Chyrsler Sticking to Second Quarter Plan

John D. Stoll, DOW JONES NEWSWIRES DETROIT -- Chrysler Group Chief Executive Tom LaSorda said Wednesday that the company is sticking to a plan to cut its production in the third and fourth quarters in order to deal with rising inventory of pickup trucks and sport utility vehicles.

Chrysler, the U.S. unit of DaimlerChrysler AG (DCX), is weathering a downturn in U.S. sales and, like its domestic competitors General Motors Corp. (GM) and Ford Motor Co. (F), is trying to cope with falling demand for its highest-profit models.

LaSorda, speaking to reporters at a charity event at the company's U.S. headquarters, said the auto maker hasn't been surprised by the significant shift by consumers away from large SUVs and pickups. He said the auto maker is planning to offset the shortfall by introducing a spate of more-fuel-efficient models in coming months.

Chrysler plans to cut approximately 10% of its production in the third quarter compared to the same period in 2005. LaSorda declined to give specifics of the fourth-quarter cuts, but said the cut will be smaller than the current quarter and "slightly down" from year-ago.

In recent years, the majority of Chrysler's sales mix has been made up of trucks and SUVs, but the balance is changing. "We've had a swing of about 4% from trucks and big SUVs to midsize SUVs and smaller cars, so we're adjusting from that," LaSorda said. He said the Dodge Durango large SUV has seen the highest production cuts.

Chrysler expects to lose as much as $600 million in the third quarter on an operating basis but return to profitability in the final three months of the year as new-model launches take root. "Eight of our launches are starting now until the end of the year," LaSorda said. For instance, the company kicks off production of a redesigned Jeep Wrangler on Monday.

Chrysler's downturn comes after a relatively healthy run for the auto maker. The company in recent years unveiled popular products in key segments, such as the 300 sedan that often sold with an expensive "Hemi" engine option.

The auto maker's effort to supplement falling volume of certain products is gaining steam already, LaSorda said. The company's Jeep Compass and Dodge Caliber small hatchback cars are based on the same platform, or chassis, and have receieved 90,000 dealer orders since recently being launched.

Chrysler plans to eventually launch a sub-compact car that is smaller than the Caliber, but has not yet firmed up plans for the model. The company is in talks with a joint-venture partner on the project and is looking at building the car in Europe or Asia, LaSorda said.

Products like the Compass and Caliber are meeting a strong reception because of high gasoline prices that continue to sit around $3 a gallon. Gas prices in the U.S. have backed off in recent weeks, but still influence consumer buying patterns.

Consistently high gasoline prices have been a major factor in the sales slowdown, but LaSorda said the company is prepared to see higher gas prices in the future.

"Internally, we're saying `what if it sits between $3 and $4 (a gallon)?,'" LaSorda said. He said that assuming gasoline prices will continue to fall could lead to "disaster."