dodge Durango, began
at the Newark assembly plant in the fall of 1997. The provision reflects the
recognition of supplemental unemployment benefits, job security benefits and
other related employee costs, and the write-down of certain equipment and
tooling. The provision is included in Costs, other than items below in the
consolidated statement of earnings for 1995.
NOTE 15. SUPPLEMENTAL CASH FLOW INFORMATION
--------------------------------------------
Supplemental disclosures to the consolidated statement of cash flows were
as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------------
1997 1996 1995
------ ------- --------
(IN MILLIONS OF DOLLARS)
Interest paid (net of amounts capitalized):
Chrysler, excluding CFC....................................... $ 164 $ 227 $105
CFC........................................................... 791 788 847
Interest capitalized............................................... 194 156 204
Income taxes paid, net of refunds received......................... 1,230 1,206 944
CFC acquired $1.0 billion and $250 million of asset-backed securities in
non-cash transactions relating to the securitization of retail receivables
during 1996 and 1995, respectively.
50
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. FINANCIAL INSTRUMENTS
------------------------------
The estimated fair values of financial instruments have been determined by
Chrysler using available market information and the valuation methodologies
described below. However, judgment is often required in interpreting market data
to develop the estimates of fair value. Accordingly, the estimates presented
herein may not be indicative of the amounts that Chrysler could realize in a
current market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
Amounts related to Chrysler's financial instruments were as follows:
[Enlarge/Download Table]
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- --------- -------
(IN MILLIONS OF DOLLARS)
BALANCE SHEET FINANCIAL INSTRUMENTS
Marketable securities................................. $ 2,950 $ 2,950 $ 2,594 $ 2,594
Finance receivables and retained interests (1)........ 10,948 10,941 10,353 10,315
Debt.................................................. 15,485 16,020 13,448 13,929
Currency exchange agreements (2)...................... -- -- 52 57
-------------------------
(1) The carrying value of finance receivables and retained interests excludes
$2,570 million and $1,986 million of direct finance and leveraged leases
classified as finance receivables in the consolidated balance sheet at
December 31, 1997 and 1996, respectively.
(2) Currency exchange agreements are recorded on the consolidated balance
sheet as a net reduction to the carrying value of debt.
[Enlarge/Download Table]
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------- --------------------------
CONTRACT OR UNREALIZED CONTRACT OR UNREALIZED
NOTIONAL GAINS/ NOTIONAL GAINS/
AMOUNT (LOSSES) AMOUNT (LOSSES)
----------- ---------- ------------ ---------
(IN MILLIONS OF DOLLARS)
OTHER FINANCIAL INSTRUMENTS
Interest rate swaps
With unrealized gains........................... $ 840 $ 9 $1,246 $ 14
With unrealized losses.......................... 2,589 (13) 2,420 (22)
Forward contracts................................... -- -- 520 (3)
Currency forward contracts
With unrealized gains........................... 1,824 121 2,028 90
With unrealized losses.......................... 720 (10) 680 (47)
The carrying values of cash and cash equivalents, accounts receivable and
accounts payable approximated fair values due to the short-term maturities of
these instruments.
The methods and assumptions used to estimate the fair values of balance
sheet and other financial instruments are summarized as follows:
Marketable securities
---------------------
The fair values of marketable securities were estimated using quoted market
prices.
Finance receivables and retained interests in sold receivables
--------------------------------------------------------------
The carrying value of variable-rate finance receivables was assumed to
approximate fair value since they are priced at current market rates. The fair
value of fixed-rate finance receivables was estimated by discounting expected
cash flows using rates at which loans of similar maturities would be made as of
the date of the consolidated balance sheet. The fair values of residual cash
flows and other subordinated amounts due CFC arising from receivable sale
transactions were estimated by discounting expected cash flows at current market
rates.
51
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. FINANCIAL INSTRUMENTS - CONTINUED
-------------------------------------------
Debt
----
The fair value of public debt was estimated using quoted market prices. The
fair value of other long-term debt was estimated by discounting future cash
flows using rates currently available for debt with similar terms and remaining
maturities.
Currency exchange agreements
----------------------------
The fair values of currency exchange agreements were estimated by
discounting the expected cash flows using market exchange rates and relative
market interest rates over the remaining terms of the agreements. Currency
exchange agreements are more fully described in Notes 1 and 7.
Interest rate swaps
-------------------
The fair values of interest rate swaps were estimated by discounting
expected cash flows using quoted market interest rates. Interest rate swaps are
more fully described in Notes 1 and 7.
Forward contracts
-----------------
The fair values of forward contracts were estimated by discounting expected
cash flows using quoted market interest rates. Forward contracts are more fully
described in Note 1.
Currency forward contracts
--------------------------
The fair values of currency forward contracts were estimated based on
quoted market prices for contracts of similar terms. Currency forward contracts
are more fully described in Note 1.
The fair value estimates presented herein were based on information
available as of the date of the consolidated balance sheet. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been revalued since the date of the
consolidated balance sheet and, therefore, current estimates of fair value may
differ from the amounts presented herein.
52
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. EARNINGS PER COMMON SHARE AND CAPITAL STRUCTURE INFORMATION
---------------------------------------------------------------------
Earnings per common share ("EPS") data were computed as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995
------------- ------------- -----------
(IN MILLIONS OF DOLLARS AND SHARES,
EXCEPT PER-COMMON-SHARE AMOUNTS)
Earnings before extraordinary item and cumulative
effect of a change in accounting principle................... $2,805 $3,720 $2,121
Less: Preferred stock dividends............................... (1) (3) (21)
------ ------ ------
Earnings before extraordinary item and cumulative effect
of a change in accounting principle, net of preferred
stock dividends.............................................. $2,804 $3,717 $2,100
====== ====== ======
Basic EPS:
----------
Weighted-average common shares outstanding..................... 675.5 730.3 748.4
====== ====== ======
Earnings before extraordinary item and cumulative effect
of a change in accounting principle, net of preferred
stock dividends.............................................. $ 4.15 $ 5.09 $ 2.81
====== ====== ======
Diluted EPS:
------------
Weighted-average common shares outstanding..................... 675.5 730.3 748.4
Shares issued on exercise of dilutive options.................. 28.4 26.5 21.1
Shares purchased with proceeds of options...................... (21.6) (19.1) (14.0)
Shares applicable to convertible preferred stock............... 1.3 4.4 34.7
Shares contingently issuable................................... 1.7 1.7 1.5
------ ------ ------
Shares applicable to diluted earnings.......................... 685.3 743.8 791.7
====== ====== ======
Earnings before extraordinary item and cumulative
effect of a change in accounting principle................... $ 4.09 $ 5.00 $ 2.68
====== ====== ======
Unexercised employee stock options to purchase 0.3 million, 0.1 million and
0.2 million shares of Chrysler common stock as of December 31, 1997, 1996 and
1995, respectively, were not included in the computations of diluted EPS because
the options' exercise prices were greater than the average market price of
Chrysler common stock during the respective periods.
NOTE 18. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
---------------------------------------------------
INDUSTRY SEGMENT DATA
---------------------
Chrysler operates in two principal industry segments: Automotive Operations
and Financial Services. The Automotive Operations of Chrysler includes the
research, design, manufacture, assembly and sale of cars, trucks and related
parts and accessories. Based on assets, revenues and earnings, Automotive
Operations represent the majority of Chrysler's business activities. The
Financial Services segment is comprised primarily of CFC, which is engaged
principally in retail and lease financing for vehicles, dealer inventory and
other financing needs, dealer property and casualty insurance, and dealership
facility development and management. Prior to December 23, 1997, Chrysler
participated in short-term vehicle rental activities through DTAG (the "Car
Rental Operations"). See Note 13. Disposition of Assets. The Car Rental
Operations represent less than 10 percent of revenues, operating profits and
identifiable assets, and have been included in the Automotive segment.
Chrysler's operations are conducted primarily in North America, including the
United States, Canada and Mexico.
53
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA - CONTINUED
---------------------------------------------------------------
Information concerning operations by industry segment was as follows:
[Enlarge/Download Table]
AUTOMOTIVE FINANCIAL
OPERATIONS SERVICES CONSOLIDATED
----------- ----------- ------------
(IN MILLIONS OF DOLLARS)
DECEMBER 31, 1997
-----------------
Revenues:
Unaffiliated customers..................................... $58,656 $ 2,491 $61,147
Intersegment............................................... 6 226 --
-------- ------- -------
Total revenues.................................................. 58,662 2,717 61,147
Operating earnings.............................................. 4,238 661 4,723
Interest expense................................................ 342 -- 166
Earnings before income taxes, extraordinary item and
cumulative effect of a change in accounting principle...... 3,896 661 4,557
Depreciation and special tools amortization..................... 2,506 190 2,696
Capital expenditures............................................ 5,659 1,491 7,150
Identifiable assets............................................. 44,483 19,599 60,418
Liabilities..................................................... 36,485 16,235 49,056
DECEMBER 31, 1996
-----------------
Revenues:
Unaffiliated customers..................................... $59,006 $ 2,391 $61,397
Intersegment............................................... 15 160 --
-------- ------- -------
Total revenues.................................................. 59,021 2,551 61,397
Operating earnings.............................................. 5,767 613 6,269
Interest expense................................................ 288 -- 177
Earnings before income taxes, extraordinary item and
cumulative effect of a change in accounting principle...... 5,479 613 6,092
Depreciation and special tools amortization..................... 2,194 118 2,312
Capital expenditures............................................ 5,035 394 5,429
Identifiable assets............................................. 41,251 17,721 56,184
Liabilities..................................................... 33,028 14,373 44,613
DECEMBER 31, 1995
-----------------
Revenues:
Unaffiliated customers.................................... $50,966 $ 2,229 $53,195
Intersegment.............................................. 13 210 --
-------- ------- -------
Total revenues................................................. 50,979 2,439 53,195
Operating earnings............................................. 3,202 522 3,550
Interest expense............................................... 275 -- 101
Earnings before income taxes, extraordinary item and
cumulative effect of a change in accounting principle..... 2,927 522 3,449
Depreciation and special tools amortization.................... 2,139 81 2,220
Capital expenditures........................................... 3,774 332 4,106
Identifiable assets............................................ 38,358 17,835 53,756
Liabilities.................................................... 30,701 14,533 42,797
Interest expense of the Financial Services segment has been netted against
operating earnings, which is consistent with industry practice. Certain line
items do not add to the consolidated amounts due to the elimination of
intersegment transactions.
54
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA -- CONTINUED
----------------------------------------------------------------
GEOGRAPHIC AREA DATA
--------------------
Information concerning operations by principal geographic area was as
follows:
[Enlarge/Download Table]
UNITED ADJMTS.
STATES CANADA OTHER & ELIMS. CONSOLIDATED
------ ------ ----- ---------- ------------
(IN MILLIONS OF DOLLARS)
DECEMBER 31, 1997
-----------------
Revenues:
Unaffiliated customers................. $52,006 $ 4,950 $4,191 $ -- $61,147
Transfers between geographic areas..... 10,210 7,150 4,923 (22,283) --
------- ------- ------ -------- -------
Total revenues.............................. 62,216 12,100 9,114 (22,283) 61,147
Earnings before income taxes, extraordinary
item and cumulative effect of a change
in accounting principle................ 3,853 264 440 -- 4,557
Identifiable assets......................... 50,401 6,754 3,263 -- 60,418
Net assets.................................. 8,080 1,613 1,669 -- 11,362
DECEMBER 31, 1996
-----------------
Revenues:
Unaffiliated customers................. $53,171 $ 4,446 $3,780 $ -- $61,397
Transfers between geographic areas..... 10,540 7,999 5,121 (23,660) --
------- -------- ------ -------- -------
Total revenues.............................. 63,711 12,445 8,901 (23,660) 61,397
Earnings before income taxes, extraordinary
item and cumulative effect of a change
in accounting principle................ 5,631 224 237 -- 6,092
Identifiable assets......................... 47,843 5,497 2,844 -- 56,184
Net assets.................................. 8,847 1,435 1,289 -- 11,571
DECEMBER 31, 1995
-----------------
Revenues:
Unaffiliated customers................. $ 47,289 $ 3,834 $2,072 $ -- $53,195
Transfers between geographic areas..... 6,888 5,913 2,919 (15,720) --
-------- ------- ------ -------- -------
Total revenues.............................. 54,177 9,747 4,991 (15,720) 53,195
Earnings before income taxes, extraordinary
item and cumulative effect of a change
in accounting principle................ 3,179 78 192 -- 3,449
Identifiable assets......................... 46,794 4,531 2,431 -- 53,756
Net assets.................................. 8,411 1,310 1,238 -- 10,959
Transfers between geographic areas are based on prices negotiated between
the buying and selling locations.
55
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
------------------------------
[DELOITTE & TOUCHE LLP LETTERHEAD]
---------------------------------------------------------
Suite 900 Telephone: (313) 396-3000
600 Renaissance Center
Detroit, Michigan 48243-1704
INDEPENDENT AUDITORS' REPORT
Shareholders And Board Of Directors
Chrysler Corporation
Auburn Hills, Michigan
We have audited the accompanying consolidated balance sheet of Chrysler
Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of earnings and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Chrysler Corporation and
consolidated subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in the notes to the financial statements, in 1995 the Company
changed its method of accounting for sales of vehicles for which it has
guaranteed a minimum resale value.
January 22, 1998
56
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
CONFORMED
MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
-----------------------------------------------------------
Chrysler's management is responsible for preparing the financial statements and
other financial information in this Annual Report. This responsibility includes
maintaining the integrity and objectivity of financial data and the presentation
of Chrysler's results of operations and financial position in accordance with
generally accepted accounting principles. The financial statements include
amounts that are based on management's best estimates and judgments.
Chrysler's financial statements have been audited by Deloitte & Touche LLP,
independent auditors. Their audits were conducted in accordance with generally
accepted auditing standards and included consideration of the internal control
system and tests of transactions as part of planning and performing their
audits.
Chrysler maintains a system of internal controls that provides reasonable
assurance that its records reflect its transactions in all material respects and
that significant misuse or loss of assets will be prevented. Management believes
the system of internal controls is adequate to accomplish these objectives on a
continuous basis. Chrysler maintains a strong internal auditing program that
independently assesses the effectiveness of the internal controls and recommends
possible improvements. Management considers the recommendations of the General
Auditor and Deloitte & Touche LLP concerning the system of internal controls and
takes appropriate actions to respond to these recommendations.
The Board of Directors, acting through its Audit Committee composed solely of
nonemployee directors, is responsible for determining that management fulfills
its responsibilities in the preparation of financial statements and the
maintenance of internal controls. In fulfilling its responsibility, the Audit
Committee recommends independent auditors to the Board of Directors for
appointment by the shareholders. The Audit Committee also reviews the
consolidated financial statements and adequacy of internal controls. The Audit
Committee meets regularly with management, the General Auditor and the
independent auditors. Both the independent auditors and the General Auditor have
full and free access to the Audit Committee, without management representatives
present, to discuss the scope and results of their audits and their views on the
adequacy of internal controls and the quality of financial reporting.
It is the business philosophy of Chrysler to obey the law and to require that
its employees conduct their activities according to the highest standards of
business ethics. Management reinforces this philosophy by numerous actions,
including issuing a Code of Ethical Behavior and maintaining a Business
Practices Committee and a Business Practices Office to support compliance with
Chrysler's policies.
[Download Table]
R. J. Eaton G. C. Valade
------------------------------- ----------------------------------
R. J. EATON G. C. VALADE
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
57
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
SUPPLEMENTAL INFORMATION
------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
[Enlarge/Download Table]
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------------- ------------------- ------------------ ------------------
1997 1996 1997(1) 1996(2) 1997(3) 1996(4) 1997(5) 1996(6)
------- ------- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS EXCEPT PER-COMMON-SHARE DATA)
Sales of manufactured products......... $15,156 $14,044 $13,393 $14,858 $12,101 $13,396 $16,336 $15,289
Finance, insurance & other
revenues............................ 960 912 995 981 1,075 960 1,131 957
------- ------- ------- ------- ------- ------- ------- -------
Total revenues................... 16,116 14,956 14,388 15,839 13,176 14,356 17,467 16,246
Total expenses................... 14,412 13,286 13,577 14,119 12,450 13,245 16,151 14,655
------- ------- ------- ------- ------- ------- ------- -------
Earnings before income taxes
and extraordinary item.............. 1,704 1,670 811 1,720 726 1,111 1,316 1,591
Provision for income taxes............. 675 665 328 683 285 431 464 593
------- ------- ------- ------- ------- ------- ------- -------
Earnings before extraordinary item..... 1,029 1,005 483 1,037 441 680 852 998
Extraordinary item - Loss on early
extinguishment of debt............ -- -- -- -- -- -- -- (191)
------- ------- ------- ------- ------- ------- ------- -------
Net earnings................... $ 1,029 $ 1,005 $ 483 $ 1,037 $ 441 $ 680 $ 852 $ 807
Preferred stock dividends.............. -- 1 1 1 -- 1 -- --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings on common stock........... $ 1,029 $ 1,004 $ 482 $ 1,036 $ 441 $ 679 $ 852 $ 807
======= ======= ======= ======= ======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE*:
Earnings before extraordinary item..... $ 1.47 $ 1.33 $ 0.71 $ 1.40 $ 0.66 $ 0.94 $ 1.30 $ 1.41
Extraordinary item..................... -- -- -- -- -- -- -- (0.27)
------- ------- ------- ------- ------- ------- ------- -------
Net earnings per common share.......... $ 1.47 $ 1.33 $ 0.71 $ 1.40 $ 0.66 $ 0.94 $ 1.30 $ 1.14
======= ======= ======= ======= ======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE*:
Earnings before extraordinary item..... $ 1.45 $ 1.31 $ 0.70 $ 1.38 $ 0.65 $ 0.93 $ 1.28 $ 1.38
Extraordinary item..................... -- -- -- -- -- -- -- (0.26)
------- ------- ------- ------- ------- ------- ------- -------
Net earnings per common share.......... $ 1.45 $ 1.31 $ 0.70 $ 1.38 $ 0.65 $ 0.93 $ 1.28 $ 1.12
======= ======= ======= ======= ======= ======= ======= =======
-----------------------
* Earnings per share ("EPS") amounts have been restated to reflect the
adoption of Statement of Financial Accounting Standards No. 128,
"Earnings per Share," which replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively.
(1) Results for the second quarter of 1997 reflected the unfavorable
impact of a 29-day strike which reduced earnings by an estimated $730
million ($438 million after taxes). For calendar-year 1997, the estimated
unfavorable impact of the 29-day strike was $590 million ($364 million
after taxes) after considering partial recovery of production losses from
the strike.
(2) Results for the second quarter of 1996 included a gain of $101 million ($87
million after taxes) from the sale of Electrospace Systems, Inc., and
Chrysler Technologies Airborne Systems, Inc., and a charge of $65 million
($100 million after taxes) to write down the carrying value of Thrifty
Rent-A-Car System, Inc., to estimated fair value less cost to sell.
(3) Results for the third quarter of 1997 included a charge of $41 million ($25
million after taxes) for costs related to the decision to discontinue
Chrysler's Eagle brand at the end of the 1998 model year.
(4) Results for the third quarter of 1996 included a charge of $88 million ($55
million after taxes) for costs associated with a voluntary early retirement
program for certain salaried employees.
(5) Results for the fourth quarter of 1997 included the recognition of $97
million ($60 million after taxes) of previously deferred profits from the
sale of vehicles from Chrysler to Dollar Thrifty Automotive Group, Inc.
("DTAG", formerly Pentastar Transportation Group, Inc.) as a result of the
initial public offering of Chrysler's common stock interest in DTAG which
was completed during December 1997.
(6) Results for the fourth quarter of 1996 included a charge of $77 million
($51 million after taxes) to write down the carrying value of Pentastar
Electronics, Inc. ("PEI") to estimated fair value less cost to sell and a
charge of $50 million ($31 million after taxes) for lump-sum retiree
pension costs related to the 1996 UAW collective bargaining agreement. The
sale of PEI was completed on January 10, 1997.
58
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
SUPPLEMENTAL INFORMATION
------------------------
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF EARNINGS
(unaudited)
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
------------------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products......................................... $56,967 $58,004 $49,747
Equity in earnings of unconsolidated subsidiaries and affiliates....... 699 565 535
Interest income and other revenues..................................... 828 748 688
------- ------- -------
TOTAL REVENUES 58,494 59,317 50,970
------- ------- -------
Costs, other than items below.......................................... 45,852 45,454 40,653
Depreciation and special tools amortization............................ 2,496 2,186 2,132
Selling and administrative expenses.................................... 4,155 3,985 3,408
Employee retirement benefits........................................... 1,178 1,383 1,132
Interest expense....................................................... 256 217 196
------- ------- -------
TOTAL EXPENSES 53,937 53,225 47,521
------- ------- -------
EARNINGS BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 4,557 6,092 3,449
Provision for income taxes 1,752 2,372 1,328
------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPLE 2,805 3,720 2,121
Extraordinary item - Loss on early extinguishment of debt,
net of taxes........................................................ -- (191) --
Cumulative effect of a change in accounting principle, net of taxes... -- -- (96)
------- ------- -------
NET EARNINGS $ 2,805 $ 3,529 $ 2,025
======= ======= =======
This Supplemental Information does not present the results of operations of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the results of operations of Chrysler with its
investments in Chrysler Financial Corporation ("CFC") and Car Rental Operations
accounted for on an equity basis rather than as consolidated subsidiaries and,
therefore, does not comply with Statement of Financial Accounting Standards
("SFAS") No. 94, "Consolidation of All Majority-Owned Subsidiaries." Because the
operations of CFC and the Car Rental Operations are different in nature than
Chrysler's manufacturing operations, management believes that this disaggregated
financial data enhances an understanding of the consolidated financial
statements.
59
ITEM 8. FINANCIAL STATEMENTS AND PART II - CONTINUED
------------------------
SUPPLEMENTARY DATA - CONTINUED
------------------------------
SUPPLEMENTAL INFORMATION
------------------------
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
BALANCE SHEET
(unaudited)
[Enlarge/Download Table]
DECEMBER 31
-------------------
1997 1996
------ ------
(IN MILLIONS OF
DOLLARS)
ASSETS:
Cash and cash equivalents ................................................... $ 4,533 $ 4,825
Marketable securities ....................................................... 2,542 2,122
------- -------
Total cash, cash equivalents and marketable securities ................... 7,075 6,947
Accounts receivable - trade and other ........................................ 936 630
Inventories ................................................................. 4,738 4,364
Prepaid employee benefits, taxes and other expenses .......................... 2,174 1,893
Property and equipment ...................................................... 15,923 13,877
Special tools ............................................................... 4,572 3,924
Investments in and advances to unconsolidated subsidiaries ................... 3,405 3,624
Intangible assets ............................................................ 1,573 1,627
Deferred tax assets .......................................................... 1,977 1,624
Other noncurrent assets ...................................................... 5,474 5,448
------- -------
TOTAL ASSETS $47,847 $43,958
======= =======
LIABILITIES:
Accounts payable ............................................................. $ 8,599 $ 8,169
Accrued liabilities and expenses ............................................. 9,303 8,525
Short-term debt .............................................................. 378 346
Payments due within one year on long-term debt ............................... 19 22
Amounts due to CFC ........................................................... 1,667 819
Long-term debt .............................................................. 2,258 1,206
Accrued noncurrent employee benefits ......................................... 9,783 9,365
Other noncurrent liabilities ................................................. 4,478 3,935
------- -------
TOTAL LIABILITIES 36,485 32,387
------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized 20.0 shares; Series A
Convertible Preferred Stock; issued and outstanding: 1997 and 1996 -
0.02 and 0.04 shares, respectively (aggregate liquidation
preference $8 million and $21 million, respectively) ..................... * *
Common stock - $1 per share par value; authorized 1,000.0 shares;
issued: 1997 and 1996 - 823.1 and 821.6 shares, respectively ........... 823 822
Additional paid-in capital ................................................... 5,231 5,129
Retained earnings ............................................................ 10,605 8,829
Treasury stock - at cost: 1997 and 1996 - 174.7 and 119.1 shares,
respectively ............................................................. (5,297) (3,209)
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,362 11,571
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $47,847 $43,958
======= =======
--------------------------
* Less than $1 million
This Supplemental Information does not present the financial position of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the financial position of Chrysler with its
investments in CFC and the Car Rental Operations accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore does not comply
with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries." The
financial covenant contained in Chrysler's revolving credit facility is based on
this Supplemental Information. In addition, because the operations of CFC and
the Car Rental Operations are different in nature than Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements. In December 1997,
Chrysler completed an initial public offering of its common stock interest in
the Car Rental Operations. See Note 13.
60
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
SUPPLEMENTAL INFORMATION
------------------------
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF CASH FLOWS
(unaudited)
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------
1997 1996 1995
---- ---- ----
(IN MILLIONS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings................................................................ $ 2,805 $ 3,529 $ 2,025
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and special tools amortization............................ 2,496 2,186 2,132
Equity in earnings of unconsolidated subsidiaries and affiliates....... (699) (565) (535)
Deferred income taxes.................................................. 279 1,120 186
Extraordinary item - Loss on early extinguishment of debt.............. -- 191 --
Cumulative effect of a change in accounting principle.................. -- -- 96
Change in accounts receivable.......................................... (306) 104 (358)
Change in inventories.................................................. (374) (546) (460)
Change in prepaid expenses and other assets............................ (1,196) (1,310) (631)
Change in accounts payable and accrued and other liabilities........... 1,807 2,044 2,094
Dividends received from CFC............................................ 415 382 335
Other.................................................................. 472 159 261
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,699 7,294 5,145
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities....................................... (860) (2,436) (2,971)
Sales and maturities of marketable securities............................ 1,362 2,198 3,736
Proceeds from sales of nonautomotive assets.............................. -- 476 --
Expenditures for property and equipment.................................. (3,356) (3,218) (2,573)
Expenditures for special tools........................................... (1,703) (1,364) (1,049)
Purchases of vehicle operating leases.................................... (582) (428) (139)
Other.................................................................... 289 203 63
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,850) (4,569) (2,933)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt................................................ 32 76 --
Proceeds from long-term borrowings....................................... 1,588 14 --
Payments on long-term borrowings......................................... (528) (37) (485)
Payment for early extinguishment of debt................................. -- (853) --
Advances from CFC........................................................ 848 819 --
Repurchases of common stock.............................................. (2,130) (2,041) (1,047)
Dividends paid........................................................... (1,096) (963) (710)
Other.................................................................... 145 105 38
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,141) (2,880) (2,204)
------- ------- -------
Change in cash and cash equivalents......................................... (292) (155) 8
Cash and cash equivalents at beginning of year.............................. 4,825 4,980 4,972
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................................... $ 4,533 $ 4,825 $ 4,980
======= ======= =======
This Supplemental Information does not present the cash flows of Chrysler
in accordance with generally accepted accounting principles. This Supplemental
Information reflects the cash flows of Chrysler with its investments in CFC and
the Car Rental Operations accounted for on an equity basis rather than as
consolidated subsidiaries and, therefore, does not comply with SFAS No. 94,
"Consolidation of All Majority-Owned Subsidiaries." Because the operations of
CFC and the Car Rental Operations are different in nature than Chrysler's
manufacturing operations, management believes that this disaggregated financial
data enhances an understanding of the consolidated financial statements.
61
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS PART II - CONTINUED
---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
PART III
--------
Items 10, 11, 12, and 13
Information required by Part III (Items 10, 11, 12, and 13) of this Form
10-K is incorporated by reference from Chrysler Corporation's definitive Proxy
Statement for its 1998 Annual Meeting of Stockholders, which will be filed with
the Securities and Exchange Commission, pursuant to Regulation 14A, not later
than 120 days after the end of the fiscal year, all of which information is
hereby incorporated by reference in, and made part of, this Form 10-K, except
that the information required by Item 10 with respect to executive officers of
the Registrant is included in Part I of this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
-----------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
(a) The following documents are filed as part of this report:
1. Financial Statements
Financial statements filed as part of this Form 10-K are listed
under Part II, Item 8.
2. Financial Statement Schedules
No schedules are included because they are not required under the
instructions contained in Regulation S-X or because the information called
for is shown in the financial statements and notes thereto.
3. Exhibits:
[Download Table]
3-A-1 Copy of Certificate of Incorporation of Chrysler Corporation, as
amended and restated and in effect on May 21, 1987. Filed as
Exhibit 3-A-1 to Chrysler Corporation Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference.
3-A-2 Copy of Certificate of Amendment of Certificate of Incorporation
of Chrysler Corporation dated May 19, 1994, as in effect on May
20, 1994. Filed as Exhibit 3-A-2 to Chrysler Corporation Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
3-B Copy of By-Laws of Chrysler Corporation, as amended as of February
8, 1996. Filed as Exhibit 3-B to Chrysler Corporation Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1996
incorporated herein by reference.
3-C Copy of Certificate of Designation for Chrysler Corporation Junior
Participating Cumulative Preferred Stock. Filed as Exhibit 3-C to
Chrysler Corporation Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
3-D Copy of Certificate of Designation, Preferences and Rights of
Series A Convertible Preferred Stock. Filed as Exhibit 3-D to
Chrysler Corporation Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
4-A Certificate of Incorporation and By-Laws of Chrysler Corporation.
See Exhibits 3-A through 3-D above.
4-B-1 Copy of Certificate of Ownership and Merger merging Chrysler
Motors Corporation into Chrysler Corporation, effective on
December 31, 1989. Filed as Exhibit 4-B-1 to Chrysler Corporation
Annual Report on Form 10-K for the year ended December 31, 1989,
and incorporated herein by reference.
62
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K - CONTINUED
----------------------------------------
[Download Table]
4-B-2 Copy of Agreement of Merger and Plan of Reorganization, dated as
of March 6, 1986, among Chrysler Corporation, Chrysler Holding
Corporation (now Chrysler Corporation) and New Chrysler, Inc.,
annexed as Exhibit A to Registration Statement No. 33-4537 on Form
S-4 of Chrysler Holding Corporation (now Chrysler Corporation),
and incorporated herein by reference.
4-C-1 Copy of Rights Agreement, dated as of February 4, 1988, and
amended and restated as of December 14, 1990, between Chrysler
Corporation and First Chicago Trust Company of New York (formerly
Morgan Shareholder Services Trust Company), as Rights Agent,
relating to Rights to purchase Chrysler Corporation Junior
Participating Cumulative Preferred Stock. Filed as Exhibit 1 to
Chrysler Corporation Current Report on Form 8-K, dated December
14, 1990, and incorporated herein by reference.
4-C-2 Amendment No. 1, dated as of December 1, 1994, to the Rights
Agreement, dated as of February 4, 1988, and amended and restated
as of December 14, 1990, between Chrysler Corporation and First
Chicago Trust Company of New York (formerly known as Morgan
Shareholder Services Trust Company), as Rights Agent. Filed as
Exhibit 1 to Chrysler Corporation Current Report on Form 8-K,
dated December 1, 1994, and incorporated herein by reference.
4-C-3 Amendment No. 2, dated as of February 8, 1996, to the Rights
Agreement, dated as of February 4, 1988, and amended and restated
as of December 14, 1996, between Chrysler Corporation and First
Chicago Trust Company of New York (formerly known as Morgan
Shareholder Services Trust Company) as Rights Agent. Filed as
Exhibit 1 to Chrysler Corporation Current Report on Form 8-K,
dated February 13, 1996, and incorporated herein by reference.
4-D-1 Conformed copy of Indenture, dated as of March 1, 1985, between
Chrysler Corporation and Manufacturers Hanover Trust Company, as
Trustee, State Street Bank and Trust Company, as successor
Trustee, relating to Debt Securities . Filed as Exhibit 4-B to
Chrysler Corporation Annual Report on Form 10-K for the year ended
December 31, 1985, and incorporated herein by reference.
4-D-2 Form of Supplemental Indenture, dated as of May 30, 1986, between
Chrysler Holding Corporation (now Chrysler Corporation), Chrysler
Corporation and Manufacturers Hanover Trust Company, as Trustee,
State Street Bank and Trust Company, as successor Trustee,
relating to Debt Securities. Filed as Exhibit 4-E-2 to the
Post-Effective Amendment No. 1 to Registration Statement No.
33-4537 on Form S-4 of Chrysler Holding Corporation (now Chrysler
Corporation), and incorporated herein by reference.
4-D-3 Copy of Supplemental Indenture, dated as of December 31, 1989,
between Chrysler Corporation and Manufacturers Hanover Trust
Company, as Trustee, State Street Bank and Trust Company, as
successor Trustee, relating to Debt Securities. Filed as Exhibit
4-D-4 to Chrysler Corporation Annual Report on Form 10-K for the
year ended December 31, 1989, and incorporated herein by
reference.
4-D-4 Conformed copy of Third Supplemental Indenture, dated as of May 1,
1990, between Chrysler Corporation and Manufacturers Hanover Trust
Company, as Trustee, State Street Bank and Trust Company, as
successor Trustee, relating to Debt Securities and Appendix D to
Indenture dated as of March 1, 1985 between Chrysler Corporation
and Manufacturers Hanover Trust Company relating to Debentures Due
2020. Filed as Exhibit 4-D-5 to Chrysler Corporation Annual Report
on Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference.
4-D-5 Conformed copy of Trust Agreement, dated as of May 1, 1990,
between Chrysler Corporation and Manufacturers Hanover Bank
(Delaware), Trustee, relating to the Auburn Hills Trust. Filed as
Exhibit 4-D-6 to Chrysler Corporation Annual Report on Form 10-K
for the year ended December 31, 1990, and incorporated herein by
reference.
4-D-6 Appendix E to Indenture, dated as of March 1, 1985, as amended and
supplemented, between Chrysler Corporation and State Street Bank
and Trust Company, as successor Trustee to Manufacturers Hanover
Trust Company. Filed as Exhibit 4-D-7 to Registration No.
333-21849 on Form S-4 of Chrysler Corporation and incorporated
herein by reference.
63
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV - CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
4-D-7 Appendix F to Indenture, dated as of March 1, 1985, as amended and
supplemented, between Chrysler Corporation and State Street Bank
and Trust Company, as successor Trustee to Manufacturers Hanover
Trust Company. Filed as Exhibit 4-D-8 to Registration No.
333-21849 on Form S-4 of Chrysler Corporation and incorporated
herein by reference.
4-D-8 Appendix G to Indenture, dated as of March 1, 1985, as amended and
supplemented, between Chrysler Corporation and State Street Bank
and Trust Company, as successor Trustee to Manufacturers Hanover
Trust Company. Filed as Exhibit 4-D-9 to Chrysler Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
and incorporated herein by reference.
4-D-9 Appendix H to Indenture, dated as of March 1, 1985, as amended and
supplemented, between Chrysler Corporation and State Street Bank
and Trust Company, as successor Trustee to Manufacturers Hanover
Trust Company. Filed as Exhibit 4-D-10 to Chrysler Corporation
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997 and incorporated herein by reference.
4-E Copy of $2,550,000,000 Revolving Credit Agreement, dated as of
April 24, 1997, among Chrysler Corporation, Chrysler Canada Ltd.,
the several Banks party to the Agreement, Royal Bank of Canada, as
Canadian Administrative Agent, and The Chase Manhattan Bank, as
Administrative Agent for the Banks. Filed as Exhibit 4-E to
Chrysler Corporation Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 and incorporated herein by reference.
4-F-1 Copy of Indenture, dated as of June 15, 1984, between Chrysler
Financial Corporation and Manufacturers Hanover Trust Company, as
Trustee, United States Trust Company of New York, as successor
Trustee, related to Senior Debt Securities of Chrysler Financial
Corporation. Filed as Exhibit (1) to the Current Report of
Chrysler Financial Corporation on Form 8-K, dated June 26, 1984,
and incorporated herein by reference.
4-F-2 Copy of Supplemental Indenture, dated as of August 24, 1995,
between Chrysler Financial Corporation and the United States Trust
Company of New York, as Trustee, to the Indenture, dated as of
June 15, 1984, related to Senior Debt Securities of Chrysler
Financial Corporation. Filed as Exhibit 4-K to the Current Report
of Chrysler Financial Corporation on Form 8-K, dated August 24,
1995, and incorporated herein by reference.
4-F-3 Copy of Indenture, dated as of September 15, 1986, between
Chrysler Financial Corporation and Manufacturers Hanover Trust
Company, Trustee, United States Trust Company of New York, as
Successor Trustee, related to Chrysler Financial Corporation
Senior Debt Securities. Filed as Exhibit 4-E to the Quarterly
Report of Chrysler Financial Corporation on Form 10-Q for the
quarter ended September 30, 1986, and incorporated herein by
reference.
4-F-4 Copy of Indenture, dated as of February 15, 1988, between Chrysler
Financial Corporation and Manufacturers Hanover Trust Company,
Trustee, United States Trust Company of New York, as Successor
Trustee, related to Chrysler Financial Corporation Senior Debt
Securities. Filed as Exhibit 4-A to Registration No. 33-23479 of
Chrysler Financial Corporation, and incorporated herein by
reference.
4-F-5 Copy of First Supplemental Indenture, dated as of March 1, 1988,
between Chrysler Financial Corporation and Manufacturers Hanover
Trust Company, Trustee, United States Trust Company of New York,
as successor Trustee, to the Indenture, dated as of February 15,
1988, between such parties, related to Chrysler Financial
Corporation Senior Debt Securities. Filed as Exhibit 4-L to the
Annual Report of Chrysler Financial Corporation on Form 10-K for
the year ended December 31, 1987, and incorporated herein by
reference.
4-F-6 Copy of the Second Supplemental Indenture, dated as of September
7, 1990, between Chrysler Financial Corporation and Manufacturers
Hanover Trust Company, Trustee, United States Trust Company of New
York, as Successor Trustee, to the Indenture, dated as of February
15, 1988, between such parties, related to Chrysler Financial
Corporation Senior Debt Securities. Filed as Exhibit 4-M to the
Quarterly Report of Chrysler Financial Corporation on Form 10-Q
for the quarter ended September 30, 1990, and incorporated herein
by reference.
64
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
4-F-7 Copy of Third Supplemental Indenture, dated as of May 4, 1992,
between Chrysler Financial Corporation and United States Trust
Company of New York, as Successor Trustee, to the Indenture, dated
as of February 15, 1988 between such parties, relating to Chrysler
Financial Corporation Senior Debt Securities. Filed as Exhibit 4-N
to the Quarterly Report of Chrysler Financial Corporation on Form
10-Q for the quarter ended June 30, 1992, and incorporated herein
by reference.
10-A-1 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect on and after May 14, 1986 and before November 5, 1987,
assumed by Chrysler Corporation (formerly Chrysler Holding
Corporation). Filed as Exhibit 10-A-8 to Chrysler Corporation
Annual Report on Form 10-K for the year ended December 31, 1986,
and incorporated herein by reference.
10-A-2 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect on and after November 5, 1987 and before February 4, 1988.
Filed as Exhibit 10-A-8 to Chrysler Corporation Annual Report on
Form 10-K for the year ended December 31, 1987, and incorporated
herein by reference.
10-A-3 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect on and after February 4, 1988 and before June 7, 1990.
Filed as Exhibit 10-A-9 to Chrysler Corporation Annual Report on
Form 10-K for the year ended December 31, 1987, and incorporated
herein by reference.
10-A-4 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect on and after June 7, 1990 and before December 2, 1993.
Filed as Exhibit 10-A-10 to Chrysler Corporation Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference.
10-A-5 Copy of Chrysler Corporation Stock Option Plan, as amended through
December 2, 1993 and before February 6, 1997. Filed as Exhibit
10-A-6 to the Chrysler Corporation Annual Report on Form 10-K for
the year ended December 31, 1993 and incorporated herein by
reference.
10-A-6 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect through February 6, 1997 and before July 3, 1997. Filed as
Exhibit 10-A-11 to Chrysler Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and incorporated herein
by reference.
10-A-7 Copy of Chrysler Corporation Stock Option Plan, as amended and in
effect on and after July 3, 1997. Filed as Exhibit 10-A-14 to
Chrysler Corporation Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by reference.
10-A-8 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as in
effect on and after May 16, 1991 and before December 2, 1993.
Filed as Exhibit 10-A-32 to the Chrysler Corporation Annual Report
on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference.
10-A-9 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after December 2, 1993 and before May
19, 1994. Filed as Exhibit 10-A-9 to the Chrysler Corporation
Annual Report on Form 10-K for the year ended December 31, 1993
and incorporated herein by reference.
10-A-10 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after May 19, 1994 and before May 31,
1995. Filed as Exhibit 10-A-10 to Chrysler Corporation Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10-A-11 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after May 31, 1995 and before
February 6, 1997. Filed as Exhibit 2 to Chrysler Corporation
Solicitation/Recommendation Statement on Schedule 14D-9 dated July
6, 1995 and incorporated herein by reference.
10-A-12 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after February 6, 1997 and before May
15, 1997. Filed as Exhibit 10-A-10 to Chrysler Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
and incorporated herein by reference.
65
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-A-13 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after May 15, 1997 and before July 3,
1997. Filed as Exhibit 10-A-12 to Chrysler Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997 and
incorporated herein by reference.
10-A-14 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as
amended and in effect on and after July 3, 1997. Filed as Exhibit
10-A-13 to Chrysler Corporation Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 and incorporated herein by
reference.
10-B-1 Copy of Chrysler Corporation Incentive Compensation Plan, as
amended and in effect on and after May 31, 1995 and before May 15,
1997. Filed as Exhibit 10-B-1 to Chrysler Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference.
10-B-2 Copy of Chrysler Corporation Incentive Compensation Plan, as
amended and in effect on and after May 15, 1997. Filed as Exhibit
10-B-6 to Chrysler Corporation Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 and incorporated herein by
reference.
10-B-3 Copy of Chrysler Corporation Long-Term Performance Plan, as
amended and in effect on and after May 19, 1994 and before May 15,
1997. Filed as Exhibit 10-B-2 to Chrysler Corporation Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
10-B-4 Copy of Chrysler Corporation Long-Term Performance Plan, as
amended and in effect on and after May 15, 1997. Filed as Exhibit
10-B-8 to Chrysler Corporation Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 and incorporated herein by
reference.
10-B-5 Copy of Chrysler Supplemental Executive Retirement Plan, as
amended through July 8, 1996 and in effect as of October 1, 1996.
Filed as Exhibit 10-B-3 to Chrysler Corporation Annual Report on
Form 10-K for the year ended December 31, 1996 and incorporated
herein by reference.
10-B-6 Copy of Chrysler Corporation Discretionary Incentive Compensation
Plan as in effect on and after May 31, 1995. Filed as Exhibit
10-B-4 to Chrysler Corporation Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1995 and incorporated herein
by reference.
10-B-7 Copy of Chrysler Corporation Long-Term Incentive Plan, as amended
and in effect on and after May 15, 1997. Filed as Exhibit 10-B-7
to Chrysler Corporation Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997 and incorporated herein by
reference.
10-C-1 Copy of agreement, dated March 14, 1992, between Chrysler
Corporation and Robert J. Eaton. Filed as Exhibit 10-C-8 to
Chrysler Corporation Annual Report on Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference.
10-C-2 Copy of Employment Agreement, dated as of June 1, 1995, between
Chrysler Corporation and Robert J. Eaton. Filed as Exhibit 12 to
Chrysler Corporation Solicitation/Recommendation Statement on
Schedule 14D-9 dated July 6, 1995 and incorporated herein by
reference.
10-C-3 Copy of Employment Agreement, dated as of June 1, 1995, between
Chrysler Corporation and Robert A. Lutz. Filed as Exhibit 13 to
Chrysler Corporation Solicitation/Recommendation Statement on
Schedule 14D-9 dated July 6, 1995 and incorporated herein by
reference.
10-C-4 Copy of Employment Agreement dated as of June 1, 1995 between
Chrysler Corporation and Gary C. Valade. Filed as Exhibit 15 to
Chrysler Corporation Solicitation/Recommendation Statement on
Schedule 14D-9 dated July 6, 1995 and incorporated herein by
reference.
10-C-5 Form of Employment Continuation Agreement between Chrysler
Corporation and each of Robert J. Eaton, Robert A. Lutz, Thomas T.
Stallkamp and Gary C. Valade. Filed as Exhibit 10-C-9 to Chrysler
Corporation Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995 and incorporated herein by reference.
66
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
10-C-6 Form of Employment Continuation Agreement between Chrysler
Corporation and each Executive Officer of Chrysler Corporation
other than Messrs. Eaton, Lutz, Stallkamp and Valade. Filed as
Exhibit 10-C-10 to Chrysler Corporation Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995 and
incorporated herein by reference.
10-D Conformed copy of Participation Agreement for Sale and Leaseback
Financing of Chrysler Technology Center Facilities among Chrysler
Corporation, Manufacturers Hanover Bank (Delaware), as Trustee,
and AH Service Corporation, dated as of May 1, 1990. Filed as
Exhibit 10-E-11 to Chrysler Corporation Annual Report on Form 10-K
for the year ended December 31, 1990 and incorporated herein by
reference.
10-E-1 Copy of Income Maintenance Agreement made December 20, 1968 among
Chrysler Financial Corporation, Chrysler Corporation and Chrysler
Motors Corporation (now dissolved). Filed as Exhibit 13-D to
Registration Statement No. 2-32037 of Chrysler Financial
Corporation, and incorporated herein by reference.
10-E-2 Copy of Agreement made April 19, 1971 among Chrysler Financial
Corporation, Chrysler Corporation and Chrysler Motors Corporation
(now dissolved), amending the Income Maintenance Agreement among
such parties. Filed as Exhibit 13-B to Registration Statement No.
2-40110 of Chrysler Financial Corporation and Chrysler
Corporation, and incorporated herein by reference.
10-F-1 Copy of Agreement made May 29, 1973 among Chrysler Financial
Corporation, Chrysler Corporation and Chrysler Motors Corporation
(now dissolved), further amending the Income Maintenance Agreement
among such parties. Filed as Exhibit 5-C to Registration Statement
No. 2-49615 of Chrysler Financial Corporation, and incorporated
herein by reference.
10-F-2 Copy of Agreement made as of July 1, 1975 among Chrysler Financial
Corporation, Chrysler Corporation and Chrysler Motors Corporation
(now dissolved), further amending the Income Maintenance Agreement
among such parties. Filed as Exhibit D to the Annual Report of
Chrysler Financial Corporation on Form 10-K for the year ended
December 31, 1975, and incorporated herein by reference.
10-G Copy of Agreement made June 4, 1976 between Chrysler Financial
Corporation and Chrysler Corporation further amending the Income
Maintenance Agreement between such parties. Filed as Exhibit 5-H
to Registration Statement No. 2-56398 of Chrysler Financial
Corporation, and incorporated herein by reference.
10-H Copy of Agreement made March 27, 1986 between Chrysler Financial
Corporation, Chrysler Holding Corporation (now Chrysler
Corporation) and Chrysler Corporation further amending the Income
Maintenance Agreement among such parties. Filed as Exhibit 10-F to
the Annual Report of Chrysler Financial Corporation on Form 10-K
for the year ended December 31, 1986, and incorporated herein by
reference.
10-I Copy of Short Term Revolving Credit Agreement, dated as of April
24, 1997, among Chrysler Financial Corporation, Chrysler Credit
Canada Ltd., the several commercial banks party thereto, as
Managing Agents, Royal Bank of Canada, as Canadian Administrative
Agent, and Chemical Bank, as Administrative Agent. Filed as
Exhibit 10-G to the Quarterly Report of Chrysler Financial
Corporation on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference.
10-J Copy of Long Term Revolving Credit Agreement, dated as of April
24, 1997, among Chrysler Financial Corporation, Chrysler Credit
Canada Ltd., the several commercial banks party thereto, as
Managing Agents, Royal Bank of Canada, as Canadian Administrative
Agent, and Chemical Bank, as Administrative Agent. Filed as
Exhibit 10-H to the Quarterly Report of Chrysler Financial
Corporation on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference.
10-K Copy of Amended and Restated Trust Agreement, dated as of April 1,
1993, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1993-2. Filed as Exhibit 4.1 to the
Quarterly Report of Premier Auto Trust 1993-2 on Form 10-Q for the
quarter ended June 30, 1993, and incorporated herein by reference.
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AND REPORTS ON FORM 8-K - CONTINUED
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[Download Table]
10-L Copy of Indenture, dated as of April 1, 1993, between Premier Auto
Trust 1993-2 and Bankers Trust Company, as Indenture Trustee, with
respect to Premier Auto Trust 1993-2. Filed as Exhibit 4.2 of the
Quarterly Report of Premier Auto Trust 1993-2 on Form 10-Q for the
quarter ended June 30, 1993, and incorporated herein by reference.
10-M Copy of Amended and Restated Trust Agreement, dated as of June 1,
1993, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1993-3. Filed as Exhibit 4.1 to the
Quarterly Report of Premier Auto Trust 1993-3 on Form 10-Q for the
quarter ended June 30, 1993, and incorporated herein by reference.
10-N Copy of Indenture, dated as of June 1, 1993, between Premier Auto
Trust 1993-3 and Bankers Trust Company, as Indenture Trustee.
Filed as Exhibit 4.2 to the Quarterly Report of Premier Auto Trust
1993-3 on Form 10-Q for the quarter ended June 30, 1993, and
incorporated herein by reference.
10-O Copy of Amended and Restated Loan Agreement, dated as of June 1,
1993, between Chrysler Realty Corporation and Chrysler Credit
Corporation. Filed as Exhibit 10-XXXX to the Quarterly Report on
Form 10-Q of Chrysler Financial Corporation for the quarter ended
September 30, 1993, and incorporated herein by reference.
10-P Copy of Origination and Servicing Agreement, dated as of June 4,
1993, among Chrysler Leaserve, Inc., General Electric Capital Auto
Lease, Inc., Chrysler Credit Corporation and Chrysler Financial
Corporation. Filed as Exhibit 10-ZZZZ to the Quarterly Report on
Form 10-Q of Chrysler Financial Corporation for the quarter ended
September 30, 1993, and incorporated herein by reference.
10-Q Copy of Amended and Restated Trust Agreement, dated as of
September 1, 1993, among Premier Auto Receivables Company,
Chrysler Financial Corporation and Chemical Bank Delaware, as
Trustee, with respect to Premier Auto Trust 1993-5. Filed as
Exhibit 4.1 to the Quarterly Report of Premier Auto Trust 1993-5
on Form 10-Q for the quarter ended September 30, 1993, and
incorporated herein by reference.
10-R Copy of Indenture, dated as of September 1, 1993, between Premier
Auto Trust 1993-5 and Bankers Trust Company, as Indenture Trustee,
with respect to Premier Auto Trust 1993-5. Filed as Exhibit 4.2 to
the Quarterly Report of Premier Auto Trust 1993-5 on Form 10-Q for
the quarter ended September 30, 1993, and incorporated herein by
reference.
10-S-1 Copy of Amended and Restated Trust Agreement, dated as of November
1, 1993, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1993-6. Filed as
Exhibit 4-A to the Annual Report on Form 10-K of Premier Auto
Trust 1993-6 for the year ended December 31, 1993, and
incorporated herein by reference.
10-S-2 Copy of Indenture, dated as of November 1, 1993, between Premier
Auto Trust 1993-6 and The Fuji Bank and Trust Company, as
Indenture Trustee, with respect to Premier Auto Trust 1993-6.
Filed as Exhibit 4-B to the Annual Report on Form 10-K of Premier
Auto Trust 1993-6 for the year ended December 31, 1993, and
incorporated herein by reference.
10-T-1 Copy of Amended and Restated Trust Agreement, dated as of February
1, 1994, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1994-1. Filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1994-1 for the quarter ended March 31, 1994, and
incorporated herein by reference.
10-T-2 Copy of Indenture, dated as of February 1, 1994, between Premier
Auto Trust 1994-1 and The Fuji Bank and Trust Company, as
Indenture Trustee, with respect to Premier Auto Trust 1994-1.
Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1994-1 for the quarter ended March 31, 1994,
and incorporated herein by reference.
10-U Copy of Amended and Restated Trust Agreement, dated as of May 1,
1994, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank, Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1994-2. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1994-2 for the
quarter ended June 30, 1994, and incorporated herein by reference.
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AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
10-V Copy of Indenture, dated as of May 1, 1994, between Premier Auto
Trust 1994-2 and The Fuji Bank and Trust Company, as Indenture
Trustee, with respect to Premier Auto Trust 1994-2. Filed as
Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1994-2 for the quarter ended June 30, 1994, and incorporated
herein by reference.
10-W Copy of Amended and Restated Trust Agreement, dated as of June 1,
1994, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank, Delaware, with respect to Premier
Auto Trust 1994-3. Filed as Exhibit 4.1 to the Quarterly Report on
Form 10-Q of Premier Auto Trust 1994-3 for the quarter ended June
30, 1994, and incorporated herein by reference.
10-X Copy of Indenture, dated as of June 1, 1994, between Premier Auto
Trust 1994-3 and The Fuji Bank and Trust Company, as Indenture
Trustee, with respect to Premier Auto Trust 1994-3. Filed as
Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1994-3 for the quarter ended June 30, 1994, and incorporated
herein by reference.
10-Y Copy of Master Receivables Purchase Agreement among Chrysler
Credit Canada Ltd., CORE Trust and Chrysler Financial Corporation,
dated as of November 29, 1994. Filed as Exhibit 10-FFF to the
Annual Report of Chrysler Financial Corporation on Form 10-K for
the year ended December 31, 1994, and incorporated herein by
reference.
10-Z Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE
Trust and Chrysler Financial Corporation dated as of December 2,
1994, with respect to the sale of retail automotive receivables to
CORE Trust. Filed as Exhibit 10-GGG to the Annual Report of
Chrysler Financial Corporation on Form 10- K for the year ended
December 31, 1994, and incorporated herein by reference.
10-AA Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE
Trust and Chrysler Financial Corporation dated as of December 22,
1994, with respect to the sale of retail automotive receivables to
CORE Trust. Filed as Exhibit 10-HHH to the Annual Report of
Chrysler Financial Corporation on Form 10- K for the year ended
December 31, 1994, and incorporated herein by reference.
10-BB Copy of Receivables Purchase Agreement, dated as of December 15,
1994, among Chrysler Financial Corporation, Premier Auto
Receivables Company and ABN AMRO Bank, N.V., as Agent with respect
to the sale of retail automotive receivables to Windmill Funding
Corporation. Filed as Exhibit 10-JJJ to the Annual Report of
Chrysler Financial Corporation on Form 10-K for the year ended
December 31, 1994, and incorporated herein by reference.
10-CC Copy of Amended and Restated Master Custodial and Servicing
Agreement, dated as of December 16, 1997 between Chrysler Credit
Canada Ltd. and The Royal Trust Company, as Custodian. Filed as
Exhibit 10-CC to the Annual Report on Form 10-K of Chrysler
Financial Corporation for the year ended December 31, 1997 and
incorporated herein by reference.
10-DD Copy of Amended and Restated Series 1995-1 Supplement, dated as of
December 16, 1997, among Chrysler Credit Canada Ltd., The Royal
Trust Company, Prime Trust, Auto Receivables Corporation and
Chrysler Financial Corporation, to the Amended and Restated Master
Custodial and Servicing Agreement, dated as of December 16, 1997.
Filed as Exhibit 10-DD to the Annual Report of Chrysler Financial
Corporation on Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference.
10-EE Copy of Trust Indenture, dated as of September 1, 1992, among
Canadian Dealer Receivables Corporation and Montreal Trust Company
of Canada, as Trustee. Filed as Exhibit 10-UUUUU to the
Registration Statement on Form S-2 of Chrysler Financial
Corporation (Registration Statement No. 33-51302) on November 24,
1992, and incorporated herein by reference.
10-FF Copy of Servicing Agreement, dated as of October 20, 1992, between
Chrysler Leaserve, Inc. (a subsidiary of General Electric Capital
Auto Lease, Inc.) and Chrysler Credit Corporation, with respect to
the sale of Gold Key Leases. Filed as Exhibit 10-YYYYY to the
Registration Statement on Form S-2 of Chrysler Financial
Corporation (Registration Statement No. 33-51302) on November 24,
1992, and incorporated herein by reference.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
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AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
10-GG Copy of Amended and Restated Trust Agreement, dated as of August
1, 1993, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1993-4. Filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1993-4 for the quarter ended September 30, 1993, and
incorporated herein by reference.
10-HH Copy of Indenture, dated as of August 1, 1993, between Premier
Auto Trust 1993-4 and Bankers Trust Company, as Indenture Trustee,
with respect to Premier Auto Trust 1993-4. Filed as Exhibit 4.2 to
the Quarterly Report on Form 10-Q of Premier Auto Trust 1993-4 for
the quarter ended September 30, 1993, and incorporated herein by
reference.
10-II Copy of Amended and Restated Trust Agreement, dated as of August
1, 1994, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1994-4. Filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1994-4 for the quarter ended September 30, 1994, and
incorporated herein by reference.
10-JJ Copy of Indenture, dated as of August 1, 1994, between Premier
Auto Trust 1994-4 and Bankers Trust Company, as Indenture Trustee.
Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1994-4 for the quarter ended September 30,
1994, and incorporated herein by reference.
10-KK Copy of Receivables Purchase Agreement, dated as of February 28,
1995, among Chrysler Financial Corporation, Premier Auto
Receivables Company and ABN AMRO Bank, N.V., with respect to the
sale of retail automotive receivables to Windmill Funding
Corporation. Filed as Exhibit 10-GGGG to the Quarterly Report on
Form 10-Q of Chrysler Financial Corporation for the quarter ended
March 31, 1995, and incorporated herein by reference.
10-LL Copy of Series 1994-1 Supplement, dated as of September 30, 1994,
among U.S. Auto Receivables Company, as Seller, Chrysler Credit
Corporation, as Servicer, and Manufacturers and Traders Trust
Company, as Trustee, with respect to CARCO Auto Loan Master Trust,
Series 1994-1. Filed as Exhibit 3 to the Registration Statement on
Form 8-A of CARCO Auto Loan Master Trust dated November 23, 1994,
and incorporated herein by reference.
10-MM Copy of Series 1995-1 Supplement, dated as of December 31, 1994,
among U.S. Auto Receivables Company, as Seller, Chrysler Credit
Corporation, as Servicer, and Manufacturers and Traders Trust
Company, as Trustee, with respect to CARCO Auto Loan Master Trust,
Series 1995-1. Filed as Exhibit 3 to the Registration Statement on
Form 8-A of CARCO Auto Loan Master Trust dated January 19, 1995,
and incorporated herein by reference.
10-NN Copy of Series 1995-2 Supplement, dated as of February 28, 1995,
among U.S. Auto Receivables Company, as Seller, Chrysler Credit
Corporation, as Servicer, and Manufacturers and Traders Trust
Company, as Trustee, with respect to CARCO Auto Loan Master Trust
1995-2. Filed as Exhibit 3 to CARCO Auto Loan Master Trust's
Registration Statement on Form 8-A dated March 27, 1995, and
incorporated herein by reference.
10-OO Copy of Amended and Restated Trust Agreement, dated as of February
1, 1995, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1995-1. Filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 of Premier Auto Trust 1995-1, and
incorporated herein by reference.
10-PP Copy of Indenture, dated as of February 1, 1995, between Premier
Auto Trust 1995-1 and The Bank of New York, as Indenture Trustee,
with respect to Premier Auto Trust 1995-1. Filed as Exhibit 4.2 to
the Quarterly Report on Form 10-Q for the quarter ended March 31,
1995 of Premier Auto Trust 1995-1, and incorporated herein by
reference.
10-QQ Copy of Sale and Servicing Agreement, dated as of February 1,
1995, among Premier Auto Trust 1995-1, Chrysler Credit Corporation
and Chrysler Financial Corporation, with respect to Premier Auto
Trust 1995-1. Filed as Exhibit 4.3 to the Quarterly Report on Form
10-Q for the quarter ended March 31, 1995 of Premier Auto Trust
1995-1, and incorporated herein by reference.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
10-RR Copy of Amended and Restated Trust Agreement, dated as of April 1,
1995, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1995-2. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
of Premier Auto Trust 1995-2, and incorporated herein by
reference.
10-SS Copy of Indenture, dated as of April 1, 1995, between Premier Auto
Trust 1995-2 and The Bank of New York, as Indenture Trustee, with
respect to Premier Auto Trust 1995-2. Filed as Exhibit 4.2 to the
Quarterly report on Form 10-Q for the quarter ended June 30, 1995
of Premier Auto Trust 1995-2, and incorporated herein by
reference.
10-TT Copy of Sale and Servicing Agreement, dated as of April 1, 1995,
among Premier Auto Trust 1995-2, Chrysler Credit Corporation and
Chrysler Financial Corporation, with respect to Premier Auto Trust
1995-2. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 of Premier Auto Trust 1995-2,
and incorporated herein by reference.
10-UU Copy of Series 1995-3 Supplement, dated as of April 30, 1995,
among U.S. Auto Receivables Company, Chrysler Credit Corporation
and Manufacturers and Traders Trust Company, as Trustee, with
respect to CARCO Auto Loan Master Trust 1995-3. Filed as Exhibit
4-Z to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 of CARCO Auto Loan Master Trust, and incorporated
herein by reference.
10-VV Copy of Series 1995-4 Supplement, dated as of April 30, 1995,
among U.S. Auto Receivables Company, Chrysler Credit Corporation
and Manufacturers and Traders Trust Company, as Trustee, with
respect to CARCO Auto Loan Master Trust Series 1995-4. Filed as
Exhibit 4-AA to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 of CARCO Auto Loan Master Trust, and
incorporated herein by reference.
10-WW Copy of Series 1995-4A Supplement, dated as of April 30, 1995,
among U.S. Auto Receivables Company, Chrysler Credit Corporation
and Manufacturers and Traders Trust Company, as Trustee, with
respect to CARCO Auto Loan Master Trust Series 1995-4A. Filed as
Exhibit 4-BB to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 of CARCO Auto Loan Master Trust, and
incorporated herein by reference.
10-XX Copy of Master Receivables Purchase Agreement, made as of July 24,
1995, among Chrysler Credit Canada Ltd., The Royal Trust Company
and Chrysler Financial Corporation, with respect to Pure Trust
1995-1. Filed as Exhibit 10-RRRR to the Quarterly Report on Form
10-Q of Chrysler Financial Corporation for the quarter ended
September 30, 1995, and incorporated herein by reference.
10-YY Copy of Terms Schedule, dated as of July 24, 1995, among Chrysler
Credit Canada Ltd., The Royal Trust Company and Chrysler Financial
Corporation, with respect to Pure Trust 1995-1. Filed as Exhibit
10-SSSS to the Quarterly Report on Form 10-Q of Chrysler Financial
Corporation for the quarter ended September 30, 1995, and
incorporated herein by reference.
10-ZZ Copy of Receivables Purchase Agreement, dated as of December 14,
1995, among Chrysler Financial Corporation, Premier Auto
Receivables Company, Chrysler Credit Corporation, and ABN AMRO
Bank N.V., as Agent, with respect to the sale of retail automotive
receivables to Windmill Funding Corporation, Series 1995-2. Filed
as Exhibit 10-KKKK to the Annual Report on Form 10-K of Chrysler
Financial Corporation for the year ended December 31, 1995, and
incorporated herein by reference.
10-AAA Copy of Certificate of Trust of Premier Auto Trust 1995-3. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1995-3 for the quarter ended September 30, 1995, and
incorporated herein by reference.
10-BBB Copy of Amended and Restated Trust Agreement, dated as of July 1,
1995, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1995-3. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the
quarter ended September 30, 1995, and incorporated herein by
reference.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV - CONTINUED
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AND REPORTS ON FORM 8-K - CONTINUED
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[Download Table]
10-CCC Copy of Indenture, dated as of July 1, 1995, between Premier Auto
Trust 1995-3 and The Bank of New York, as Indenture Trustee, with
respect to Premier Auto Trust 1995-3. Filed as Exhibit 4.2 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the
quarter ended September 30, 1995, and incorporated herein by
reference.
10-DDD Copy of Sale and Servicing Agreement, dated as of July 1, 1995,
among Premier Auto Trust 1995-3, Chrysler Credit Corporation and
Chrysler Financial Corporation, with respect to Premier Auto Trust
1995-3. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q
of Premier Auto Trust 1995-3 for the quarter ended September 30,
1995, and incorporated herein by reference.
10-EEE Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE
Trust and Chrysler Financial Corporation, dated as of December 14,
1995, with respect to CORE Trust 1995-1. Filed as Exhibit 10-PPPP
to the Annual Report on Form 10-K of Chrysler Financial
Corporation for the year ended December 31, 1995, and incorporated
herein by reference.
10-FFF Copy of Amended and Restated Trust Agreement, dated as of November
1, 1995, among Premier Auto Receivables Company, Chrysler
Financial Corporation and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Receivables 1995-4. Filed as
Exhibit 4.1 to the Annual Report on Form 10-K of Premier Auto
Trust 1995-4 for the year ended December 31, 1995, and
incorporated herein by reference.
10-GGG Copy of Certificate of Trust of Premier Auto Trust 1995-4. Filed
as Exhibit 3 to the Annual Report on Form 10-K of Premier Auto
Trust 1995-4 for the year ended December 31, 1995, and
incorporated herein by reference.
10-HHH Copy of Indenture, dated as of November 1, 1995, between Premier
Auto Trust 1995-4 and The Bank of New York, as Indenture Trustee,
with respect to Premier Auto Trust 1995-4. Filed as Exhibit 4.2 to
the Annual Report on Form 10-K of Premier Auto Trust 1995-4 for
the year ended December 31, 1995, and incorporated herein by
reference.
10-III Copy of Sale and Servicing Agreement, dated as of November 1,
1995, among Premier Auto Trust 1995-4, Chrysler Credit Corporation
and Chrysler Financial Corporation, with respect to Premier Auto
Trust 1995-4. Filed as Exhibit 4.3 to the Annual Report on Form
10-K of Premier Auto Trust 1995-4 for the year ended December 31,
1995, and incorporated herein by reference.
10-JJJ Copy of Receivables Purchase Agreement, dated as of May 30, 1996,
among Premier Auto Receivables Company, Chrysler Financial
Corporation, and ABN AMRO Bank, N.V., as Agent, with respect to
the sale of retail automotive receivables to Windmill Funding
Corporation, Series 1996-1. Filed as Exhibit 10- OOOO to the
Quarterly Report on Form 10-Q of Chrysler Financial Corporation
for the quarter ended June 30, 1996, and incorporated herein by
reference.
10-KKK Copy of Certificate of Trust of Premier Auto Trust 1996-1. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1996-1 for the quarter ended March 31, 1996, and
incorporated herein by reference.
10-LLL Copy of Amended and Restated Trust Agreement, dated as of March 1,
1996, among Premier Auto Receivables Company, Chrysler Financial
Corporation and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1996-1. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1996-1 for the
quarter ended March 31, 1996, and incorporated herein by
reference.
10-MMM Copy of Indenture, dated as of March 1, 1996, between Premier Auto
Trust 1996-1 and The Bank of New York, as Indenture Trustee
(excluding Schedule A), with respect to Premier Auto Trust 1996-1.
Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1996-1 for the quarter ended March 31, 1996,
and incorporated herein by reference.
10-NNN Copy of Sale and Servicing Agreement, dated as of March 1, 1996,
between Premier Auto Trust 1996-1 and Chrysler Financial
Corporation (excluding Schedules A and C), for Premier Auto Trust
1996-1. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q
of Premier Auto Trust 1996-1 for the quarter ended March 31, 1996,
and incorporated by reference.
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AND REPORTS ON FORM 8-K - CONTINUED
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10-OOO Copy of Receivables Sale Agreement, dated as of June 27, 1996,
among Premier Receivables L.L.C., Chrysler Financial Corporation,
Asset Securitization Cooperative Corporation and Canadian Imperial
Bank of Commerce, as Administrative Agent. Filed as Exhibit
10-TTTT to the Quarterly Report on Form 10-Q of Chrysler Financial
Corporation for the quarter ended June 30, 1996, and incorporated
herein by reference.
10-PPP Copy of Asset Purchase Agreement, dated as of August 30, 1996,
between Chrysler First Business Credit Corporation and Berkeley
Federal Bank & Trust, F.S.B. Filed as Exhibit 10-IIII to the
Quarterly Report on Form 10-Q of Chrysler Financial Corporation
for the quarter ended September 30, 1996, and incorporated herein
by reference.
10-QQQ Copy of Asset Purchase Agreement, dated as of August 30, 1996,
between Chrysler First Business Credit Corporation and Blackrock
Capital Finance, L.P. Filed as Exhibit 10-JJJJ to the Quarterly
Report on Form 10- Q for the quarter ended September 30, 1996,
and incorporated herein by reference.
10-RRR Copy of Certificate of Trust of Premier Auto Trust 1996-2. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1996-2 for the quarter ended June 30, 1996, and
incorporated herein by reference.
10-SSS Copy of Amended and Restated Trust Agreement, dated as of May 1,
1996, among Premier Auto Receivables Company, Chrysler Financial
Corporation, and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1996-2. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1996-2 for
the quarter ended June 30, 1996, and incorporated herein by
reference.
10-TTT Copy of Indenture, dated as of May 1, 1996, between Premier Auto
Trust 1996-2 and The Bank of New York, as Indenture Trustee
(excluding Schedule A), with respect to Premier Auto Trust
1996-2. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q
of Premier Auto Trust 1996-2 for the quarter ended June 30, 1996,
and incorporated herein by reference.
10-UUU Copy of Sale and Servicing Agreement, dated as of May 1, 1996,
between Premier Auto Trust 1996-2 and Chrysler Financial
Corporation (excluding Schedules A and C), with respect to
Premier Auto Trust 1996-2. Filed as Exhibit 4.3 to the Quarterly
Report on Form 10-Q of Premier Auto Trust 1996-2 for the quarter
ended June 30, 1996, and incorporated herein by reference.
10-VVV Copy of Certificate of Trust of Premier Auto Trust 1996-3. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1996-3 for the quarter ended June 30, 1996, and
incorporated herein by reference.
10-WWW Copy of Amended and Restated Trust Agreement, dated as of June 1,
1996, among Premier Auto Receivables Company, Chrysler Financial
Corporation, and Chemical Bank Delaware, as Owner Trustee, with
respect to Premier Auto Trust 1996-3. Filed as Exhibit 4.1 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1996-3 for
the quarter ended June 30, 1996, and incorporated herein by
reference.
10-XXX Copy of Indenture, dated as of June 1, 1996, between Premier Auto
Trust 1996-3 and The Bank of New York, as Indenture Trustee
(excluding Schedule A), with respect to Premier Auto Trust
1996-3. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q
of Premier Auto Trust 1996-3 for the quarter ended June 30, 1996,
and incorporated herein by reference.
10-YYY Copy of Sale and Servicing Agreement, dated as of June 1, 1996,
between Premier Auto Trust 1996-3 and Chrysler Financial
Corporation (excluding Schedules A and C), with respect to
Premier Auto Trust 1996-3. Filed as Exhibit 4.3 to the Quarterly
Report on Form 10-Q of Premier Auto Trust 1996-3 for the quarter
ended June 30, 1996, and incorporated herein by reference.
10-ZZZ Copy of Receivables Sale Agreement, dated as of November 25,
1996, among Premier Receivables L.L.C., Chrysler Financial
Corporation, Asset Securitization Cooperative Corporation, and
Canadian Imperial Bank of Commerce, as Administrative Agent.
Filed as Exhibit 10-OOOO to the Annual Report on Form 10-K of
Chrysler Financial Corporation for the year ended December 31,
1996, and incorporated herein by reference.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
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AND REPORTS ON FORM 8-K - CONTINUED
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[Download Table]
10-AAAA Copy of Certificate of Trust of Premier Auto Trust 1996-4.
Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1996-4 for the quarter ended September 30,
1996, and incorporated herein by reference. Filed as Exhibit
10-PPPP to the Annual Report on Form 10-K of Chrysler
Financial Corporation for the year ended December 31, 1996 and
incorporated herein by reference.
10-BBBB Copy of Amended and Restated Trust Agreement, dated as of
August 1, 1996, among Premier Receivables L.L.C., Chrysler
Financial Corporation, and Chase Manhattan Bank Delaware, as
Owner Trustee, with respect to Premier Auto Trust 1996-4.
Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1996-4 for the quarter ended September 30,
1996, and incorporated herein by reference.
10-CCCC Copy of Indenture, dated as of August 1, 1996, between Premier
Auto Trust 1996-4 and The Bank of New York, as Indenture
Trustee, with respect to Premier Auto Trust 1996-4. Filed as
Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier
Auto Trust 1996-4 for the quarter ended September 30, 1996,
and incorporated herein by reference.
10-DDDD Copy of Sale and Servicing Agreement, dated as of August 1,
1996, between Premier Auto Trust 1996-4 and Chrysler Financial
Corporation, with respect to Premier Auto Trust 1996-4. Filed
as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier
Auto Trust 1996-4 for the quarter ended September 30, 1996,
and incorporated herein by reference.
10-EEEE Copy of Receivables Sale Agreement, dated as of December 12,
1996, among Premier Receivables L.L.C., Chrysler Financial
Corporation, Monte Rosa Capital Corporation, and Union Bank of
Switzerland, New York Branch, as Administrative Agent. Filed
as Exhibit 10-TTTT to the Annual Report on Form 10-K of
Chrysler Financial Corporation for the year ended December 31,
1996, and incorporated herein by reference.
10-FFFF Copy of Receivables Sale Agreement, dated as of December 12,
1996, among Premier Receivables L.L.C., Chrysler Financial
Corporation, Old Line Funding Corp., and Royal Bank of Canada,
as Agent. Filed as Exhibit 10-UUUU to the Annual Report on
Form 10-K of Chrysler Financial Corporation for the year ended
December 31, 1996 and incorporated herein by reference.
10-GGGG Copy of Receivables Sale Agreement, dated as of December 18,
1996, among Chrysler Credit Canada, Ltd., Chrysler Financial
Corporation, Canadian Master Trust, and Nesbitt Burns, Inc.
Filed as Exhibit 10-GGGG to the Annual Report on Form 10-K of
Chrysler Financial Corporation for the year ended December 31,
1997, and incorporated herein by reference.
10-HHHH Copy of Loan Agreement, dated as of August 1, 1996, between
Chrysler Canada Ltd. and Chrysler Credit Canada Ltd., with
respect to Gold Key Leasing. Filed as Exhibit 10-WWWW to the
Annual Report on Form 10-K of Chrysler Financial Corporation
for the year ended December 31, 1996, and incorporated herein
by reference.
10-IIII Copy of Series 1996-1 Supplement, dated as of September 30,
1996, among U.S. Auto Receivables Company, as Seller, Chrysler
Financial Corporation, as Servicer, and The Bank of New York,
as Trustee, with respect to CARCO Auto Loan Master Trust.
Filed as Exhibit 4-EE to the Annual Report on Form 10-K of
CARCO Auto Loan Master Trust for the year ended December 31,
1996, and incorporated herein by reference.
10-JJJJ Copy of Series 1996-2 Supplement, dated as of November 30,
1996, among U.S. Auto Receivables Company, as Seller, Chrysler
Financial Corporation, as Servicer, and The Bank of New York,
as Trustee, with respect to CARCO Auto Loan Master Trust.
Filed as Exhibit 4-FF to the Annual Report on Form 10-K of
CARCO Auto Loan Master Trust for the year ended December 31,
1996, and incorporated herein by reference.
10-KKKK Copy of Certificate of Trust of Premier Auto Trust 1997-1.
Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of
Premier Auto Trust 1997-1 for the quarter ended March 31,
1997, and incorporated herein by reference.
74
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
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10-LLLL Copy of Amended and Restated Trust Agreement, dated as of March
1, 1997, among Premier Receivables L.L.C., Chrysler Financial
Corporation, and Chase Manhattan Bank Delaware, as Owner Trustee,
with respect to Premier Auto Trust 1997-1. Filed as Exhibit 4.1
to the Quarterly Report on Form 10-Q of Premier Auto Trust 1997-1
for the quarter ended March 31, 1997, and incorporated herein by
reference.
10-MMMM Copy of Indenture, dated as of March 1, 1997, between Premier
Auto Trust 1997-1 and The Bank of New York, as Indenture Trustee,
with respect to Premier Auto Trust 1997-1. Filed as Exhibit 4.2
to the Quarterly Report on Form 10-Q of Premier Auto Trust 1997-1
for the quarter ended March 31, 1997, and incorporated herein by
reference.
10-NNNN Copy of Sale and Servicing Agreement, dated as of March 1, 1997,
between Premier Auto Trust 1997-1 and Chrysler Financial
Corporation, with respect to Premier Auto Trust 1997-1. Filed as
Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1997-1 for the quarter ended March 31, 1997, and
incorporated herein by reference.
10-OOOO Copy of Receivables Sale Agreement, dated as of April 29, 1997,
among Premier Receivables L.L.C., Chrysler Financial Corporation,
Windmill Funding Corporation, and ABN AMRO Bank N.V., as
Administrative Agent. Filed as Exhibit 10-SSSS to the Quarterly
Report of Chrysler Financial Corporation on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by
reference.
10-PPPP Copy of Receivables Sale Agreement, dated as of June 16, 1997,
among Premier Receivables L.L.C., Chrysler Financial Corporation,
Park Avenue Receivables Corporation, and the Chase Manhattan
Bank, as Funding Agent. Filed as Exhibit 10-TTTT to the Quarterly
Report of Chrysler Financial Corporation on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by
reference.
10-QQQQ Copy of Receivable Sales Agreement, dated as of September 29,
1997, among Premier Receivables L.L.C., Chrysler Financial
Corporation, Thunder Bay Funding Inc., and Royal Bank of Canada,
as Agent. Filed as Exhibit 10-UUUU to the Quarterly Report of
Chrysler Financial Corporation on Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by reference.
10-RRRR Copy of Certificate of Trust of Premier Auto Trust 1997-2. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1997-2 for the quarter ended September 30, 1997, and
incorporated herein by reference.
10-SSSS Copy of Amended and Restated Trust Agreement, dated as of August
1, 1997, among Premier Auto Receivables Company, Chrysler
Financial Corporation, and Chemical Bank Delaware, as Owner
Trustee, with respect to Premier Auto Trust 1997-2. Filed as
Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1997-2 for the quarter ended September 30, 1997, and
incorporated herein by reference.
10-TTTT Copy of Indenture, dated as of August 1, 1997, between Premier
Auto Trust 1997-2 and The Bank of New York, as Indenture Trustee
(excluding Schedule A), with respect to Premier Auto Trust
1997-2. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q
of Premier Auto Trusts 1997-2 for the quarter ended September 30,
1997, and incorporated herein by reference.
10-UUUU Copy of Sale and Servicing Agreement, dated as of August 1, 1997,
between Premier Auto Trust 1997-2 and Chrysler Financial
Corporation (excluding Schedules A and C), with respect to
Premier Auto Trust 1997-2. Filed as Exhibit 4.3 to the Quarterly
Report on Form 10-Q of Premier Auto Trust 1997-2 for the quarter
ended September 30, 1997, and incorporated herein by reference.
10-VVVV Copy of Certificate of Trust of Premier Auto Trust 1997-3. Filed
as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto
Trust 1997-3 for the quarter ended September 30, 1997, and
incorporated herein by reference.
10-WWWW Copy of Amended and Restated Trust Agreement, dated as of
September 1, 1997, among Premier Auto Receivables Company,
Chrysler Financial Corporation, and Chemical Bank Delaware, as
Owner Trustee, with respect to Premier Auto Trust 1997-3. Filed
as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier
Auto Trust 1997-3 for the quarter ended September 30, 1997, and
incorporated herein by reference.
75
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K - CONTINUED
-----------------------------------
[Download Table]
10-XXXX Copy of Indenture, dated as of September 1, 1997, between
Premier Auto Trust 1997-3 and The Bank of New York, as
Indenture Trustee (excluding Schedule A), with respect to
Premier Auto Trust 1997-3. Filed as Exhibit 4.2 to the
Quarterly Report on Form 10-Q of Premier Auto Trust 1997-3 for
the quarter ended September 30, 1997, and incorporated herein
by reference.
10-YYYY Copy of Sale and Servicing Agreement, dated as of September 1,
1997, between Premier Auto Trust 1997- 3. Filed as Exhibit 4.3
to the Quarterly Report on Form 10-Q of Premier Auto Trust
1997-3 for the quarter ended September 30, 1997, and
incorporated herein by reference.
10-ZZZZ Copy of Receivable Sale Agreement, dated as of November 6,
1997, among Premier Receivables L.L.C., as Seller, Chrysler
Financial Corporation, as Servicer, Preferred Receivables
Funding Corporation, as a Purchaser, Falcon Asset
Securitization Corporation, as a Purchaser and the First
National Bank of Chicago, as Administrative Agent. Filed as
Exhibit 10-ZZZZ to the Annual Report on Form 10-K of Chrysler
Financial Corporation for the year ended December 31, 1997 and
incorporated herein by reference.
10-AAAAA Copy of Receivable Sale Agreement, dated as of November 20,
1997, among Premier Receivables L.L.C., as Seller, Chrysler
Financial Corporation, as Servicer, Receivables Capital
Corporation, as Purchaser and Bank of America National Trust
and Savings Association, as Administrative Agent. Filed as
Exhibit 10- AAAAA to the Annual Report on Form 10-K of
Chrysler Financial Corporation for the year ended December 31,
1997 and incorporated herein by reference.
10-BBBBB Copy of Receivable Sale Agreement, dated as of December 3,
1997, among Premier Receivables L.L.C., as Seller, Chrysler
Financial Corporation, as Servicer, Old Line Funding Company,
as Purchaser and Royal Bank of Canada, as Agent. Filed as
Exhibit 10-BBBBB to the Annual Report on Form 10-K of Chrysler
Financial Corporation for the year ended December 31, 1997 and
incorporated herein by reference.
10-CCCCC Copy of Receivable Sale Agreement, dated as of December 22,
1997, among Premier Receivables L.L.C., as Seller, Chrysler
Financial Corporation, as Servicer, Windmill Funding
Corporation, as Purchaser and ABN AMRO Bank N.V., as
Administrative Agent. Filed as Exhibit 10-CCCCC to the Annual
Report on Form 10-K of Chrysler Financial Corporation for the
year ended December 31, 1997 and incorporated herein by
reference.
*12 Statement regarding computation of ratios of earnings to
fixed charges and preferred stock dividends.
*21 Subsidiaries of the Registrant.
*23 Consent of Deloitte & Touche LLP, independent auditors for
Chrysler Corporation.
*24 Powers of Attorney executed by officers and directors who
signed this Annual Report on Form 10-K by an attorney-in-fact.
*27 Financial Data Schedule for year ended December 31, 1997.
In lieu of filing certain instruments with respect to the long-term debt of the
type described in Item 601 (b)(4) of Regulation S-K with respect to the
long-term debt of Chrysler Corporation and its consolidated subsidiaries,
Chrysler Corporation agrees to furnish a copy of such instruments to the
Securities and Exchange Commission on request.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
December 31, 1997.
---------------------
* Filed herewith.
76
CONFORMED
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CHRYSLER CORPORATION
By /s/ R. J. Eaton
---------------------------
R. J. EATON
Chairman of the Board
and Chief Executive Officer
January 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Principal executive officers:
[Download Table]
R. J. Eaton Chairman of the Board and January 23, 1998
--------------------- Chief Executive Officer
R. J. EATON
T. T. Stallkamp President January 23, 1998
----------------------
T. T. STALLKAMP
Principal financial officer:
G. C. Valade Executive Vice President and January 23, 1998
---------------------- Chief Financial Officer
G. C. VALADE
Principal accounting officer:
J. D. Donlon, III Vice President and January 23, 1998
---------------------- Controller
J. D. Donlon, III
77
CONFORMED
[Download Table]
SIGNATURES
----------
Board of Directors:
/s/ LILYAN H. AFFINITO* Director January 23, 1998
----------------------------------
LILYAN H. AFFINITO
/s/ JAMES D. ALJIAN* Director January 23, 1998
----------------------------------
JAMES D. ALJIAN
s/ ROBERT E. ALLEN* Director January 23, 1998
----------------------------------
ROBERT E. ALLEN
/s/ JOSEPH A. CALIFANO, JR.* Director January 23, 1998
----------------------------------
JOSEPH A. CALIFANO, JR.
/s/ ROBERT J. EATON* Director January 23, 1998
----------------------------------
ROBERT J. EATON
/s/ EARL G. GRAVES* Director January 23, 1998
----------------------------------
EARL G. GRAVES
/s/ KENT KRESA* Director January 23, 1998
----------------------------------
KENT KRESA
/s/ ROBERT J. LANIGAN* Director January 23, 1998
----------------------------------
ROBERT J. LANIGAN
/s/ ROBERT A. LUTZ* Director January 23, 1998
----------------------------------
ROBERT A. LUTZ
/s/ PETER A. MAGOWAN* Director January 23, 1998
----------------------------------
PETER A. MAGOWAN
/s/ JOHN B. NEFF* Director January 23, 1998
----------------------------------
JOHN B. NEFF
/s/ LYNTON R. WILSON* Director January 23, 1998
----------------------------------
LYNTON R. WILSON
* By /s/ R. D. Houtman
------------------------------
R. D. HOUTMAN
Attorney-in-Fact
January 23, 1998
78
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NO. DESCRIPTION PAGE
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*12 Statement regarding computation of ratios of earnings to fixed charges and preferred
stock dividends.
*21 Subsidiaries of the Registrant.
*23 Consent of Deloitte & Touche LLP, independent auditors for Chrysler Corporation.
*24 Powers of Attorney executed by officers and directors who signed this Annual Report
on Form 10-K by an attorney-in-fact.
*27 Financial Data Schedule for year ended December 31, 1997.
----------------------------
* Filed herewith.
79
Dates Referenced Herein and Documents Incorporated by Reference
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