Document/Exhibit Description Pages Size
1: 10-K Annual Report 90 532K
2: EX-10.(B)3 Material Contract 75 143K
3: EX-11 Statement re: Computation of Earnings Per Share 2± 10K
4: EX-12 Statement re: Computation of Ratios 2± 10K
5: EX-21 Subsidiaries of the Registrant 5 29K
6: EX-23 Consent of Experts or Counsel 1 9K
7: EX-24 Power of Attorney 14 26K
8: EX-27 Financial Data Schedule (Pre-XBRL) 1 9K
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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, 1996
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)
(810) 576-5741
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
[Download Table]
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, Pacific Stock Exchange
$1.00 par value Philadelphia Stock Exchange
10.95% Debentures Due 2017 New York Stock Exchange
10.40% Notes Due 1999 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:
[Download Table]
Montreal Stock Exchange Montreal, Quebec, Canada
Toronto Stock Exchange Toronto, Ontario, Canada
The Stock Exchange, London London, England
Paris Stock Exchange Paris, France
Elektronische Borse Schweiz EBS Zurich, Switzerland
Frankfurt Stock Exchange Frankfurt, Germany
Tokyo Stock Exchange Tokyo, Japan
Berlin Stock Exchange Berlin, Germany
Munich Stock Exchange Munich, Germany
Amsterdam Stock Exchange Amsterdam, Netherlands
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. [ ]
The aggregate market value of voting Common Stock held by nonaffiliates of
the registrant was approximately $23.19 billion as of December 31, 1996.
The registrant had 702,580,708 shares of Common Stock outstanding as of
December 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in Chrysler Corporation's definitive Proxy Statement for
its 1997 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CHRYSLER CORPORATION
FORM 10-K
---------
YEAR ENDED DECEMBER 31, 1996
INDEX
-----
[Enlarge/Download Table]
PAGE NO.
--------
PART I.
Item 1. Business........................... 3 - 18
Item 2. Properties......................... 18 - 19
Item 3. Legal Proceedings.................. 19 - 21
Item 4. Submission of Matters to a Vote of
Security Holders................... 21
Executive Officers of the
Registrant(Unnumbered Item) ................................... 22
PART II.
Item 5. Market for the Registrant's Common
Equity and Related Stockholder
Matters............................ 23
Item 6. Selected Financial Data............ 24
Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations.............. 25 - 33
Item 8. Financial Statements and
Supplementary Data................. 34 - 70
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............... 71
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)........ 71
PART IV.
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form
8-K................................ 71 - 87
SIGNATURES................................................................................. 88 - 89
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 Chrysler Motors
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. Chrysler also participates
in short-term vehicle rental activities through certain of its subsidiaries (the
"Car Rental Operations"). 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 (810) 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 Motors
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, Taiwan, Korea, Italy, France and
Venezuela, a majority-owned distributor in Japan, a joint venture in Austria,
and through minority-owned affiliates located in China, Egypt and Thailand.
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 1996, Chrysler sold Electrospace Systems, Inc. and Chrysler
Technologies Airborne Systems, Inc., which were principally engaged 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. Also in 1996,
Chrysler entered into an agreement to sell Pentastar Electronics, Inc. ("PEI"),
which produces automatic test equipment for military applications and
represented the remaining operations of CTC. The sale of PEI was completed on
January 10, 1997. During the past several years, Chrysler has sold other such
assets and businesses which were not related to its core automotive business,
and is exploring the sale of other non-core assets and businesses in the near
term.
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 increase vehicle prices and to use
retail sales incentives effectively is significantly
3
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
NORTH AMERICAN OPERATIONS -- CONTINUED
--------------------------------------
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.
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 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 automobiles and light-duty trucks in North
America.
4
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
UNITED STATES
--------------
The tables below set forth comparative market share data for retail sales
of cars and trucks in the United States for the major 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.
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
---------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
(PERCENT OF TOTAL INDUSTRY)
U.S. Car Market Share(1):
-------------------------
U.S. Manufacturers (Including Imports):
General Motors................................. 32.3% 33.9% 34.0% 34.1% 34.6%
Ford........................................... 20.3 20.7 21.6 22.1 21.6
Chrysler....................................... 9.8 9.1 9.0 9.8 8.3
----- ----- ----- ----- -----
Total U.S. Manufacturers..................... 62.4 63.7 64.6 66.0 64.5
Foreign-Based Manufacturers(2):
Japanese....................................... 30.1 29.7 29.5 29.1 30.1
All Other...................................... 7.5 6.6 5.9 4.9 5.4
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers............ 37.6 36.3 35.4 34.0 35.5
----- ----- ----- ----- -----
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................................. 29.0% 29.9% 30.9% 31.4% 32.2%
Ford........................................... 31.0 31.9 30.1 30.5 29.7
Chrysler....................................... 23.3 21.3 21.7 21.4 21.1
All Other...................................... 1.9 2.0 2.0 1.9 1.8
----- ----- ----- ----- -----
Total U.S. Manufacturers..................... 85.2 85.1 84.7 85.2 84.8
Foreign-Based Manufacturers(2):
Japanese....................................... 12.8 12.7 13.5 13.2 13.9
All Other...................................... 2.0 2.2 1.8 1.6 1.3
----- ----- ----- ----- -----
Total Foreign-Based Manufacturers............ 14.8 14.9 15.3 14.8 15.2
----- ----- ----- ----- -----
Total..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
[Enlarge/Download Table]
(IN THOUSANDS OF UNITS)
Unit Sales(1):
--------------
U.S. Industry Retail Sales:
Cars........................................... 8,527 8,635 8,990 8,518 8,214
Trucks(3)...................................... 6,929 6,481 6,421 5,681 4,904
------ ------ ------ ------ ------
Total..................................... 15,456 15,116 15,411 14,199 13,118
====== ====== ====== ====== ======
Chrysler U.S. Retail Sales (Including Fleet):
Cars........................................... 833 786 812 834 680
Trucks(3)...................................... 1,618 1,378 1,392 1,214 1,033
------ ------ ------ ------ ------
Total..................................... 2,451 2,164 2,204 2,048 1,713
====== ====== ====== ====== ======
-------------------------
(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 includes minivans.
5
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE 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 37.6 percent in 1996, compared
to 36.3 percent in 1995. The market share for trucks sold in the United States
(including transplants) by foreign-based manufacturers was 14.8 percent in 1996,
compared to 14.9 percent in 1995. Vehicles assembled in the United States by
Japanese manufacturers have significantly contributed to the market share
obtained by foreign-based manufacturers. Japanese transplant sales accounted for
approximately 21.8 percent of the U.S. passenger car market and 5.3 percent of
the U.S. truck market in 1996, compared to 18.5 percent and 5.3 percent,
respectively, in 1995.
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's vehicle shipments in the United States in 1995 were
2,209,202 units, which represent 83 percent of Chrysler's 1995 worldwide
shipments of 2,673,539 units.
CHRYSLER CANADA LTD.
--------------------
Chrysler's consolidated 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 1996 and 1995, Chrysler Canada shipped 690,948 and 540,493 vehicles,
respectively, the majority of which were sold outside of Canada. Chrysler
Canada's retail sales totaled 239,514 vehicles in 1996 and 225,122 vehicles in
1995, the majority of which were manufactured outside of Canada. Chrysler
Canada's retail unit sales of cars accounted for 13.1 percent and 14.6 percent
of the Canadian car market in 1996 and 1995, respectively. In 1996, retail unit
sales of trucks accounted for 28.2 percent of the Canadian truck market compared
with 25.8 percent in 1995. In 1996, Chrysler Canada ranked third in the Canadian
industry in retail unit sales for both cars and trucks.
CHRYSLER DE MEXICO S.A.
-----------------------
Chrysler's consolidated 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, transmissions and air conditioning condensers.
Chrysler Mexico shipped 359,444 vehicles in 1996 and 207,004 vehicles in
1995. Of these totals, 36,283 vehicles and 26,503 vehicles were sold in Mexico
in 1996 and 1995, respectively. Sales of vehicles exported to Mexico were 17,221
vehicles and 6,565 vehicles in 1996 and 1995, respectively.
Chrysler Mexico's retail vehicle sales accounted for 14.4 percent of the
Mexican car market and 20.1 percent of the Mexican truck market in 1996,
compared with 14.5 percent and 17.7 percent, respectively, in 1995. Within the
Mexican industry, Chrysler Mexico's retail unit sales ranked fifth in cars and
third in trucks in 1996. Retail industry sales in Mexico are estimated to have
been approximately 330,500 units in 1996, 232,600 units in 1995 and 618,900 in
1994. The decrease in retail industry sales in 1996 and 1995, compared with
1994, was primarily attributable to unfavorable economic conditions in Mexico,
commencing with the devaluation of the Mexican peso in December 1994. Although
Chrysler expects the economic conditions in Mexico to continue to improve in
1997, Chrysler cannot predict when Mexican automotive industry sales will return
to predevaluation levels. Chrysler's operating results, when compared to
operating
6
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
CHRYSLER DE MEXICO S.A. -- CONTINUED
------------------------------------
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.
Chrysler shipments to markets outside of North America in 1996 were 187,057
units, an increase of 19,677 units or 12 percent from 1995. Retail sales in
European markets in 1996 were 102,139 units, compared to 84,585 units in 1995.
Retail sales in other world markets, primarily Japan, Taiwan and the Middle
East, in 1996, were 119,896 units compared to 101,349 units in 1995. In
addition, Chrysler exported 36,600 kits to worldwide affiliates for assembly in
1996, compared to 40,892 kits in 1995. The majority of the kits were Jeep
products shipped to China, Indonesia and Venezuela.
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 both sold in Europe and exported to other markets.
Chrysler also exports finished vehicles produced in North America to independent
distributors and to wholly owned distribution companies in Italy and France.
During 1996, Chrysler established its wholly owned distribution companies in
Italy and France and a European Headquarters Office in Brussels, Belgium.
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, a
joint-venture in Thailand and independent distributors and dealers.
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 wholly owned distribution
companies in Brazil, Argentina and Venezuela. 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. During 1996, Chrysler began construction
of a manufacturing facility in Argentina, where Jeep Cherokees and Grand
Cherokees will be assembled beginning in 1997 for sale in South America. In
addition, in January 1997, Chrysler entered into an agreement to form a joint
venture with Bayerische Motoren Werke ("BMW") to manufacture a small
7
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
INTERNATIONAL OPERATIONS -- CONTINUED
-------------------------------------
LATIN/AMERICA/MIDDLE EAST/AFRICA -- CONTINUED
---------------------------------------------
gasoline engine for use in vehicles of both Chrysler and a subsidiary of BMW.
Also, in 1997, Chrysler will begin construction of a manufacturing facility in
Brazil, where Dodge Dakota pickup trucks will be assembled.
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 the U.S. At the end of 1996, 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.
Although it sells products and sources components internationally, Chrysler
presently does not have significant risks related to changes in currency
exchange rates because its business is primarily conducted in the United States.
When Chrysler sells vehicles or purchases components outside the United States,
transactions are frequently denominated in currencies other than U.S. dollars.
The primary foreign currencies in which Chrysler conducts such transactions are
the German mark, French franc, Japanese yen, Canadian dollar, Mexican peso,
Taiwan dollar, Austrian schilling, British pound, Spanish peseta, Italian lira,
Swiss franc, Dutch guilder and Belgian franc. To the extent possible, sales and
purchases in specific currencies are offset against each other. In addition,
Chrysler periodically initiates hedging activities by entering into currency
exchange agreements, consisting primarily of currency forward contracts and
purchased currency options, to minimize revenue and cost variations which could
result from fluctuations in currency exchange rates. Chrysler also utilizes
written currency options to effectively close out existing purchased currency
options. At December 31, 1996, Chrysler had currency exchange agreements for the
following primary foreign currencies: German mark, French franc, Japanese yen,
British pound, Swiss franc, Dutch guilder and Belgian franc. Chrysler's
operating results are affected by changes in currency exchange rates during the
period in which transactions are executed, to the extent that hedge coverage
does not exist. However, the impact of any changes in currency exchange rates on
unhedged transactions is not expected to be material to Chrysler's operating
results or financial position.
Chrysler does not use derivative financial instruments for trading
purposes. Chrysler's hedging activities are based upon purchases and sales which
are exposed to foreign currency risk. The currency exchange agreements which
provide hedge coverage typically mature within three years of origination,
consistent with the underlying purchase or sales commitment. These hedging
instruments are periodically modified as existing commitments are fulfilled and
new commitments are made. Chrysler's management believes that its hedging
activities have been effective in reducing Chrysler's limited risks related to
currency exchange fluctuations.
SEGMENT INFORMATION
-------------------
Industry segment and geographic area data for 1996, 1995 and 1994 are
summarized in Part II, Item 8, Notes to Consolidated Financial Statements, Note
19.
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
8
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
SEASONAL NATURE OF BUSINESS -- CONTINUED
----------------------------------------
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 INTRODUCTIONS
--------------------------------
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.
For the 1996 model year, the Chrysler Sebring convertible, which utilizes
"cab-forward" styling in a convertible model, was added to Chrysler's product
lineup. This two-door coupe competes in the mid-specialty segment.
Despite its classification as a truck, the Dodge Caravan, which was
introduced in 1995, was named the Motor Trend Car of the Year in 1996. Chrysler
held 46.8 percent and 42.1 percent of the U.S. minivan segment in 1996 and 1995,
respectively. In spite of increased competition in this segment, retail sales of
Chrysler minivans in the United States were 538,807 in 1996, compared to 493,997
in 1995.
In January 1996, Chrysler announced its intent to produce the Plymouth
Prowler convertible as a 1997 1/2 model unique to the Plymouth brand. The
Prowler draws on the heritage of "street rods" for its retro-styling cues, but
offers all the technology and customer convenience of a 1990s production car. As
a small volume niche vehicle, the Prowler will serve as a technology test bed
for aluminum body and chassis applications.
Chrysler began production of a substantially redesigned Jeep Wrangler in
January 1996. It includes an all-new suspension, front and rear, an all-new
interior with an integrated instrument panel, and improved front and rear
passenger accommodations, while maintaining Wrangler's traditional exterior
styling and rugged appearance. Also included are driver and passenger airbags.
The Wrangler was named 4-Wheel & Off-Road magazine's 1997 4X4 of the Year.
In March 1996, Chrysler launched the new Viper GTS, a coupe version of the
original Viper roadster which was the first vehicle developed under Chrysler's
platform team system.
In July 1996, Chrysler began production of a major renewal of the Dodge
Dakota pickup truck featuring an all-new frame and chassis. The Dakota received
Off-Road magazine's 1997 Truck of the Year award and Four Wheeler magazine's
1997 Pickup Truck of the Year award.
For the 1998 model year, Chrysler intends to introduce a completely
redesigned Chrysler Concorde and Dodge Intrepid as successor models to the cars
that began Chrysler's distinctive "cab-forward" passenger car designs. No major
body components are carried over from the previous models, and virtually no
exterior sheet metal, instrument panels, or major interior trim are shared
between the two cars.
Also new for the 1998 model year is the Dodge Durango, a compact
sport-utility vehicle. The Durango is the first compact sport-utility vehicle to
offer optional eight-passenger seating.
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 4,612 dealers at December 31, 1996, compared with 4,652 at
December 31, 1995. Chrysler Canada had 598 dealers at December 31, 1996,
compared with 609 dealers at December 31, 1995.
9
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
AUTOMOTIVE MARKETING -- CONTINUED
---------------------------------
The quality and strength of Chrysler's dealer organization will have an
important 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 $17 million in 43 dealerships as of December 31, 1996,
compared with $22 million in 51 dealerships as of December 31, 1995.
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 continues to focus on its core automotive business. Chrysler
manufactures most of its requirements for engines, transmissions and transaxles,
certain body stampings, electronic components, and fabricated glass parts.
Chrysler purchases materials, parts and other components from numerous
unaffiliated suppliers. Chrysler used approximately 1,050 suppliers of
productive materials in 1996, compared to approximately 1,150 used in 1995.
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 its requirements for these items rather than
manufacturing them.
MITSUBISHI MOTORS CORPORATION
-----------------------------
As a result of relatively low sales volumes in recent years, Chrysler and
Mitsubishi Motors Corporation ("MMC") agreed in 1996 to terminate 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 and 1995, Chrysler sold 4,692 and 14,823 MMC-manufactured
vehicles in the United States, respectively, representing less than one percent
of Chrysler's U.S. retail vehicle sales in each year. Chrysler will continue to
purchase 2.5-liter and 3.0-liter V-6 engines from MMC for use in certain
minivans and other vehicles through the 1999 model year. Chrysler purchased
approximately 308,000 such engines during 1996, compared to 372,000 engines in
1995.
Mitsubishi Motors 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 terminates in July 1999, 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.
Chrysler's sales of MMMA-manufactured vehicles in 1996 and 1995 represented 3.3
and 3.7 percent, respectively, of Chrysler's U.S. retail vehicle sales volume in
each period.
Chrysler previously owned an equity interest in both MMC and MMMA. Chrysler
sold its 50 percent interest in MMMA to MMC, its partner in the joint venture,
in October 1991. Chrysler subsequently sold its equity interest in MMC in 1992
and 1993.
10
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
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 and New Jersey have adopted California standards with various effective
dates, and a few other states are considering similar action. Federal courts
have generally upheld New York and Massachusetts' adoption of the California
standards.
Vehicle Emissions Standards
Under the Clean Air Act, auto manufacturers are required, among other
things, to significantly reduce emissions from automobiles 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
also requires full implementation of on-board diagnostic systems ("OBD") on 1996
model year light-duty vehicles. California has its own OBD requirements which
are more stringent than the federal requirements. The Clean Air Act imposes
standards for model years through 2003 that require further significant
reductions in motor vehicle emissions 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. Chrysler is actively pursuing the development of
flexible fuel vehicles capable of operating on both gasoline and either methanol
or ethanol blend fuels, as well as the development of vehicles capable of
operating on compressed natural gas, liquid petroleum gas or electricity.
The California Air Resources Board ("CARB") has received federal approval,
pursuant to the Clean Air Act, for its Low Emission Vehicle Program 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. Included in this program was a requirement
that a specified percentage of each manufacturer's California light-duty
production volume, beginning at two percent in 1998 and increasing to ten
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 current
11
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
-----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
VEHICLE REGULATION -- CONTINUED
-------------------------------
Vehicle Emissions Standards -- Continued
lead-acid battery technology would have a range of less than 100 miles under
optimal conditions and a greatly 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.
On December 19, 1994, the Administrator of the EPA responded to a petition
filed by the Ozone Transport Commission ("OTC"), a group of 12 Northeast states
and the District of Columbia. The response held that the states comprising the
OTC must either adopt the California vehicle emissions standards or a 49 state
program advocated by the American Automobile Manufacturers Association ("AAMA")
(of which Chrysler is a member) and the Association of International Automobile
Manufacturers ("AIAM"). The Administrator's decision does not require the states
that adopt California's general vehicle emission standards to adopt California's
ZEV requirement, but permits the states to adopt the ZEV requirement if they
elect to do so. Only New York and Massachusetts have unconditionally adopted the
California ZEV requirements, although Maine has also adopted the ZEV
requirements subject to conditions which have not yet been met. The EPA issued a
Notice of Proposed Rulemaking on October 10, 1995, detailing a voluntary 49
state National Low Emission Vehicle ("NLEV") Program which might form the basis
of a 49 state program of the type advocated by AAMA and AIAM. Negotiations
relating to the NLEV program are ongoing.
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.
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 can 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 substantial 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. 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, legislative and regulatory factors. If
Chrysler could not meet new CAFE standards, it would be subject to sizeable
civil penalties and could result in the closure of plants and a restriction in
product offerings to remain in compliance.
From time to time there have been federal legislative and administrative
initiatives that would increase CAFE standards from their current levels. In
addition, the National Highway Traffic Safety Administration
12
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
VEHICLE REGULATION -- CONTINUED
-------------------------------
Vehicle Fuel Economy -- Continued
("NHTSA") has initiated rulemaking to set more stringent light truck CAFE
standards through the 2006 model years. The current global climate change or
global warming debate is providing an impetus to more stringent CAFE standards.
The U.S. government is developing policy options to reduce greenhouse gases.
These options may include more stringent CAFE standards, 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, 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.
NHTSA conducted an engineering analysis of the rear liftgate latches in
Chrysler's minivans built during the 1984-1995 model years (approximately four
million vehicles) as a result of allegations that some latches open during
collisions. On October 25, 1995, NHTSA closed this investigation and announced
that it was satisfied with Chrysler's voluntary service action to replace the
latches in these minivans. Chrysler began its latch replacement service action
in September 1995 and expects to complete it by mid-1997.
Chrysler also agreed to recall approximately 360,000 vehicles for diagnosis
and repair, if necessary, of antilock brake systems ("ABS"). The vehicles
included are certain 1991 through 1993 minivans, 1990 through 1993 Dodge
Dynasty, Chrysler New Yorker and Imperial models and 1989 through 1991 Jeep
Cherokee and Wagoneer models. Under certain conditions the ABS function can be
lost and reduced power assist may be experienced. The recall is expected to be
completed in 1997.
NHTSA has filed a lawsuit in the U.S. District Court for the District of
Columbia to compel Chrysler to recall approximately 90,000 Cirrus and Stratus
vehicles built during the 1995 model year. NHTSA has alleged that these vehicles
failed the agency's compliance testing under 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 in the third quarter of 1997.
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 December 1996,
NHTSA issued a Notice of Proposed Rulemaking that would permit manufacturers to
depower all air bags in current vehicles and future production so that they
"inflate less aggressively", thereby
13
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
VEHICLE REGULATION -- CONTINUED
-------------------------------
Vehicle Recalls -- Continued
reducing the likelihood of injury. Both houses of Congress have also held
hearings to consider legislative solutions to the problem. Chrysler is actively
participating in these proceedings and providing technical support in an effort
to develop promptly the most effective means of promoting the safe use of
passive restraints.
In addition, Chrysler has provided the owners of all of its air bag
equipped vehicles with advice on avoiding air bag injury, including reference to
seat belt usage and proper seating locations for children. Further, Chrysler has
undertaken a separate educational campaign directed at child-care providers and
elementary school teachers and their students.
Chrysler's emissions and safety-related recall costs vary widely from year
to year, and could be significant in future periods, depending on the corrective
action required to remedy a particular condition and the number of vehicles
involved.
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 1997 through 2001 will be approximately $450
million. Of this total, Chrysler estimates that approximately $75 million will
be spent in 1997 and approximately $95 million in 1998. Substantially all of
these expenditures are included in Chrysler's planned disbursements for new
product development and the acquisition of productive assets over the 1997 to
2001 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. Most recent reports filed with the EPA
pursuant to the Superfund Amendments and Reauthorization Act of 1986 indicate
that, for calendar year 1995, releases and emissions of chemicals and toxins by
Chrysler were reduced
14
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
GOVERNMENT REGULATION -- CONTINUED
----------------------------------
STATIONARY SOURCE REGULATION -- CONTINUED
-----------------------------------------
Clean Air Act -- Continued
by more than 80 percent from comparable 1987 levels, even though vehicle
production increased more than four percent during this period.
The EPA has undertaken review of the National Ambient Air Quality Standards
for Ozone and Particulate Matter. The EPA is expected to increase the stringency
of both standards and further define 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 107 sites
involved in the foregoing matters at December 31, 1996. Chrysler may also incur
remediation costs at an additional 44 of its active or deactivated facilities.
Chrysler's reserves for these environmental matters totaled $238 million and
$271 million as of December 31, 1996 and 1995, 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 necessarily
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
15
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
FINANCIAL SERVICES -- CONTINUED
-------------------------------
December 31, 1996, receivables serviced for others accounted for 71 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:
[Enlarge/Download Table]
DECEMBER 31
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS)
Automotive..................................... $36,858 $35,696 $29,962 $25,011 $22,481
Nonautomotive.................................. 2,204 2,391 2,775 3,251 7,657
------- ------- ------- ------- -------
Total financing................................ $39,062 $38,087 $32,737 $28,262 $30,138
======= ======= ======= ======= =======
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.
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 independent of, and affiliated with,
Chrysler. The automotive financing operations of CFC are conducted through 29
zone offices in the United States and Canada (Chrysler Credit Canada Ltd.).
During 1996, CFC expanded into international markets by opening offices in
Belgium, France, Italy and Japan.
During 1996, CFC financed or leased approximately 790,000 new and used
vehicles at retail in the United States, including approximately 485,000 new
Chrysler passenger cars and light-duty trucks, representing 20 percent of
Chrysler's U.S. retail and fleet deliveries. During 1996, CFC financed or leased
approximately 83,000 vehicles at retail in Canada, including approximately
77,000 new Chrysler cars and trucks representing 32 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 $370
in 1996. The average new contract balance was $19,954 and the average original
term was 54 months. CFC also financed approximately 1,771,000 and 157,000 new
Chrysler passenger cars and light-duty trucks at wholesale in the U.S. and
Canada, respectively, representing 72 percent and 67 percent of Chrysler's U.S.
and Canadian vehicle shipments, respectively, in 1996.
Nonautomotive Financing
CFC conducts its nonautomotive finance business through its subsidiary,
Chrysler Capital Corporation. At December 31, 1996, the nonautomotive
receivables managed throughout the United States consisted of $0.2 billion of
commercial loans and leases and $2.0 billion of leveraged leases.
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
16
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
FINANCIAL SERVICES -- CONTINUED
-------------------------------
Automobile Dealership Management -- Continued
options dealership facilities and then leases or subleases these facilities to
Chrysler dealers. At December 31, 1996, Chrysler Realty controlled 824 sites (of
which 259 were owned by Chrysler Realty).
Funding
Receivable sales are a significant source of funding. Net proceeds from the
sale of automotive retail receivables were $8.1 billion during 1996 compared to
$6.5 billion in 1995. Securitization of revolving wholesale account balances
provided funding which aggregated $6.8 billion and $6.7 billion at December 31,
1996 and 1995, respectively. During 1996, CFC issued $1.2 billion of term debt
(primarily medium-term notes) and repaid term debt of $2.0 billion.
During the second quarter of 1996, CFC entered into new revolving credit
facilities which replaced its existing U.S. and Canadian credit facilities. The
new facilities, which total $8.0 billion, consist of a $2.0 billion facility
expiring in April 1997 and a $6.0 billion facility expiring in April 2001. As of
December 31, 1996, no amounts were outstanding under these facilities.
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 for foreign debt
issuances. Sensitivity of earnings to changing interest rates, variability in
spread relationships and mismatches of repricing intervals has been managed by
entering into securitization transactions and the issuance of debt obligations
with appropriate price and term characteristics. Derivative financial
instruments, which primarily consist of interest rate swaps, are utilized to
reduce the exposure to market risks and manage funding costs. Exposure to
variability in foreign exchange rates is mitigated through the use of currency
exchange agreements on foreign debt. CFC does not use derivative financial
instruments for trading purposes.
CFC's outstanding debt at the end of each of the five most recent years was
as follows:
[Enlarge/Download Table]
DECEMBER 31
--------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------ -------
(IN MILLIONS OF DOLLARS)
Short-term notes (primarily commercial paper)... $ 2,616 $ 2,435 $ 4,315 $2,772 $ 352
Bank borrowings under revolving credit
facilities.................................... -- -- -- -- 5,924
Bank borrowings -- International................ 90 -- -- -- --
Senior term debt................................ 8,435 9,234 6,069 5,139 4,436
Subordinated term debt.......................... -- -- 27 77 585
Other borrowings................................ 104 100 260 447 455
------- ------- ------- ------ -------
Total........................................... $11,245 $11,769 $10,671 $8,435 $11,752
======= ======= ======= ====== =======
CAR RENTAL OPERATIONS
Through its Pentastar Transportation Group, Inc. ("Pentastar") subsidiary,
Chrysler owns Thrifty Rent-A-Car System, Inc. ("Thrifty") and Dollar Rent A Car
Systems, Inc. ("Dollar"). Both Thrifty and Dollar are engaged in leasing
vehicles to independent businesses they have licensed to use their trade names,
systems and technologies in the daily rental of cars for business, personal and
leisure use. They also maintain and operate a number of their own locations.
Chrysler's strategy is to focus on its core automotive business. As part of
this strategy, Chrysler, in September 1994, sold Snappy Car Rental, Inc., which
was engaged in renting automobiles on a short-term
17
ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED
---------------------
CAR RENTAL OPERATIONS -- CONTINUED
----------------------------------
basis. In 1996, Chrysler committed to a plan of disposal for Thrifty. For
further information regarding Thrifty, refer to Part II, Item 8, Notes to
Consolidated Financial Statements, Note 15.
RESEARCH AND DEVELOPMENT
------------------------
For the years ended December 31, 1996, 1995 and 1994, Chrysler spent $1.6
billion, $1.4 billion, and $1.3 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 the government.
EMPLOYEES
---------
At December 31, 1996, Chrysler had a total of approximately 126,000
employees worldwide. Of this total, approximately 74,000 hourly workers and
26,000 salaried workers were employed in the United States and 13,000 hourly
workers and 2,000 salaried workers were employed in Canada. In the United States
and Canada, approximately 97 percent of Chrysler's hourly employees and 24
percent of its salaried employees are represented by unions. Of these
represented employees, 97 percent of hourly and 90 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 addition, the
local plant agreements at all of Chrysler's major production facilities have
been settled.
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 plans 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.
ITEM 2. PROPERTIES
----------
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.
18
ITEM 2. PROPERTIES -- CONTINUED PART I -- CONTINUED
-----------------------
AUTOMOTIVE OPERATIONS -- CONTINUED
----------------------------------
Chrysler's manufacturing plants include a foundry, machining plants, metal
stamping plants, engine plants, transmission plants, electronic parts plants,
air conditioning equipment plants, glass fabricating plants 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
situated in various sections 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 and Venezuela.
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 3.2 million units in 1996,
compared to 2.9 million units in 1995. Chrysler's worldwide assembly plants
operated at 90 percent of capacity in 1996, compared to 86 percent of capacity
in 1995 (with capacity determined based on a maximum overtime assumption).
Capacity utilization in 1996 was higher than 1995 primarily as a result of the
changeover and launch of Chrysler's all-new minivans during 1995 and increased
production efficiencies.
FINANCIAL SERVICES
------------------
CFC conducts its business through 33 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, 1996, a
total of 259 automobile dealership properties, generally consisting of land and
improvements, were owned by a subsidiary of CFC and leased primarily to Chrysler
franchised dealers.
ITEM 3. LEGAL PROCEEDINGS
-----------------
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 $934 million in compensatory and $971 million in punitive damages
in the aggregate as of December 31, 1996. 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.
Numerous complaints seek damages for personal injuries sustained in
accidents involving alleged rollovers of Jeep CJ vehicles. These complaints
represent approximately $280 million of the compensatory and
19
ITEM 3. LEGAL PROCEEDINGS -- CONTINUED PART I -- CONTINUED
------------------------------
PRODUCT MATTERS -- CONTINUED
----------------------------
$725 million of the punitive damages specified above. Pursuant to an
indemnification agreement with Chrysler, Renault has agreed to indemnify
Chrysler against a portion of certain costs arising from accidents involving
alleged Jeep CJ vehicle rollovers that occurred between April 1, 1985 and March
31, 1994.
Many of the remaining complaints seek compensatory and punitive damages for
personal injuries sustained in accidents involving alleged defects in occupant
restraint systems, seats, heater cores, liftgate latches, or various other
components in several different vehicle models. Some complaints seek repair of
the vehicles or compensation for the alleged reduction in vehicle value.
The Federal District Court in San Francisco entered a judgment approving
the previously reported settlement of certain class action lawsuits involving
rear liftgate latches in Chrysler's minivans built during the 1984-1995 model
years (see page 16 of the 1995 Annual Report on Form 10-K). An appeal of that
judgment by certain class members is pending with the Federal Court of Appeals
for the Ninth Circuit.
Two previously reported class action lawsuits alleging defects in the
antilock braking systems found in certain model year vehicles are pending.
Chrysler announced a voluntary recall in 1996 to test and, if necessary, repair
one of the systems referenced in those lawsuits. An additional class action
lawsuit was filed in November 1996 containing similar allegations. The lawsuits
seek compensatory and punitive damages, restitution, repair and/or profits from
vehicle sales.
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.
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 107 sites involved in the
foregoing matters at December 31, 1996. Chrysler may also incur remediation
costs at an additional 44 of its active or deactivated facilities. Chrysler's
reserves for these environmental matters totaled $238 million and $271 million
as of December 31, 1996 and 1995, 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 previously reported lawsuit filed by the State of Wisconsin in February
1995 against Chrysler Outboard Corporation, a Chrysler subsidiary subsequently
merged into Chrysler, alleging improper disposal of hazardous waste in 1969 was
dismissed in 1996.
Estimates of future expenditures in connection with these environmental
matters are necessarily 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
20
ITEM 3. LEGAL PROCEEDINGS -- CONTINUED PART I -- CONTINUED
------------------------------
ENVIRONMENTAL MATTERS -- CONTINUED
----------------------------------
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.
OTHER MATTERS
-------------
All of the previously reported class action lawsuits filed in April 1995
against Chrysler, certain of its current and former directors and, in some
cases, Tracinda Corporation, a holding company wholly owned by Kirk Kerkorian,
in the Court of Chancery of the State of Delaware for New Castle County,
Delaware, have been dismissed without prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS
----------------
None during the three months ended December 31, 1996.
21
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
(AS OF JANUARY 21, 1997)
[Enlarge/Download Table]
OFFICER
NAME AGE SINCE (1) PRESENT POSITION
-------------------- ---- ------------------ ----------------------------------------------------------
R. J. Eaton......... 56 March 14, 1992 Chairman of the Board, President and Chief Executive
Officer(2)
R. A. Lutz.......... 64 June 3, 1986 Vice Chairman of the Board(2)
T. G. Denomme....... 57 April 9, 1981 Vice Chairman of the Board and Chief Administrative
Officer(2)
F. J. Castaing...... 51 August 5, 1987 Executive Vice President -- International and General
Manager -- Power Train Operations
T. R. Cunningham.... 50 September 3, 1987 Executive Vice President -- Chrysler Corporation and
President and Managing Director -- Chrysler de Mexico,
S.A.
T. C. Gale.......... 53 April 4, 1985 Executive Vice President -- Product Development
J. P. Holden........ 45 May 6, 1993 Executive Vice President -- Sales and Marketing
D. K. Pawley........ 55 April 11, 1991 Executive Vice President -- Manufacturing
T. T. Stallkamp..... 50 May 1, 1990 Executive Vice President -- Procurement and Supply and
General Manager -- Minivan Operations
G. C. Valade........ 54 June 7, 1990 Executive Vice President and Chief Financial Officer
R. R. Boltz......... 51 June 11, 1987 Vice President -- Product Strategy and Regulatory Affairs
and General Manager -- Large Car Operations
T. P. Capo.......... 45 November 7, 1991 Vice President and Treasurer
J. E. Cappy......... 62 August 5, 1987 Vice President -- Chrysler Technologies and Rental Car
Operations
J. D. Donlon, III... 50 January 1, 1992 Vice President and Controller
F. J. Ewasyshyn..... 44 October 6, 1994 Vice President -- Advance Manufacturing Engineering
W. F. Fountain...... 52 August 1, 1995 Vice President -- Government Affairs
R. L. Franson....... 42 January 18, 1996 Vice President -- Quality and Serviceability
T. Gallagher........ 54 September 3, 1992 Vice President -- Employee Relations
G. L. Henson........ 54 August 1, 1994 Vice President -- Large and Small Car, Jeep and Truck
Assembly and Stamping Operations
J. E. Herlitz....... 54 April 7, 1994 Vice President -- Product Design
R. G. Liberatore.... 47 January 1, 1993 Vice President -- Washington Affairs
A. C. Liebler....... 54 May 17, 1990 Vice President -- Communications
C. Lobo S........... 48 July 9, 1992 Vice President -- Power Train Manufacturing
M. J. MacDonald..... 52 May 16, 1996 Vice President -- Marketing
W. J. O'Brien....... 53 September 3, 1987 Vice President, General Counsel and Secretary
K. M. Oswald........ 47 October 6, 1994 Vice President -- Human Resources
E. T. Pappert....... 57 November 5, 1981 Vice President -- Sales and Service
L. C. Richie........ 55 June 12, 1986 Vice President and General Counsel -- Automotive Legal
Affairs
B. I. Robertson..... 54 February 6, 1992 Vice President -- Engineering Technologies and General
Manager -- Jeep/Truck Operations
S. T. Rushwin....... 49 October 6, 1994 Vice President -- International Manufacturing and Minivan
Assembly Operations
T. W. Sidlik........ 47 September 3, 1992 Vice President -- Chrysler Corporation and Chairman of the
Board -- Chrysler Financial Corporation and General
Manager -- Small Car Operations
-------------------------
(1) The "Officer Since" date shown is the date from which the named individual
has served continuously as an officer of either Chrysler Corporation or the
former Chrysler Motors Corporation which, effective December 31, 1989, was
merged with and into Chrysler Corporation.
(2) 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 Messrs. Eaton and 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,
Messrs. Eaton and Henson were high level executives at General Motors
Corporation.
22
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
136,000 shareholders of record of Chrysler's common stock at December 31, 1996.
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
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
[Download Table]
DIVIDENDS
1995 HIGH LOW DECLARED
---------------- ------- ------- ---------
First Quarter $26.688 $19.125 $0.20
Second Quarter 26.250 19.500 0.25
Third Quarter 29.063 23.625 0.25
Fourth Quarter 27.813 23.563 0.30
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 certain specified levels.
23
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]
1996(1) 1995(2) 1994(3) 1993(4) 1992(5)
------- ------- ------- ------- -------
(DOLLARS AND SHARES IN MILLIONS
EXCEPT PER-COMMON-SHARE DATA)
Total revenues............................... $61,397 $53,195 $52,235 $43,600 $36,897
Earnings before extraordinary item and
cumulative effect of changes in accounting
principles................................. 3,720 2,121 3,713 2,415 505
Primary earnings per common share**........ 5.03 2.78 5.06 3.38 0.74
Net earnings (loss).......................... 3,529 2,025 3,713 (2,551) 723
Primary earnings (loss) per common
share**................................. 4.77 2.65 5.06 (3.81) 1.11
Fully diluted earnings per common
share**................................. 4.74 2.56 4.55 * 1.07
Dividends declared per common share**........ 1.40 1.00 0.55 0.33 0.30
Total assets................................. 56,184 53,756 49,539 43,679 40,690
Total debt................................... 13,396 14,193 13,106 11,451 15,551
Convertible preferred stock (in shares)...... 0.04 0.14 1.72 1.72 1.72
-------------------------
* Not applicable for reporting period.
** Per share data has been adjusted to reflect the two-for-one stock split in
1996.
(1) 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 new 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.
(2) 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."
(3) 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.
(4) 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 MMC 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 Statement of Financial Accounting
Standards ("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."
(5) Earnings for the year ended December 31, 1992 include a pretax gain of $142
million ($88 million after taxes) on the sale of 43.6 million shares of MMC
stock, a $218 million favorable effect of a change in accounting principle
relating to the adoption of SFAS No. 109, "Accounting for Income Taxes," a
$101 million pretax charge ($79 million after taxes) relating to the
restructuring of Chrysler's short-term vehicle rental subsidiaries, and a
$110 million pretax charge ($69 million after taxes) relating to investment
losses experienced by Chrysler Canada.
24
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
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
$4.77 per common share, compared with $2.0 billion, or $2.65 per common share in
1995.
Chrysler also reported earnings before income taxes and extraordinary item
of $1,591 million in the fourth quarter of 1996, compared with $1,659 million in
the fourth quarter of 1995. Net earnings for the fourth quarter of 1996 were
$807 million, or $1.12 per common share, compared with $1,040 million, or $1.35
per common share in the fourth quarter of 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 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 new 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"). 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.
The following table summarizes this information:
[Enlarge/Download Table]
FOURTH QUARTER CALENDAR YEAR
---------------- ----------------
1996 1995 1996 1995
------ ------ ------ ------
(IN MILLIONS OF DOLLARS)
Earnings before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle..... $1,591 $1,659 $6,092 $3,449
Voluntary early retirement program.......................... 9 -- 97 --
PEI write-down.............................................. 77 -- 77 --
Thrifty write-down.......................................... -- -- 65 --
Lump sum retiree pension costs.............................. 50 -- 50 --
Gain on sale of ESI and CTAS................................ -- -- (101) --
Newark production changes................................... -- -- -- 263
Voluntary minivan owner service action...................... -- -- -- 115
------ ------ ------ ------
Pretax earnings excluding items above..................... $1,727 $1,659 $6,280 $3,827
====== ====== ====== ======
Pretax earnings excluding items 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
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
FINANCIAL REVIEW -- CONTINUED
-----------------------------
1996 Compared With 1995 -- Continued
shipments of Dodge Ram pickup trucks primarily reflects a full year of
production in 1996 at two additional assembly plants.
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.
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), or $0.13 per common share in
1995. The ongoing effect of this accounting change was not material to 1996 and
1995 earnings.
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 the U.S., Canada and Mexico ("North America") in 1996 were
223,657 units, an increase of 15,385 units or seven percent from 1995 levels.
Chrysler's worldwide vehicle shipments in the fourth quarter of 1996 were
753,326 units, an increase of 11,556 units or two percent from fourth-quarter
1995 levels. Chrysler's vehicle shipments outside of North America in the fourth
quarter of 1996 were 69,084 units, an increase of 7,339 units or 12 percent from
fourth-quarter 1995 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 16.6 million units in
1996, compared with 16.3 million units in 1995, an increase of two percent.
Chrysler's U.S. and combined U.S. and Canada retail sales and market share
data for 1996 and 1995 were as follows:
[Download Table]
1996 1995 INCREASE
--------- --------- --------
U.S. Retail Market(1):
Car sales.................................. 832,633 786,180 46,453
Car market share........................... 9.8% 9.1% 0.7%
Truck sales (including minivans)........... 1,618,193 1,378,163 240,030
Truck market share......................... 23.3% 21.3% 2.0%
Combined car and truck sales............... 2,450,826 2,164,343 286,483
Combined car and truck market share........ 15.9% 14.3% 1.6%
U.S. and Canada Retail Market(1):
Combined car and truck sales............... 2,690,340 2,389,465 300,875
Combined car and truck market share........ 16.1% 14.7% 1.4%
-------------------------
(1) All retail sales and market share data include fleet sales.
The increase in Chrysler's U.S. car market share during 1996 was primarily
due to increased sales of its midsize sedans and coupes, including the new
Plymouth Breeze and Chrysler Sebring convertible. The increase in Chrysler's
U.S. truck market share during 1996 was primarily due to increased sales of its
Dodge Ram pickup trucks, Jeep(R) sport-utility vehicles, and minivans.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
FINANCIAL REVIEW -- CONTINUED
-----------------------------
1996 Compared With 1995 -- Continued
Chrysler Financial Corporation ("CFC") reported earnings before income
taxes of $586 million in 1996, compared with $522 million in 1995. CFC's net
earnings were $376 million in 1996, compared with $339 million in 1995. The
increase in net earnings in 1996 primarily reflects net margin improvements
partially offset by an increase in the provision for credit losses. The net
margin improvements in 1996 reflect lower average effective cost of borrowings
resulting primarily from lower market interest rates in the U.S. and Canada.
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. In addition, Chrysler has also
benefitted over the past several years from a cost advantage in comparison to
vehicles manufactured in Japan (and vehicles containing significant material
components manufactured in Japan) as a result of favorable exchange rates
between the Japanese yen and the U.S. dollar. During 1996, this cost advantage
was substantially reduced as a result of unfavorable changes in the Japanese yen
to U.S. dollar exchange rate. These changes did not have a material adverse
effect on Chrysler's 1996 consolidated operating results. Chrysler believes,
however, that further substantial unfavorable exchange rate changes could, over
time, have an adverse effect on 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 its entire product
lineup 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 environment.
1995 Compared With 1994
Chrysler reported earnings before income taxes and the cumulative effect of
a change in accounting principle of $3.4 billion in 1995, compared with $5.8
billion in 1994. Net earnings for 1995 were $2.0 billion, or $2.65 per common
share, compared with $3.7 billion, or $5.06 per common share in 1994. Earnings
in 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 included an after-tax charge of $96
million, or $0.13 per common share, for the cumulative effect of a change in
accounting principle related to the consensus reached on EITF Issue 95-1. Net
earnings for 1994 included favorable income tax adjustments aggregating $132
million.
The lower operating results for 1995 as compared with 1994 resulted
primarily from lower minivan shipments and costs associated with the launch of
Chrysler's all-new minivans, higher sales incentives and material costs, a lower
mix of higher-margin vehicles, lower vehicle shipments in Mexico and the costs
associated with production changes at the Newark assembly plant.
Chrysler's worldwide vehicle shipments in 1995 were 2,673,539 units, a
decrease of 88,564 units or three percent from 1994 levels. Minivan shipments in
1995 were 555,824 units, a decrease of 121,652 units from 1994 levels. The
decline in minivan shipments was primarily attributable to the launch of
Chrysler's all-new minivans. By the end of 1995, the launch of Chrysler's
all-new minivans was substantially complete.
27
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
--------------------------------------------------------
Chrysler's total revenues were as follows:
[Enlarge/Download Table]
1996 VS. 1995 1995 VS. 1994
INCREASE/ INCREASE/
1996 1995 (DECREASE) 1994 (DECREASE)
------- ------- ------------- ------- -------------
(IN MILLIONS (IN MILLIONS
OF DOLLARS) OF DOLLARS)
Sales of manufactured products............ $57,587 $49,601 16% $49,363 --
Finance and insurance revenues............ 1,746 1,589 10% 1,384 15%
Other revenues............................ 2,064 2,005 3% 1,488 35%
------- ------- -------
Total revenues $61,397 $53,195 15% $52,235 2%
======= ======= =======
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 $18,305 to
$19,442. 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 increase in sales of manufactured
products in 1995 as compared with 1994 primarily reflects an increase in average
revenue per unit, net of sales incentives, from $17,663 to $18,305, largely
offset by a three percent decrease in vehicle shipments. The increase in average
revenue per unit in 1995 as compared with 1994 was principally due to pricing
actions, partially offset by higher sales incentives.
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. The increase in finance and insurance revenues
in 1995 as compared with 1994 was primarily attributable to higher average
automotive finance receivables outstanding.
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:
[Enlarge/Download Table]
1996 1995 1994
----- ----- -----
U.S. Penetration:
Retail............................................................... 20% 27% 24%
Wholesale............................................................ 72% 74% 73%
Number of New Chrysler Vehicles Financed in the U.S. (in thousands):
Retail............................................................... 485 594 525
Wholesale............................................................ 1,771 1,632 1,647
The decrease in retail penetration is primarily due to increased
competition and actions taken by CFC to improve retail credit quality mix.
Other revenues increased in 1995 as compared with 1994 primarily as a
result of increased interest income, reflecting Chrysler's higher average cash,
cash equivalents and marketable securities balances and higher interest rates as
well as the recognition of lease revenue in accordance with EITF 95-1.
28
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]
1996 VS. 1995 1995 VS. 1994
INCREASE/ INCREASE/
1996 1995 (DECREASE) 1994 (DECREASE)
------- ------- ------------- --------------- -------------
(IN MILLIONS OF (IN MILLIONS OF
DOLLARS) DOLLARS)
Costs, other than items below........ $45,842 $41,304 11% $38,032 9%
Depreciation and special tools
amortization....................... 2,312 2,220 4% 1,955 14%
Selling and administrative
expenses........................... 4,730 4,064 16% 3,933 3%
Employee retirement benefits......... 1,414 1,163 22% 1,548 (25)%
Interest expense..................... 1,007 995 1% 937 6%
------- ------- -------
Total expenses.................. $55,305 $49,746 11% $46,405 7%
======= ======= =======
Costs, other than items below increased in 1996 as compared with 1995
primarily as a result of an 11 percent increase in vehicle shipments and an
increased proportion of truck shipments to total vehicle shipments. In addition,
Costs, other than items below in 1995 included a charge of $263 million related
to production changes at the Newark assembly plant and a $115 million charge
related to a voluntary minivan owner service action. Costs, other than items
below increased in 1995 as compared with 1994 primarily as a result of increased
product costs, costs associated with the changeover and launch of Chrysler's
all-new minivans and costs associated with production changes at the Newark
assembly plant, partially offset by the effect of a decrease in vehicle
shipments of three percent. Costs, other than items below as a percent of sales
of manufactured products were 80 percent, 83 percent and 77 percent in 1996,
1995 and 1994, respectively.
Depreciation and special tools amortization increased in 1996 as compared
with 1995 primarily as a result of higher levels of property and equipment in
use. Depreciation and special tools amortization increased in 1995 as compared
with 1994 primarily as a result of higher levels of property and equipment in
use as well as increased tooling costs related to Chrysler's new products.
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. Selling and administrative expenses
increased in 1995 as compared with 1994 primarily as a result of increased
advertising expenses.
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 a voluntary early retirement program for certain salaried employees in
1996, and increased pension benefits related to Chrysler's new collective
bargaining agreements. This increase was partially offset by the favorable
effect of higher expected returns on pension plan assets in 1996. Employee
retirement benefits decreased in 1995 as compared with 1994 primarily due to
improved funding of the pension plans, an increase in the discount rates used to
determine 1995 pension expense and nonpension postretirement benefit expense,
and favorable health care inflation experience. Chrysler contributed $941
million, $838 million and $2.6 billion to the pension funds during 1996, 1995
and 1994, respectively.
Interest expense increased slightly in 1995 as compared with 1994 primarily
as a result of higher average levels of term debt at CFC largely offset by a
decrease in average non-CFC debt levels.
In 1996, Chrysler completed the sale of 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, a
wholly owned
29
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
---------------------------------------------------------------------
subsidiary of Chrysler. The sale resulted in a pretax gain of $101 million ($87
million after taxes) which is included in Costs, other than items below in the
consolidated statement of earnings for 1996.
Consistent with its strategy to focus on its core automotive business, in
1996, Chrysler committed to a plan of disposal for Thrifty. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," a pretax loss of $65 million ($100 million after taxes) was recognized in
1996 to write down Thrifty's carrying value to estimated fair value less cost to
sell. Chrysler's estimate of the fair value of Thrifty is based principally on
an analysis of non-binding bids. 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. Thrifty's assets and
liabilities at December 31, 1996 and its results of operations for 1996 were
immaterial to Chrysler's consolidated assets and liabilities and results of
operations, respectively. Chrysler is continuing with its efforts to sell
Thrifty and is uncertain when the sale of Thrifty may occur.
In the fourth quarter of 1996, Chrysler signed an agreement to sell PEI for
net proceeds of $17 million. PEI produces automatic test equipment for military
applications and represents the remaining operations of Chrysler Technologies
Corporation. In accordance with SFAS No. 121, a pretax loss of $77 million ($51
million after taxes) was recognized in the fourth quarter of 1996 to write down
PEI's carrying value to estimated fair value less cost to sell. Chrysler's
estimate of the fair value of PEI was based on the terms of the agreement.
Included in the cost to sell PEI is an estimate for job security benefits,
special early retirement benefits and other employee costs related to employees
which Chrysler agreed to retain. The pretax loss is included in Costs, other
than items below in the consolidated statement of earnings for 1996. PEI's
assets and liabilities at December 31, 1996 and its results of operations for
1996 were immaterial to Chrysler's consolidated assets and liabilities and
results of operations, respectively. The sale of PEI was completed on January
10, 1997.
In 1995, Chrysler recorded a $263 million provision ($162 million after
income 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, is scheduled to begin 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 1996, 1995 and 1994 were 38.9 percent,
38.5 percent and 36.3 percent, respectively. The provision for income taxes in
1994 included favorable adjustments aggregating $132 million, including $100
million for the recognition of tax credits related to expenditures in prior
years for qualifying research and development activities.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $7.8 billion at December 31, 1996 (including $797 million
held by CFC and Car Rental Operations), $8.1 billion at December 31, 1995
(including $1.2 billion held by CFC and Car Rental Operations), and $8.4 billion
at December 31, 1994 (including $756 million held by CFC and Car Rental
Operations). At December 31, 1996, CFC had approximately $400 million of
marketable securities which were limited for use in its
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
--------------------------------------------
insurance operations in accordance with various statutory requirements. The
decrease in Chrysler's consolidated combined cash, cash equivalents and
marketable securities in 1996 was primarily the result of capital expenditures,
common stock repurchases, net debt repayments and dividend payments, largely
offset by cash generated by operating activities, marketable securities acquired
in non-cash transactions related to the securitization of retail receivables and
net proceeds from the sales of nonautomotive assets. The decrease in Chrysler's
consolidated combined cash, cash equivalents and marketable securities in 1995
was primarily the result of capital expenditures, net finance receivables
acquired and common stock repurchases, largely offset by cash generated by
operating activities and cash provided by an increase in long-term debt.
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 $17.1 billion for the three-year period ended December
31, 1996. Expenditures for these items during the succeeding three-year period
are expected to be at similar or higher levels. At December 31, 1996, Chrysler
had commitments for capital expenditures, including commitments for assets
currently under construction, totaling approximately $1.6 billion.
In May 1996, Chrysler declared a two-for-one stock split in the form of a
100 percent stock dividend which was distributed on July 15, 1996 to
shareholders of record on June 15, 1996. 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 have 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, common
shares issued, outstanding and held in treasury for prior periods have not been
restated for the two-for-one stock split.
During 1996, Chrysler repurchased 66 million shares of its common stock at
a cost of $2.0 billion (including $16 million in unsettled repurchases at
December 31, 1996). In December 1996, Chrysler's Board of Directors approved an
increase in Chrysler's planned 1997 common stock repurchases from $1 billion to
$2 billion. The planned 1997 common stock repurchases are subject to market and
general economic conditions. Since beginning its common stock repurchase program
in 1995, Chrysler has repurchased 112 million shares of its common stock at a
cost of $3.1 billion.
In the second quarter of 1996, Chrysler increased its quarterly dividend
from $0.30 to $0.35 per common share. In the fourth quarter of 1996, Chrysler
increased its quarterly dividend from $0.35 to $0.40 per common share. Dividends
per common share have been adjusted to reflect the two-for-one stock split.
In December 1996, Chrysler prepaid certain 1997 nonpension employee
benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary
Association trust and other employee benefit plans.
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 at a cost of $859 million. At December 31, 1996, $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. In addition, Chrysler entered into forward contracts
(notional amount $520 million) to mitigate interest rate risk related to debt
Chrysler intends to incur in the first quarter of 1997 to refinance the
extinguished Certificates. The refinancing is subject to market and general
economic conditions.
At December 31, 1996, Chrysler (excluding CFC) had aggregate debt
maturities of $1.1 billion through 1999. At December 31, 1996, Chrysler had a
$2.4 billion revolving credit agreement which expires in April
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
--------------------------------------------
2001. The revolving credit agreement was not drawn upon at December 31, 1996.
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.
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.
Term debt, commercial paper and receivable sales are CFC's primary funding
sources. CFC decreased its term debt outstanding by $0.8 billion during 1996 and
increased its term debt outstanding by $3.1 billion during 1995. CFC's
commercial paper outstanding increased by $0.2 billion during 1996 and decreased
by $1.9 billion in 1995. CFC realized $8.1 billion and $6.5 billion of net
proceeds from the sales of automotive retail receivables during 1996 and 1995,
respectively. In addition, securitization of revolving wholesale account
balances provided funding for CFC which aggregated $6.8 billion and $6.7 billion
at December 31, 1996 and 1995, respectively.
At December 31, 1996, CFC had debt maturities of $5.7 billion in 1997
(including $2.6 billion of short-term notes), $2.6 billion in 1998, and $1.6
billion in 1999. CFC's U.S. and Canadian revolving credit facilities, which
total $8 billion, consist of a $2 billion facility expiring in April 1997 and a
$6 billion facility expiring in April 2001. Neither of the revolving credit
facilities was drawn upon at December 31, 1996. CFC believes that cash provided
by operations, receivable sales, securitizations, and the issuance of term debt
and commercial paper will provide sufficient liquidity to meet its debt maturity
and other funding requirements.
During 1996, Chrysler completed the sale of ESI and CTAS for net proceeds
of $476 million. Also during 1996, CFC completed the sale of certain
nonautomotive assets for net proceeds of $225 million, which approximated the
net book value of the assets.
Chrysler's strategy is to focus on its core automotive business. As part of
this strategy, Chrysler has sold certain assets and businesses in past years
which are not related to its core automotive business, and is exploring the sale
of other such assets and businesses in the near term.
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 worldwide vehicle production in the fourth quarter of 1996 was
711,217 units, an increase of 11,857 units or two percent as compared with the
fourth quarter of 1995. Worldwide vehicle production for the first quarter of
1997 is expected to be approximately 779,000 units, an increase of 36,000 units
or five percent as compared with the first quarter of 1996. This expected
production level is heavily dependent on continued favorable economic conditions
in the U.S. and Canada, where Chrysler's sales are concentrated. A significant
weakening of Chrysler's competitive position or economic conditions in the U.S.
and Canada could result in the lowering of first-quarter 1997 planned
production.
Chrysler projects that 1997 retail (including fleet) industry sales for the
U.S. will range from 15.0 million to 15.5 million units and that 1997 retail
(including fleet) industry sales for Canada will range from 1.1 million to 1.2
million units. Retail (including fleet) industry sales in 1996 were 15.4 million
units and 1.2 million units in the U.S. and Canada, respectively. Actual levels
of industry retail (including fleet) sales will depend on,
32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
----------------------------------------------------------
OUTLOOK -- CONTINUED
--------------------
among other things, economic conditions in the U.S. and Canada. Accordingly,
there can be no assurance that Chrysler's estimates will be accurate.
Chrysler's business plan for 1997 is predicated on several broad economic
assumptions, including, among others, that 1997 inflation and interest rates in
the U.S. will remain stable and will be comparable to 1996 rates; there will be
a moderate expansion in the U.S. economy during 1997, with real economic growth
between 2.0 percent and 2.5 percent; and average 1997 gasoline and oil prices in
the U.S. will be comparable to 1996 prices. As with most economic projections,
actual conditions in 1997 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: 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, sales incentives, acceptance of new products and price
pressures; excess or shortage of manufacturing capacity; risks and uncertainties
associated with Chrysler's expansion into international markets; and changes in
foreign 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.
NEW ACCOUNTING STANDARDS
------------------------
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." This Statement is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996. Chrysler believes that the implementation of this new accounting standard
will not have a material impact on its consolidated operating results or
financial position. Chrysler will adopt this accounting standard on a
prospective basis on January 1, 1997, as required.
33
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
-----------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products................................... $57,587 $49,601 $49,363
Finance and insurance revenues................................... 1,746 1,589 1,384
Other revenues................................................... 2,064 2,005 1,488
------- ------- -------
TOTAL REVENUES 61,397 53,195 52,235
------- ------- -------
Costs, other than items below (Notes 14, 15, 16)................. 45,842 41,304 38,032
Depreciation and special tools amortization (Notes 1 and 5)...... 2,312 2,220 1,955
Selling and administrative expenses.............................. 4,730 4,064 3,933
Employee retirement benefits (Note 12)........................... 1,414 1,163 1,548
Interest expense................................................. 1,007 995 937
------- ------- -------
TOTAL EXPENSES 55,305 49,746 46,405
------- ------- -------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 6,092 3,449 5,830
Provision for income taxes (Note 8).............................. 2,372 1,328 2,117
------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 3,720 2,121 3,713
Extraordinary item - Loss on early extinguishment of debt, net of
taxes (Note 13)................................................ (191) -- --
Cumulative effect of a change in accounting principle, net of
taxes (Note 1)................................................. -- (96) --
------- ------- -------
NET EARNINGS $ 3,529 $ 2,025 $ 3,713
Preferred stock dividends (Note 11).............................. 3 21 80
------- ------- -------
NET EARNINGS ON COMMON STOCK $ 3,526 $ 2,004 $ 3,633
======= ======= =======
(IN DOLLARS OR MILLIONS OF
SHARES)
PRIMARY EARNINGS PER COMMON SHARE (NOTES 1, 11, 13):
Earnings before extraordinary item and cumulative effect of a
change in accounting principle.............................. $ 5.03 $ 2.78 $ 5.06
Extraordinary item............................................. (0.26) -- --
Cumulative effect of a change in accounting principle.......... -- (0.13) --
------- ------- -------
Net earnings per common share.................................. $ 4.77 $ 2.65 $ 5.06
======= ======= =======
Average common and dilutive equivalent shares outstanding...... 738.6 756.3 718.4
FULLY DILUTED EARNINGS PER COMMON SHARE (NOTES 1, 11, 13):
Earnings before extraordinary item and cumulative effect of a
change in accounting principle.............................. $ 5.00 $ 2.68 $ 4.55
Extraordinary item............................................. (0.26) -- --
Cumulative effect of a change in accounting principle.......... -- (0.12) --
------- ------- -------
Net earnings per common share.................................. $ 4.74 $ 2.56 $ 4.55
======= ======= =======
Average common and dilutive equivalent shares outstanding...... 744.2 792.3 815.5
DIVIDENDS DECLARED PER COMMON SHARE.............................. $ 1.40 $ 1.00 $ 0.55
See notes to consolidated financial statements.
34
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
[Enlarge/Download Table]
DECEMBER 31
------------------
1996 1995
------- -------
(IN MILLIONS OF
DOLLARS)
ASSETS:
Cash and cash equivalents (Note 1)........................................ $ 5,158 $ 5,543
Marketable securities (Note 2)............................................ 2,594 2,582
------- -------
Total cash, cash equivalents and marketable securities.................. 7,752 8,125
Accounts receivable -- trade and other (less allowance for doubtful
accounts: 1996 and 1995 -- $44 million and $58 million, respectively)... 2,126 2,003
Inventories (Notes 1 and 3)............................................... 5,195 4,448
Prepaid employee benefits, taxes and other expenses (Note 12)............. 1,929 985
Finance receivables and retained interests in sold receivables (Note 4)... 12,339 13,623
Property and equipment (Note 5)........................................... 14,905 12,595
Special tools (Note 1).................................................... 3,924 3,566
Intangible assets (Note 1)................................................ 1,995 2,082
Other assets (Note 12).................................................... 6,019 6,329
------- -------
TOTAL ASSETS $56,184 $53,756
======= =======
LIABILITIES:
Accounts payable.......................................................... $ 8,981 $ 8,290
Short-term debt (Note 7).................................................. 3,214 2,674
Payments due within one year on long-term debt (Note 7)................... 2,998 1,661
Accrued liabilities and expenses (Note 6)................................. 8,864 7,032
Long-term debt (Note 7)................................................... 7,184 9,858
Accrued noncurrent employee benefits (Note 12)............................ 9,431 9,217
Other noncurrent liabilities.............................................. 3,941 4,065
------- -------
TOTAL LIABILITIES 44,613 42,797
------- -------
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: 1996 and 1995 --
0.04 and 0.14 shares, respectively (aggregate liquidation preference $21
million and $68 million, respectively).................................. * *
Common stock -- $1 per share par value; authorized 1,000.0 shares; issued:
1996 and 1995 -- 821.6 and 408.2 shares, respectively................... 822 408
Additional paid-in capital................................................ 5,129 5,506
Retained earnings......................................................... 8,829 6,280
Treasury stock -- at cost: 1996 -- 119.1 shares; 1995 -- 29.9 shares...... (3,209) (1,235)
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,571 10,959
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $56,184 $53,756
======= =======
-------------------------
* Less than $1 million
See notes to consolidated financial statements.
35
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
--------------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................. $ 3,529 $ 2,025 $ 3,713
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and special tools amortization.............. 2,312 2,220 1,955
Provision for credit losses.............................. 373 372 203
Deferred income taxes.................................... 1,120 186 1,065
Extraordinary item -- Loss on early extinguishment of
debt (Note 13)......................................... 191 -- --
Cumulative effect of a change in accounting principle
(Note 1)............................................... -- 96 --
Change in receivables.................................... (224) 848 (1,158)
Change in inventories.................................... (691) (435) 129
Change in prepaid expenses and other assets.............. (1,394) (681) (1,888)
Change in accounts payable and accrued and other
liabilities............................................ 2,143 2,092 2,613
Other.................................................... (58) 231 161
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,301 6,954 6,793
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities....................... (4,346) (5,160) (5,425)
Sales and maturities of marketable securities............ 5,294 6,122 3,519
Finance receivables acquired............................. (19,906) (24,437) (20,149)
Finance receivables collected............................ 3,062 3,795 5,772
Proceeds from sales of finance receivables............... 16,809 17,602 13,138
Proceeds from sales of nonautomotive assets.............. 701 94 --
Expenditures for property and equipment.................. (3,271) (2,597) (2,666)
Expenditures for special tools........................... (1,364) (1,049) (1,177)
Purchases of vehicle operating leases.................... (794) (460) (143)
Other.................................................... 248 179 173
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,567) (5,911) (6,958)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt................................ 410 (1,971) 1,348
Proceeds under long-term borrowings and revolving lines
of credit.............................................. 1,390 4,731 1,305
Payments on long-term borrowings and revolving lines of
credit................................................. (2,167) (1,687) (1,011)
Payment for early extinguishment of debt................. (853) -- --
Repurchases of common stock (Note 11).................... (2,041) (1,047) --
Dividends paid........................................... (963) (710) (399)
Other.................................................... 105 39 27
-------- -------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,119) (645) 1,270
-------- -------- --------
Change in cash and cash equivalents........................... (385) 398 1,105
Cash and cash equivalents at beginning of year................ 5,543 5,145 4,040
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR...................... $ 5,158 $ 5,543 $ 5,145
======== ======== ========
See notes to consolidated financial statements.
36
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. Amounts for 1995 and 1994 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
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. The ongoing effect of this accounting change was
not material to 1996 and 1995 earnings.
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.
Finance revenue from finance receivables of Chrysler Financial Corporation
("CFC"), a wholly owned subsidiary, is recognized using the interest method.
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 recourse provisions. CFC
generally sells its receivables to a trust and remains as servicer, for which it
is paid a servicing fee. Normal 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
37
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
---------------------------------------------------------------
REVENUE RECOGNITION -- CONTINUED
principal balances of the sold receivables and certain cash deposits provided as
credit enhancements for investors. Gains or losses from the sales of retail
receivables are recognized in the period in which such sales occur. In
determining the gain or loss for each qualifying sale of retail receivables, the
investment in the sold receivable pool is allocated between the portion sold and
the portion retained, based on their relative fair values on the date of sale.
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. During any given model year, special
tools will contain tooling with varying useful lives.
In 1994, Chrysler revised the estimated service lives of certain special
tools and property and equipment. These revisions were based on updated
assessments of the service lives of the related assets and resulted in the
recognition of additional amortization of special tools of $246 million in 1994
and lower depreciation of property and equipment of $45 million in 1994.
PRODUCT-RELATED COSTS
Expenditures for research and development, advertising, sales promotion and
other product-related costs are expensed as incurred. Provisions for product
warranty costs are recognized at the time the related sale is recognized.
Research and development costs were $1.6 billion, $1.4 billion and $1.3 billion
in 1996, 1995 and 1994, respectively. Advertising expense was $1.5 billion, $1.2
billion and $1.1 billion in 1996, 1995 and 1994, respectively.
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 receivables or vehicle leases 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 vehicle
leases not supported by a dealer guaranty 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 39 percent and 42 percent of inventories at December 31, 1996 and
1995, respectively, was determined on a Last-In, First-Out ("LIFO") basis. The
balance of inventory cost was determined on a First-In, First-Out ("FIFO")
basis.
38
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
---------------------------------------------------------------
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 $778 million and
$767 million at December 31, 1996 and 1995, 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 $161 million and $37 million at December 31, 1996 and 1995,
respectively.
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Effective January 1, 1996, Chrysler adopted Statement of Financial
Accounting Standards ("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 15.
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 has elected to continue to account for its employee stock
compensation plans under APB Opinion No. 25. Pro forma disclosures of net
earnings and earnings per share, as if the fair value based method of accounting
defined in SFAS No. 123 had been applied, are presented in Note 10.
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.
39
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
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 and purchased
options, 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. Fees paid for purchased currency options are deferred and included
in Other assets. The currency exchange agreements are treated as
off-balance-sheet financial instruments, with the deferred fees and 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 and any fees paid continue to
be deferred and are included in the settlement of the underlying transaction.
Chrysler also uses written currency options to effectively close out existing
purchased options, both of which are then carried at fair value. Previously
unrecognized gains and losses on the purchased options continue to be deferred
and are included in earnings upon the settlement of the underlying transaction.
Forward contracts are used to manage exposure to fluctuations in funding costs
for the anticipated issuance of debt. Unrealized 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 utilizes interest rate swaps and currency exchange agreements 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
exchange rate variability for foreign debt issuances. CFC uses interest rate
swap agreements to change the characteristics of its fixed and variable rate
exposures and to manage its asset/liability match. Interest rate basis swaps are
used to manage variability in spread relationships. 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 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 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 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
---------------------------------------
Effective January 1, 1994, Chrysler adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The adoption of this
accounting standard did not have a material effect on Chrysler's consolidated
operating results or financial position.
40
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. MARKETABLE AND OTHER SECURITIES -- CONTINUED
----------------------------------------------------
Under SFAS No. 115, debt and equity securities with readily determinable
fair values are segregated into one of the following categories: trading,
available-for-sale or held-to-maturity. Chrysler does not hold securities for
trading purposes. 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.
Investments in marketable securities were as follows:
[Enlarge/Download Table]
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- ----------- ----------- ---------------
DECEMBER 31
-------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
------ ------ ---- ---- ---- ---- ------ ------
(IN MILLIONS OF DOLLARS)
AVAILABLE-FOR-SALE SECURITIES:
U.S. and Canadian government and agency
securities............................ $1,454 $ 682 $ 6 $ 9 $(11) $(2) $1,449 $ 689
Corporate debt securities................ 965 783 8 22 (5) (1) 968 804
Other marketable securities.............. 162 386 2 9 -- -- 164 395
------ ------ --- --- ---- --- ------ ------
Total available-for-sale securities... 2,581 1,851 16 40 (16) (3) 2,581 1,888
------ ------ --- --- ---- --- ------ ------
HELD-TO-MATURITY SECURITIES:
U.S. and Canadian government and agency
securities............................ -- 234 -- -- -- -- -- 234
Corporate debt securities................ -- 184 -- 1 -- -- -- 185
Other marketable securities.............. 13 276 -- -- -- -- 13 276
------ ------ --- --- ---- --- ------ ------
Total held-to-maturity securities..... 13 694 -- 1 -- -- 13 695
------ ------ --- --- ---- --- ------ ------
Total................................. $2,594 $2,545 $16 $41 $(16) $(3) $2,594 $2,583
====== ====== === === ==== === ====== ======
At December 31, 1996, contractual maturities of marketable debt securities
were as follows: within one year -- $534 million; after one year through five
years -- $1,822 million; after five years through ten years -- $59 million; and
after ten years -- $139 million.
Proceeds from sales and maturities of available-for-sale securities were
$4.5 billion and $3.1 billion in 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 and $4.8
billion at December 31, 1996 and 1995, respectively, and consisted primarily of
commercial paper, repurchase agreements, and certificates of deposit.
41
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
-------------------------------------
Inventories, summarized by major classification, were as follows:
[Download Table]
DECEMBER 31
------------------
1996 1995
------ ------
(IN MILLIONS OF
DOLLARS)
Finished products, including service parts................. $1,569 $1,232
Raw materials, finished production parts and supplies...... 1,540 1,456
Vehicles held for short-term lease......................... 2,086 1,760
------ ------
Total................................................. $5,195 $4,448
====== ======
Inventories valued on the LIFO basis would have been $439 million and $334
million higher than reported had they been valued on the FIFO basis at December
31, 1996 and 1995, respectively.
Vehicles held for short-term lease include the carrying value of vehicles
for which Chrysler conditionally guarantees the minimum resale value of the
vehicles. The carrying value of these vehicles were $900 million and $746
million at December 31, 1996 and 1995, respectively.
Total manufacturing cost of sales aggregated $46.5 billion, $41.7 billion
and $39.0 billion for 1996, 1995 and 1994, 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
--------------------
1996 1995
------- -------
(IN MILLIONS OF
DOLLARS)
Automotive financing..................................... $ 6,920 $ 8,726
Nonautomotive financing.................................. 3,219 3,222
Retained senior interests in wholesale receivables held
in trusts.............................................. 677 935
------- -------
Total finance receivables........................... 10,816 12,883
Retained interests in sold receivables................... 3,488 3,039
Unearned income.......................................... (1,418) (1,682)
Allowance for credit losses.............................. (547) (617)
------- -------
Total............................................... $12,339 $13,623
======= =======
Retained interests in sold receivables are generally restricted and subject
to limited recourse provisions.
Contractual maturities of total finance receivables as of December 31,
1996, were (in millions of dollars): 1997 -- $4,193; 1998 -- $1,560; 1999 --
$1,269; 2000 -- $744; 2001 -- $615; and 2002 and thereafter -- $2,435. Actual
cash flows will vary from contractual maturities due to future sales of finance
receivables, prepayments and charge-offs.
42
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SOLD RECEIVABLES --
CONTINUED
-------------------------------------------------------------------------
Changes in the allowance for credit losses were as follows:
[Download Table]
YEAR ENDED DECEMBER 31
-------------------------
1996 1995 1994
----- ----- -----
(IN MILLIONS OF DOLLARS)
Balance at beginning of year......................... $ 617 $ 522 $ 507
Provision for credit losses.......................... 373 372 203
Net credit losses.................................... (398) (252) (159)
Other adjustments.................................... (45) (25) (29)
----- ----- -----
Balance at end of year............................... $ 547 $ 617 $ 522
===== ===== =====
Nonearning finance receivables, including receivables sold subject to
limited recourse, totaled $278 million and $333 million at December 31, 1996 and
1995, respectively, which represented 0.8 percent and 1.0 percent of such
receivables outstanding, respectively.
NOTE 5. PROPERTY AND EQUIPMENT
------------------------------
Property and equipment, summarized by major classification, were as
follows:
[Enlarge/Download Table]
DECEMBER 31
WEIGHTED AVERAGE -------------------
SERVICE LIVES 1996 1995
---------------- ------- -------
(YEARS) (IN MILLIONS OF
DOLLARS)
Land...................................................... -- $ 405 $ 399
Buildings................................................. 33 5,467 5,171
Machinery and equipment................................... 14 12,364 11,865
Furniture and fixtures.................................... 10 630 549
Vehicles under purchased operating leases................. 3 1,311 593
Construction in progress.................................. -- 2,875 1,891
------- -------
23,052 20,468
Accumulated depreciation (8,147) (7,873)
------- -------
Total................................................ $14,905 $12,595
======= =======
Depreciation of property and equipment was $1,317 million, $1,100 million
and $994 million in 1996, 1995 and 1994, respectively.
43
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. ACCRUED LIABILITIES AND EXPENSES
----------------------------------------
Accrued liabilities and expenses consisted of the following:
[Enlarge/Download Table]
DECEMBER 31
-------------------
1996 1995
------ ------
(IN MILLIONS OF
DOLLARS)
Customer and dealer allowances and claims............................... $2,660 $2,097
Employee compensation and benefits...................................... 2,477 1,892
Deferred revenue related to vehicles sold with guaranteed
minimum resale values................................................. 1,190 991
Other................................................................... 2,537 2,052
------ ------
Total.............................................................. $8,864 $7,032
====== ======
NOTE 7. DEBT
---------------
Debt consisted of the following:
[Enlarge/Download Table]
DECEMBER 31
-----------------------------------------------
WEIGHTED
AVERAGE
INTEREST
MATURITY RATE(1)
--------- ------------
1996 1996 1995 1996 1995
--------- ---- ---- ------- -------
(IN MILLIONS OF
DOLLARS)
Chrysler, excluding CFC:
Short-term debt.................................. 6.8% 6.7% $ 419 $ 160
Long-term debt payable within one year........... 23 49
------- -------
Total debt payable within one year............ 442 209
------- -------
Debentures....................................... 2017 11.0% 11.0% 265 265
Notes and other debt............................. 1998-2020 9.2% 10.1% 1,444 1,950
------- -------
Total long-term debt.......................... 1,709 2,215
------- -------
Total....................................... 2,151 2,424
------- -------
CFC:
Short-term debt (primarily commercial paper)..... 5.1% 6.2% 2,795 2,514
Long-term debt payable within one year........... 2,975 1,612
------- -------
Total debt payable within one year............ 5,770 4,126
------- -------
Senior notes and debentures...................... 1998-2018 6.9% 7.2% 5,462 7,625
Mortgage notes, capital leases and other......... 13 18
------- -------
Total long-term debt.......................... 5,475 7,643
------- -------
Total....................................... 11,245 11,769
------- -------
Total Chrysler:
Total long-term debt............................. $ 7,184 $ 9,858
======= =======
Total debt....................................... $13,396 $14,193
======= =======
-------------------------
(1) The weighted average interest rates include the effects of interest rate
exchange agreements.
44
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
-------------------------
At December 31, 1996, aggregate annual maturities of consolidated debt,
including principal payments on capital leases, were as follows (in millions of
dollars): 1997 -- $6,212; 1998 -- $2,826; 1999 -- $2,125; 2000 -- $943; and 2001
-- $462.
CFC enters 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 are 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 $75 million at December 31, 1996. If
CFC had not entered into currency exchange agreements, the amount would have
been $22 million higher.
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 major
financial 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 exchange agreements on interest expense was immaterial in 1996, 1995 and
1994.
The following table summarizes CFC's interest rate derivatives related to
its debt:
[Enlarge/Download Table]
NOTIONAL AMOUNTS
OUTSTANDING AND
WEIGHTED AVERAGE
RATES
---------------------
DECEMBER 31
VARIABLE MATURING ---------------------
UNDERLYING FINANCIAL INSTRUMENTS RATE INDICES THROUGH 1996 1995
------------------------------------- ------------------- -------- ------ ------
(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 5.6% 5.9%
Senior notes and debentures........ 1998 $ 369 $ 74
Weighted average pay rate....... 5.4% 7.4%
Weighted average receive rate... Bankers Acceptances 4.4% 6.6%
RECEIVE FIXED INTEREST RATE SWAPS
Senior notes and debentures........ 2002 $1,436 $ 750
Weighted average pay rate....... LIBOR 8.1% 7.5%
Weighted average receive rate... 9.0% 8.3%
VARIABLE INTEREST RATE SWAPS
Senior notes and debentures........ 1999 $1,611 $1,611
Weighted average pay rate....... LIBOR 5.5% 5.9%
Weighted average receive rate... Federal Funds 5.6% 6.1%
CFC's U.S. and Canadian revolving credit facilities, which total $8
billion, consist of a $2 billion facility expiring in April 1997 and a $6
billion facility expiring in April 2001. Neither of the revolving credit
facilities was drawn upon at December 31, 1996.
At December 31, 1996, Chrysler (excluding CFC) had a $2.4 billion revolving
credit agreement which expires in April 2001. The revolving credit agreement was
not drawn upon at December 31, 1996.
See also Note 13. Extraordinary Item -- Loss on Early Extinguishment of
Debt.
45
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
--------------------
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
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS OF DOLLARS)
United States................................................... $5,631 $3,179 $5,239
Foreign......................................................... 461 270 591
------ ------ ------
Total...................................................... $6,092 $3,449 $5,830
====== ====== ======
The provision for income taxes included in the consolidated statement of
earnings was as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS OF DOLLARS)
Provision for income taxes before extraordinary item and the
cumulative effect of a change in accounting principle......... $2,372 $1,328 $2,117
Income tax benefit of the extraordinary item.................... (118) -- --
Income tax benefit of the cumulative effect of a change in
accounting principle.......................................... -- (59) --
------ ------ ------
Total...................................................... $2,254 $1,269 $2,117
====== ====== ======
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS OF DOLLARS)
Currently Payable:
United States................................................. $ 963 $ 879 $ 876
Foreign....................................................... 52 63 60
State and local............................................... 119 200 116
------ ------ ------
1,134 1,142 1,052
------ ------ ------
Deferred:
United States................................................. 883 116 820
Foreign....................................................... 76 48 73
State and local............................................... 161 (37) 172
------ ------ ------
1,120 127 1,065
------ ------ ------
Total...................................................... $2,254 $1,269 $2,117
====== ====== ======
Chrysler does not provide for U.S. income taxes or foreign withholding
taxes on $2.3 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.
46
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
---------------------------------
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
----------------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS OF DOLLARS)
Tax at U.S. statutory rate...................................... $2,132 $1,207 $2,041
State and local taxes, net of federal tax benefit............... 197 116 191
Recognition of prior years' research and development tax
credits....................................................... -- -- (100)
Adjustments to reflect assessment of realizability of deferred
tax assets.................................................... -- (29) (32)
Other........................................................... 43 34 17
------ ------ ------
Provision for income taxes before extraordinary item and the
cumulative effect of a change in accounting principle...... $2,372 $1,328 $2,117
====== ====== ======
Effective income tax rate.................................. 38.9% 38.5% 36.3%
====== ====== ======
The adjustment to the provision for income taxes for the recognition of
prior years' research and development tax credits in 1994 represented the tax
benefits 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.
The tax-effected temporary differences and carryforwards which comprised
deferred tax assets and liabilities were as follows:
[Enlarge/Download Table]
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------------- -----------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES
---------- --------------- ---------- ---------------
(IN MILLIONS OF DOLLARS)
Nonpension postretirement benefits............. $3,251 $ -- $3,121 $ --
Pensions....................................... 14 1,911 8 1,966
Accrued expenses............................... 2,692 2 2,698 2
Lease transactions............................. -- 1,828 -- 1,734
Depreciation................................... -- 2,056 -- 1,769
Prepaid employee benefits...................... -- 394 -- --
Tax credit carryforwards....................... 211 -- 211 --
Alternative minimum tax credit carryforwards... 107 -- 282 --
State and local taxes.......................... 105 129 160 109
Net operating loss ("NOL") carryforwards....... 42 -- 77 --
Other.......................................... 160 845 346 825
------ ------ ------ ------
6,582 7,165 6,903 6,405
Valuation allowance............................ (8) -- (3) --
------ ------ ------ ------
Total..................................... $6,574 $ 7,165 $6,900 $ 6,405
====== ====== ====== ======
Chrysler's tax credit carryforwards expire at various dates through the
year 2010 and alternative minimum tax credit carryforwards have no expiration
dates. NOL carryforwards totaled $119 million at December 31, 1996, of which $82
million may be used through the year 2008, and $37 million of which have
47
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
---------------------------------
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
------------------------
1996 1995 1994
---- ---- ----
(IN MILLIONS OF DOLLARS)
Balance at beginning of year........................................ $ 3 $ 77 $146
Utilization of NOL carryforwards.................................... -- (45) (25)
Adjustments to reflect assessment of realizability of deferred tax
assets............................................................ -- (29) (32)
Other............................................................... 5 -- (12)
--- ---- ----
Balance at end of year.............................................. $ 8 $ 3 $ 77
=== ==== ====
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 necessarily 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 $238 million and $271 million as of December 31, 1996 and 1995,
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.
48
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
--------------------------------------------------
OTHER MATTERS
The majority of Chrysler's lease payments are for operating leases. At
December 31, 1996, Chrysler had the following minimum rental commitments under
operating leases with noncancelable lease terms in excess of one year: 1997 -
$240 million; 1998 - $187 million; 1999 - $139 million; 2000 - $109 million;
2001 - $60 million; and 2002 and thereafter - $206 million. Future minimum lease
commitments have not been reduced by minimum sublease rentals of $202 million
due in the future under noncancelable subleases.
Rental expense under operating leases were $470 million, $436 million and
$407 million in 1996, 1995 and 1994, respectively. Sublease rentals of $58
million, $58 million and $60 million were received in 1996, 1995 and 1994,
respectively.
Chrysler had commitments for capital expenditures, including commitments
for assets currently under construction, approximating $1.6 billion at December
31, 1996.
At December 31, 1996, Chrysler had guaranteed obligations of others in the
amount of $89 million, none of which were secured by collateral.
NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION
--------------------------------------------------
STOCK-BASED COMPENSATION
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 $30 million, $19 million and $4
million for 1996, 1995 and 1994, respectively.
If compensation cost for stock option grants and Performance Share awards
had been determined based on the fair value at the grant dates for 1996 and 1995
consistent with the method prescribed by SFAS No. 123, Chrysler's net earnings
and earnings per share would have been adjusted to the pro forma amounts
indicated below:
[Download Table]
1996 1995
------ ------
Net earnings -- As reported................................ $3,529 $2,025
-- Pro forma.................................. 3,527 2,025
Primary earnings per share -- As reported.................. $ 4.77 $ 2.65
-- Pro forma.................... 4.79 2.65
Fully diluted earnings per share -- As reported............ $ 4.74 $ 2.56
-- Pro forma.............. 4.76 2.56
During the initial phase-in period, as required by SFAS No. 123, the pro
forma amounts were determined based on stock option grants and Performance Share
awards in 1996 and 1995 only. 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 five 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.
49
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
---------------------------------------------------------------
STOCK-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, key employees and nonemployee directors of Chrysler.
Outstanding options, consisting of ten-year nonqualified stock options,
generally 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 1996, 1995
and 1994 were 11.6 million, 22.4 million and 30.2 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 1996 and 1995, respectively:
dividend yield of 4.8 and 4.8 percent, expected volatility of 31 and 36 percent,
risk-free interest rates of 6.7 and 5.8 percent, and expected lives of five and
five years.
A summary of the status of fixed stock option grants under Chrysler's
stock-based compensation plans as of December 31, 1996, 1995 and 1994, and
changes during the years ending on those dates is presented below:
[Enlarge/Download Table]
1996 1995 1994
------------------------ ------------------------ ------------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
(MILS) PRICE (MILS) PRICE (MILS) PRICE
------- ------------- ------- ------------- ------- -------------
Outstanding at beginning of
year......................... 29.4 $ 19.40 26.2 $ 15.61 22.3 $ 11.92
Granted........................ 9.2 28.66 7.3 24.42 6.5 23.97
Exercised...................... (7.2) 16.11 (3.7) 10.58 (2.5) 9.76
Forfeited...................... (2.9) 14.79 (0.4) 14.56 (0.1) 15.80
----- ----- -----
Outstanding at end of year..... 28.5 23.68 29.4 19.40 26.2 15.61
===== ===== =====
Options exercisable at year
end.......................... 13.3 $ 20.12 17.0 $ 17.20 15.0 $ 14.02
Weighted-average fair value of
options granted during the
year......................... $6.87 $6.49
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
[Enlarge/Download Table]
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- -------------------------
WEIGHTED-AVG. WEIGHTED-AVG.
RANGE OF OPTIONS WEIGHTED-AVG. EXERCISE OPTIONS EXERCISE
EXERCISE PRICES (MILS) REMAINING LIFE PRICE (MILS) PRICE
---------------- ------- -------------- ------------- ------- -------------
$ 5.87 to $10.00 1.3 3.7years $ 7.39 1.3 $ 7.39
10.01 to 15.00 2.1 4.0 10.59 2.1 10.59
15.01 to 20.00 0.3 4.8 16.68 0.3 16.68
20.01 to 25.00 15.4 7.1 23.91 9.3 23.68
25.01 to 30.00 9.0 8.9 28.48 0.1 27.43
30.01 to 33.83 0.4 5.8 32.17 0.2 31.35
---- ----
$ 5.87 to $33.83 28.5 7.2 $ 23.68 13.3 $ 20.12
==== ====
50
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
---------------------------------------------------------------
STOCK-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 five years) to each eligible executive (officers and a limited number of
senior executives). At the end of each cycle, participants may earn no shares,
or a number of Performance Shares ranging from a set minimum to a maximum of 125
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, 1996, 1995
and 1994 were 0.8 million, 1.1 million and 0.6 million, respectively. As of
December 31, 1996, the 0.8 million Performance Share awards outstanding have a
weighted-average remaining life of 1.4 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.
51
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
----------------------------
1996 1995 1994
------- ------- ------
(IN MILLIONS OF DOLLARS)
PREFERRED STOCK:
Balance at beginning of year......................................... $ * $ 2 $ 2
Conversions into common stock..................................... * (2) --
------- ------- ------
Balance at end of year............................................... $ * $ * $ 2
======= ======= ======
COMMON STOCK:
Balance at beginning of year......................................... $ 408 $ 364 $ 364
Effect of two-for-one stock split................................. 410 -- --
Conversions of preferred stock.................................... 4 44 --
------- ------- ------
Balance at end of year............................................... $ 822 $ 408 $ 364
======= ======= ======
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year......................................... $ 5,506 $ 5,536 $5,533
Effect of two-for-one stock split................................. (410) -- --
Conversions of preferred stock.................................... (4) (42) --
Shares issued under employee benefit plans........................ 37 12 3
------- ------- ------
Balance at end of year............................................... $ 5,129 $ 5,506 $5,536
======= ======= ======
RETAINED EARNINGS:
Balance at beginning of year......................................... $ 6,280 $ 5,006 $1,170
Net earnings...................................................... 3,529 2,025 3,713
Dividends declared................................................ (1,016) (777) (470)
Adjustment of additional minimum pension liability................ 24 (42) 626
Net unrealized gains (losses) on investments in certain debt
and equity securities............................................ (23) 44 (21)
Other adjustments................................................. 35 24 (12)
------- ------- ------
Balance at end of year............................................... $ 8,829 $ 6,280 $5,006
======= ======= ======
TREASURY STOCK:
Balance at beginning of year......................................... $(1,235) $ (214) $ (233)
Shares of common stock repurchased (1996 -- 66; 1995 -- 23
(on a pre-split basis)).......................................... (2,041) (1,047) --
Shares issued under employee benefit plans (1996 -- 7; 1995 -- 2
and 1994 -- 1 (on a pre-split basis))............................ 67 26 19
------- ------- ------
Balance at end of year............................................... $(3,209) $(1,235) $ (214)
======= ======= ======
-------------------------
* Less than $1 million
In May 1996, Chrysler declared a two-for-one stock split in the form of a
100 percent stock dividend which was distributed on July 15, 1996 to
shareholders of record on June 15, 1996. 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 have been adjusted to reflect this
stock split. In addition, the par value of the new shares issued as a result of
the
52
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
------------------------------------------
two-for-one stock split has been transferred from additional paid-in capital to
common stock. Additional paid-in capital, common stock balances, common shares
issued, outstanding and held in treasury for prior periods have not been
restated for the two-for-one stock split.
During 1996, Chrysler repurchased 66 million shares of its common stock at
a cost of $2.0 billion (including $16 million in unsettled repurchases at
December 31, 1996). In December 1996, Chrysler's Board of Directors approved an
increase in Chrysler's planned 1997 common stock repurchases from $1 billion to
$2 billion. The planned 1997 common stock repurchases are subject to market and
general economic conditions. Since beginning its common stock repurchase program
in 1995, Chrysler has repurchased 112 million shares of its common stock at a
cost of $3.1 billion. As of December 31, 1996, 42,131 shares of Preferred Stock
were outstanding and convertible into 2.3 million shares of Chrysler common
stock.
The annual dividend on the Series A Convertible Preferred Stock (the
"Preferred Stock") is $46.25 per share. The Preferred Stock is convertible,
unless previously redeemed, 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 not redeemable prior to January 22, 1997. Thereafter, Chrysler may
redeem the Preferred Stock, in whole or in part, at $523.13 per share of
Preferred Stock for the period ending December 31, 1997 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 $0.05 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.
53
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
------------------------------------------
Of the 1.0 billion shares of authorized common stock at December 31, 1996,
44 million shares were reserved for issuance under Chrysler's various employee
benefit plans and the conversion of the Preferred Stock.
Primary earnings per-common-share amounts were computed by dividing
earnings after deduction of preferred stock dividends by the average number of
common and dilutive equivalent shares outstanding. Fully diluted
per-common-share amounts assume conversion of the Preferred Stock, the
elimination of the related preferred stock dividend requirement, and the
issuance of common stock for all other potentially dilutive equivalents
outstanding.
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 $941 million,
$838 million and $2.6 billion to the pension funds during 1996, 1995 and 1994,
respectively.
At December 31, 1996, plan assets were invested in a diversified portfolio
that consisted primarily of debt and equity securities, including 5.0 million
shares of Chrysler common stock with a market value of $166 million. During
1996, $23 million of dividends were received on Chrysler common stock.
The components of pension expense were as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- --------------------------- ---------------------------
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.... $ 305 $ 29 $ 334 $ 233 $ 20 $ 253 $ 275 $ 29 $ 304
Interest on projected
benefit obligation........ 915 99 1,014 903 90 993 833 86 919
Return on plan assets:
Actual return............. (1,953) (249) (2,202) (2,572) (168) (2,740) 183 11 194
Deferred (loss) gain...... 687 139 826 1,465 67 1,532 (1,106) (116) (1,222)
------- ----- ------- ------- ----- ------- ------- ----- -------
Expected return........... (1,266) (110) (1,376) (1,107) (101) (1,208) (923) (105) (1,028)
Net amortization and
other..................... 523 62 585 328 39 367 471 48 519
------- ----- ------- ------- ----- ------- ------- ----- -------
Total................... $ 477 $ 80 $ 557 $ 357 $ 48 $ 405 $ 656 $ 58 $ 714
======= ===== ======= ======= ===== ======= ======= ===== =======
54
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
------------------------------------------------------------
PENSION PLANS -- CONTINUED
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
------------------------------------ --------------------------------
1996 1995 1994 1993 1996 1995 1994 1993
------ ------ ------ ------ ----- ----- ----- -----
Discount rate............... 7.25% 7.00% 8.63% 7.38% 7.50% 8.25% 9.75% 8.25%
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 increase in the discount rate for U.S. Plans from 7.00 percent as of
December 31, 1995 to 7.25 percent as of December 31, 1996 resulted in a $306
million decrease in the PBO at December 31, 1996 and is expected to result in a
$16 million decrease in 1997 pension expense. Scheduled increases in benefits
under the 1996 U.S. collective bargaining agreements resulted in a $706 million
increase in the PBO in 1996 and is expected to result in a $101 million increase
in 1997 pension expense. The increase in 1997 pension expense as a result of the
1996 U.S. collective bargaining agreements is expected to be more than offset by
a reduction in 1997 pension expense resulting from an increase in expected
return on U.S. plan assets.
55
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
------------------------------------------------------------
PENSION PLANS -- 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, 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/(gain)............... 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
======== ====== ======= ====== ==== ====== =======
[Enlarge/Download Table]
DECEMBER 31, 1995
--------------------------------------------------------------------------
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................................... $ 9,644 $ 376 $10,020 $1,132 $ 9 $1,141 $11,161
Nonvested................................ 2,622 79 2,701 23 1 24 2,725
------- ------ ------- ------ ---- ------ -------
Accumulated benefit obligation............. 12,266 455 12,721 1,155 10 1,165 13,886
Effect of projected future salary
increases................................ 252 9 261 12 2 14 275
------- ------ ------- ------ ---- ------ -------
PBO........................................ 12,518 464 12,982 1,167 12 1,179 14,161
Plan assets at fair value.................. 13,353 86 13,439 1,218 -- 1,218 14,657
------- ------ ------- ------ ---- ------ -------
PBO less than/(in excess of) plan assets... 835 (378) 457 51 (12) 39 496
Unrecognized net loss/(gain)............... 1,292 79 1,371 485 (1) 484 1,855
Unrecognized prior service cost............ 1,258 39 1,297 187 -- 187 1,484
Unamortized net obligation at date of
adoption................................. 855 1 856 4 4 8 864
Adjustment required to recognize minimum
liability................................ -- (114) (114) -- (1) (1) (115)
------- ------ ------- ------ ---- ------ -------
Net prepaid pension asset/(liability)
recognized in the consolidated balance
sheet.................................... $ 4,240 $ (373) $ 3,867 $ 727 $(10) $ 717 $ 4,584
======= ====== ======= ====== ==== ====== =======
56
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
------------------------------------------------------------
PENSION PLANS -- CONTINUED
Included in Other assets on the consolidated balance sheet as of December
31, 1996 and 1995, was noncurrent prepaid pension expense of $4.9 billion and
$4.7 billion, respectively.
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
------------------------
1996 1995 1994
---- ---- ----
(IN MILLIONS OF DOLLARS)
Benefits attributed to employees' service........................... $191 $136 $178
Interest on accumulated nonpension postretirement benefit
obligation........................................................ 671 670 665
Net amortization.................................................... (5) (48) (9)
---- ---- ----
Total........................................................ $857 $758 $834
==== ==== ====
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
--------------------
1996 1995
------ -------
(IN MILLIONS OF
DOLLARS)
Accumulated nonpension postretirement benefit obligation ("ANPBO")
attributable to:
Retirees............................................................. $4,976 $ 4,798
Active employees eligible for benefits............................... 1,935 1,761
Other active employees............................................... 3,010 3,273
------ -------
Total ANPBO....................................................... 9,921 9,832
Unrecognized prior service cost...................................... (36) 237
Unrecognized net loss................................................ (760) (1,344)
------ -------
Total........................................................... $9,125 $ 8,725
====== =======
57
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 -- CONTINUED
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 were:
[Enlarge/Download Table]
DECEMBER 31
------------------------
1996 1995 1994
---- ---- ----
Discount rate......................................................... 7.3% 7.0% 8.6%
Health care inflation rate in following (or "base") year.............. 7.0% 7.5% 7.5%
Ultimate health care inflation rate (2002)(1)......................... 5.0% 5.4% 5.5%
Average health care inflation rate (base year through 2002)........... 5.4% 5.8% 6.1%
-------------------------
(1) Rate decreases annually through the year 2002
The increase in the discount rate from 7.0 percent as of December 31, 1995
to 7.3 percent as of December 31, 1996 resulted in a $221 million decrease in
the ANPBO in 1996, and is expected to result in a $5 million decrease in
nonpension postretirement benefit expense in 1997.
A one percentage point increase in the assumed health care inflation rate
in each year would have increased the ANPBO at December 31, 1996, by $1.2
billion and would have increased the aggregate of the service and interest cost
components of nonpension postretirement benefit expense in 1996 by $117 million.
VOLUNTARY EARLY RETIREMENT PROGRAMS
During 1996, 1995 and 1994, the cost of voluntary early retirement
programs, which are periodically offered to certain salaried and hourly
employees, was $97 million, $22 million and $77 million, respectively, and is
included in employee retirement benefit expense.
PREPAID EMPLOYEE BENEFITS
In December 1996, Chrysler prepaid certain 1997 nonpension employee
benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary
Association trust and other employee benefit plans.
NOTE 13. EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT
-------------------------------------------------------------------
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, 1996, $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. In addition, Chrysler
entered into forward contracts (notional amount $520 million) to mitigate
interest rate risk related to debt Chrysler intends to incur in the first
quarter of 1997 to refinance the extinguished Certificates. The refinancing is
subject to market and general economic conditions.
58
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. SALES OF ASSETS
------------------------
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, a wholly owned subsidiary
of Chrysler. The sale resulted in a pretax gain of $101 million ($87 million
after taxes) which is 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.
In 1994, Chrysler sold its wire harness operations and certain of its soft
trim operations, and entered into five-year supply agreements with each of the
purchasers. Aggregate net proceeds from the sales and the supply agreements were
$315 million. The related pretax gains of $254 million were deferred and are
being recognized over the periods of the respective supply agreements.
NOTE 15. LOSSES ON ASSETS TO BE SOLD
------------------------------------
Consistent with its strategy to focus on its core automotive business, in
1996, Chrysler committed to a plan of disposal for Thrifty Rent-A-Car System,
Inc. ("Thrifty"). In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," a
pretax loss of $65 million ($100 million after taxes) was recognized in 1996 to
write down Thrifty's carrying value to estimated fair value less cost to sell.
Chrysler's estimate of the fair value of Thrifty is based principally on an
analysis of non-binding bids. 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. Thrifty's assets and
liabilities at December 31, 1996, and its results of operations for 1996 were
immaterial to Chrysler's consolidated assets and liabilities and results of
operations, respectively. Chrysler is continuing with its efforts to sell
Thrifty and is uncertain when the sale of Thrifty may occur.
In the fourth quarter of 1996, Chrysler signed an agreement to sell
Pentastar Electronics, Inc. ("PEI") for net proceeds of $17 million. PEI
produces automatic test equipment for military applications and represents the
remaining operations of Chrysler Technologies Corporation. In accordance with
SFAS No. 121, a pretax loss of $77 million ($51 million after taxes) was
recognized in the fourth quarter of 1996 to write down PEI's carrying value to
estimated fair value less cost to sell. Chrysler's estimate of the fair value of
PEI was based on the terms of the agreement. Included in the cost to sell PEI is
an estimate for job security benefits, special early retirement benefits and
other employee costs related to employees which Chrysler agreed to retain. The
pretax loss is included in Costs, other than items below in the consolidated
statement of earnings for 1996. PEI's assets and liabilities at December 31,
1996, and its results of operations for 1996 were immaterial to Chrysler's
consolidated assets and liabilities and results of operations, respectively. The
sale of PEI was completed on January 10, 1997.
NOTE 16. 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. 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, is scheduled to begin at the
Newark assembly plant in the fall of 1997. The provision reflects the
recognition of supplemental unemployment benefits, job security benefits and
other
59
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. SPECIAL PLANT PROVISION -- CONTINUED
---------------------------------------------
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 17. SUPPLEMENTAL CASH FLOW INFORMATION
-------------------------------------------
Supplemental disclosures to the consolidated statement of cash flows were
as follows:
[Enlarge/Download Table]
YEAR ENDED DECEMBER 31
--------------------------
1996 1995 1994
------ ---- ----
(IN MILLIONS OF DOLLARS)
Interest paid (net of amounts capitalized):
Chrysler, excluding CFC......................................... $ 227 $105 $195
CFC............................................................. 788 847 733
Interest capitalized.............................................. 156 204 177
Income taxes paid, net of refunds received........................ 1,206 944 910
CFC acquired $1.0 billion, $250 million and $300 million of asset-backed
securities in non-cash transactions relating to the securitization of retail
receivables during 1996, 1995 and 1994, respectively.
NOTE 18. 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, 1996 DECEMBER 31, 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
(IN MILLIONS OF DOLLARS)
BALANCE SHEET FINANCIAL INSTRUMENTS
Marketable securities.......................... $ 2,594 $ 2,594 $ 2,582 $ 2,583
Finance receivables and retained
interests(1)................................ 10,353 10,315 11,823 11,827
Debt........................................... 13,448 13,929 14,368 15,331
Currency exchange agreements(2)................ 52 57 175 200
-------------------------
(1) The carrying value of finance receivables and retained interests excludes
$1,986 million and $1,800 million of direct finance and leveraged leases
classified as finance receivables in the consolidated balance sheet at
December 31, 1996 and 1995, respectively.
(2) Currency exchange agreements are recorded on the consolidated balance sheet
as a net reduction to the carrying value of debt.
60
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. FINANCIAL INSTRUMENTS -- CONTINUED
-------------------------------------------
[Enlarge/Download Table]
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
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.................. $ 1,246 $ 14 $ 750 $ 26
With unrealized losses................. 2,420 (22) 1,935 (33)
Forward contracts......................... 520 (3) -- --
Currency forward contracts
With unrealized gains.................. 2,028 90 573 14
With unrealized losses................. 680 (47) 885 (26)
Purchased currency options(1)
With unrealized gains.................. 35 2 328 23
With unrealized losses................. -- -- 418 (10)
-------------------------
(1) Includes purchased currency options with a notional amount of $351 million
at December 31, 1995 which have been effectively closed out with written
currency options also with a notional amount of $351 million.
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.
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.
61
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18. FINANCIAL INSTRUMENTS -- CONTINUED
-------------------------------------------
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 and option contracts
-------------------------------------
The fair values of currency forward and option contracts were estimated
based on quoted market prices for contracts of similar terms. Currency forward
and option 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.
NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
--------------------------------------------------
INDUSTRY SEGMENT DATA
---------------------
Chrysler operates in two principal industry segments: Car and Truck and
Financial Services. The Car and Truck segment is comprised of the automotive
operations of Chrysler, which 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 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. Chrysler also
participates in short-term vehicle rental activities through its Car Rental
Operations. The Car Rental Operations represent less than 10 percent of
revenues, operating profits and identifiable assets, and have been included in
the Car and Truck segment. Chrysler's operations are conducted primarily in
North America including the United States, Canada and Mexico.
62
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA -- CONTINUED
---------------------------------------------------------------
INDUSTRY SEGMENT DATA -- CONTINUED
----------------------------------
Information concerning operations by industry segment was as follows:
[Enlarge/Download Table]
CAR FINANCIAL
AND TRUCK SERVICES CONSOLIDATED
--------- --------- ------------
(IN MILLIONS OF DOLLARS)
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
DECEMBER 31, 1994
-----------------
Revenues:
Unaffiliated customers...................................... $50,381 $ 1,854 $ 52,235
Intersegment................................................ 7 141 --
------- ------- -------
Total revenues................................................ 50,388 1,995 52,235
Operating earnings............................................ 5,826 315 6,020
Interest expense.............................................. 311 -- 190
Earnings before income taxes, extraordinary item, and
cumulative effect of a change in accounting principle....... 5,515 315 5,830
Depreciation and special tools amortization................... 1,880 75 1,955
Capital expenditures.......................................... 3,796 190 3,986
Identifiable assets........................................... 36,001 16,648 49,539
Liabilities................................................... 28,580 13,375 38,845
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.
63
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19. 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 AND ELIMS. CONSOLIDATED
------- ------- ------ ---------- ------------
(IN MILLIONS OF DOLLARS)
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
DECEMBER 31, 1994
--------------------
Revenues:
Unaffiliated customers..................... $45,655 $ 3,888 $2,692 $ -- $ 52,235
Transfers between geographic areas......... 7,452 7,301 2,385 (17,138) --
------- ------- ------ -------- -------
Total revenues............................... 53,107 11,189 5,077 (17,138) 52,235
Earnings before income taxes, extraordinary
item, and cumulative effect of a change in
accounting principle....................... 5,239 208 383 -- 5,830
Identifiable assets.......................... 42,752 3,977 2,810 -- 49,539
Transfers between geographic areas are based on prices negotiated between
the buying and selling locations.
64
ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED
------------------------
SUPPLEMENTARY DATA -- CONTINUED
-------------------------------
[DELOITTE & TOUCHE 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, 1996 and 1995, and
the related consolidated statements of earnings and cash flows for each of the
three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, 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.
DELOITTE & TOUCHE LLP
January 21, 1997
[DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL LOGO]
65
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.
[Enlarge/Download Table]
R. J. Eaton G. C. Valade
-------------------------------------------- --------------------------------------------
R. J. EATON G. C. VALADE
Chairman of the Board, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
66
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
----------------- ----------------- ----------------- -----------------
1996 1995(1) 1996(2) 1995(3) 1996(4) 1995(3) 1996(5) 1995
------- ------- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS EXCEPT PER-COMMON-SHARE DATA)
Sales of manufactured products..... $14,044 $12,829 $14,858 $11,653 $13,396 $11,184 $15,289 $13,935
Finance, insurance & other
revenues......................... 912 784 981 863 960 825 957 1,122
------- ------- ------- ------- ------- ------- ------- -------
Total revenues................. 14,956 13,613 15,839 12,516 14,356 12,009 16,246 15,057
Total expenses................. 13,286 12,643 14,119 12,278 13,245 11,427 14,655 13,398
------- ------- ------- ------- ------- ------- ------- -------
Earnings before income taxes,
extraordinary item, and
cumulative effect of a change in
accounting principle............. 1,670 970 1,720 238 1,111 582 1,591 1,659
Provision for income taxes......... 665 378 683 103 431 228 593 619
------- ------- ------- ------- ------- ------- ------- -------
Earnings before extraordinary item
and cumulative effect of a change
in accounting principle.......... 1,005 592 1,037 135 680 354 998 1,040
Extraordinary item -- Loss on early
extinguishment of debt........... -- -- -- -- -- -- (191) --
Cumulative effect of a change in
accounting principle............. -- (96) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings................... $ 1,005 $ 496 $ 1,037 $ 135 $ 680 $ 354 $ 807 $ 1,040
Preferred stock dividends.......... 1 14 1 3 1 2 -- 2
------- ------- ------- ------- ------- ------- ------- -------
Net earnings on common stock....... $ 1,004 $ 482 $ 1,036 $ 132 $ 679 $ 352 $ 807 $ 1,038
======= ======= ======= ======= ======= ======= ======= =======
PRIMARY EARNINGS PER COMMON SHARE:
Earnings before extraordinary item
and cumulative effect of a change
in accounting principle.......... $ 1.32 $ 0.80 $ 1.39 $ 0.17 $ 0.93 $ 0.45 $ 1.39 $ 1.35
Extraordinary item................. -- -- -- -- -- -- (0.27) --
Cumulative effect of a change in
accounting principle............. -- (0.14) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings per common share...... $ 1.32 $ 0.66 $ 1.39 $ 0.17 $ 0.93 $ 0.45 $ 1.12 $ 1.35
======= ======= ======= ======= ======= ======= ======= =======
FULLY DILUTED EARNINGS PER COMMON
SHARE:
Earnings before extraordinary item
and cumulative effect of a change
in accounting principle.......... $ 1.30 $ 0.73 $ 1.38 $ 0.17 $ 0.93 $ 0.45 $ 1.38 $ 1.33
Extraordinary item................. -- -- -- -- -- -- (0.26) --
Cumulative effect of a change in
accounting principle............. -- (0.12) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net earnings per common share...... $ 1.30 $ 0.61 $ 1.38 $ 0.17 $ 0.93 $ 0.45 $ 1.12 $ 1.33
======= ======= ======= ======= ======= ======= ======= =======
-------------------------
(1) Results for the first quarter of 1995 included a $96 million after-tax
charge 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." First
quarter results also included a $115 million charge ($71 million after
taxes) for a voluntary minivan owner service action.
(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 second quarter of 1995 included a $232 million provision
($143 million after taxes) for costs associated with production changes at
Chrysler's Newark assembly plant. The provision includes the recognition of
supplemental unemployment benefits, job security benefits and other related
employee costs, and the write-down of certain equipment and tooling. During
the third quarter of 1995, this provision was increased by $31 million to
$263 million, primarily reflecting changes in the estimate for job security
benefit costs.
(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 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 new UAW collective bargaining agreement. The sale of
PEI was completed on January 10, 1997.
67
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
---------------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS OF DOLLARS)
Sales of manufactured products.............................. $58,004 $49,747 $49,534
Equity in earnings of unconsolidated subsidiaries and
affiliates................................................ 565 535 237
Interest income and other revenues.......................... 748 688 323
------- ------- -------
TOTAL REVENUES 59,317 50,970 50,094
------- ------- -------
Costs, other than items below............................... 45,454 40,653 37,485
Depreciation and special tools amortization................. 2,186 2,132 1,873
Selling and administrative expenses......................... 3,985 3,408 3,146
Employee retirement benefits................................ 1,383 1,132 1,532
Interest expense............................................ 217 196 228
------- ------- -------
TOTAL EXPENSES 53,225 47,521 44,264
------- ------- -------
EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY
ITEM, AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 6,092 3,449 5,830
Provision for income taxes.................................. 2,372 1,328 2,117
------- ------- -------
EARNINGS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 3,720 2,121 3,713
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 $ 3,529 $ 2,025 $ 3,713
======= ======= =======
This Supplemental Information, "Chrysler (with CFC and Car Rental
Operations on an Equity Basis)," reflects the results of operations of Chrysler
with its investments in Chrysler Financial Corporation ("CFC") and its
investments in short-term vehicle rental subsidiaries (the "Car Rental
Operations") accounted for on an equity basis rather than as consolidated
subsidiaries. This Supplemental Information does not purport to present results
of operations in accordance with generally accepted accounting principles
because it 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.
68
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
--------------------
1996 1995
------- -------
(IN MILLIONS OF
DOLLARS)
ASSETS:
Cash and cash equivalents.............................................. $ 4,825 $ 4,980
Marketable securities.................................................. 2,122 1,908
------- -------
Total cash, cash equivalents and marketable securities............... 6,947 6,888
Accounts receivable -- trade and other (net)........................... 630 816
Inventories............................................................ 4,364 3,762
Prepaid employee benefits, taxes and other expenses.................... 1,893 948
Property and equipment................................................. 13,877 11,717
Special tools.......................................................... 3,924 3,566
Investments in and advances from/to unconsolidated subsidiaries and
affiliated companies................................................. 2,874 3,755
Intangible assets...................................................... 1,627 1,718
Deferred tax assets.................................................... 1,624 1,978
Other assets........................................................... 5,448 5,327
------- -------
TOTAL ASSETS $43,208 $40,475
======= =======
LIABILITIES:
Accounts payable....................................................... $ 8,238 $ 7,654
Short-term debt........................................................ 346 140
Payments due within one year on long-term debt......................... 22 48
Accrued liabilities and expenses....................................... 8,525 6,741
Long-term debt......................................................... 1,206 1,763
Accrued noncurrent employee benefits................................... 9,365 9,156
Other noncurrent liabilities........................................... 3,935 4,014
------- -------
TOTAL LIABILITIES 31,637 29,516
------- -------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock -- $1 per share par value; authorized 20.0 shares;
Series A Convertible Preferred Stock; issued and outstanding: 1996
and 1995 -- 0.04 and 0.14 shares, respectively (aggregate liquidation
preference $21 million and $68 million, respectively)................ * *
Common stock -- $1 per share par value; authorized 1,000.0 shares;
issued: 1996 and 1995 -- 821.6 and 408.2 shares, respectively........ 822 408
Additional paid-in capital............................................. 5,129 5,506
Retained earnings...................................................... 8,829 6,280
Treasury stock -- at cost: 1996 -- 119.1 shares; 1995 -- 29.9 shares... (3,209) (1,235)
------- -------
TOTAL SHAREHOLDERS' EQUITY 11,571 10,959
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,208 $40,475
======= =======
-------------------------
* Less than $1 million
This Supplemental Information, "Chrysler (with CFC and Car Rental
Operations on an Equity Basis)," 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. This Supplemental
Information does not purport to present financial position in accordance with
generally accepted accounting principles because it 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.
69
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
-----------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings..................................................... $ 3,529 $ 2,025 $ 3,713
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and special tools amortization................. 2,186 2,132 1,873
Equity in earnings of unconsolidated subsidiaries and
affiliates................................................ (565) (535) (237)
Deferred income taxes....................................... 1,120 186 1,065
Extraordinary item -- Loss on early extinguishment of
debt...................................................... 191 -- --
Cumulative effect of a change in accounting principle....... -- 96 --
Change in accounts receivable............................... 104 (358) 345
Change in inventories....................................... (546) (460) (201)
Change in prepaid expenses and other assets................. (1,310) (631) (2,095)
Change in accounts payable and accrued and other
liabilities............................................... 2,113 2,094 2,856
Dividends received from CFC................................. 382 335 40
Other....................................................... 159 261 131
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,363 5,145 7,490
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities............................. (2,436) (2,971) (3,412)
Sales and maturities of marketable securities.................. 2,198 3,736 1,463
Proceeds from sales of nonautomotive assets.................... 476 -- --
Expenditures for property and equipment........................ (3,218) (2,573) (2,611)
Expenditures for special tools................................. (1,364) (1,049) (1,177)
Purchases of vehicle operating leases.......................... (428) (139) --
Other.......................................................... 203 63 183
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (4,569) (2,933) (5,554)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt...................................... 76 -- 40
Payments on long-term borrowings............................... (37) (485) (412)
Payment for early extinguishment of debt....................... (853) -- --
Advances from CFC.............................................. 750 -- --
Repurchases of common stock.................................... (2,041) (1,047) --
Dividends paid................................................. (963) (710) (399)
Other.......................................................... 119 38 30
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (2,949) (2,204) (741)
------- ------- -------
Change in cash and cash equivalents.............................. (155) 8 1,195
Cash and cash equivalents at beginning of year................... 4,980 4,972 3,777
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................... $ 4,825 $ 4,980 $ 4,972
======= ======= =======
This Supplemental Information, "Chrysler (with CFC and Car Rental
Operations on an Equity Basis)," 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. This Supplemental Information
does not purport to present cash flows in accordance with generally accepted
accounting principles because it 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.
70
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 1997 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.
71
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
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.
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 July 15, 1987, between Chrysler
Corporation and Manufacturers Hanover Trust Company, as Trustee, State
Street Bank and Trust Company, as successor Trustee, relating to Debt
Securities, Appendix B thereto relating to 10.95% Debentures Due 2017 and
Appendix C thereto relating to 10.40% Notes Due 1999. Filed as Exhibit
4-D-1 to Chrysler Corporation Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference.
4-D-2 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 and Appendix B thereto relating to 13% Debentures Due 1997.
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-3 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.
72
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
4-D-4 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-5 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-6 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-E Copy of $2,400,000,000 Revolving Credit Agreement, dated as of April 26,
1996, among Chrysler Corporation, Chrysler Canada Ltd., the several Banks
party to the Agreement, Royal Bank of Canada, as Canadian Administrative
Agent, and Chemical 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 March 31, 1996 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 Amended and Restated 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-H to the Quarterly Report of Chrysler Financial
Corporation on Form 10-Q for the quarter ended June 30, 1987, and
incorporated herein by reference.
73
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
4-F-5 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-6 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-7 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.
4-F-8 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.
4-G-1 Copy of Indenture, dated as of February 15, 1988, between Chrysler
Financial Corporation and IBJ Schroder Bank & Trust Company, Trustee,
related to Chrysler Financial Corporation Subordinated Debt Securities.
Filed as Exhibit 4-B to Registration No. 33-23479 of Chrysler Financial
Corporation, and incorporated herein by reference.
4-G-2 Copy of First Supplemental Indenture, dated as of September 1, 1989,
between Chrysler Financial Corporation and IBJ Schroder Bank & Trust
Company, Trustee, to the Indenture, dated as of February 15, 1988, between
such parties, related to Chrysler Financial Corporation Subordinated Debt
Securities. Filed as Exhibit 4-N to the Current Report of Chrysler
Financial Corporation on Form 8-K dated September 1, 1989 and filed
September 13, 1989, and incorporated herein by reference.
4-H-1 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 Junior Subordinated Debt Securities. Filed
as Exhibit 4-C to Registration No. 33-23479 of Chrysler Financial
Corporation, and incorporated herein by reference.
4-H-2 Copy of First Supplemental Indenture dated as of September 1, 1989, between
Chrysler Financial Corporation and Irving Trust Company, Trustee, to the
Indenture, dated as of February 15, 1988, between such parties, related to
Chrysler Financial Corporation Junior Subordinated Debt Securities. Filed
as Exhibit 4-O to the Current Report of Chrysler Financial Corporation on
Form 8-K dated September 1, 1989 and filed on September 13, 1989, and
incorporated herein by reference.
74
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
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. 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. 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 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-7 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-8 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as amended and
in effect on and after May 19, 1994. 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-9 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as amended and
in effect on and after May 31, 1995. Filed as Exhibit 2 to Chrysler
Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated
July 6, 1995 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. Filed as Exhibit 10-B-1 to Chrysler
Corporation Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995 and incorporated herein by reference.
10-B-2 Copy of Chrysler Corporation Long-Term Performance Plan, as amended and in
effect on and after May 19, 1994. 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-3 Copy of Chrysler Supplemental Executive Retirement Plan, as amended through
July 8, 1996 and in effect as of October 1, 1996.
75
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-B-4 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-5 Copy of Chrysler Corporation Long-Term Incentive Plan, as amended and in
effect on and after May 31, 1995. Filed as Exhibit 10-B-5 to Chrysler
Corporation Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995 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 Thomas G. Denomme. Filed as Exhibit 14 to Chrysler
Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated
July 6, 1995 and incorporated herein by reference.
10-C-5 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-6 Form of Employment Continuation Agreement, dated as of July 6, 1995,
between Chrysler Corporation and each of Robert J. Eaton, Robert A. Lutz,
Thomas G. Denomme 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.
10-C-7 Form of Employment Continuation Agreement, dated as of July 6, 1995,
between Chrysler Corporation and each Executive Officer of Chrysler
Corporation other than Messrs. Eaton, Lutz, Denomme 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.
76
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
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 26, 1996,
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,
1996, and incorporated herein by reference.
10-J Copy of Long Term Revolving Credit Agreement, dated as of April 26, 1996,
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,
1996, and incorporated herein by reference.
10-K Copy of Sixth Amended and Restated Commitment Transfer Agreement, dated as
of April 26, 1996, among Chrysler Financial Corporation, the several
financial institutions parties thereto and Chemical Bank, as agent. Filed
as Exhibit 10-I to the quarterly report of Chrysler Financial Corporation
on Form 10-Q for the quarter ended June 30, 1996, and incorporated herein
by reference.
10-L 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.
77
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-M 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-N 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-O 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-P Copy of Series 1993-1 Supplement, dated as of February 1, 1993, 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 1993-1. Filed as Exhibit 3
to the Trust's Registration Statement on Form 8-A dated March 15, 1993, and
incorporated herein by reference.
10-Q Copy of Receivables Purchase Agreement, made as of April 7, 1993, among
Chrysler Credit Canada Ltd., Chrysler Financial Corporation and Association
Assets Acquisition Inc., with respect to CARS 1993-1. Filed as Exhibit
10-OOOO 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-R Copy of Pooling and Servicing Agreement, dated as of August 1, 1993, among
Auto Receivables Corporation, Chrysler Credit Canada Ltd., Montreal Trust
Company of Canada and Chrysler Financial Corporation, with respect to CARCO
1993-1. Filed as Exhibit 10-QQQQ 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-S Copy of Standard Terms and Conditions of Agreement, dated as of August 1,
1993, among Auto Receivables Corporation, Chrysler Credit Canada Ltd. and
Chrysler Financial Corporation, with respect to CARCO 1993-1. Filed as
Exhibit 10-RRRR 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-T Copy of Purchase Agreement, dated as of August 1, 1993, between Chrysler
Credit Canada Ltd., and Auto Receivables Corporation, with respect to CARCO
1993-1. Filed as Exhibit 10-SSSS 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-U 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.
78
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-V 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-W 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-X 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-Y Copy of Secured Loan Purchase Agreement, dated as of December 15, 1993,
among Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial
Corporation. Filed as Exhibit 10-PPPP to the Annual Report on Form 10-K of
Chrysler Financial Corporation for the year ended December 31, 1993, and
incorporated herein by reference.
10-Z Copy of Series 1993-2 Supplement, dated as of November 1, 1993, 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. Filed as Exhibit 3 to the
Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated
December 6, 1993, and incorporated herein by reference.
10-AA-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-AA-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-BB Copy of Secured Loan Purchase Agreement, dated as of March 29, 1994, among
Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial Corporation.
Filed as Exhibit 10-ZZZ to the Quarterly Report of Chrysler Financial
Corporation on Form 10-Q for the quarter ended March 31, 1994, and
incorporated herein by reference.
10-CC-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.
79
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-CC-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-DD Copy of Secured Loan Purchase Agreement, dated as of July 6, 1994, among
Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial Corporation.
Filed as Exhibit 10-BBBB to the Quarterly Report on Form 10-Q of Chrysler
Financial Corporation for the quarter ended June 30, 1994, and incorporated
herein by reference.
10-EE 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.
10-FF 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-GG 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-HH 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-II 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-JJ 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-KK 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-LL Copy of Asset Purchase Agreement dated as of December 14, 1994, between
Chrysler Capital Income Partners, L.P. and First Union Commercial
Corporation. Filed as Exhibit 10-III to the Annual Report of Chrysler
Financial Corporation on Form 10-K for the year ended December 31, 1994,
and incorporated herein by reference.
80
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-MM Copy of 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-NN Copy of Series 1992-2 Supplement to the Pooling and Servicing Agreement,
dated as of October 1, 1992, 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 1992-2. Filed as Exhibit 3 to Form 8-A of CARCO Auto Loan
Master Trust on October 30, 1992, and incorporated herein by reference.
10-OO Copy of Master Custodial and Servicing Agreement, dated as of September 1,
1992 between Chrysler Credit Canada Ltd. and The Royal Trust Company, as
Custodian. Filed as Exhibit 10-TTTTT 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-PP Copy of Series 1995-1 Supplement, dated as of September 20, 1995, among
Chrysler Credit Canada Ltd., The Royal Trust Company, Pure Trust, Auto
Receivables Corporation and Chrysler Financial Corporation, to the Master
Custodial and Servicing Agreement, dated as of September 1, 1992. Filed as
Exhibit 10-NNN to the Quarterly Report of Chrysler Financial Corporation on
Form 10-Q for the quarter ended September 30, 1995, and incorporated herein
by reference.
10-QQ 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-RR 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.
10-SS 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-TT 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-UU 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.
81
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-VV 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-WW 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-XX 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-YY Copy of Series 1994-2 Supplement, dated as of October 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 1994-2. Filed as Exhibit 3 to the
Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated
December 22, 1994, and incorporated herein by reference.
10-ZZ Copy of Series 1994-3 Supplement, dated as of November 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 1994-3. Filed as Exhibit
4-W to the Annual Report on Form 10-K of CARCO Auto Loan Master Trust for
the year ended December 31, 1994, and incorporated herein by reference.
10-AAA 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-BBB 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-CCC 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.
82
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-DDD 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-EEE 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.
10-FFF 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-GGG 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-HHH 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-III 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-JJJ 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 Trust, 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-KKK 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-LLL 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.
83
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-MMM 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-NNN 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-OOO 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-PPP 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.
10-QQQ 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-RRR 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-SSS 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-TTT Copy of Agreement and Plan of Merger, dated as of December 31, 1995,
between Chrysler Financial Corporation and Chrysler Credit Corporation,
providing for the merger of these two corporations on December 31, 1995,
with Chrysler Financial Corporation being the surviving corporation. Filed
as Exhibit 10-QQQQ 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-UUU 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-VVV 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.
84
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-WWW 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-XXX 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-YYY 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-ZZZ 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-AAAA 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-BBBB 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-CCCC 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.
10-DDDD 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-EEEE 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-FFFF 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.
85
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-GGGG 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-HHHH 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-IIII 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-JJJJ 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-KKKK 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-LLLL 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-MMMM 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-NNNN 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-OOOO 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.
10-PPPP 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.
10-QQQQ 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.
86
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED
----------------------------------------
AND REPORTS ON FORM 8-K -- CONTINUED
------------------------------------
[Download Table]
10-RRRR 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-SSSS 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-TTTT 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.
10-UUUU 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.
10-VVVV 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.
*11 Statement regarding computation of earnings per common share.
*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, 1996.
-------------------------
* Filed herewith
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, 1996.
87
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,
President and Chief Executive
Officer
January 21, 1997
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.
[Enlarge/Download Table]
Principal executive officer:
/s/ R. J. EATON Chairman of the Board, President January 21, 1997
------------------------------------- and Chief Executive Officer
R. J. EATON
Principal financial officer:
/s/ G. C. VALADE Executive Vice President and Chief January 21, 1997
------------------------------------- Financial Officer
G. C. VALADE
Principal accounting officer:
/s/ J. D. DONLON, III Vice President and Controller January 21, 1997
-------------------------------------
J. D. DONLON, III
88
[Download Table]
Board of Directors:
/s/ LILYAN H. AFFINITO* Director January 21, 1997
-------------------------------------
LILYAN H. AFFINITO
/s/ JAMES D. ALJIAN* Director January 21, 1997
-------------------------------------
JAMES D. ALJIAN
/s/ ROBERT E. ALLEN* Director January 21, 1997
-------------------------------------
ROBERT E. ALLEN
/s/ JOSEPH A. CALIFANO, JR.* Director January 21, 1997
-------------------------------------
JOSEPH A. CALIFANO, JR.
/s/ THOMAS G. DENOMME* Director January 21, 1997
-------------------------------------
THOMAS G. DENOMME
/s/ ROBERT J. EATON* Director January 21, 1997
-------------------------------------
ROBERT J. EATON
/s/ EARL G. GRAVES* Director January 21, 1997
-------------------------------------
EARL G. GRAVES
/s/ KENT KRESA* Director January 21, 1997
-------------------------------------
KENT KRESA
/s/ ROBERT J. LANIGAN* Director January 21, 1997
-------------------------------------
ROBERT J. LANIGAN
/s/ ROBERT A. LUTZ* Director January 21, 1997
-------------------------------------
ROBERT A. LUTZ
/s/ PETER A. MAGOWAN* Director January 21, 1997
-------------------------------------
PETER A. MAGOWAN
/s/ JOHN B. NEFF* Director January 21, 1997
-------------------------------------
JOHN B. NEFF
/s/ MALCOLM T. STAMPER* Director January 21, 1997
-------------------------------------
MALCOLM T. STAMPER
/s/ LYNTON R. WILSON* Director January 21, 1997
-------------------------------------
LYNTON R. WILSON
*By /s/ R. D. HOUTMAN
------------------------------------
R. D. HOUTMAN
Attorney-in-Fact
January 21, 1997
89
EXHIBIT INDEX
[Enlarge/Download Table]
EXHIBIT
NO. DESCRIPTION PAGE
-------- ----------------------------------------------------------------------------- ----
*10-B-3 Chrysler Supplement Executive Retirement Plan Consolidated as of October 1,
1996.
*11 Statement regarding computation of earnings per common share.
*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, 1996.
-------------------------
* Filed herewith
90
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000950124-97-000176 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Sat., Apr. 27, 3:38:00.1am ET 
