<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 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 38-2673623
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Chrysler Drive, Auburn Hills, Michigan 48326-2766
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(248) 576-5741
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 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
--- ---
The registrant had 647,423,781 shares of common stock outstanding as of
September 30, 1998.
<PAGE> 2
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 1-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15-17
Item 6. Exhibits and Reports on Form 8-K 18
Signature Page 19
Exhibit Index 20
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. FINANCIAL STATEMENTS
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (unaudited)
For the Three and Nine Months Ended September 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales of manufactured products $ 13,910 $ 12,101 $ 45,805 $ 40,650
Finance and insurance revenues 572 394 1,517 1,204
Other revenues 475 681 1,436 1,826
------------ ------------ ------------ -----------
TOTAL REVENUES 14,957 13,176 48,758 43,680
------------ ------------ ------------ -----------
Costs, other than items below 11,283 10,145 36,642 33,205
Depreciation and special tools amortization 817 590 2,539 1,974
Selling and administrative expenses 1,106 1,139 3,330 3,560
Employee retirement benefits 326 325 952 961
Interest expense 346 251 942 739
------------ ------------ ------------ -----------
TOTAL EXPENSES 13,878 12,450 44,405 40,439
------------ ------------ ------------ -----------
EARNINGS BEFORE INCOME TAXES 1,079 726 4,353 3,241
Provision for income taxes 397 285 1,616 1,288
------------ ------------ ------------ -----------
NET EARNINGS $ 682 $ 441 $ 2,737 $ 1,953
============ ============ ============ ===========
<CAPTION>
(In dollars or millions of shares)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE $ 1.05 $ 0.66 $ 4.23 $ 2.86
=========== =========== =========== ===========
Average common shares outstanding 647.3 671.0 646.5 682.5
DILUTED EARNINGS PER COMMON SHARE $ 1.02 $ 0.65 $ 4.14 $ 2.82
=========== =========== =========== ===========
Average common and dilutive equivalent
shares outstanding 665.5 681.0 661.5 692.7
DIVIDENDS DECLARED PER COMMON SHARE $ 0.40 $ 0.40 $ 1.20 $ 1.20
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------- ------------------------------
Sept. 30 Dec. 31 Sept. 30
------------- ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 6,963 $ 4,898 $ 5,347
Marketable securities 3,665 2,950 2,252
-------------- -------------- -------------
Total cash, cash equivalents and marketable securities 10,628 7,848 7,599
Accounts receivable - trade and other 1,548 1,646 1,837
Inventories 5,979 4,738 6,419
Prepaid employee benefits, taxes and other expenses 1,010 2,193 1,670
Finance receivables and retained interests in
sold receivables 16,292 13,518 13,161
Property and equipment 19,820 17,968 16,924
Special tools 4,540 4,572 4,358
Intangible assets 1,511 1,573 1,950
Other noncurrent assets 6,408 6,362 6,201
-------------- -------------- -------------
TOTAL ASSETS $ 67,736 $ 60,418 $ 60,119
============== ============== =============
LIABILITIES:
Accounts payable $ 10,697 $ 9,512 $ 9,614
Accrued liabilities and expenses 11,114 9,717 9,456
Short-term debt 3,708 3,841 3,145
Payments due within one year on long-term debt 3,081 2,638 2,692
Long-term debt 11,344 9,006 10,097
Accrued noncurrent employee benefits 10,126 9,841 9,865
Other noncurrent liabilities 4,464 4,501 3,983
-------------- -------------- -------------
TOTAL LIABILITIES 54,534 49,056 48,852
-------------- -------------- -------------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized 20.0 shares; Series A
Convertible Preferred Stock; issued and outstanding: 1997 - 0.02 and 0.02
shares, respectively (aggregate liquidation preference 1997 - $8 million
and $8 million, respectively) -- * *
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1998 - 824.0 shares; 1997 - 823.1
and 823.1 shares, respectively 824 823 823
Additional paid-in capital 5,219 5,231 5,232
Retained earnings 12,557 10,605 9,996
Treasury stock - at cost: 1998 - 176.6 shares;
1997 - 174.7 and 160.6 shares, respectively (5,398) (5,297) (4,784)
-------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 13,202 11,362 11,267
-------------- -------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 67,736 $ 60,418 $ 60,119
============== ============== =============
</TABLE>
*Less than $50 thousand
See notes to consolidated financial statements.
2
<PAGE> 5
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the Nine Months Ended September 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,720 $ 5,884
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (2,719) (1,983)
Sales and maturities of marketable securities 2,869 2,343
Finance receivables acquired (22,731) (21,165)
Finance receivables collected 7,515 6,659
Proceeds from sales of finance receivables 13,351 14,082
Expenditures for property and equipment (2,092) (2,359)
Expenditures for special tools (941) (1,208)
Purchases of vehicle operating leases (2,255) (1,427)
Proceeds from sales of vehicles under purchased
operating leases 273 129
Change in cash and investments held by securitization trusts 151 (1,164)
Other 215 156
-------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (6,364) (5,937)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (133) (69)
Proceeds from long-term borrowings 4,983 5,550
Payments on long-term borrowings (2,252) (2,938)
Repurchases of common stock (197) (1,593)
Dividends paid (777) (830)
Other 85 122
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,709 242
-------------- -------------
Change in cash and cash equivalents 2,065 189
Cash and cash equivalents at beginning of period 4,898 5,158
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,963 $ 5,347
============== =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1. CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION
The unaudited consolidated financial statements of Chrysler Corporation and its
consolidated subsidiaries ("Chrysler") include the accounts of all significant
majority-owned subsidiaries that are controlled by Chrysler. Affiliates that are
20 percent to 50 percent owned and subsidiaries where control is expected to be
temporary or does not reside with Chrysler are generally accounted for on an
equity basis. Intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements of Chrysler for the three
and nine months ended September 30, 1998 and 1997 reflect all adjustments,
consisting of only normal and recurring items, which are, in the opinion of
management, necessary to present a fair statement of the results for the interim
periods. The operating results for the three and nine months ended September 30,
1998 are not necessarily indicative of the results of operations for the entire
year. Reference should be made to the consolidated financial statements included
in the Annual Report on Form 10-K for the year ended December 31, 1997. Certain
amounts for 1997 have been reclassified to conform with current period
classifications.
NOTE 2. INVENTORIES
Inventories, summarized by major classification, were as follows:
<TABLE>
<CAPTION>
1998 1997
------------- ------------------------------
Sept. 30 Dec. 31 Sept. 30
------------ ------------ ------------
(In millions of dollars)
<S> <C> <C> <C>
Finished products, including service parts $ 1,904 $ 1,883 $ 1,865
Raw materials, finished production parts and supplies 1,598 1,445 1,495
Vehicles held for short-term lease 2,477 1,410 3,059
------------- ------------- ------------
TOTAL $ 5,979 $ 4,738 $ 6,419
============= ============= ============
</TABLE>
NOTE 3. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, Chrysler adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This Statement requires
that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. Annual financial
statements for prior periods will be reclassified, as required.
Chrysler's total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
-------------------------------- ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- -------------
(In millions of dollars)
<S> <C> <C> <C> <C>
Net earnings $ 682 $ 441 $ 2,737 $ 1,953
Other comprehensive earnings (loss) (11) 9 (28) 1
-------------- -------------- -------------- -------------
Total comprehensive earnings $ 671 $ 450 $ 2,709 $ 1,954
============== ============== ============== =============
</TABLE>
Effective January 1, 1998, Chrysler adopted Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This SOP provides guidance on accounting for the costs of
computer software developed or obtained for internal use. This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met. Historically, Chrysler generally expensed the costs of developing or
obtaining internal-use software as incurred. Adoption of the standard did not
have a material effect on Chrysler's consolidated financial statements.
4
<PAGE> 7
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
------------------------------------------------------
NOTE 4. PROPOSED BUSINESS COMBINATION
Chrysler, Daimler-Benz Aktiengesellschaft ("Daimler-Benz") and DaimlerChrysler
AG ("DaimlerChrysler") have entered into a Business Combination Agreement dated
as of May 7, 1998 (as amended and restated) providing for (i) the merger of a
newly created Delaware corporation with and into Chrysler ("the Chrysler
Merger"); (ii) an offer by DaimlerChrysler to exchange one DaimlerChrysler
ordinary share for each Daimler-Benz ordinary share (or 1.005 DaimlerChrysler
shares for each Daimler-Benz ordinary share if greater than 90 percent of shares
are exchanged); and (iii) the merger of Daimler-Benz with and into
DaimlerChrysler. In the Chrysler merger, each share of outstanding Chrysler
common stock will be converted into the right to receive 0.6235 DaimlerChrysler
shares. As a result of these transactions, DaimlerChrysler will be owned by the
former shareholders of Chrysler and Daimler-Benz, and Chrysler will be a wholly
owned subsidiary of DaimlerChrysler.
On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk
Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of
approximately 11 percent of the common stock of Chrysler, pursuant to which
Tracinda agreed to vote its shares in favor of the transactions contemplated by
the Business Combination Agreement.
Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of February
5, 1998, with First Chicago Trust Company of New York. The amendment renders the
Rights Agreement inapplicable to the transactions contemplated by the Business
Combination Agreement.
The transaction is expected to close in November 1998, subject to the
satisfaction or waiver of various conditions as more fully described in the
Business Combination Agreement. These conditions include completion of the
exchange of at least 75 percent of the outstanding shares of Daimler-Benz for
DaimlerChrysler shares and the receipt of opinions from the respective tax
counsel of Chrysler and Daimler-Benz regarding certain United States federal
income and German tax consequences of the transactions. Additionally, the
transaction is conditioned upon the receipt by Chrysler of a private letter
ruling from the United States Internal Revenue Service (the "IRS"), which was
received from the IRS on September 4, 1998.
Chrysler's and Daimler-Benz' shareholders approved the proposed business
combination at separate Special Shareholders' Meetings held on September 18,
1998. The initial period for the exchange of Daimler-Benz shares for
DaimlerChrysler shares extends from September 24, 1998 through October 23, 1998.
In September 1998, Chrysler filed a preliminary Form S-3 with the Securities and
Exchange Commission to register the offering of up to 30 million shares of
Chrysler common stock. This offering of Chrysler common stock is conditioned on
the exchange of at least 90 percent of the outstanding shares of Daimler-Benz
for DaimlerChrysler shares.
NOTE 5. PREFERRED STOCK REDEMPTION
On July 24, 1998, Chrysler redeemed all of the outstanding Depositary Shares
representing its Series A Convertible Preferred Stock.
5
<PAGE> 8
Item 1. FINANCIAL STATEMENTS - CONTINUED
CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
------------------------------------------------------
NOTE 6. EARNINGS PER COMMON SHARE
Earnings per common share ("EPS") data were computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
------------------------------- ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- ------------
(In millions of dollars and shares,
except per-common-share amounts)
<S> <C> <C> <C> <C>
Net earnings $ 682 $ 441 $ 2,737 $ 1,953
============= ============= ============= =============
Basic EPS:
Weighted-average common shares outstanding 647.3 671.0 646.5 682.5
============= ============= ============= =============
Basic EPS $ 1.05 $ 0.66 $ 4.23 $ 2.86
============= ============= ============= =============
Diluted EPS:
Weighted-average common shares outstanding 647.3 671.0 646.5 682.5
Shares issued on exercise of dilutive options 36.1 31.1 33.5 27.8
Shares purchased with proceeds of options (20.5) (23.8) (21.4) (20.8)
Shares applicable to convertible preferred stock 0.1 0.9 0.5 1.5
Shares contingently issuable 2.5 1.8 2.4 1.7
------------- ------------- ------------- -------------
Shares applicable to diluted earnings 665.5 681.0 661.5 692.7
============= ============= ============= =============
Diluted EPS $ 1.02 $ 0.65 $ 4.14 $ 2.82
============= ============= ============= =============
</TABLE>
6
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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
Chrysler reported earnings before income taxes of $1.079 billion for the
third quarter of 1998 compared with $726 million for the third quarter of 1997.
For the first nine months of 1998, Chrysler reported earnings before income
taxes of $4.353 billion, compared with $3.241 billion for the first nine months
of 1997. Net earnings for the third quarter of 1998 were $682 million, or $1.05
per common share ($1.02 per diluted common share), compared with $441 million,
or $0.66 per common share ($0.65 per diluted common share), for the third
quarter of 1997. Net earnings for the first nine months of 1998 were $2.737
billion, or $4.23 per common share ($4.14 per diluted common share), compared
with $1.953 billion, or $2.86 per common share ($2.82 per diluted common share),
for the first nine months of 1997.
The increase in earnings for the third quarter of 1998 compared with the
third quarter of 1997 primarily reflects an increase in vehicle shipments,
partially offset by an increase in depreciation and special tools amortization.
The increase in earnings for the first nine months of 1998 compared with the
first nine months of 1997 primarily reflects an increase in vehicle shipments
and decreased warranty costs, partially offset by an increase in average sales
incentives and depreciation and special tools amortization. Vehicle shipments
for the first nine months of 1997 were negatively impacted by the 29-day strike
at an engine plant in Detroit, Michigan. The decrease in warranty costs was
primarily related to several voluntary customer service actions and recalls
which occurred in 1997. The increase in average sales incentives was
attributable to an increasingly competitive automotive market environment.
Earnings for the third quarter and first nine months of 1997 also included a $41
million charge ($25 million after taxes) for costs related to discontinuing
Chrysler's Eagle brand at the end of the 1998 model year.
Chrysler's worldwide vehicle shipments in the third quarter and first nine
months of 1998 were 673,163 units and 2,348,252 units, respectively, compared
with 605,356 units and 2,125,048 units, respectively, in the third quarter and
first nine months of 1997. The increase in worldwide shipments for the third
quarter of 1998, as compared to the third quarter of 1997, primarily reflects
increased shipments of Chrysler's Dodge Durango and full-size sedans, partially
offset by decreased shipments of Jeep(R) Grand Cherokees. The increase in
worldwide shipments for the first nine months of 1998, as compared to the first
nine months of 1997, primarily reflects increased shipments of Chrysler's Dodge
Durango and Dodge Ram pickup trucks as well as a general increase in passenger
cars, partially offset by decreased shipments of Jeep Grand Cherokees. Decreased
shipments of Jeep Grand Cherokees resulted from the changeover to the all-new
Jeep Grand Cherokee which began in the second quarter of 1998 and was
substantially completed in the third quarter of 1998. Shipments for the first
nine months of 1997 also reflect the unfavorable impact of a 29-day strike
during the second quarter of 1997. Chrysler's vehicle shipments outside of the
U.S., Canada and Mexico in the third quarter and first nine months of 1998 were
38,228 units and 145,919 units, respectively, compared with 54,138 units and
179,298 units, respectively, in the third quarter and first nine months of 1997.
The decrease in shipments outside of the U.S., Canada and Mexico is primarily
caused by economic difficulties in Asian markets.
Chrysler's revenues and results of operations are principally derived from
the U.S. and Canada automotive marketplaces. In the third quarter of 1998,
retail industry sales (including fleet) of new cars and trucks in the U.S. and
Canada, on a Seasonally Adjusted Annual Rate basis, were 16.7 million units
compared with 17.2 million units for the third quarter of 1997. In the first
nine months of 1998, retail industry sales (including fleet) of new cars and
trucks in the U.S. and Canada, on a Seasonally Adjusted Annual Rate basis, were
17.1 million units compared with 16.9 million units for the first nine months of
1997.
7
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
FINANCIAL REVIEW - CONTINUED
Chrysler's U.S. and combined U.S. and Canada retail sales and market
share data for the third quarter and first nine months of 1998 and 1997 were as
follows:
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------------------------------- ----------------------------------------
Increase/
1998 1997 Increase 1998 1997 (Decrease)
--------- --------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Retail Market (1):
Car sales 179,189 165,010 14,179 569,948 583,325 (13,377)
Car market share 9.0% 7.7% 1.3% 9.2% 9.1% 0.1%
Truck sales (including minivans) 407,688 379,177 28,511 1,318,547 1,162,007 156,540
Truck market share 22.1% 20.9% 1.2% 22.7% 21.5% 1.2%
Combined car and truck sales 586,877 544,187 42,690 1,888,495 1,745,332 143,163
Combined car and truck
market share 15.3% 13.7% 1.6% 15.7% 14.8% 0.9%
U.S. and Canada Retail Market (1):
Combined car and truck sales 651,192 607,789 43,403 2,095,853 1,936,843 159,010
Combined car and truck
market share 15.5% 14.1% 1.4% 16.0% 15.1% 0.9%
</TABLE>
(1) All retail sales and market share data include fleet sales.
Chrysler's U.S. car market share for the third quarter of 1998 increased
compared with the third quarter of 1997 primarily as a result of increased sales
of its full-size sedans. Chrysler's U.S. truck market share for the third
quarter of 1998 increased compared with the third quarter of 1997 primarily as a
result of increased sales of its Dodge Ram pickup trucks and Dodge Durango,
partially offset by decreased sales of minivans. Chrysler's U.S. truck market
share for the first nine months of 1998 increased compared with the first nine
months of 1997 primarily as a result of increased sales of its Dodge Durango.
U.S. truck market share in the third quarter and first nine months of 1998, as
compared to the corresponding periods in 1997, was also negatively impacted by
the changeover to the all-new Jeep Grand Cherokee which began in the second
quarter of 1998 and was substantially completed in the third quarter of 1998.
Chrysler Financial Corporation ("CFC") reported earnings before income
taxes of $180 million for the third quarter of 1998 compared with $168 million
for the third quarter of 1997. For the first nine months of 1998, CFC reported
earnings before income taxes of $518 million compared with $465 million for the
first nine months of 1997. CFC's net earnings for the third quarter and first
nine months of 1998 were $116 million and $344 million, respectively, compared
with $111 million and $307 million for the third quarter and first nine months
of 1997, respectively. The increase in net earnings for the third quarter of
1998 compared with the third quarter of 1997 primarily reflects higher gains and
servicing fees from the sales of finance receivables and a decrease in the
provision for credit losses.
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES
Chrysler's total revenues for the third quarter and first nine months of
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Third Quarter Nine Months
---------------------------------------- -----------------------------------------
Increase/ Increase/
(In millions of dollars) 1998 1997 (Decrease) 1998 1997 (Decrease)
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales of manufactured products $ 13,910 $ 12,101 15 % $ 45,805 $ 40,650 13 %
Finance and insurance revenues 572 394 45 % 1,517 1,204 26 %
Other revenues 475 681 (30)% 1,436 1,826 (21)%
----------- ----------- ----------- -----------
Total revenues $ 14,957 $ 13,176 14 % $ 48,758 $ 43,680 12 %
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES - CONTINUED
The increase in Sales of manufactured products in the third quarter 1998,
compared with the corresponding period in 1997, primarily reflects an 11
percent increase in vehicle shipments and the recognition of deferred revenue
related to sales to rental car companies under guaranteed depreciation
programs. The increase in Sales of manufactured products in the first nine
months of 1998, compared with the corresponding period in 1997, primarily
reflects an 11 percent increase in vehicle shipments and the recognition of
deferred revenue related to sales to rental car companies under guaranteed
depreciation programs, partially offset by higher average sales incentives.
The increase in Finance and insurance revenues in the third quarter and
first nine months of 1998 compared with the corresponding 1997 periods is
primarily attributable to higher levels of vehicles under purchased operating
leases and automotive finance receivables managed.
The decrease in Other revenues for the third quarter and first nine months
of 1998 compared with the corresponding 1997 periods is primarily attributable
to the divestiture of Chrysler's Car Rental Operations in December 1997.
Chrysler's total expenses for the third quarter and first nine months of
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Third Quarter Nine Months
-------------------------------------- ---------------------------------------
Increase/ Increase/
1998 1997 (Decrease) 1998 1997 (Decrease)
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
(In millions of dollars)
Costs, other than items below $ 11,283 $ 10,145 11 % $ 36,642 $ 33,205 10 %
Depreciation and special tools
amortization 817 590 38 % 2,539 1,974 29 %
Selling and administrative expenses 1,106 1,139 (3)% 3,330 3,560 (6)%
Employee retirement benefits 326 325 -- 952 961 (1)%
Interest expense 346 251 38 % 942 739 27 %
------------ ------------ ----------- -----------
Total expenses $ 13,878 $ 12,450 11 % $ 44,405 $ 40,439 10 %
============ ============ =========== ===========
</TABLE>
Costs, other than items below increased in the third quarter and first nine
months of 1998 compared with the corresponding 1997 periods, primarily as a
result of an 11 percent increase in vehicle shipments. Costs, other than items
below were 81 percent and 80 percent of Sales of manufactured products for the
third quarter and first nine months of 1998, respectively, compared with 84
percent and 82 percent for the third quarter and first nine months of 1997,
respectively.
Depreciation and special tools amortization for the third quarter and first
nine months of 1998 increased compared with the corresponding 1997 periods
primarily as a result of higher levels of property and equipment in use,
including increased depreciation related to vehicles under purchased operating
leases.
Selling and administrative expenses for the third quarter and first nine
months of 1998 decreased compared with the corresponding 1997 periods primarily
as a result of the divestiture of Chrysler's Car Rental Operations, partially
offset by increased selling and advertising costs.
Interest expense for the third quarter and first nine months of 1998
increased compared with the corresponding 1997 periods primarily as a result of
higher average debt levels at CFC and increased vehicles intransit and intransit
times, partially offset by lower average effective borrowing costs at CFC.
Chrysler's effective income tax rates were 36.8 percent and 37.1 percent in
the third quarter and first nine months of 1998, respectively, compared with
39.3 percent and 39.7 percent in the third quarter and first nine months of
1997, respectively. These decreases reflect ongoing income tax reduction
initiatives by Chrysler.
9
<PAGE> 12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $10.628 billion at September 30, 1998 (including $1.114
billion held by CFC), compared with $7.848 billion at December 31, 1997
(including $788 million held by CFC). The increase in Chrysler's combined cash,
cash equivalents and marketable securities in the first nine months of 1998 was
primarily the result of cash generated by operating activities and cash provided
by a net increase in total debt at CFC, partially offset by capital
expenditures, net finance receivables acquired and dividend payments.
At September 30, 1998, Chrysler (excluding CFC) had debt maturities
totaling $129 million through 2000. At September 30, 1998, Chrysler had a $2.6
billion revolving credit agreement that expires in April 2002. There were no
amounts outstanding under the revolving credit agreement during the third
quarter of 1998. Chrysler believes that cash from operations and its cash
position will be sufficient to meet its capital expenditure, debt maturity and
other funding requirements.
Receivable sales continued to be a significant source of funding for CFC,
which realized $7.8 billion of net proceeds from the sale of automotive retail
receivables in the first nine months of 1998 compared with $6.1 billion of net
proceeds in the first nine months of 1997. In addition, securitization of
revolving wholesale account balances provided funding for CFC which aggregated
$4.8 billion and $7.0 billion at September 30, 1998 and 1997, respectively.
At September 30, 1998, CFC had contractual debt maturities of $4.1 billion
for the remainder of 1998 (including $2.8 billion of short-term notes), $3.4
billion in 1999 and $3.6 billion in 2000. CFC's U.S. and Canadian revolving
credit facilities, which total $8 billion, consist of a $2 billion facility
expiring in April 1999 and a $6 billion facility expiring in April 2002. At
September 30, 1998, no amounts were outstanding under these facilities. CFC
believes that cash provided by operations, receivable sales, access to term debt
markets and issuance of commercial paper will provide sufficient liquidity to
meet its debt maturity and other funding requirements.
OUTLOOK
The statements contained in this Outlook section are based on management's
current expectations. With the exception of the historical information contained
herein, the statements presented in this Outlook section are forward-looking
statements that involve numerous risks and uncertainties. Actual results may
differ materially.
Chrysler's average sales incentives per vehicle increased during 1998 as a
result of an increasingly competitive automotive environment, including the
continued unfavorable effects of changes in the Japanese yen to U.S. dollar
exchange rate. Chrysler expects to continue to face an increasingly competitive
automotive environment, within the context of falling goods prices worldwide and
industry overcapacity, which is likely to continue to limit vehicle-pricing
flexibility in the near term and which could have an effect on profitability. In
addition, the weakness of the Japanese yen and other Asian currencies against
the U.S. dollar and the continued deterioration in the Asian economies could
result in substantial increases in imports from Asia to the U.S. and Canada. The
Asian economic difficulties could result in more intense competition in the
automotive industry and could have an unfavorable effect on overall economic
conditions in the U.S. and Canada, where Chrysler's sales are concentrated.
Economic difficulties in the Asian and Latin American markets may also impact
the ability of Chrysler to produce and sell vehicles in those markets.
Chrysler's worldwide vehicle production in the third quarter of 1998 was
644,875 units, an increase of 72,357 units or 13 percent, as compared with the
third quarter of 1997. Chrysler's worldwide vehicle production for the fourth
quarter of 1998 is expected to be approximately 724,500 units, a decrease of
8,500 units or 1 percent, as compared with the fourth quarter of 1997. Future
expected production levels are heavily dependent on Chrysler's ability to
maintain its competitive position, continued favorable economic conditions in
the U.S. and Canada, the avoidance of work stoppages by represented employees
and the continued successful launch of Chrysler's new products.
In the first nine months of 1998, retail (including fleet) industry sales
of new cars and trucks in the U.S., on a Seasonally Adjusted Annual Rate basis,
were 15.7 million units. Chrysler projects that 1998 retail (including fleet)
industry sales for the U.S. will range from 15.2 million to 15.6 million units
and that 1999 retail (including fleet) industry sales for the U.S. will range
from 14.9 million to 15.4 million units. Actual levels of retail (including
fleet) industry sales in the remainder of 1998 and in 1999 will depend on, among
other things, economic conditions in the U.S. Continuation of economic
difficulties in markets outside of the U.S. and volatility in certain world
currencies and capital markets could have an unfavorable effect on consumer
confidence and overall economic conditions in the U.S. Accordingly, there can be
no assurance that Chrysler's estimates will be accurate.
10
<PAGE> 13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
OUTLOOK - CONTINUED
In addition, Chrysler wishes to caution readers that several factors, as
well as those factors described elsewhere in this discussion or in other
Securities and Exchange Commission filings, in some cases have affected, and in
the future could affect, Chrysler's actual results and could cause Chrysler's
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, Chrysler. Those factors include: government
regulations as they may affect Chrysler's ability to produce and sell the kinds
of vehicles that consumers demand, business conditions and growth in the
automotive industry and general economy; changes in gasoline and oil prices;
changes in consumer debt levels and interest rates; changes in consumer
preferences away from pickup trucks, sport-utility vehicles and minivans;
competitive factors, such as domestic and foreign rival car and truck offerings,
price pressures and sales incentives, and acceptance of new products; excess or
shortage of manufacturing capacity; risks and uncertainties associated with
Chrysler's expansion into international markets; and changes in foreign currency
exchange rates and the resulting impact on pricing strategies of major foreign
competitors. Additionally, several of Chrysler's competitors have larger
worldwide sales volumes and greater financial resources, which may, over time,
place Chrysler at a competitive disadvantage in responding to its competitors'
offerings, substantial changes in consumer preferences, government regulations,
or adverse economic conditions in the U.S. and Canada. Finally, the automotive
industry historically has been highly cyclical and the duration of these cycles
has been difficult to predict.
PROPOSED BUSINESS COMBINATION
Chrysler, Daimler-Benz Aktiengesellschaft ("Daimler-Benz") and
DaimlerChrysler AG ("DaimlerChrysler") have entered into a Business Combination
Agreement dated as of May 7, 1998 (as amended and restated) providing for (i)
the merger of a newly created Delaware corporation with and into Chrysler ("the
Chrysler Merger"); (ii) an offer by DaimlerChrysler to exchange one
DaimlerChrysler ordinary share for each Daimler-Benz ordinary share (or 1.005
DaimlerChrysler shares for each Daimler-Benz ordinary share if greater than 90
percent of shares are exchanged); and (iii) the merger of Daimler-Benz with and
into DaimlerChrysler. In the Chrysler merger, each share of outstanding Chrysler
common stock will be converted into the right to receive 0.6235 DaimlerChrysler
shares. As a result of these transactions, DaimlerChrysler will be owned by the
former shareholders of Chrysler and Daimler-Benz, and Chrysler will be a wholly
owned subsidiary of DaimlerChrysler.
On May 7, 1998, Chrysler entered into a Stockholder Agreement with Kirk
Kerkorian and Tracinda Corporation (together, "Tracinda"), the owner of
approximately 11 percent of the common stock of Chrysler, pursuant to which
Tracinda agreed to vote its shares in favor of the transactions contemplated by
the Business Combination Agreement.
Also on May 7, 1998, Chrysler amended its Rights Agreement, dated as of
February 5, 1998, with First Chicago Trust Company of New York. The amendment
renders the Rights Agreement inapplicable to the transactions contemplated by
the Business Combination Agreement.
The transaction is expected to close in November 1998, subject to the
satisfaction or waiver of various conditions as more fully described in the
Business Combination Agreement. These conditions include completion of the
exchange of at least 75 percent of the outstanding shares of Daimler-Benz for
DaimlerChrysler shares and the receipt of opinions from the respective tax
counsel of Chrysler and Daimler-Benz regarding certain United States federal
income and German tax consequences of the transactions. Additionally, the
transaction is conditioned upon the receipt by Chrysler of a private letter
ruling from the United States Internal Revenue Service (the "IRS"), which was
received from the IRS on September 4, 1998.
Chrysler's and Daimler-Benz' shareholders approved the proposed business
combination at separate Special Shareholders' Meetings held on September 18,
1998. The initial period for the exchange of Daimler-Benz shares for
DaimlerChrysler shares extends from September 24, 1998 through October 23, 1998.
In September 1998, Chrysler filed a preliminary Form S-3 with the Securities and
Exchange Commission to register the offering of up to 30 million shares of
Chrysler common stock. This offering of Chrysler common stock is conditioned on
the exchange of at least 90 percent of the outstanding shares of Daimler-Benz
for DaimlerChrysler shares.
11
<PAGE> 14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
YEAR 2000
Chrysler has conducted an evaluation of the actions necessary in order to
ensure that its business critical computer systems will be able to function
without disruption with respect to the application of dating systems in the Year
2000. As a result of this evaluation, Chrysler is engaged in the process of
upgrading, replacing and testing certain of its information and other computer
systems so as to be able to operate without disruption due to Year 2000 issues.
Chrysler's remedial actions are scheduled to be completed during the third
quarter of 1999 and, based upon information currently available, Chrysler does
not anticipate that the costs of its remedial actions will be material to
Chrysler's consolidated results of operations and financial position and are
being expensed as incurred. However, there can be no assurance that the remedial
actions being implemented by Chrysler will be able to be completed by the time
necessary to avoid dating systems problems or that the cost of doing so will not
be material. If Chrysler is unable to complete its remedial actions in the
planned timeframe, contingency plans will be developed to address those business
critical systems which may not be Year 2000 compliant. In addition, disruptions
with respect to the computer systems of vendors or customers, which systems are
outside the control of Chrysler, could impair the ability of Chrysler to obtain
necessary materials or products or to sell or to service their customers.
Disruptions of Chrysler's computer systems, or the computer systems of
Chrysler's vendors or customers, as well as the cost of avoiding such
disruption, could have a material adverse effect upon Chrysler's financial
condition and results of operations. Chrysler has a process in place to assess
the Year 2000 readiness of its business critical vendors and customers. Chrysler
believes that the most reasonably likely worst case scenario is that a small
number of vendors will be unable to supply components for a short time after
January 1, 2000. As part of the assessment process, Chrysler will develop
contingency plans for those business critical vendors who are either unable or
unwilling to develop remediation plans to become Year 2000 compliant. Although
these plans are yet to be developed, Chrysler expects that these plans will
include a combination of actions including stockpiling of components and
selective resourcing of materials to Year 2000 compliant vendors. Chrysler
expects that vendors in this category will represent an insignificant part of
its total supply base. It is expected that these plans will be in place by the
third quarter of 1999.
NEW ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." This Statement revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This Statement is effective for
Chrysler's financial statements for the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. This Statement is
not expected to have a material impact on Chrysler's consolidated financial
statements. This Statement is effective for fiscal years beginning after June
15, 1999, with earlier adoption encouraged. Chrysler will adopt this accounting
standard as required by January 1, 2000.
REVIEW BY INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, Chrysler's independent public accountants, performed
a review of the financial statements for the three and nine months ended
September 30, 1998 and 1997 in accordance with the standards for such reviews
established by the American Institute of Certified Public Accountants. The
review did not constitute an audit, and accordingly, Deloitte & Touche LLP did
not express an opinion on the aforementioned data. Refer to the Independent
Accountants' Report included at Exhibit 15A.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On May 7 and 8, 1998, two purported class actions, respectively
entitled "Maryland Linotype Composition Co., et al. v. Robert Anthony Lutz, et
al.," C.A. 16363 NC and "Jules Bernstein v. Robert Anthony Lutz, et al.," C.A.
16369 NC, were filed in the Court of Chancery of the State of Delaware, New
Castle County, naming Chrysler and its directors as defendants. Plaintiffs,
purporting to represent the stockholders of Chrysler, allege that Chrysler and
its directors breached their fiduciary duties to stockholders by failing to
obtain the best price for the shares of Chrysler Common Stock in the Chrysler
Merger. The complaints seek to enjoin preliminarily the Chrysler Merger or, in
the alternative, damages in the amount of the difference between the value
received for the shares of Chrysler Common Stock and the alleged "best price
obtainable." Chrysler intends to defend against such allegations vigorously, if
and when it is served with these actions.
On September 29, 1998, a jury awarded $64 million in damages against
Chrysler in "Kiefer vs Chrysler Corporation," a case filed in the 229th Judicial
District Court in Starr County, Texas. The complaint alleged that the fuel
system in a 1977 Dodge Club Cab pickup truck was defective and allowed fuel to
be spilled after the truck was struck by another vehicle, rolled over several
times, and caught fire, resulting in the death of its two occupants. Chrysler
intends to file motions challenging the verdict and the damage award, and to
pursue such motions vigorously, based in part on the fact that the systems which
were allegedly defective had been substantially and dangerously modified by the
driver and other previous owners.
In connection with the previously reported investigation by the U.S.
Attorney's Office in Indianapolis, Indiana and the Criminal Investigation
Division of the U.S. Environmental Protection Agency, the Federal District Court
for the Southern District of Indiana impaneled a grand jury to investigate
wastewater discharges last year at Chrysler's transmission plant in Kokomo,
Indiana. Chrysler is unable to estimate the amount of fines and penalties, if
any, that may ultimately be imposed in connection with this matter.
The Wayne County Air Pollution District in Wayne County, Michigan
issued a notice of violation under the Federal Clean Air Act with respect to
emission levels at Chrysler's engine plant in Trenton, Michigan. Chrysler is
unable to estimate the amount of fines and penalties, if any, that may
ultimately be imposed in connection with this matter.
Three of the four previously reported class action lawsuits alleging
defects in airbags in 1993-1996 model year minivans have been dismissed by U.S.
District Courts in Louisiana and Texas. The remaining case is pending in Coosa
County Circuit Court in Alabama.
Two previously consolidated lawsuits alleging defects in the antilock
braking systems (ABS) found in certain model year vehicles were denied class
certification by the U.S. District Court in New Jersey. As previously reported,
an additional ABS class action is pending in Sumter County Circuit Court in
Alabama.
13
<PAGE> 16
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) A Special Meeting of Stockholders of Chrysler Corporation ("Chrysler
Special Meeting") was held on September 18, 1998.
(c) The following matters were submitted to a vote at the meeting:
(1) approval and adoption of the Amended and Restated Business
Combination Agreement, dated as of May 7, 1998, among Daimler-Benz
Aktiengesellschaft ("Daimler-Benz"), Chrysler and DaimlerChrysler AG
("DaimlerChrysler"), and the transactions contemplated thereby,
including at any adjournment or postponement of the Chrysler Special
Meeting. The vote on this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--------------- -------------- ------------- -------------
<S> <C> <C> <C>
475,771,250 12,021,462 1,407,768 -0-
</TABLE>
(2) approval of any postponement or adjournment of the Chrysler Special
Meeting, if proposed by the Board of Directors of Chrysler
Corporation. The vote on this matter was as follows:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--------------- -------------- ------------- -------------
<S> <C> <C> <C>
390,323,756 94,629,907 4,246,817 -0-
</TABLE>
14
<PAGE> 17
Item 5. OTHER INFORMATION
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
STATEMENT OF EARNINGS (unaudited)
For the Three and Nine Months Ended September 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales of manufactured products $ 13,775 $ 12,385 $ 45,185 $ 41,317
Equity in earnings of unconsolidated subsidiaries
and affiliates 184 207 557 516
Interest income and other revenues 270 197 726 604
------------ ------------ ------------ -----------
TOTAL REVENUES 14,229 12,789 46,468 42,437
------------ ------------ ------------ -----------
Costs, other than items below 11,036 10,215 35,679 33,278
Depreciation and special tools amortization 699 536 2,250 1,836
Selling and administrative expenses 992 936 2,994 2,951
Employee retirement benefits 321 321 938 947
Interest expense 102 55 254 184
------------ ------------ ------------ -----------
TOTAL EXPENSES 13,150 12,063 42,115 39,196
------------ ------------ ------------ -----------
EARNINGS BEFORE INCOME TAXES 1,079 726 4,353 3,241
Provision for income taxes 397 285 1,616 1,288
------------ ------------ ------------ -----------
NET EARNINGS $ 682 $ 441 $ 2,737 $ 1,953
============ ============ ============ ===========
</TABLE>
This Supplemental Information does not present the results of operations of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the results of operations of Chrysler with its
investments in Chrysler Financial Corporation ("CFC") and short-term vehicle
rental subsidiaries (the "Car Rental Operations") accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore, does not comply
with Statement of Financial Accounting Standards ("SFAS") No. 94, "Consolidation
of All Majority-Owned Subsidiaries." Because the operations of CFC and the Car
Rental Operations are different in nature from Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements. In December 1997,
Chrysler completed an initial public offering of its common stock interest in
the Car Rental Operations.
15
<PAGE> 18
Item 5. OTHER INFORMATION - CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
BALANCE SHEET (unaudited)
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
------------- ------------------------------
Sept. 30 Dec. 31 Sept. 30
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 6,356 $ 4,533 $ 5,041
Marketable securities 3,211 2,542 1,839
------------- -------------- -------------
Total cash, cash equivalents and marketable securities 9,567 7,075 6,880
Accounts receivable - trade and other 1,627 936 694
Inventories 5,979 4,738 5,224
Prepaid employee benefits, taxes and other expenses 988 2,174 1,631
Property and equipment 16,479 15,923 15,182
Special tools 4,540 4,572 4,358
Investments in and advances to unconsolidated subsidiaries 3,580 3,405 3,659
Intangible assets 1,511 1,573 1,600
Deferred tax assets 1,426 1,977 1,857
Other noncurrent assets 5,393 5,474 5,470
-------------- -------------- -------------
TOTAL ASSETS $ 51,090 $ 47,847 $ 46,555
============== ============== =============
LIABILITIES:
Accounts payable $ 9,215 $ 8,599 $ 8,351
Accrued liabilities and expenses 10,956 9,303 9,148
Short-term debt 351 378 385
Payments due within one year on long-term debt 43 19 20
Amounts due CFC 1,243 1,667 1,137
Long-term debt 2,248 2,258 2,267
Accrued noncurrent employee benefits 10,066 9,783 9,805
Other noncurrent liabilities 3,766 4,478 4,175
-------------- -------------- -------------
TOTAL LIABILITIES 37,888 36,485 35,288
-------------- -------------- -------------
SHAREHOLDERS' EQUITY: (shares in millions)
Preferred stock - $1 per share par value; authorized 20.0
shares; Series A Convertible Preferred Stock; issued and outstanding:
1997 - 0.02 and 0.02 shares, respectively (aggregate
liquidation preference 1997 - $8 million and $8 million, respectively) -- * *
Common stock - $1 per share par value; authorized
1,000.0 shares; issued: 1998 - 824.0 shares; 1997 - 823.1
and 823.1 shares, respectively 824 823 823
Additional paid-in capital 5,219 5,231 5,232
Retained earnings 12,557 10,605 9,996
Treasury stock - at cost: 1998 - 176.6 shares;
1997 - 176.8 and 160.6 shares, respectively (5,398) (5,297) (4,784)
-------------- -------------- --------------
TOTAL SHAREHOLDERS' EQUITY 13,202 11,362 11,267
-------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 51,090 $ 47,847 $ 46,555
============== ============== ==============
</TABLE>
* Less than $50 thousand
This Supplemental Information does not present the financial position of
Chrysler in accordance with generally accepted accounting principles. This
Supplemental Information reflects the financial position of Chrysler with its
investments in CFC and the Car Rental Operations accounted for on an equity
basis rather than as consolidated subsidiaries and, therefore, does not comply
with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries." The
financial covenant contained in Chrysler's revolving credit facility is based on
this Supplemental Information. In addition, because the operations of CFC and
the Car Rental Operations are different in nature from Chrysler's manufacturing
operations, management believes that this disaggregated financial data enhances
an understanding of the consolidated financial statements. In December 1997,
Chrysler completed an initial public offering of its common stock interest in
the Car Rental Operations.
16
<PAGE> 19
Item 5. OTHER INFORMATION - CONTINUED
SUPPLEMENTAL INFORMATION
CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS)
CONDENSED STATEMENT OF CASH FLOWS (unaudited)
For the Nine Months Ended September 30, 1998 and 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,180 $ 4,631
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (700) (579)
Sales and maturities of marketable securities 851 868
Expenditures for property and equipment (2,083) (2,290)
Expenditures for special tools (941) (1,208)
Purchases of vehicle operating leases (359) (448)
Proceeds from sales of vehicles under purchased
operating leases 114 52
Other 137 70
-------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (2,981) (3,535)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in short-term debt (27) 39
Proceeds from long-term borrowings 12 1,588
Payments on long-term borrowings (48) (524)
Change in advances from CFC (424) 318
Repurchases of common stock (197) (1,593)
Dividends paid (777) (830)
Other 85 122
-------------- --------------
NET CASH USED IN FINANCING ACTIVITIES (1,376) (880)
-------------- --------------
Change in cash and cash equivalents 1,823 216
Cash and cash equivalents at beginning of period 4,533 4,825
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,356 $ 5,041
============== =============
</TABLE>
This Supplemental Information does not present the cash flows of Chrysler in
accordance with generally accepted accounting principles. This Supplemental
Information reflects the cash flows of Chrysler with its investments in CFC and
the Car Rental Operations accounted for on an equity basis rather than as
consolidated subsidiaries and, therefore, does not comply with SFAS No. 94,
"Consolidation of All Majority-Owned Subsidiaries." Because the operations of
CFC and the Car Rental Operations are different in nature from Chrysler's
manufacturing operations, management believes that this disaggregated financial
data enhances an understanding of the consolidated financial statements. In
December 1997, Chrysler completed an initial public offering of its common stock
interest in the Car Rental Operations.
17
<PAGE> 20
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits filed with this Report are listed in the Exhibit Index
that immediately precedes such exhibits.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
September 30, 1998.
18
<PAGE> 21
CONFORMED
SIGNATURE
Pursuant to the requirements 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
--------------------------------------
(Registrant)
Date: October 13, 1998 By J. D. Donlon, III
----------------------- ----------------------------------
J. D. Donlon, III
Vice President and Controller
(Principal Accounting Officer)
19
<PAGE> 22
EXHIBIT INDEX
-------------
For Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1998
EXHIBIT
-------
10C Copy of Chrysler Corporation Incentive Compensation Plan, as
amended and in effect on and after July 30, 1998 (Filed with
this report.)
15A Letter, dated October 9, 1998, re unaudited interim
information. (Filed with this report.)
15B Letter, dated October 9, 1998, re unaudited interim
information. (Filed with this report.)
27 Financial Data Schedule for the nine months ended September 30,
1998 (Filed with this report).
20
<PAGE> 1
EXHIBIT 10C
CHRYSLER CORPORATION
INCENTIVE COMPENSATION PLAN
Effective January 1, 1970
(As Amended Through July 30, 1998)
1. PURPOSE
The purpose of the Chrysler Corporation Incentive Compensation Plan (below
called the Plan or this Plan) is to encourage the continued and energetic
efforts of officers and key salaried employees (below called collectively
Employees) of Chrysler Corporation (below called Chrysler) and its subsidiaries
(Chrysler and its subsidiaries collectively below called the Corporation) on
behalf of the Corporation by enabling them to share in the profits of the
Corporation, in accordance with the resolution adopted by the Stockholders of
Chrysler at their Annual Meeting on April 16, 1929, as they amended it at their
Annual Meeting on April 17, 1956, and at their Special Meeting on April 16,
1963, and at their Annual Meetings on April 15, 1969, April 18, 1972, June 7,
1984, May 20, 1993 and May 19, 1994, and as it may be further amended from time
to time (below called the Stockholders' Resolution).
2. INCENTIVE COMPENSATION COMMITTEE
The Board of Directors of Chrysler (below called the Board) shall appoint
not less than three Directors of Chrysler, none of whom shall be entitled to
receive funds or securities pursuant to any Incentive Plan (as defined in the
Stockholders' Resolution) of Chrysler, to be an Incentive Compensation Committee
(below called the Committee) to administer this Plan. Each member of the
Committee shall be a "Non-Employee Director" (which term as used herein shall
have the meaning ascribed to it in Rule 16b-3 under the Securities Exchange Act
of 1934, or in any amendment thereof in effect at the relevant time). The
Committee may designate a Secretary, one or more Assistant Secretaries and an
Administrator, none of whom need be Directors of Chrysler. Subject to the
provisions of this Plan, the Committee shall have authority, in its discretion,
to prescribe, amend, and rescind rules and regulations relating to this Plan.
3. INCENTIVE COMPENSATION FUND
For each fiscal year the Board shall authorize and approve the amount to be
provided out of the earnings of the Corporation for such fiscal year for
purposes of this Plan and the Chrysler Corporation Long-Term Incentive Plan
(below called the Long-Term Plan, this Plan and the Long-Term Plan collectively
below called the Plans), not to exceed the amount permitted by the Stockholders'
Resolution, and shall authorize and direct the proper officers of the
Corporation (a) to set aside such amount and to add to it (b) any amount
authorized and approved by the Board for any prior fiscal year but not
previously awarded and (c) any amount awarded for any prior fiscal year that has
been forfeited. The sum of all such amounts (or such part thereof as the Board
may determine should be made available for awards for any fiscal year) shall be
the Incentive Compensation Fund for that fiscal year (below called the Fund).
Any part of such sum that the Board determines shall not be made available for
awards for any fiscal year shall be carried forward and may be awarded in a
subsequent fiscal year.
4. ELIGIBILITY
The Committee, in its sole and absolute discretion, shall have full power
to determine by salary, salary grade, salary band, classification, or otherwise,
the Employees (including those who have retired or died or have been granted a
leave of absence or were laid off during the year) who shall be eligible for
consideration to participate in the Plans in any year, except that the Committee
may not determine as eligible for consideration to participate in the Plans any
Employee who was eligible at any time in that year to participate in any other
Incentive Plan of the Corporation as defined in the Stockholders' Resolution.
Employees shall not be ineligible for consideration to participate in the Plans
by reason of their eligibility to participate in any Performance
<PAGE> 2
Award Plan or in any Savings and Investment Plan, both as defined in the
Stockholders' Resolution, or in any Stock Option Plan, or any Performance Award
Plan adopted under any Stock Option Plan, of Chrysler or any of its subsidiaries
or in any successor plan or programs adopted to replace any such plan or
programs.
5. SELECTING PARTICIPANTS AND DETERMINING AWARDS
Each year the Committee, in accordance with such rules as it may prescribe,
shall:
(a) select from the Employees eligible for consideration to
participate in the Plans those Employees who are to participate for that
year;
(b) award under this Plan to certain of the Employees so selected
(below called Participant) such share of the Fund as the Committee shall
determine (below called an Award); provided, however, that the maximum
amount of such share that may be awarded to a Participant for a given
fiscal year shall not exceed a dollar amount equal to 0.15% of the
Corporation's consolidated net earnings for such year as determined in
accordance with the Stockholders' Resolution; and
(c) award under the Long-Term Plan to certain of the Employees so
selected, in accordance with the terms of the Long-Term Plan, such share of
the Fund as the Committee shall determine.
An Employee may receive an Award under this Plan and an award under the
Long-Term Plan in the same year.
The Committee shall have full and final authority in performing these
duties, but shall report to the Board the share of the Fund awarded to each
Employee under this Plan and under the Long-Term Plan, expressed in dollar
amounts and/or percentage of base salary or performance share awards or award
units or otherwise, as the Committee shall determine.
Notwithstanding anything else contained in this Plan to the contrary, if
any Award is intended at the time of grant to be other performance based
compensation within the meaning of Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as the same may be amended from time to time (the "Code"), to the
extent required to so qualify any Award hereunder, the Committee shall not be
entitled to exercise any discretion otherwise authorized under this Plan with
respect to such Award if the ability to exercise such discretion (as opposed to
the exercise of such discretion) would cause such Award to fail to qualify as
other performance based compensation.
6. CORPORATE PERFORMANCE GOALS
The Committee may establish one or more corporate performance goals
("Performance Goals") each year relating to: quality, customer satisfaction,
profitability, net margin as a percentage of revenue, return on sales, return on
capital, breakeven, productivity, and/or debt to capitalization. A Performance
Goal may consist of such criteria, terms and conditions as the Committee may
designate. The Committee shall have the discretion to add additional goals and
to modify any objectives or performance levels designated in relation to
previously established goals. If an Award for a given year is intended to be
qualified performance-based compensation under Section 162(m) of the Code, then
the related Performance Goal and Award levels shall be established, as described
below, no later than the 90th day of such year.
7. AWARDS
At the time it establishes a Performance Goal, the Committee shall
determine that the attainment of specified levels of performance in respect of
such Performance Goal shall correspond to specified Award levels, subject to
reduction as described below. Awards shall be expressed as a percentage of a
Participant's base salary (or the average base salary or midpoint of the salary
range of a class of Employees) in effect at the time the Performance Goal is
established. In no event, however, may an Award exceed the maximum amount
referenced in Section 5(b) above. An Employee who first becomes eligible for
an Award, and is selected as a Participant, after the beginning of a given year
may receive an Award established on a pro rata basis for the number of months
he or she is eligible during such year.
8. CORPORATE PERFORMANCE EVALUATION
The Committee shall confirm the performance level attained by the
Corporation in respect of the Performance Goal established for a given year and
the corresponding Awards to be paid in respect of such performance; provided,
however, that the Committee, in its sole discretion, may reduce the amount of
any Award otherwise payable in respect of such performance.
2
<PAGE> 3
9. PAYING AND EARNING OUT OF AWARDS UNDER THIS PLAN
Awards under this Plan shall be paid to Participants in one lump sum,
unless the Committee, in its discretion, determines that an Award shall be paid
in installments.
A Participant will have earned out under this Plan an Award payable in one
lump sum, or the first installment of an Award payable in installments, if his
or her employment with the Corporation has been continuous (a) up to the date of
payment of the Award payable in one lump sum, or of the first installment of the
Award payable in installments, as the case may be, or (b) up to the date of the
Participant's retirement or death if he or she should retire or die before the
date of such payment, or (c) up to the date the Participant was granted a leave
of absence if such leave of absence was granted before the date of such payment,
or (d) up to the date the Participant was laid off if he was laid off before the
date of such payment. A Participant will have earned out a subsequent
installment if his or her employment with the Corporation has been continuous up
to and including (a) the December 31 immediately preceding the date the
installment is payable, or (b) the date of the Participant's death if he or she
should die before such December 31, or (c) such date as the Corporation may
determine under all other circumstances.
A Participant whose employment with the Corporation is terminated other
than by death will not thereafter earn out under this Plan any installment of an
Award payable in installments unless the Corporation expressly consents in
writing to waive the condition of continuous employment with the Corporation,
and the Participant thereafter will earn out each installment only if up to and
including the December 31 immediately preceding the date the installment is
payable the Participant neither (a) takes other employment or renders services
to others without the written consent of the Corporation, nor (b) conducts
himself or herself in a manner adversely affecting the Corporation, the
determination by the Committee that a Participant has so conducted himself or
herself to be final and conclusive.
Any installment which a Participant fails to earn out under this Plan shall
be forfeited and included in the Fund for a subsequent year as provided in
paragraph 3.
Nothing in this Plan shall prevent the Corporation from discharging or
requesting the resignation of any Participant.
An Award payable in one lump sum, or the first installment of an Award
payable in installments, shall be paid to the Participant on such date as the
Committee shall determine, and if the Participant complies with the conditions
for earning out a subsequent installment, it shall be paid to him or her on such
date in the year in which it is payable as the Committee shall determine.
Any lump sum payment or installment earned out under this Plan and payable
to a Participant who is deceased shall be paid to his or her legal
representative in such manner and at such time as it would have been paid to the
Participant were he or she then alive and in the employ of the Corporation.
10. FORM OF PAYMENTS UNDER THIS PLAN
The Committee in its sole and absolute discretion shall determine for any
year whether under this Plan the lump sum payment or the installment of any
Awards payable in that year shall be paid in cash or in shares of Chrysler
stock, or partly in cash and partly in shares of Chrysler stock, the shares to
be shares held by the Corporation in its treasury or purchased by the
Corporation in the market for distributing in place of cash, the shares to be
valued for this purpose in accordance with the Stockholders' Resolution, with
cash in place of fractional shares.
3
<PAGE> 4
11. DEFERRAL OF PAYMENT
A Participant may voluntarily elect to defer receipt of payment under this
Plan of all or any part of an Award payable in one lump sum or of any
installment of an Award payable in installments upon such terms and conditions
as the Committee may prescribe.
12. COSTS
All costs of administering the Plans shall be borne by the Corporation and
shall not be charged against the Fund.
13. PAYMENTS UPON A CHANGE IN CONTROL
Notwithstanding any other provisions hereof, if a "Change in Control" (as
defined in paragraph 13(D) hereof) of Chrysler shall occur, the following shall
be paid, in cash, no later than the tenth day following such Change in Control
in the case of a Change in Control as defined in paragraph 13(D)(i), (ii) or
(iv) hereof, or no later than the tenth day following consummation of the
Change in Control transaction in the case of a Change in Control as defined in
paragraph 13(D)(iii) hereof: (a) all unpaid installments of an Award payable
in installments pursuant to paragraph 9 of this Plan, (b) all voluntary
deferrals made by a Participant pursuant to paragraph 11 of this Plan (other
than deferrals made into the Chrysler Corporation Salaried Employees Savings
Plan and the Chrysler Corporation Salaried Employees Supplemental Savings Plan,
which deferrals will be governed by the terms of such plans), (c) all unpaid
Awards made (including any made pursuant to paragraph 13(C) hereof) for any
completed fiscal year which preceded the Change in Control, and (d) "Change in
Control Awards" (as determined pursuant to paragraph 13(A) hereof).
A. CHANGE IN CONTROL AWARDS. Upon a Change in Control of Chrysler, each
Employee (below called a "Change in Control Participant") eligible pursuant to
paragraph 4 hereof for consideration to participate in the Plans for the fiscal
year in which the Change in Control occurs (the "Change in Control Year") shall
be paid a cash award, in a lump sum (the "Change in Control Award").
The tentative Change in Control Award of each Change in Control Participant
to whom an Award was made for the last fiscal year immediately preceding the
Change in Control for which Awards (including Awards, if any, made pursuant to
paragraph 13(C) hereof) were made generally (the "Base Year") shall be
determined by multiplying the "Change in Control Fund" (calculated in accordance
with paragraph 13(B) hereof) by a fraction, the numerator of which shall be the
amount of the Award of such Change in Control Participant for the Base Year, and
the denominator of which shall be the aggregate amount of Awards made for the
Base Year. A tentative Change in Control Award for each Change in Control
Participant to whom an Award was not made for the Base Year shall also be
determined and shall be comparable to the tentative Change in Control Awards of
similarly situated (in terms of the criteria employed by the Committee to
determine participation under paragraph 4 hereof, such as salary, salary grade
or classification) Change in Control Participants to whom Awards were made for
the Base Year.
The actual Change in Control Award of each Change in Control Participant
shall then be determined by multiplying the Change in Control Fund by a
fraction, the numerator of which shall be his tentative Change in Control Award
and the denominator of which shall be the aggregate tentative Change in Control
Awards.
B. CHANGE IN CONTROL FUND. The Change in Control Fund shall be the sum of
the amounts described in (i) and (ii) below, adjusted by the amount described in
(iii):
(i) the sum (measured immediately prior to a Change in Control) of (x)
any amount authorized and approved by the Board for any fiscal year
completed prior to the Change in Control but not previously awarded from,
or charged against, the Incentive Compensation Fund pursuant to this or any
other plan of the Corporation and (y) any amount awarded from, or charged
against, the Incentive Compensation Fund for any fiscal year completed
prior to the Change in Control that has been forfeited;
(ii) the aggregate amount calculated for the fiscal year in which the
Change in Control occurs, from its inception up to and including the date
of the Change in Control, in the case of a Change in Control as defined in
paragraph 13(D)(i), (ii) or (iv) hereof, and up to and including the date
on which the Change in Control transaction is consummated in the case of a
Change in Control as defined in paragraph 13(D)(iii) hereof, in the
ordinary course of business and based on the Stockholders' Resolution. The
determination (made prior to the Change in Control or, as applicable, the
consummation of the Change in Control transaction) of the Corporation's
internal accountants in making any such calculation shall be conclusive;
4
<PAGE> 5
(iii) the "applicable amount" (the sum of (i) and (ii) above) shall be
adjusted as follows: (a) if an additional charge is made against the
Incentive Compensation Fund with respect to Performance Shares under the
Long-Term Plan upon the occurrence of a Change in Control, the "applicable
amount" shall be reduced by such charge; and (b) if any amount previously
charged against the Incentive Compensation Fund for Performance Shares is
not earned and delivered upon the occurrence of a Change in Control and is
returned to the Incentive Compensation Fund, the "applicable amount" shall
be increased by such returned amount.
C. MAKING AWARDS FOR COMPLETED YEARS. Upon the occurrence of a "Potential
Change in Control" (as defined in paragraph 13(E) hereof), if there is any
completed fiscal year of the Corporation for which the audited financial
statements of the Corporation are available and for which the Board has not yet
determined the Incentive Compensation Fund and/or for which the Committee has
not yet determined the Awards, such determinations and the payments of any
Awards so determined shall be made as soon as reasonably possible.
D. CHANGE IN CONTROL DEFINITION. "Change in Control" shall mean a change in
control of Chrysler, which shall be deemed to have occurred:
(i) if any Person (as defined below) is or becomes the Beneficial
Owner (as defined below) of securities of Chrysler representing 20% or
more of the combined voting power of Chrysler's then outstanding
securities (unless the event causing the 20% threshold to be crossed is
an acquisition of securities directly from Chrysler); or
(ii) if during any period of two consecutive years beginning after
June 7, 1990, individuals who at the beginning of such period constitute
the Board and any new Director (other than a Director designated by a
Person who has entered into an agreement with Chrysler to effect a
transaction described in paragraph (i), (iii) or (iv) of this Change in
Control definition) whose election or nomination for election was
approved by a vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning of the period
or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board; or
(iii) upon the approval by the stockholders of Chrysler of a merger
or consolidation of Chrysler with any other corporation (other than a
merger or consolidation which would result in the voting securities of
Chrysler outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the entity surviving such merger or consolidation), in
combination with voting securities of Chrysler or such surviving entity
held by a trustee or other fiduciary pursuant to any employee benefit plan
of Chrysler or such surviving entity or any subsidiary of Chrysler or such
surviving entity, at least 80% of the combined voting power of the voting
securities of Chrysler or such surviving entity outstanding immediately
after such merger or consolidation), if, and only if, such merger or
consolidation is ultimately consummated; or
(iv) if the stockholders of Chrysler approve a plan of complete
liquidation or dissolution of Chrysler or an agreement for the sale or
disposition by Chrysler of all or substantially all Chrysler's assets.
For purposes of the definition of Change in Control in this paragraph
13(D): (a) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as supplemented by Section 13(d)(3) of the Exchange Act, provided,
however, that Person shall not include (i) Chrysler, any subsidiary of
Chrysler or any other Person controlled by Chrysler, (ii) any trustee or
other fiduciary holding securities under any employee benefit plan of
Chrysler or any subsidiary of Chrysler, or (iii) a corporation owned,
directly or indirectly, by the stockholders of Chrysler in substantially
the same proportions as their ownership of securities of Chrysler; and (b)
a Person shall be deemed the "Beneficial Owner" of any securities which
such Person, directly or indirectly, has the right to vote or dispose of or
otherwise has "beneficial ownership" of (within the meaning of Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement
or understanding (whether or not in writing); provided, however, that (i) a
Person shall not be deemed the Beneficial Owner of any security as a result
of an agreement, arrangement or understanding to vote such securities (x)
arising solely from a revocable proxy or consent given in response to a
public proxy or
5
<PAGE> 6
consent solicitation made pursuant to, and in accordance with, the Exchange
Act and the applicable rules and regulations thereunder or (y) made in
connection with, or to otherwise participate in, a proxy or consent
solicitation made, or to be made, pursuant to, and in accordance with, the
applicable provisions of the Exchange Act and the applicable rules and
regulations thereunder, in either case described in clause (x) or clause
(y) above, whether or not such agreement, arrangement or understanding is
also then reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report), and (ii) a Person engaged in
business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
E. POTENTIAL CHANGE IN CONTROL DEFINITION. A "Potential Change in Control"
shall be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(i) Chrysler enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
(ii) Chrysler or any Person (as defined in paragraph 13(D) hereof)
publicly announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(iii) any Person who is or becomes the Beneficial Owner (as defined in
paragraph 13(D) hereof), directly or indirectly, of securities of Chrysler
representing 10% or more of the combined voting power of Chrysler's then
outstanding securities, increases such Person's beneficial ownership of
such securities by 5% or more over the percentage so owned by such Person
on the date hereof; or
(iv) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change in Control has occurred.
14. INTERPRETATION
The Board shall have full power and authority to interpret and construe
this Plan and its interpreting and construing of this Plan and acts pursuant to
this Plan in good faith shall be final and conclusive. The Board may correct any
defect or supply any omission or reconcile any inconsistency in such a manner
and to such an extent as it shall find expedient to carry this Plan into effect,
and it shall be the sole and final judge of the expediency. If any such
interpreting or construing shall involve a question of law, the Board may rely
and act upon the opinion of counsel (who may be counsel to Chrysler) on the
question of law.
15. EFFECTIVE PERIOD
The Plan shall become effective, upon approval by the Board, beginning
January 1, 1970, and shall remain in effect until terminated as provided in
Paragraph 16.
16. AMENDMENT AND TERMINATION
At any time the Board may amend, alter or terminate this Plan (consistent
with the Stockholders' Resolution) as the Board shall deem advisable; provided,
however, that the Board may not: (a) without the approval of the holders of a
majority of the shares of Common Stock of Chrysler voting on the matter,
increase the total amount that under the Stockholders' Resolution may be
provided out of the earnings of the Corporation for incentive compensation and
(b) without the approval of the holders of a majority of the shares of Common
Stock of Chrysler issued and outstanding, issue shares of Chrysler stock for
distributing in place of cash; and provided further, however, that terminating
or amending this Plan shall not terminate the right of any Participant to earn
out and thereby become entitled to receive, in the same manner as if this Plan
had not been terminated or amended, any unpaid installment of an Award made to
him under this Plan prior to the terminating or amending of this Plan or any
Retirement Benefit he would become eligible to receive under the Supplemental
Plan by complying with the terms thereof.
Nothing in this Plan shall be interpreted to preclude Chrysler from
granting awards under, or paying compensation outside the parameters of, the
Plan including, without limitation, base salaries, awards under
6
<PAGE> 7
any other plan of Chrysler (whether or not approved by stockholders), incentive
compensation (whether or not based on the attainment of pre-established
performance objectives) or retention or other special payments, that is not
deductible for Federal, State or local income tax purposes by reason of Section
162(m) of the Code or otherwise, should the Board or any committee thereof
(including the Committee), whichever is applicable, determine that such action
is in the best interests of Chrysler and its stockholders.
7
<PAGE> 1
EXHIBIT 15A
INDEPENDENT ACCOUNTANTS' REPORT
Shareholders and Board of Directors
Chrysler Corporation
Auburn Hills, Michigan
We have reviewed the accompanying condensed consolidated balance sheet of
Chrysler Corporation and consolidated subsidiaries as of September 30, 1998 and
1997 and the related condensed consolidated statements of earnings for the
three-month and nine-month periods and of cash flows for the nine-month periods
ended September 30, 1998 and 1997. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Chrysler Corporation and
consolidated subsidiaries as of December 31, 1997, and the related consolidated
statements of earnings and cash flows for the year then ended (not presented
herein); and in our report dated January 22, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997 is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
Detroit, Michigan
October 9, 1998
<PAGE> 1
EXHIBIT 15B
October 9, 1998
Chrysler Corporation
1000 Chrysler Drive
Auburn Hills, Michigan
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Chrysler Corporation and consolidated subsidiaries for the
three-month and nine-month periods ended September 30, 1998 and 1997, as
indicated in our report dated October 9, 1998. Because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, is
incorporated by reference in the following Registration Statements:
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
<S> <C> <C>
S-8 33-5588 Chrysler Salaried Employees' Savings Plan
S-8 33-6117 Chrysler Corporation Stock Option Plan
S-3 33-13739 Chrysler Corporation Common Stock deliverable to Selling
stockholder named therein
S-3 33-15716 Chrysler Corporation Common Stock deliverable to Selling
stockholders named therein
S-8 33-15544 Chrysler Corporation Common Stock
(Post-Effective deliverable pursuant to the 1972 and 1980
Amendment No. 1) American Motors Corporation Stock Option Plans
S-3 33-15849 Chrysler Corporation Debt Securities
S-3 33-22233 Chrysler Corporation Common Stock deliverable to Selling
stockholders named therein
S-3 33-39688 Chrysler Corporation Common Stock deliverable to Selling
stockholders named therein
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
REGISTRATION
FORM STATEMENT NO. DESCRIPTION
<S> <C> <C>
S-8 33-47986 Chrysler Corporation 1991 Stock Compensation Plan
S-3 33-59294 Chrysler Corporation Common Stock deliverable to Selling
stockholder named therein
S-8 33-55817 Chrysler Corporation 1991 Stock Compensation Plan
S-3 33-21589 Chrysler Corporation Debt Securities
S-4 333-21849 Chrysler Corporation Debt Securities
S-3 333-64195 Chrysler Corporation Common
Stock deliverable to Selling
Stockholders named therein
</TABLE>
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
Detroit, Michigan
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,963
<SECURITIES> 3,665
<RECEIVABLES> 1,548
<ALLOWANCES> 73
<INVENTORY> 5,979
<CURRENT-ASSETS> 0
<PP&E> 29,756
<DEPRECIATION> 9,936
<TOTAL-ASSETS> 67,736
<CURRENT-LIABILITIES> 0
<BONDS> 11,344
0
0<F2>
<COMMON> 824
<OTHER-SE> 12,378
<TOTAL-LIABILITY-AND-EQUITY> 67,736
<SALES> 45,805
<TOTAL-REVENUES> 48,758
<CGS> 36,642<F1>
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> 942
<INCOME-PRETAX> 4,353
<INCOME-TAX> 1,616
<INCOME-CONTINUING> 2,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,737
<EPS-PRIMARY> 4.23
<EPS-DILUTED> 4.14
<FN>
<F1>Excludes depreciation and special tools amortization and employee retirement
benefits
<F2>Less than $50 thousand
</FN>
</TABLE>
