-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RvuPiHaafnfSg+IjSGEwkn0JtXtd+UjQU8khJUuoBpOrz/GVHGG9fsjYgQdhMuon UWKp3fqi9V5JMihuI6pyLw== 0000950124-97-000176.txt : 19970122 0000950124-97-000176.hdr.sgml : 19970122 ACCESSION NUMBER: 0000950124-97-000176 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970121 SROS: CSX SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRYSLER CORP /DE CENTRAL INDEX KEY: 0000791269 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 382673623 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09161 FILM NUMBER: 97507738 BUSINESS ADDRESS: STREET 1: 1000 CHRYSLER DR STREET 2: CIMS 485 11 51 CITY: AUBURN HILLS STATE: MI ZIP: 48326-2766 BUSINESS PHONE: 8105765741 MAIL ADDRESS: STREET 1: 1000 CHRYSLER DRIVE STREET 2: CIMS 485 11 51 CITY: AUBURN HILLS STATE: MI ZIP: 48326-2766 FORMER COMPANY: FORMER CONFORMED NAME: CHRYSLER HOLDING CORP DATE OF NAME CHANGE: 19860610 10-K 1 FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K -- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9161 CHRYSLER CORPORATION (Exact name of registrant as specified in its charter) STATE OF DELAWARE (State or other jurisdiction of incorporation or organization) 1000 CHRYSLER DRIVE, AUBURN HILLS, MICHIGAN (Address of principal executive offices) 38-2673623 (I.R.S. Employer Identification No.) 48326-2766 (Zip Code) (810) 576-5741 Registrant's telephone number, including area code Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------------------------------ -------------------------- Common Stock, $1.00 par value; New York Stock Exchange Rights to Purchase Junior Participating Chicago Stock Exchange Cumulative Preferred Stock, Pacific Stock Exchange $1.00 par value Philadelphia Stock Exchange 10.95% Debentures Due 2017 New York Stock Exchange 10.40% Notes Due 1999 New York Stock Exchange Auburn Hills Trust Guaranteed Exchangeable Certificates Due 2020 New York Stock Exchange
The Common Stock of the Registrant is listed for trading on the following additional stock exchanges: Montreal Stock Exchange Montreal, Quebec, Canada Toronto Stock Exchange Toronto, Ontario, Canada The Stock Exchange, London London, England Paris Stock Exchange Paris, France Elektronische Borse Schweiz EBS Zurich, Switzerland Frankfurt Stock Exchange Frankfurt, Germany Tokyo Stock Exchange Tokyo, Japan Berlin Stock Exchange Berlin, Germany Munich Stock Exchange Munich, Germany Amsterdam Stock Exchange Amsterdam, Netherlands
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting Common Stock held by nonaffiliates of the registrant was approximately $23.19 billion as of December 31, 1996. The registrant had 702,580,708 shares of Common Stock outstanding as of December 31, 1996. DOCUMENTS INCORPORATED BY REFERENCE Certain information in Chrysler Corporation's definitive Proxy Statement for its 1997 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, is incorporated by reference in Part III (Items 10, 11, 12 and 13) of this Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CHRYSLER CORPORATION FORM 10-K --------- YEAR ENDED DECEMBER 31, 1996 INDEX -----
PAGE NO. -------- PART I. Item 1. Business........................... 3 - 18 Item 2. Properties......................... 18 - 19 Item 3. Legal Proceedings.................. 19 - 21 Item 4. Submission of Matters to a Vote of Security Holders................... 21 Executive Officers of the Registrant(Unnumbered Item) ................................... 22 PART II. Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................ 23 Item 6. Selected Financial Data............ 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 25 - 33 Item 8. Financial Statements and Supplementary Data................. 34 - 70 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 71 PART III. Items 10, 11, 12 and 13. (Incorporated by reference from Chrysler Corporation's definitive Proxy Statement which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year)........ 71 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 71 - 87 SIGNATURES................................................................................. 88 - 89
2 3 PART I ------ ITEM 1. BUSINESS - ---------------- CHRYSLER CORPORATION -------------------- GENERAL ------- Chrysler Corporation was incorporated under the laws of the State of Delaware on March 4, 1986, and is the surviving corporation following mergers with a number of its operating subsidiaries, including Chrysler Motors Corporation which was originally incorporated in 1925. Chrysler Corporation and its consolidated subsidiaries ("Chrysler") operate in two principal industry segments: Automotive Operations and Financial Services. Automotive Operations include the research, design, manufacture, assembly and sale of cars, trucks and related parts and accessories. Substantially all of Chrysler's automotive products are marketed through retail dealerships, most of which are privately owned and financed. Financial Services include the operations of Chrysler Financial Corporation and its consolidated subsidiaries ("CFC"), which are engaged principally in providing consumer and dealer automotive financing for Chrysler's products. Chrysler also participates in short-term vehicle rental activities through certain of its subsidiaries (the "Car Rental Operations"). Chrysler's principal executive offices are located at Chrysler World Headquarters, 1000 Chrysler Drive, Auburn Hills, Michigan 48326-2766. The telephone number of those offices is (810) 576-5741. AUTOMOTIVE OPERATIONS --------------------- Chrysler manufactures, assembles and sells cars and trucks under the brand names Chrysler, Dodge, Plymouth, Eagle and Jeep(R), and related automotive parts and accessories, primarily in the United States, Canada and Mexico ("North America"). Passenger cars are offered in various size classes and models. Chrysler produces trucks in pickup, sport-utility and van/wagon models, which constitute the largest segments of the truck market. Chrysler also purchases and distributes certain passenger cars manufactured in the United States by Mitsubishi Motors Corporation's ("MMC") subsidiary, Mitsubishi Motors Manufacturing of America ("MMMA"). Although Chrysler currently sells most of its vehicles in North America, Chrysler also participates in other international markets through its wholly owned subsidiaries in Argentina, Brazil, Taiwan, Korea, Italy, France and Venezuela, a majority-owned distributor in Japan, a joint venture in Austria, and through minority-owned affiliates located in China, Egypt and Thailand. Chrysler sells vehicles and parts, and provides related services, to independent distributors and dealers in various other markets throughout the world. Chrysler's strategy is to focus on its core automotive business. As part of this strategy, in 1996, Chrysler sold Electrospace Systems, Inc. and Chrysler Technologies Airborne Systems, Inc., which were principally engaged in the manufacture of defense electronics and aircraft modification, respectively, and represented substantially all of the operations of Chrysler Technologies Corporation ("CTC"), a wholly owned subsidiary of Chrysler. Also in 1996, Chrysler entered into an agreement to sell Pentastar Electronics, Inc. ("PEI"), which produces automatic test equipment for military applications and represented the remaining operations of CTC. The sale of PEI was completed on January 10, 1997. During the past several years, Chrysler has sold other such assets and businesses which were not related to its core automotive business, and is exploring the sale of other non-core assets and businesses in the near term. NORTH AMERICAN OPERATIONS - ------------------------- The automotive industry in North America is highly competitive with respect to a number of factors, including vehicle quality, pricing, development and introduction time, appearance, size, special options, distribution organization, warranties, reliability, safety, fuel economy, dealer service and financing terms. As a result, Chrysler's ability to increase vehicle prices and to use retail sales incentives effectively is significantly 3 4 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- NORTH AMERICAN OPERATIONS -- CONTINUED - -------------------------------------- affected by the pricing actions and sales programs of its principal competitors. Moreover, the introduction of new products by other manufacturers may adversely affect the market shares of competing products made by Chrysler. Recently, Chrysler has been very successful in bringing new products to market in greatly reduced vehicle development time. However, several of Chrysler's competitors have larger worldwide sales volumes and greater financial resources, which may, over time, place Chrysler at a competitive disadvantage in responding to its competitors' offerings, substantial changes in consumer preferences, governmental regulations, or adverse economic conditions in North America. Chrysler's long-term profitability will depend significantly on its ability to continue its capital expenditure and vehicle development programs and to market its products successfully in an increasingly competitive environment. The success of Chrysler's new vehicles will depend on a number of factors, including general economic conditions, competition, consumer acceptance, product quality, new product development, the effect of governmental regulation and the strength of Chrysler's marketing and dealer networks. As both Chrysler and its competitors plan to introduce new products, Chrysler cannot predict the market shares its new products will achieve. Moreover, Chrysler is substantially committed to its product plans and would be adversely affected by events requiring a major shift in product development. Chrysler's principal competitors in North America are General Motors Corporation and Ford Motor Company. In addition, a number of foreign automotive companies, principally Toyota Motor Corporation, Honda Motor Co., Ltd. and Nissan Motor Co., Ltd., own and operate manufacturing and/or assembly facilities in North America ("transplants"), and there are a number of other foreign manufacturers that distribute automobiles and light-duty trucks in North America. 4 5 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- UNITED STATES - -------------- The tables below set forth comparative market share data for retail sales of cars and trucks in the United States for the major manufacturers (including cars and trucks imported by them) and for foreign-based manufacturers, and unit sales of passenger cars and trucks (including imports) by Chrysler.
YEAR ENDED DECEMBER 31 --------------------------------------------- 1996 1995 1994 1993 1992 ----- ----- ----- ----- ----- (PERCENT OF TOTAL INDUSTRY) U.S. Car Market Share(1): - ------------------------- U.S. Manufacturers (Including Imports): General Motors................................. 32.3% 33.9% 34.0% 34.1% 34.6% Ford........................................... 20.3 20.7 21.6 22.1 21.6 Chrysler....................................... 9.8 9.1 9.0 9.8 8.3 ----- ----- ----- ----- ----- Total U.S. Manufacturers..................... 62.4 63.7 64.6 66.0 64.5 Foreign-Based Manufacturers(2): Japanese....................................... 30.1 29.7 29.5 29.1 30.1 All Other...................................... 7.5 6.6 5.9 4.9 5.4 ----- ----- ----- ----- ----- Total Foreign-Based Manufacturers............ 37.6 36.3 35.4 34.0 35.5 ----- ----- ----- ----- ----- Total..................................... 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== ===== U.S. Truck Market Share(1)(3): - ------------------------------ U.S. Manufacturers (Including Imports): General Motors................................. 29.0% 29.9% 30.9% 31.4% 32.2% Ford........................................... 31.0 31.9 30.1 30.5 29.7 Chrysler....................................... 23.3 21.3 21.7 21.4 21.1 All Other...................................... 1.9 2.0 2.0 1.9 1.8 ----- ----- ----- ----- ----- Total U.S. Manufacturers..................... 85.2 85.1 84.7 85.2 84.8 Foreign-Based Manufacturers(2): Japanese....................................... 12.8 12.7 13.5 13.2 13.9 All Other...................................... 2.0 2.2 1.8 1.6 1.3 ----- ----- ----- ----- ----- Total Foreign-Based Manufacturers............ 14.8 14.9 15.3 14.8 15.2 ----- ----- ----- ----- ----- Total..................................... 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
(IN THOUSANDS OF UNITS) Unit Sales(1): - -------------- U.S. Industry Retail Sales: Cars........................................... 8,527 8,635 8,990 8,518 8,214 Trucks(3)...................................... 6,929 6,481 6,421 5,681 4,904 ------ ------ ------ ------ ------ Total..................................... 15,456 15,116 15,411 14,199 13,118 ====== ====== ====== ====== ====== Chrysler U.S. Retail Sales (Including Fleet): Cars........................................... 833 786 812 834 680 Trucks(3)...................................... 1,618 1,378 1,392 1,214 1,033 ------ ------ ------ ------ ------ Total..................................... 2,451 2,164 2,204 2,048 1,713 ====== ====== ====== ====== ======
- ------------------------- (1) All U.S. retail sales data are based on publicly available information on manufacturers from the American Automobile Manufacturers Association and data on foreign company imports from Ward's Automotive Reports, a trade publication. (2) "Foreign-Based Manufacturers" include imports and vehicles assembled and sold in the United States by foreign companies. (3) U.S. truck retail sales and market share includes minivans. 5 6 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- UNITED STATES -- CONTINUED - -------------------------- Competition from foreign car and truck manufacturers, in the form of both exports to the United States and sales by transplants, is substantial. The market share for passenger cars sold in the United States (including transplants) by foreign-based manufacturers was 37.6 percent in 1996, compared to 36.3 percent in 1995. The market share for trucks sold in the United States (including transplants) by foreign-based manufacturers was 14.8 percent in 1996, compared to 14.9 percent in 1995. Vehicles assembled in the United States by Japanese manufacturers have significantly contributed to the market share obtained by foreign-based manufacturers. Japanese transplant sales accounted for approximately 21.8 percent of the U.S. passenger car market and 5.3 percent of the U.S. truck market in 1996, compared to 18.5 percent and 5.3 percent, respectively, in 1995. Chrysler's vehicle shipments in the United States in 1996 were 2,445,820 units, which represent 83 percent of Chrysler's 1996 worldwide shipments of 2,958,800 units. Chrysler's vehicle shipments in the United States in 1995 were 2,209,202 units, which represent 83 percent of Chrysler's 1995 worldwide shipments of 2,673,539 units. CHRYSLER CANADA LTD. - -------------------- Chrysler's consolidated subsidiary, Chrysler Canada Ltd. ("Chrysler Canada"), operates manufacturing and assembly facilities and sales and distribution networks in Canada. Chrysler Canada, whose operations are substantially integrated with Chrysler's U.S. operations, manufactures components and assembles minivans, large sedans, and full-size vans. In 1996 and 1995, Chrysler Canada shipped 690,948 and 540,493 vehicles, respectively, the majority of which were sold outside of Canada. Chrysler Canada's retail sales totaled 239,514 vehicles in 1996 and 225,122 vehicles in 1995, the majority of which were manufactured outside of Canada. Chrysler Canada's retail unit sales of cars accounted for 13.1 percent and 14.6 percent of the Canadian car market in 1996 and 1995, respectively. In 1996, retail unit sales of trucks accounted for 28.2 percent of the Canadian truck market compared with 25.8 percent in 1995. In 1996, Chrysler Canada ranked third in the Canadian industry in retail unit sales for both cars and trucks. CHRYSLER DE MEXICO S.A. - ----------------------- Chrysler's consolidated subsidiary, Chrysler de Mexico S.A. ("Chrysler Mexico"), operates manufacturing and assembly facilities in Mexico, producing vehicles and components for both Mexican and export markets. In addition, Chrysler Mexico provides certain major automobile components to Chrysler, including engines, transmissions and air conditioning condensers. Chrysler Mexico shipped 359,444 vehicles in 1996 and 207,004 vehicles in 1995. Of these totals, 36,283 vehicles and 26,503 vehicles were sold in Mexico in 1996 and 1995, respectively. Sales of vehicles exported to Mexico were 17,221 vehicles and 6,565 vehicles in 1996 and 1995, respectively. Chrysler Mexico's retail vehicle sales accounted for 14.4 percent of the Mexican car market and 20.1 percent of the Mexican truck market in 1996, compared with 14.5 percent and 17.7 percent, respectively, in 1995. Within the Mexican industry, Chrysler Mexico's retail unit sales ranked fifth in cars and third in trucks in 1996. Retail industry sales in Mexico are estimated to have been approximately 330,500 units in 1996, 232,600 units in 1995 and 618,900 in 1994. The decrease in retail industry sales in 1996 and 1995, compared with 1994, was primarily attributable to unfavorable economic conditions in Mexico, commencing with the devaluation of the Mexican peso in December 1994. Although Chrysler expects the economic conditions in Mexico to continue to improve in 1997, Chrysler cannot predict when Mexican automotive industry sales will return to predevaluation levels. Chrysler's operating results, when compared to operating 6 7 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- CHRYSLER DE MEXICO S.A. -- CONTINUED - ------------------------------------ results prior to the devaluation of the peso, will continue to be adversely affected to the extent that the unfavorable economic conditions in Mexico continue. INTERNATIONAL OPERATIONS - ------------------------ Outside of North America, the automotive industry consists of numerous manufacturers, with no single dominant producer. However, certain manufacturers account for a majority of total vehicle sales within specific countries. Many of the factors that impact sales volumes and profitability in the North American automotive market are also prevalent outside of North America. Chrysler shipments to markets outside of North America in 1996 were 187,057 units, an increase of 19,677 units or 12 percent from 1995. Retail sales in European markets in 1996 were 102,139 units, compared to 84,585 units in 1995. Retail sales in other world markets, primarily Japan, Taiwan and the Middle East, in 1996, were 119,896 units compared to 101,349 units in 1995. In addition, Chrysler exported 36,600 kits to worldwide affiliates for assembly in 1996, compared to 40,892 kits in 1995. The majority of the kits were Jeep products shipped to China, Indonesia and Venezuela. Chrysler's international operations are divided primarily into three regions: Europe, Asia/Pacific, and Latin America/Middle East/Africa. EUROPE - ------ Outside of North America, Europe is the largest market for the sale of Chrysler vehicles. Chrysler's automotive operations in Europe consist primarily of manufacturing operations in Austria, where Jeep Grand Cherokees are assembled under an assembly contract with Steyr-Daimler-Puch Fahrzeugtechnik ("Steyr") and Chrysler Voyagers are assembled by Eurostar Automobilwerk Ges.mb.H & Co. KG ("Eurostar"), a joint venture between Chrysler and Steyr. Chrysler vehicles assembled in Austria are both sold in Europe and exported to other markets. Chrysler also exports finished vehicles produced in North America to independent distributors and to wholly owned distribution companies in Italy and France. During 1996, Chrysler established its wholly owned distribution companies in Italy and France and a European Headquarters Office in Brussels, Belgium. ASIA/PACIFIC - ------------ Chrysler's automotive operations in the Asia/Pacific region include the assembly in China of Jeep Cherokees for distribution in China by Beijing Jeep Corporation, Ltd., a minority-owned joint venture. In addition, Chrysler has agreements for the assembly of right-hand-drive Jeep vehicles in Malaysia, Indonesia and Thailand. Chrysler sells vehicles in this region through wholly owned distributors in Taiwan and Korea, a majority-owned distributor in Japan, a joint-venture in Thailand and independent distributors and dealers. LATIN AMERICA/MIDDLE EAST/AFRICA - -------------------------------- Chrysler's operations in the Latin America/Middle East/Africa region include manufacturing facilities in Venezuela, where Chrysler Neons and Jeep Cherokees and Grand Cherokees are assembled, and wholly owned distribution companies in Brazil, Argentina and Venezuela. Chrysler also has a minority interest in a company with assembly facilities in Egypt. Chrysler sells vehicles in this region through its wholly owned distribution companies and through independent distributors and dealers. During 1996, Chrysler began construction of a manufacturing facility in Argentina, where Jeep Cherokees and Grand Cherokees will be assembled beginning in 1997 for sale in South America. In addition, in January 1997, Chrysler entered into an agreement to form a joint venture with Bayerische Motoren Werke ("BMW") to manufacture a small 7 8 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- INTERNATIONAL OPERATIONS -- CONTINUED - ------------------------------------- LATIN/AMERICA/MIDDLE EAST/AFRICA -- CONTINUED - --------------------------------------------- gasoline engine for use in vehicles of both Chrysler and a subsidiary of BMW. Also, in 1997, Chrysler will begin construction of a manufacturing facility in Brazil, where Dodge Dakota pickup trucks will be assembled. INTERNATIONAL STRATEGY - ---------------------- Chrysler's international expansion strategy is based primarily on the integration of international and North American product development which enables Chrysler to satisfy market demands for right-hand-drive versions shortly after left-hand-drive versions debut in the U.S. At the end of 1996, five right-hand-drive models (Chrysler Neon and Voyager, and Jeep Cherokee, Grand Cherokee and Wrangler) were available for sale in certain international markets. Also as part of its international expansion strategy, Chrysler expects to continue to focus on growth opportunities in major markets in Western Europe, Japan and China and explore developing markets in South America, Eastern Europe and the Asia-Pacific region. New manufacturing and joint venture operations could be established if market conditions, sales levels and profitability opportunities are consistent with Chrysler's corporate objectives. Although it sells products and sources components internationally, Chrysler presently does not have significant risks related to changes in currency exchange rates because its business is primarily conducted in the United States. When Chrysler sells vehicles or purchases components outside the United States, transactions are frequently denominated in currencies other than U.S. dollars. The primary foreign currencies in which Chrysler conducts such transactions are the German mark, French franc, Japanese yen, Canadian dollar, Mexican peso, Taiwan dollar, Austrian schilling, British pound, Spanish peseta, Italian lira, Swiss franc, Dutch guilder and Belgian franc. To the extent possible, sales and purchases in specific currencies are offset against each other. In addition, Chrysler periodically initiates hedging activities by entering into currency exchange agreements, consisting primarily of currency forward contracts and purchased currency options, to minimize revenue and cost variations which could result from fluctuations in currency exchange rates. Chrysler also utilizes written currency options to effectively close out existing purchased currency options. At December 31, 1996, Chrysler had currency exchange agreements for the following primary foreign currencies: German mark, French franc, Japanese yen, British pound, Swiss franc, Dutch guilder and Belgian franc. Chrysler's operating results are affected by changes in currency exchange rates during the period in which transactions are executed, to the extent that hedge coverage does not exist. However, the impact of any changes in currency exchange rates on unhedged transactions is not expected to be material to Chrysler's operating results or financial position. Chrysler does not use derivative financial instruments for trading purposes. Chrysler's hedging activities are based upon purchases and sales which are exposed to foreign currency risk. The currency exchange agreements which provide hedge coverage typically mature within three years of origination, consistent with the underlying purchase or sales commitment. These hedging instruments are periodically modified as existing commitments are fulfilled and new commitments are made. Chrysler's management believes that its hedging activities have been effective in reducing Chrysler's limited risks related to currency exchange fluctuations. SEGMENT INFORMATION - ------------------- Industry segment and geographic area data for 1996, 1995 and 1994 are summarized in Part II, Item 8, Notes to Consolidated Financial Statements, Note 19. SEASONAL NATURE OF BUSINESS - --------------------------- Reflecting retail sales fluctuations of a seasonal nature, production varies from month to month in the automotive business. In addition, the changeover period related to model-year introductions has traditionally 8 9 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- SEASONAL NATURE OF BUSINESS -- CONTINUED - ---------------------------------------- occurred in the third quarter of each year. Accordingly, third-quarter operating results are generally less favorable than those in the other quarters of the year. AUTOMOTIVE PRODUCT INTRODUCTIONS - -------------------------------- Chrysler's automotive design and development activities are organized into cross-functional product development groups called "platform teams." The platform team system is designed to improve communications, reduce the design and development time of new vehicles, improve product quality, and reduce the cost of developing new vehicle lines. The platform team concept has contributed significantly to Chrysler's success in recent years. For the 1996 model year, the Chrysler Sebring convertible, which utilizes "cab-forward" styling in a convertible model, was added to Chrysler's product lineup. This two-door coupe competes in the mid-specialty segment. Despite its classification as a truck, the Dodge Caravan, which was introduced in 1995, was named the Motor Trend Car of the Year in 1996. Chrysler held 46.8 percent and 42.1 percent of the U.S. minivan segment in 1996 and 1995, respectively. In spite of increased competition in this segment, retail sales of Chrysler minivans in the United States were 538,807 in 1996, compared to 493,997 in 1995. In January 1996, Chrysler announced its intent to produce the Plymouth Prowler convertible as a 1997 1/2 model unique to the Plymouth brand. The Prowler draws on the heritage of "street rods" for its retro-styling cues, but offers all the technology and customer convenience of a 1990s production car. As a small volume niche vehicle, the Prowler will serve as a technology test bed for aluminum body and chassis applications. Chrysler began production of a substantially redesigned Jeep Wrangler in January 1996. It includes an all-new suspension, front and rear, an all-new interior with an integrated instrument panel, and improved front and rear passenger accommodations, while maintaining Wrangler's traditional exterior styling and rugged appearance. Also included are driver and passenger airbags. The Wrangler was named 4-Wheel & Off-Road magazine's 1997 4X4 of the Year. In March 1996, Chrysler launched the new Viper GTS, a coupe version of the original Viper roadster which was the first vehicle developed under Chrysler's platform team system. In July 1996, Chrysler began production of a major renewal of the Dodge Dakota pickup truck featuring an all-new frame and chassis. The Dakota received Off-Road magazine's 1997 Truck of the Year award and Four Wheeler magazine's 1997 Pickup Truck of the Year award. For the 1998 model year, Chrysler intends to introduce a completely redesigned Chrysler Concorde and Dodge Intrepid as successor models to the cars that began Chrysler's distinctive "cab-forward" passenger car designs. No major body components are carried over from the previous models, and virtually no exterior sheet metal, instrument panels, or major interior trim are shared between the two cars. Also new for the 1998 model year is the Dodge Durango, a compact sport-utility vehicle. The Durango is the first compact sport-utility vehicle to offer optional eight-passenger seating. AUTOMOTIVE MARKETING - -------------------- New passenger cars and trucks are sold at retail by dealers who have sales and service agreements with Chrysler. The dealers purchase cars, trucks, parts and accessories from Chrysler for sale to retail customers. In the United States, Chrysler had 4,612 dealers at December 31, 1996, compared with 4,652 at December 31, 1995. Chrysler Canada had 598 dealers at December 31, 1996, compared with 609 dealers at December 31, 1995. 9 10 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- AUTOMOTIVE MARKETING -- CONTINUED - --------------------------------- The quality and strength of Chrysler's dealer organization will have an important impact on future sales. Chrysler maintains programs to provide dealership operating capital through equity investments where sufficient private capital is not available. The programs anticipate that the dealer receiving such assistance will eventually use its share of the dealership profits to purchase Chrysler's equity investment. Chrysler's equity interest in U.S. and Canadian dealerships totaled $17 million in 43 dealerships as of December 31, 1996, compared with $22 million in 51 dealerships as of December 31, 1995. Chrysler continues to focus on quality customer service. A customer satisfaction survey process provides Chrysler and its franchised dealers continuous customer feedback regarding dealer sales, service and parts operations. In addition, the Chrysler Customer Center is designed to promote customer satisfaction and communicate customer concerns to dealers and internally to vehicle platform teams. MANUFACTURED AND PURCHASED PRODUCTS, COMPONENTS AND MATERIALS - ------------------------------------------------------------- Chrysler continues to focus on its core automotive business. Chrysler manufactures most of its requirements for engines, transmissions and transaxles, certain body stampings, electronic components, and fabricated glass parts. Chrysler purchases materials, parts and other components from numerous unaffiliated suppliers. Chrysler used approximately 1,050 suppliers of productive materials in 1996, compared to approximately 1,150 used in 1995. Interruptions in production or delivery of these productive materials could adversely affect Chrysler. Chrysler purchases a larger portion of its productive materials from unaffiliated suppliers than do its principal competitors and expects to continue purchasing its requirements for these items rather than manufacturing them. MITSUBISHI MOTORS CORPORATION - ----------------------------- As a result of relatively low sales volumes in recent years, Chrysler and Mitsubishi Motors Corporation ("MMC") agreed in 1996 to terminate the United States Distribution Agreement ("USDA") under which Chrysler imported and distributed selected models of passenger cars manufactured by MMC in Japan. A similar distribution agreement covering the Canadian market was also terminated in 1996. During 1996 and 1995, Chrysler sold 4,692 and 14,823 MMC-manufactured vehicles in the United States, respectively, representing less than one percent of Chrysler's U.S. retail vehicle sales in each year. Chrysler will continue to purchase 2.5-liter and 3.0-liter V-6 engines from MMC for use in certain minivans and other vehicles through the 1999 model year. Chrysler purchased approximately 308,000 such engines during 1996, compared to 372,000 engines in 1995. Mitsubishi Motors Manufacturing of America ("MMMA") produces small sporty cars in the United States for Chrysler and Mitsubishi Motor Sales of America. Pursuant to a distribution agreement that terminates in July 1999, Chrysler retains the right to purchase vehicles up to a specific maximum allocation that has been agreed to by the parties for each model year. In addition, Chrysler will provide engines and transmissions for use in certain MMMA vehicles. Chrysler's sales of MMMA-manufactured vehicles in 1996 and 1995 represented 3.3 and 3.7 percent, respectively, of Chrysler's U.S. retail vehicle sales volume in each period. Chrysler previously owned an equity interest in both MMC and MMMA. Chrysler sold its 50 percent interest in MMMA to MMC, its partner in the joint venture, in October 1991. Chrysler subsequently sold its equity interest in MMC in 1992 and 1993. 10 11 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- GOVERNMENT REGULATION - --------------------- Various governmental standards and regulations relating to emissions controls, fuel economy, safety and recalls are applicable to new motor vehicles, engines and equipment manufactured for sale in the United States, Canada, Europe and other countries. In addition, Chrysler's assembly, manufacturing and other operations are subject to substantial environmental regulation. VEHICLE REGULATION - ------------------ Fuel economy, safety and emissions regulations and standards applicable to motor vehicles have been issued from time to time under a number of federal statutes, including the National Traffic and Motor Vehicle Safety Act of 1966 (the "Safety Act"), the Clean Air Act, Titles I and V of the Motor Vehicle Information and Cost Savings Act and the Noise Control Act of 1972. In addition, the State of California has promulgated exhaust emission standards, some of which are more stringent than the federal standards. Other states that have areas with air quality problems are permitted, under the Clean Air Act, to adopt vehicle emissions standards identical to those adopted by the State of California. The States of New York, Massachusetts, Connecticut, Maine, Rhode Island and New Jersey have adopted California standards with various effective dates, and a few other states are considering similar action. Federal courts have generally upheld New York and Massachusetts' adoption of the California standards. Vehicle Emissions Standards Under the Clean Air Act, auto manufacturers are required, among other things, to significantly reduce emissions from automobiles and light trucks and are obligated to recall vehicles for failure to meet emission standards for a period of ten years or 100,000 miles, whichever occurs first. The Clean Air Act also requires full implementation of on-board diagnostic systems ("OBD") on 1996 model year light-duty vehicles. California has its own OBD requirements which are more stringent than the federal requirements. The Clean Air Act imposes standards for model years through 2003 that require further significant reductions in motor vehicle emissions and directs the U.S. Environmental Protection Agency ("EPA") to study the need for much more stringent emissions standards beginning as early as the 2004 model year. Recently, the EPA reviewed the federal test procedure used to measure vehicle tailpipe emissions and has imposed additional test requirements that increase both the stringency of the test and the related standard. Chrysler is actively pursuing the development of flexible fuel vehicles capable of operating on both gasoline and either methanol or ethanol blend fuels, as well as the development of vehicles capable of operating on compressed natural gas, liquid petroleum gas or electricity. The California Air Resources Board ("CARB") has received federal approval, pursuant to the Clean Air Act, for its Low Emission Vehicle Program for a series of passenger car and light truck emission standards that are more stringent than those prescribed by the Clean Air Act for the corresponding periods of time. These California standards are intended to promote the development of various classes of low-emission vehicles. Included in this program was a requirement that a specified percentage of each manufacturer's California light-duty production volume, beginning at two percent in 1998 and increasing to ten percent in 2003, be zero-emission vehicles ("ZEVs") that produce no tailpipe or evaporative emissions of regulated pollutants. On March 29, 1996, the CARB repealed the ZEV mandate for model years 1998 - 2002. Chrysler and six other major vehicle manufacturers have entered into a voluntary agreement with the CARB involving market-based action, continued research and development on ZEVs, and a ZEV demonstration program in California through the 2002 model year. Chrysler also has entered into a consortium of vehicle manufacturers, electric utilities and the U.S. Department of Energy to develop new battery technology for use in electric vehicles which would qualify as ZEVs and has built a limited number of experimental prototype electric vehicles using existing advanced battery technology. Development of an electric vehicle that meets consumer demands and is commercially viable will require further intensive research. Electric vehicles using current 11 12 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ----------------------------------- GOVERNMENT REGULATION -- CONTINUED - ---------------------------------- VEHICLE REGULATION -- CONTINUED - ------------------------------- Vehicle Emissions Standards -- Continued lead-acid battery technology would have a range of less than 100 miles under optimal conditions and a greatly reduced range in lower temperatures, require a recharge time of up to eight hours, lack substantial infrastructure support for battery recharging and cost significantly more than conventional vehicles. On December 19, 1994, the Administrator of the EPA responded to a petition filed by the Ozone Transport Commission ("OTC"), a group of 12 Northeast states and the District of Columbia. The response held that the states comprising the OTC must either adopt the California vehicle emissions standards or a 49 state program advocated by the American Automobile Manufacturers Association ("AAMA") (of which Chrysler is a member) and the Association of International Automobile Manufacturers ("AIAM"). The Administrator's decision does not require the states that adopt California's general vehicle emission standards to adopt California's ZEV requirement, but permits the states to adopt the ZEV requirement if they elect to do so. Only New York and Massachusetts have unconditionally adopted the California ZEV requirements, although Maine has also adopted the ZEV requirements subject to conditions which have not yet been met. The EPA issued a Notice of Proposed Rulemaking on October 10, 1995, detailing a voluntary 49 state National Low Emission Vehicle ("NLEV") Program which might form the basis of a 49 state program of the type advocated by AAMA and AIAM. Negotiations relating to the NLEV program are ongoing. Canada, Mexico, countries comprising the European Union and other countries also have vehicle emissions standards. In Canada, vehicle emissions standards generally parallel U.S. standards, whereas in Mexico the standards are generally less stringent than U.S. standards. However, it is likely that more stringent standards paralleling U.S. or California vehicle emissions standards will be adopted in Mexico in the future. In the European Union and other countries, vehicle emissions standards are generally no more restrictive than U.S. standards. Vehicle Fuel Economy The Motor Vehicle Information and Cost Savings Act, as amended by the Energy Policy and Conservation Act, requires vehicle manufacturers to provide vehicles that comply with federally mandated Corporate Average Fuel Economy ("CAFE") standards. Under this Act, a manufacturer earns credits for exceeding the applicable fuel economy standards; however, fuel economy credits earned on cars may not be used for trucks. Failure to meet the average fleet fuel economy standards can result in the imposition of penalties unless a manufacturer has sufficient fuel economy credits from the preceding three years or projects that it will generate sufficient credits over the succeeding three years. Chrysler is in substantial compliance with passenger car CAFE requirements and anticipates continued compliance with such requirements. Chrysler anticipates compliance with light-duty truck CAFE through the use of carryback and carryforward credits. A substantial increase in demand for larger light-duty trucks could jeopardize Chrysler's ability to comply with light-duty truck CAFE and require Chrysler to take additional steps to assure compliance. In addition, the Energy Tax Act of 1978 imposes a graduated "Gas Guzzler" tax on automobiles with a fuel economy rating below specified levels. Chrysler cannot control or predict with certainty, its ability to meet increased CAFE standards, as such standards are contingent upon various future economic, legislative and regulatory factors. If Chrysler could not meet new CAFE standards, it would be subject to sizeable civil penalties and could result in the closure of plants and a restriction in product offerings to remain in compliance. From time to time there have been federal legislative and administrative initiatives that would increase CAFE standards from their current levels. In addition, the National Highway Traffic Safety Administration 12 13 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- GOVERNMENT REGULATION -- CONTINUED - ---------------------------------- VEHICLE REGULATION -- CONTINUED - ------------------------------- Vehicle Fuel Economy -- Continued ("NHTSA") has initiated rulemaking to set more stringent light truck CAFE standards through the 2006 model years. The current global climate change or global warming debate is providing an impetus to more stringent CAFE standards. The U.S. government is developing policy options to reduce greenhouse gases. These options may include more stringent CAFE standards, as well as other options that may adversely impact the auto industry. A significant increase in CAFE requirements would be costly to Chrysler and could result in significant restrictions on the products Chrysler offers. Vehicle Safety Under the Safety Act, NHTSA is required to establish federal motor vehicle safety standards that are practicable, meet the need for motor vehicle safety and are stated in objective terms. NHTSA has announced its intention to upgrade certain existing standards and to establish additional standards in the future. Chrysler expects to be able to comply with those standards. In Canada, safety standards generally parallel U.S. standards. While European safety standards vary from U.S. standards, Chrysler does not anticipate any compliance problems. Vehicle Recalls Under the Clean Air Act, the EPA may require manufacturers to recall and repair vehicles that fail to meet emission standards established under that Act. Similarly, the Act authorizes the State of California to require recalls for vehicles that fail to meet its emissions standards. The Safety Act authorizes NHTSA to investigate reported vehicle problems and to order a recall if it determines that a safety-related defect exists. NHTSA conducted an engineering analysis of the rear liftgate latches in Chrysler's minivans built during the 1984-1995 model years (approximately four million vehicles) as a result of allegations that some latches open during collisions. On October 25, 1995, NHTSA closed this investigation and announced that it was satisfied with Chrysler's voluntary service action to replace the latches in these minivans. Chrysler began its latch replacement service action in September 1995 and expects to complete it by mid-1997. Chrysler also agreed to recall approximately 360,000 vehicles for diagnosis and repair, if necessary, of antilock brake systems ("ABS"). The vehicles included are certain 1991 through 1993 minivans, 1990 through 1993 Dodge Dynasty, Chrysler New Yorker and Imperial models and 1989 through 1991 Jeep Cherokee and Wagoneer models. Under certain conditions the ABS function can be lost and reduced power assist may be experienced. The recall is expected to be completed in 1997. NHTSA has filed a lawsuit in the U.S. District Court for the District of Columbia to compel Chrysler to recall approximately 90,000 Cirrus and Stratus vehicles built during the 1995 model year. NHTSA has alleged that these vehicles failed the agency's compliance testing under Standard 210 which sets the strength requirements for rear seat belt assembly anchorages. Chrysler believes that the anchors satisfy the standard and that NHTSA tested the vehicles in a manner that is not specified in its regulations or test procedures. A decision is expected in the third quarter of 1997. An increase in the incidence of air bag related fatalities in low speed crashes, particularly among small children, has prompted NHTSA to propose changes in the occupant crash protection safety standards. In December 1996, NHTSA issued a Notice of Proposed Rulemaking that would permit manufacturers to depower all air bags in current vehicles and future production so that they "inflate less aggressively", thereby 13 14 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- GOVERNMENT REGULATION -- CONTINUED - ---------------------------------- VEHICLE REGULATION -- CONTINUED - ------------------------------- Vehicle Recalls -- Continued reducing the likelihood of injury. Both houses of Congress have also held hearings to consider legislative solutions to the problem. Chrysler is actively participating in these proceedings and providing technical support in an effort to develop promptly the most effective means of promoting the safe use of passive restraints. In addition, Chrysler has provided the owners of all of its air bag equipped vehicles with advice on avoiding air bag injury, including reference to seat belt usage and proper seating locations for children. Further, Chrysler has undertaken a separate educational campaign directed at child-care providers and elementary school teachers and their students. Chrysler's emissions and safety-related recall costs vary widely from year to year, and could be significant in future periods, depending on the corrective action required to remedy a particular condition and the number of vehicles involved. STATIONARY SOURCE REGULATION - ---------------------------- Chrysler's assembly, manufacturing and other operations are subject to substantial environmental regulation under the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Pollution Prevention Act of 1990 and the Toxic Substances Control Act, as well as a substantial volume of state legislation paralleling and, in some cases, imposing more stringent obligations than the federal requirements. These regulations impose severe restrictions on air and water-born discharges of pollution from Chrysler facilities, the handling of hazardous materials at Chrysler facilities and the disposal of wastes from Chrysler operations. Chrysler is faced with many similar requirements in its operations in Europe and Canada and is facing increased governmental regulation and environmental enforcement in Mexico. While Chrysler is unable to predict the exact level of expenditures that will be required to develop and implement new technology in its facilities, since federal and state requirements are not fully defined, Chrysler expects its capital requirements for the period 1997 through 2001 will be approximately $450 million. Of this total, Chrysler estimates that approximately $75 million will be spent in 1997 and approximately $95 million in 1998. Substantially all of these expenditures are included in Chrysler's planned disbursements for new product development and the acquisition of productive assets over the 1997 to 2001 period. In addition, the extensive federal-state permit program established by the Clean Air Act may reduce operational flexibility and cause delays in upgrading Chrysler's production facilities in the United States. Clean Air Act Pursuant to the Clean Air Act, states are required to amend their implementation plans to require more stringent limitations and other controls on the quantity of pollutants which may be emitted into the atmosphere to achieve national ambient air quality standards established by the EPA. In addition, the Clean Air Act requires reduced emissions of substances that are classified as hazardous, toxic or that contribute to acid deposition, imposes comprehensive permit requirements for manufacturing facilities in addition to those required by various states, and expands federal authority to impose severe penalties and criminal sanctions. The Clean Air Act also allows states to adopt standards more stringent than those required by the Act. Most recent reports filed with the EPA pursuant to the Superfund Amendments and Reauthorization Act of 1986 indicate that, for calendar year 1995, releases and emissions of chemicals and toxins by Chrysler were reduced 14 15 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- GOVERNMENT REGULATION -- CONTINUED - ---------------------------------- STATIONARY SOURCE REGULATION -- CONTINUED - ----------------------------------------- Clean Air Act -- Continued by more than 80 percent from comparable 1987 levels, even though vehicle production increased more than four percent during this period. The EPA has undertaken review of the National Ambient Air Quality Standards for Ozone and Particulate Matter. The EPA is expected to increase the stringency of both standards and further define strategies needed to attain the new standards. Increased pressure to further control emissions from motor vehicles and manufacturing facilities is expected. Implementation is likely to occur over the next several years. Environmental Matters The EPA and various state agencies have notified Chrysler that it may be a potentially responsible party ("PRP") for the cost of cleaning up hazardous waste storage or disposal facilities pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and other federal and state environmental laws. A number of lawsuits allege that Chrysler violated CERCLA or other environmental laws and seek to recover costs associated with remedial action. In most instances, Chrysler is only one of a number of PRPs who may be found to be jointly and severally liable for remediation costs at the 107 sites involved in the foregoing matters at December 31, 1996. Chrysler may also incur remediation costs at an additional 44 of its active or deactivated facilities. Chrysler's reserves for these environmental matters totaled $238 million and $271 million as of December 31, 1996 and 1995, respectively. Chrysler periodically evaluates and revises estimates for environmental liabilities based on expenditures against established reserves and the availability of additional information. Estimates of future costs of such environmental matters are necessarily imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which Chrysler may have remediation responsibility and the apportionment and collectibility of remediation costs among responsible parties. Chrysler establishes reserves for these environmental matters when the loss is probable and reasonably estimable. It is reasonably possible that final resolution of some of these matters may require Chrysler to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although the final resolution of any such matters could have a material effect on Chrysler's consolidated operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, Chrysler believes that any resulting adjustment should not materially affect its consolidated financial position. FINANCIAL SERVICES ------------------ CFC, Chrysler's wholly owned subsidiary, is a financial services organization that provides retail and lease financing for vehicles, dealer inventory and other financing needs, dealer property and casualty insurance and dealership facility development and management, primarily for Chrysler dealers and their customers. CFC, a Michigan corporation, is the continuing corporation resulting from a merger on June 1, 1967 of a financial services subsidiary of Chrysler into a newly acquired, previously unaffiliated finance company incorporated in 1926. CFC's portfolio of finance receivables managed includes receivables owned and receivables serviced for others. Receivables serviced for others include securitized automotive receivables and retail leases. At 15 16 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- FINANCIAL SERVICES -- CONTINUED - ------------------------------- December 31, 1996, receivables serviced for others accounted for 71 percent of CFC's portfolio of receivables managed. Total finance receivables managed at the end of each of the five most recent years were as follows:
DECEMBER 31 --------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- (IN MILLIONS OF DOLLARS) Automotive..................................... $36,858 $35,696 $29,962 $25,011 $22,481 Nonautomotive.................................. 2,204 2,391 2,775 3,251 7,657 ------- ------- ------- ------- ------- Total financing................................ $39,062 $38,087 $32,737 $28,262 $30,138 ======= ======= ======= ======= =======
Due to the significant and increasing portion of CFC's business that relates to Chrysler, lower levels of production and sales of Chrysler automotive products would likely result in a reduction in the level of finance operations of CFC. Automotive Financing CFC is the major source of wholesale and retail financing for Chrysler vehicles throughout North America. CFC also offers dealers working capital loans, real estate and equipment financing and financing plans for fleet buyers, including daily rental car companies independent of, and affiliated with, Chrysler. The automotive financing operations of CFC are conducted through 29 zone offices in the United States and Canada (Chrysler Credit Canada Ltd.). During 1996, CFC expanded into international markets by opening offices in Belgium, France, Italy and Japan. During 1996, CFC financed or leased approximately 790,000 new and used vehicles at retail in the United States, including approximately 485,000 new Chrysler passenger cars and light-duty trucks, representing 20 percent of Chrysler's U.S. retail and fleet deliveries. During 1996, CFC financed or leased approximately 83,000 vehicles at retail in Canada, including approximately 77,000 new Chrysler cars and trucks representing 32 percent of Chrysler's Canadian retail and fleet deliveries. The average monthly payment for new vehicle retail installment sale contracts acquired in the United States was $370 in 1996. The average new contract balance was $19,954 and the average original term was 54 months. CFC also financed approximately 1,771,000 and 157,000 new Chrysler passenger cars and light-duty trucks at wholesale in the U.S. and Canada, respectively, representing 72 percent and 67 percent of Chrysler's U.S. and Canadian vehicle shipments, respectively, in 1996. Nonautomotive Financing CFC conducts its nonautomotive finance business through its subsidiary, Chrysler Capital Corporation. At December 31, 1996, the nonautomotive receivables managed throughout the United States consisted of $0.2 billion of commercial loans and leases and $2.0 billion of leveraged leases. Automotive Insurance Chrysler Insurance Company and its subsidiaries ("Chrysler Insurance") provide specialized insurance coverages for automotive dealers and their customers in the United States and Canada. Chrysler Insurance's property and casualty business includes physical damage, garage liability, workers' compensation and property and contents coverage provided directly to automotive dealers. Chrysler Insurance also provides vehicle collateral protection and single interest insurance to retail customers and their financing sources. Automobile Dealership Management Chrysler Realty Corporation ("Chrysler Realty"), which is engaged in the ownership, development and management of Chrysler automotive dealership properties in the United States, typically purchases, leases or 16 17 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- FINANCIAL SERVICES -- CONTINUED - ------------------------------- Automobile Dealership Management -- Continued options dealership facilities and then leases or subleases these facilities to Chrysler dealers. At December 31, 1996, Chrysler Realty controlled 824 sites (of which 259 were owned by Chrysler Realty). Funding Receivable sales are a significant source of funding. Net proceeds from the sale of automotive retail receivables were $8.1 billion during 1996 compared to $6.5 billion in 1995. Securitization of revolving wholesale account balances provided funding which aggregated $6.8 billion and $6.7 billion at December 31, 1996 and 1995, respectively. During 1996, CFC issued $1.2 billion of term debt (primarily medium-term notes) and repaid term debt of $2.0 billion. During the second quarter of 1996, CFC entered into new revolving credit facilities which replaced its existing U.S. and Canadian credit facilities. The new facilities, which total $8.0 billion, consist of a $2.0 billion facility expiring in April 1997 and a $6.0 billion facility expiring in April 2001. As of December 31, 1996, no amounts were outstanding under these facilities. CFC's primary market risks include: fluctuations in interest rates, variability in interest rate spread relationships (i.e., Prime to LIBOR spreads), mismatches of repricing intervals between finance receivables and related funding obligations, and exchange rate variability for foreign debt issuances. Sensitivity of earnings to changing interest rates, variability in spread relationships and mismatches of repricing intervals has been managed by entering into securitization transactions and the issuance of debt obligations with appropriate price and term characteristics. Derivative financial instruments, which primarily consist of interest rate swaps, are utilized to reduce the exposure to market risks and manage funding costs. Exposure to variability in foreign exchange rates is mitigated through the use of currency exchange agreements on foreign debt. CFC does not use derivative financial instruments for trading purposes. CFC's outstanding debt at the end of each of the five most recent years was as follows:
DECEMBER 31 -------------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- ------ ------- (IN MILLIONS OF DOLLARS) Short-term notes (primarily commercial paper)... $ 2,616 $ 2,435 $ 4,315 $2,772 $ 352 Bank borrowings under revolving credit facilities.................................... -- -- -- -- 5,924 Bank borrowings -- International................ 90 -- -- -- -- Senior term debt................................ 8,435 9,234 6,069 5,139 4,436 Subordinated term debt.......................... -- -- 27 77 585 Other borrowings................................ 104 100 260 447 455 ------- ------- ------- ------ ------- Total........................................... $11,245 $11,769 $10,671 $8,435 $11,752 ======= ======= ======= ====== =======
CAR RENTAL OPERATIONS Through its Pentastar Transportation Group, Inc. ("Pentastar") subsidiary, Chrysler owns Thrifty Rent-A-Car System, Inc. ("Thrifty") and Dollar Rent A Car Systems, Inc. ("Dollar"). Both Thrifty and Dollar are engaged in leasing vehicles to independent businesses they have licensed to use their trade names, systems and technologies in the daily rental of cars for business, personal and leisure use. They also maintain and operate a number of their own locations. Chrysler's strategy is to focus on its core automotive business. As part of this strategy, Chrysler, in September 1994, sold Snappy Car Rental, Inc., which was engaged in renting automobiles on a short-term 17 18 ITEM 1. BUSINESS -- CONTINUED PART I -- CONTINUED --------------------- CAR RENTAL OPERATIONS -- CONTINUED - ---------------------------------- basis. In 1996, Chrysler committed to a plan of disposal for Thrifty. For further information regarding Thrifty, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 15. RESEARCH AND DEVELOPMENT ------------------------ For the years ended December 31, 1996, 1995 and 1994, Chrysler spent $1.6 billion, $1.4 billion, and $1.3 billion, respectively, for company-sponsored research and development activities. These activities relate to the development of new products and services and the improvement of existing products and services, as well as compliance with standards that have been and are being promulgated by the government. EMPLOYEES --------- At December 31, 1996, Chrysler had a total of approximately 126,000 employees worldwide. Of this total, approximately 74,000 hourly workers and 26,000 salaried workers were employed in the United States and 13,000 hourly workers and 2,000 salaried workers were employed in Canada. In the United States and Canada, approximately 97 percent of Chrysler's hourly employees and 24 percent of its salaried employees are represented by unions. Of these represented employees, 97 percent of hourly and 90 percent of salaried employees are represented by the United Automotive, Aerospace, and Agricultural Implement Workers of America ("UAW") or the National Automobile, Aerospace and Agricultural Implement Workers of Canada ("CAW"). In 1996, Chrysler negotiated three-year national agreements with the UAW and CAW in the United States and Canada, respectively, without an interruption of production. The UAW and CAW contracts provide for essentially the same level of wages and benefits as Chrysler's major domestic competitors. In addition, the local plant agreements at all of Chrysler's major production facilities have been settled. Chrysler's pension plans, group life, and health care benefits for active and retired employees generally follow the structure of benefits common to the automotive industry. See Part II, Item 8, Notes to Consolidated Financial Statements, Note 12 for further information on pension plans and nonpension postretirement benefits. INTELLECTUAL PROPERTY --------------------- Chrysler has intellectual property rights, including patents, proprietary technology, trademarks, trade dress, service marks, copyrights, and licenses under such rights of others, relating to its businesses, products, and manufacturing equipment and processes. Chrysler grants licenses to others under its intellectual property rights and receives fees and royalties under some of these licenses. While Chrysler does not consider any particular intellectual property right to be essential, it does consider the aggregate of such rights very important to the overall conduct of its businesses. ITEM 2. PROPERTIES ---------- AUTOMOTIVE OPERATIONS --------------------- The statements concerning ownership of Chrysler's properties are made without regard to taxes or assessment liens, rights of way, contracts, easements or like encumbrances or questions of survey and are based on the records of Chrysler. Chrysler knows of no material defects in title to, or adverse claims against, any of such properties, nor any existing material liens or encumbrances against Chrysler or its properties. 18 19 ITEM 2. PROPERTIES -- CONTINUED PART I -- CONTINUED ----------------------- AUTOMOTIVE OPERATIONS -- CONTINUED - ---------------------------------- Chrysler's manufacturing plants include a foundry, machining plants, metal stamping plants, engine plants, transmission plants, electronic parts plants, air conditioning equipment plants, glass fabricating plants and other component parts plants. In addition to Michigan, manufacturing plants in the United States are located in Alabama, Indiana, New York, Ohio and Wisconsin. Chrysler's U.S. passenger car assembly plants are located in Sterling Heights and Detroit, Michigan; and Belvidere, Illinois. The U.S. truck assembly plants are located in Warren and Detroit, Michigan; Fenton, Missouri; Toledo, Ohio; and Newark, Delaware. Parts depots, warehouses and sales offices are situated in various sections of the United States, while Chrysler's principal engineering and research facilities and its general offices are located in Auburn Hills, Michigan. Automotive properties outside the U.S. are owned or leased principally by Chrysler Canada and Chrysler Mexico. Other manufacturing and assembly plants of subsidiaries outside the U.S. are located in Austria and Venezuela. In the opinion of management, Chrysler's properties include facilities which are suitable and adequate for the conduct of its present assembly and component plant requirements. The annual productive capacity of Chrysler's worldwide automotive operations was approximately 3.2 million units in 1996, compared to 2.9 million units in 1995. Chrysler's worldwide assembly plants operated at 90 percent of capacity in 1996, compared to 86 percent of capacity in 1995 (with capacity determined based on a maximum overtime assumption). Capacity utilization in 1996 was higher than 1995 primarily as a result of the changeover and launch of Chrysler's all-new minivans during 1995 and increased production efficiencies. FINANCIAL SERVICES ------------------ CFC conducts its business through 33 offices in various states throughout the United States, 4 offices in Canada, and 4 offices in Belgium, France, Italy and Japan, all of which are leased by CFC. In addition, at December 31, 1996, a total of 259 automobile dealership properties, generally consisting of land and improvements, were owned by a subsidiary of CFC and leased primarily to Chrysler franchised dealers. ITEM 3. LEGAL PROCEEDINGS ----------------- Chrysler and its subsidiaries are parties to various legal proceedings, including some purporting to be class actions, and some which demand large monetary damages or other relief which, if granted, would require significant expenditures. Chrysler believes that each of the product and environmental proceedings described below constitutes ordinary routine litigation incidental to the business conducted by Chrysler. See also Part II, Item 8, Notes to Consolidated Financial Statements, Note 9. PRODUCT MATTERS - --------------- Many of the legal proceedings seek damages for personal injuries claimed to have resulted from alleged defects in the design or manufacture of products distributed by Chrysler. The complaints filed in those matters specify approximately $934 million in compensatory and $971 million in punitive damages in the aggregate as of December 31, 1996. These amounts represent damages sought by plaintiffs and, therefore, do not necessarily constitute an accurate measure of Chrysler's ultimate cost to resolve those matters. Further, many complaints do not specify a dollar amount of damages or specify only the jurisdictional minimum. These amounts may vary significantly from one period to the next depending on the number of new complaints filed or pending cases resolved in a given period. Numerous complaints seek damages for personal injuries sustained in accidents involving alleged rollovers of Jeep CJ vehicles. These complaints represent approximately $280 million of the compensatory and 19 20 ITEM 3. LEGAL PROCEEDINGS -- CONTINUED PART I -- CONTINUED ------------------------------ PRODUCT MATTERS -- CONTINUED - ---------------------------- $725 million of the punitive damages specified above. Pursuant to an indemnification agreement with Chrysler, Renault has agreed to indemnify Chrysler against a portion of certain costs arising from accidents involving alleged Jeep CJ vehicle rollovers that occurred between April 1, 1985 and March 31, 1994. Many of the remaining complaints seek compensatory and punitive damages for personal injuries sustained in accidents involving alleged defects in occupant restraint systems, seats, heater cores, liftgate latches, or various other components in several different vehicle models. Some complaints seek repair of the vehicles or compensation for the alleged reduction in vehicle value. The Federal District Court in San Francisco entered a judgment approving the previously reported settlement of certain class action lawsuits involving rear liftgate latches in Chrysler's minivans built during the 1984-1995 model years (see page 16 of the 1995 Annual Report on Form 10-K). An appeal of that judgment by certain class members is pending with the Federal Court of Appeals for the Ninth Circuit. Two previously reported class action lawsuits alleging defects in the antilock braking systems found in certain model year vehicles are pending. Chrysler announced a voluntary recall in 1996 to test and, if necessary, repair one of the systems referenced in those lawsuits. An additional class action lawsuit was filed in November 1996 containing similar allegations. The lawsuits seek compensatory and punitive damages, restitution, repair and/or profits from vehicle sales. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. It is reasonably possible that the final resolution of some of these matters may require Chrysler to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although the final resolution of any such matters could have a material effect on Chrysler's consolidated operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, Chrysler believes that any resulting adjustment should not materially affect its consolidated financial position. ENVIRONMENTAL MATTERS - --------------------- The EPA and various state agencies have notified Chrysler that it may be a PRP for the cost of cleaning up hazardous waste storage or disposal facilities pursuant to the CERCLA and other federal and state environmental laws. A number of lawsuits allege that Chrysler violated CERCLA or other environmental laws and seek to recover costs associated with remedial action. In most instances, Chrysler is only one of a number of PRPs who may be found to be jointly and severally liable for remediation costs at the 107 sites involved in the foregoing matters at December 31, 1996. Chrysler may also incur remediation costs at an additional 44 of its active or deactivated facilities. Chrysler's reserves for these environmental matters totaled $238 million and $271 million as of December 31, 1996 and 1995, respectively. Chrysler periodically evaluates and revises estimates for environmental reserves based on expenditures against established reserves and the availability of additional information. As previously reported, the Indiana Department of Environmental Management initiated an administrative proceeding in August 1985 alleging improper disposal of waste at a facility in Indianapolis. This proceeding, which seeks to require Chrysler to conduct a site assessment and undertake remedial action, may result in the imposition of civil penalties in excess of $100,000. The previously reported lawsuit filed by the State of Wisconsin in February 1995 against Chrysler Outboard Corporation, a Chrysler subsidiary subsequently merged into Chrysler, alleging improper disposal of hazardous waste in 1969 was dismissed in 1996. Estimates of future expenditures in connection with these environmental matters are necessarily imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and application of new technologies and the apportionment and collectibility of remediation costs 20 21 ITEM 3. LEGAL PROCEEDINGS -- CONTINUED PART I -- CONTINUED ------------------------------ ENVIRONMENTAL MATTERS -- CONTINUED - ---------------------------------- among responsible parties. Chrysler establishes reserves for these environmental matters when the loss is probable and reasonably estimable. It is reasonably possible that final resolution of some of these matters could require Chrysler to make significant expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although the final resolution of any such matters could have a material effect on Chrysler's consolidated operating results for the particular reporting period in which an adjustment of the estimated liability is recorded, Chrysler believes that any resulting liability should not materially affect its consolidated financial position. OTHER MATTERS - ------------- All of the previously reported class action lawsuits filed in April 1995 against Chrysler, certain of its current and former directors and, in some cases, Tracinda Corporation, a holding company wholly owned by Kirk Kerkorian, in the Court of Chancery of the State of Delaware for New Castle County, Delaware, have been dismissed without prejudice. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF ---------------------------------- SECURITY HOLDERS ---------------- None during the three months ended December 31, 1996. 21 22 EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ (AS OF JANUARY 21, 1997)
OFFICER NAME AGE SINCE (1) PRESENT POSITION - -------------------- ---- ------------------ ---------------------------------------------------------- R. J. Eaton......... 56 March 14, 1992 Chairman of the Board, President and Chief Executive Officer(2) R. A. Lutz.......... 64 June 3, 1986 Vice Chairman of the Board(2) T. G. Denomme....... 57 April 9, 1981 Vice Chairman of the Board and Chief Administrative Officer(2) F. J. Castaing...... 51 August 5, 1987 Executive Vice President -- International and General Manager -- Power Train Operations T. R. Cunningham.... 50 September 3, 1987 Executive Vice President -- Chrysler Corporation and President and Managing Director -- Chrysler de Mexico, S.A. T. C. Gale.......... 53 April 4, 1985 Executive Vice President -- Product Development J. P. Holden........ 45 May 6, 1993 Executive Vice President -- Sales and Marketing D. K. Pawley........ 55 April 11, 1991 Executive Vice President -- Manufacturing T. T. Stallkamp..... 50 May 1, 1990 Executive Vice President -- Procurement and Supply and General Manager -- Minivan Operations G. C. Valade........ 54 June 7, 1990 Executive Vice President and Chief Financial Officer R. R. Boltz......... 51 June 11, 1987 Vice President -- Product Strategy and Regulatory Affairs and General Manager -- Large Car Operations T. P. Capo.......... 45 November 7, 1991 Vice President and Treasurer J. E. Cappy......... 62 August 5, 1987 Vice President -- Chrysler Technologies and Rental Car Operations J. D. Donlon, III... 50 January 1, 1992 Vice President and Controller F. J. Ewasyshyn..... 44 October 6, 1994 Vice President -- Advance Manufacturing Engineering W. F. Fountain...... 52 August 1, 1995 Vice President -- Government Affairs R. L. Franson....... 42 January 18, 1996 Vice President -- Quality and Serviceability T. Gallagher........ 54 September 3, 1992 Vice President -- Employee Relations G. L. Henson........ 54 August 1, 1994 Vice President -- Large and Small Car, Jeep and Truck Assembly and Stamping Operations J. E. Herlitz....... 54 April 7, 1994 Vice President -- Product Design R. G. Liberatore.... 47 January 1, 1993 Vice President -- Washington Affairs A. C. Liebler....... 54 May 17, 1990 Vice President -- Communications C. Lobo S........... 48 July 9, 1992 Vice President -- Power Train Manufacturing M. J. MacDonald..... 52 May 16, 1996 Vice President -- Marketing W. J. O'Brien....... 53 September 3, 1987 Vice President, General Counsel and Secretary K. M. Oswald........ 47 October 6, 1994 Vice President -- Human Resources E. T. Pappert....... 57 November 5, 1981 Vice President -- Sales and Service L. C. Richie........ 55 June 12, 1986 Vice President and General Counsel -- Automotive Legal Affairs B. I. Robertson..... 54 February 6, 1992 Vice President -- Engineering Technologies and General Manager -- Jeep/Truck Operations S. T. Rushwin....... 49 October 6, 1994 Vice President -- International Manufacturing and Minivan Assembly Operations T. W. Sidlik........ 47 September 3, 1992 Vice President -- Chrysler Corporation and Chairman of the Board -- Chrysler Financial Corporation and General Manager -- Small Car Operations
- ------------------------- (1) The "Officer Since" date shown is the date from which the named individual has served continuously as an officer of either Chrysler Corporation or the former Chrysler Motors Corporation which, effective December 31, 1989, was merged with and into Chrysler Corporation. (2) Also a member of the Board of Directors. There are no family relationships, as defined for reporting purposes, between any of the executive officers named above and there is no arrangement or understanding between any of the executive officers named above and any other person pursuant to which he was selected as an officer. All of the executive officers named above, except Messrs. Eaton and Henson have been in the employ of Chrysler Corporation or its subsidiaries for more than five years. During the last five years, and immediately preceding employment by Chrysler Corporation, Messrs. Eaton and Henson were high level executives at General Motors Corporation. 22 23 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND --------------------------------------------- RELATED STOCKHOLDER MATTERS --------------------------- Chrysler's common stock is listed on the stock exchanges specified on pages 1 and 2 of this Form 10-K under the trading symbol (C). There were approximately 136,000 shareholders of record of Chrysler's common stock at December 31, 1996. The following table sets forth the high and low sale prices of Chrysler's common stock as reported on the composite tape and the quarterly dividends declared for the last two years. The common stock high and low prices and dividends declared have been adjusted to reflect the two-for-one stock split in 1996.
DIVIDENDS 1996 HIGH LOW DECLARED - --------------- ------- ------- --------- First Quarter $31.813 $25.688 $0.30 Second Quarter 35.000 29.563 0.35 Third Quarter 32.063 26.250 0.35 Fourth Quarter 36.375 28.250 0.40
DIVIDENDS 1995 HIGH LOW DECLARED - ---------------- ------- ------- --------- First Quarter $26.688 $19.125 $0.20 Second Quarter 26.250 19.500 0.25 Third Quarter 29.063 23.625 0.25 Fourth Quarter 27.813 23.563 0.30
Dividends on the common stock are payable at the discretion of Chrysler's Board of Directors out of funds legally available therefor. Chrysler's ability to pay dividends in the future will depend upon its financial results, liquidity and financial condition and its ability to continue its capital expenditure and vehicle development programs and market its vehicles successfully. Chrysler's ability to pay dividends is also affected by the provision in its credit agreement that it must maintain a ratio of indebtedness to total capitalization (each as defined) at the end of each quarter at certain specified levels. 23 24 ITEM 6. SELECTED FINANCIAL DATA PART II -- CONTINUED ----------------------- The table below summarizes recent financial information for Chrysler. For further information, refer to Chrysler's consolidated financial statements and notes thereto presented under Item 8 of this Form 10-K.
1996(1) 1995(2) 1994(3) 1993(4) 1992(5) ------- ------- ------- ------- ------- (DOLLARS AND SHARES IN MILLIONS EXCEPT PER-COMMON-SHARE DATA) Total revenues............................... $61,397 $53,195 $52,235 $43,600 $36,897 Earnings before extraordinary item and cumulative effect of changes in accounting principles................................. 3,720 2,121 3,713 2,415 505 Primary earnings per common share**........ 5.03 2.78 5.06 3.38 0.74 Net earnings (loss).......................... 3,529 2,025 3,713 (2,551) 723 Primary earnings (loss) per common share**................................. 4.77 2.65 5.06 (3.81) 1.11 Fully diluted earnings per common share**................................. 4.74 2.56 4.55 * 1.07 Dividends declared per common share**........ 1.40 1.00 0.55 0.33 0.30 Total assets................................. 56,184 53,756 49,539 43,679 40,690 Total debt................................... 13,396 14,193 13,106 11,451 15,551 Convertible preferred stock (in shares)...... 0.04 0.14 1.72 1.72 1.72
- ------------------------- * Not applicable for reporting period. ** Per share data has been adjusted to reflect the two-for-one stock split in 1996. (1) Earnings for the year ended December 31, 1996 include a charge of $97 million ($61 million after taxes) for costs associated with a voluntary early retirement program for certain salaried employees, a charge of $77 million ($51 million after taxes) related to a write-down of Pentastar Electronics, Inc., a charge of $65 million ($100 million after taxes) related to a write-down of Thrifty Rent-A-Car System, Inc., a charge of $50 million ($31 million after taxes) for lump sum retiree pension costs related to the new UAW collective bargaining agreement, and a gain of $101 million ($87 million after taxes) from the sale of Electrospace Systems, Inc. and Chrysler Technologies Airborne Systems, Inc. (2) Earnings for the year ended December 31, 1995 were reduced by a $263 million charge ($162 million after taxes) for costs associated with production changes at Chrysler's Newark assembly plant and a $115 million charge ($71 million after taxes) for a voluntary minivan owner service action. Net earnings in 1995 also include an after-tax charge of $96 million for the cumulative effect of a change in accounting principle related to the consensus reached on Emerging Issues Task Force ("EITF") Issue 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." (3) Earnings for the year ended December 31, 1994 include favorable adjustments to the provision for income taxes aggregating $132 million. These adjustments related to: (1) the recognition of tax credits related to expenditures in prior years for qualifying research and development activities, in accordance with an Internal Revenue Service settlement which was based on U.S. Department of Treasury income tax regulations issued in 1994, and (2) the reversal of valuation allowances related to tax benefits associated with net operating loss carryforwards. (4) Results for the year ended December 31, 1993 include a pretax gain of $205 million ($128 million after taxes) on the sale of Chrysler's remaining 50.3 million shares of MMC stock, a pretax gain of $60 million ($39 million after taxes) on the sale of Chrysler's plastics operations, a $4.7 billion after-tax charge for the adoption of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and a $283 million after-tax charge for the adoption of SFAS No. 112, "Employers' Accounting for Postemployment Benefits." (5) Earnings for the year ended December 31, 1992 include a pretax gain of $142 million ($88 million after taxes) on the sale of 43.6 million shares of MMC stock, a $218 million favorable effect of a change in accounting principle relating to the adoption of SFAS No. 109, "Accounting for Income Taxes," a $101 million pretax charge ($79 million after taxes) relating to the restructuring of Chrysler's short-term vehicle rental subsidiaries, and a $110 million pretax charge ($69 million after taxes) relating to investment losses experienced by Chrysler Canada. 24 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto. FINANCIAL REVIEW 1996 Compared With 1995 Chrysler reported earnings before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle of $6.1 billion in 1996, compared with $3.4 billion in 1995. Net earnings for 1996 were $3.5 billion, or $4.77 per common share, compared with $2.0 billion, or $2.65 per common share in 1995. Chrysler also reported earnings before income taxes and extraordinary item of $1,591 million in the fourth quarter of 1996, compared with $1,659 million in the fourth quarter of 1995. Net earnings for the fourth quarter of 1996 were $807 million, or $1.12 per common share, compared with $1,040 million, or $1.35 per common share in the fourth quarter of 1995. Earnings before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle for 1996 included a charge of $97 million ($61 million after taxes) for costs associated with a voluntary early retirement program for certain salaried employees, a charge of $77 million ($51 million after taxes) related to a write-down of Pentastar Electronics, Inc. ("PEI"), a charge of $65 million ($100 million after taxes) related to a write-down of Thrifty Rent-A-Car System, Inc. ("Thrifty"), a charge of $50 million ($31 million after taxes) for lump sum retiree pension costs related to the new UAW collective bargaining agreement, and a gain of $101 million ($87 million after taxes) from the sale of Electrospace Systems, Inc. ("ESI") and Chrysler Technologies Airborne Systems, Inc. ("CTAS"). Earnings before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle for 1995 included a charge of $263 million ($162 million after taxes) for costs associated with production changes at Chrysler's Newark assembly plant and a charge of $115 million ($71 million after taxes) for a voluntary minivan owner service action. The following table summarizes this information:
FOURTH QUARTER CALENDAR YEAR ---------------- ---------------- 1996 1995 1996 1995 ------ ------ ------ ------ (IN MILLIONS OF DOLLARS) Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle..... $1,591 $1,659 $6,092 $3,449 Voluntary early retirement program.......................... 9 -- 97 -- PEI write-down.............................................. 77 -- 77 -- Thrifty write-down.......................................... -- -- 65 -- Lump sum retiree pension costs.............................. 50 -- 50 -- Gain on sale of ESI and CTAS................................ -- -- (101) -- Newark production changes................................... -- -- -- 263 Voluntary minivan owner service action...................... -- -- -- 115 ------ ------ ------ ------ Pretax earnings excluding items above..................... $1,727 $1,659 $6,280 $3,827 ====== ====== ====== ======
Pretax earnings excluding items above increased for calendar-year 1996 as compared with calendar-year 1995 primarily as a result of an increase in vehicle shipments and improved vehicle margins due to pricing actions and a reduction in average sales incentives per vehicle, partially offset by increased profit-based employee compensation costs. The increase in shipments for calendar-year 1996 was primarily due to increased shipments of minivans and Dodge Ram pickup trucks. Minivan shipments for calendar-year 1995 were adversely affected by the changeover and launch of Chrysler's all-new minivans. The increase in 25 26 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- FINANCIAL REVIEW -- CONTINUED - ----------------------------- 1996 Compared With 1995 -- Continued shipments of Dodge Ram pickup trucks primarily reflects a full year of production in 1996 at two additional assembly plants. In December 1996, Chrysler extinguished $550 million, or 50 percent, of the outstanding principal amount of its Auburn Hills Trust Guaranteed Exchangeable Certificates Due 2020 (the "Certificates") at a cost of $859 million. The extinguishment of the Certificates resulted in an extraordinary after-tax loss of $191 million (net of income tax benefit of $118 million), or $0.26 per common share. Effective January 1, 1995, Chrysler changed its accounting treatment for certain vehicle sales (principally to non-affiliated rental car companies) in accordance with Emerging Issues Task Force ("EITF") Issue 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." This change in accounting principle resulted in the recognition of an after-tax charge of $96 million (net of income tax benefit of $59 million), or $0.13 per common share in 1995. The ongoing effect of this accounting change was not material to 1996 and 1995 earnings. Chrysler's worldwide vehicle shipments in 1996 were 2,958,800 units, an increase of 285,261 units or 11 percent from 1995 levels. Chrysler's vehicle shipments outside of the U.S., Canada and Mexico ("North America") in 1996 were 223,657 units, an increase of 15,385 units or seven percent from 1995 levels. Chrysler's worldwide vehicle shipments in the fourth quarter of 1996 were 753,326 units, an increase of 11,556 units or two percent from fourth-quarter 1995 levels. Chrysler's vehicle shipments outside of North America in the fourth quarter of 1996 were 69,084 units, an increase of 7,339 units or 12 percent from fourth-quarter 1995 levels. Chrysler's revenues and results of operations are principally derived from the U.S. and Canada automotive marketplaces. Retail industry sales (including fleet) of new cars and trucks in the U.S. and Canada were 16.6 million units in 1996, compared with 16.3 million units in 1995, an increase of two percent. Chrysler's U.S. and combined U.S. and Canada retail sales and market share data for 1996 and 1995 were as follows:
1996 1995 INCREASE --------- --------- -------- U.S. Retail Market(1): Car sales.................................. 832,633 786,180 46,453 Car market share........................... 9.8% 9.1% 0.7% Truck sales (including minivans)........... 1,618,193 1,378,163 240,030 Truck market share......................... 23.3% 21.3% 2.0% Combined car and truck sales............... 2,450,826 2,164,343 286,483 Combined car and truck market share........ 15.9% 14.3% 1.6% U.S. and Canada Retail Market(1): Combined car and truck sales............... 2,690,340 2,389,465 300,875 Combined car and truck market share........ 16.1% 14.7% 1.4%
- ------------------------- (1) All retail sales and market share data include fleet sales. The increase in Chrysler's U.S. car market share during 1996 was primarily due to increased sales of its midsize sedans and coupes, including the new Plymouth Breeze and Chrysler Sebring convertible. The increase in Chrysler's U.S. truck market share during 1996 was primarily due to increased sales of its Dodge Ram pickup trucks, Jeep(R) sport-utility vehicles, and minivans. 26 27 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- FINANCIAL REVIEW -- CONTINUED - ----------------------------- 1996 Compared With 1995 -- Continued Chrysler Financial Corporation ("CFC") reported earnings before income taxes of $586 million in 1996, compared with $522 million in 1995. CFC's net earnings were $376 million in 1996, compared with $339 million in 1995. The increase in net earnings in 1996 primarily reflects net margin improvements partially offset by an increase in the provision for credit losses. The net margin improvements in 1996 reflect lower average effective cost of borrowings resulting primarily from lower market interest rates in the U.S. and Canada. For the past several years, Chrysler has benefitted from the following factors: (1) favorable economic conditions in the U.S. and Canada, where Chrysler's sales are concentrated, and (2) a continuing shift in U.S. and Canada consumer preferences toward trucks, as Chrysler manufactures a higher proportion of trucks to total vehicles than its principal competitors in the U.S. and Canada. A significant deterioration in either of these factors could adversely affect Chrysler's consolidated operating results. In addition, Chrysler has also benefitted over the past several years from a cost advantage in comparison to vehicles manufactured in Japan (and vehicles containing significant material components manufactured in Japan) as a result of favorable exchange rates between the Japanese yen and the U.S. dollar. During 1996, this cost advantage was substantially reduced as a result of unfavorable changes in the Japanese yen to U.S. dollar exchange rate. These changes did not have a material adverse effect on Chrysler's 1996 consolidated operating results. Chrysler believes, however, that further substantial unfavorable exchange rate changes could, over time, have an adverse effect on Chrysler's consolidated operating results. Further, Chrysler has benefitted from a strategy of focusing resources on its core automotive business and an aggressive capital expenditure and vehicle development program that has resulted in the replacement of its entire product lineup over the last five years. Chrysler's long-term profitability will depend significantly on its ability to continue its capital expenditure and vehicle development programs and to market its vehicles successfully in an increasingly competitive environment. 1995 Compared With 1994 Chrysler reported earnings before income taxes and the cumulative effect of a change in accounting principle of $3.4 billion in 1995, compared with $5.8 billion in 1994. Net earnings for 1995 were $2.0 billion, or $2.65 per common share, compared with $3.7 billion, or $5.06 per common share in 1994. Earnings in 1995 were reduced by a $263 million charge ($162 million after taxes) for costs associated with production changes at Chrysler's Newark assembly plant and a $115 million charge ($71 million after taxes) for a voluntary minivan owner service action. Net earnings in 1995 also included an after-tax charge of $96 million, or $0.13 per common share, for the cumulative effect of a change in accounting principle related to the consensus reached on EITF Issue 95-1. Net earnings for 1994 included favorable income tax adjustments aggregating $132 million. The lower operating results for 1995 as compared with 1994 resulted primarily from lower minivan shipments and costs associated with the launch of Chrysler's all-new minivans, higher sales incentives and material costs, a lower mix of higher-margin vehicles, lower vehicle shipments in Mexico and the costs associated with production changes at the Newark assembly plant. Chrysler's worldwide vehicle shipments in 1995 were 2,673,539 units, a decrease of 88,564 units or three percent from 1994 levels. Minivan shipments in 1995 were 555,824 units, a decrease of 121,652 units from 1994 levels. The decline in minivan shipments was primarily attributable to the launch of Chrysler's all-new minivans. By the end of 1995, the launch of Chrysler's all-new minivans was substantially complete. 27 28 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES -------------------------------------------------------- Chrysler's total revenues were as follows:
1996 VS. 1995 1995 VS. 1994 INCREASE/ INCREASE/ 1996 1995 (DECREASE) 1994 (DECREASE) ------- ------- ------------- ------- ------------- (IN MILLIONS (IN MILLIONS OF DOLLARS) OF DOLLARS) Sales of manufactured products............ $57,587 $49,601 16% $49,363 -- Finance and insurance revenues............ 1,746 1,589 10% 1,384 15% Other revenues............................ 2,064 2,005 3% 1,488 35% ------- ------- ------- Total revenues $61,397 $53,195 15% $52,235 2% ======= ======= =======
The increase in sales of manufactured products in 1996 as compared with 1995 primarily reflects an 11 percent increase in vehicle shipments and an increase in average revenue per unit, net of sales incentives, from $18,305 to $19,442. The increase in average revenue per unit in 1996 as compared with 1995 was principally due to pricing actions and an increased proportion of truck shipments to total vehicle shipments. The increase in sales of manufactured products in 1995 as compared with 1994 primarily reflects an increase in average revenue per unit, net of sales incentives, from $17,663 to $18,305, largely offset by a three percent decrease in vehicle shipments. The increase in average revenue per unit in 1995 as compared with 1994 was principally due to pricing actions, partially offset by higher sales incentives. The increase in finance and insurance revenues in 1996 as compared with 1995 was primarily attributable to higher average automotive finance receivables outstanding and vehicles leased. The increase in finance and insurance revenues in 1995 as compared with 1994 was primarily attributable to higher average automotive finance receivables outstanding. Financing support provided in the United States by CFC for new Chrysler vehicle retail deliveries (including fleet) and wholesale vehicle sales to dealers and the number of vehicles financed during the last three years were as follows:
1996 1995 1994 ----- ----- ----- U.S. Penetration: Retail............................................................... 20% 27% 24% Wholesale............................................................ 72% 74% 73% Number of New Chrysler Vehicles Financed in the U.S. (in thousands): Retail............................................................... 485 594 525 Wholesale............................................................ 1,771 1,632 1,647
The decrease in retail penetration is primarily due to increased competition and actions taken by CFC to improve retail credit quality mix. Other revenues increased in 1995 as compared with 1994 primarily as a result of increased interest income, reflecting Chrysler's higher average cash, cash equivalents and marketable securities balances and higher interest rates as well as the recognition of lease revenue in accordance with EITF 95-1. 28 29 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES -- CONTINUED - --------------------------------------------------------------------- Chrysler's total expenses were as follows:
1996 VS. 1995 1995 VS. 1994 INCREASE/ INCREASE/ 1996 1995 (DECREASE) 1994 (DECREASE) ------- ------- ------------- --------------- ------------- (IN MILLIONS OF (IN MILLIONS OF DOLLARS) DOLLARS) Costs, other than items below........ $45,842 $41,304 11% $38,032 9% Depreciation and special tools amortization....................... 2,312 2,220 4% 1,955 14% Selling and administrative expenses........................... 4,730 4,064 16% 3,933 3% Employee retirement benefits......... 1,414 1,163 22% 1,548 (25)% Interest expense..................... 1,007 995 1% 937 6% ------- ------- ------- Total expenses.................. $55,305 $49,746 11% $46,405 7% ======= ======= =======
Costs, other than items below increased in 1996 as compared with 1995 primarily as a result of an 11 percent increase in vehicle shipments and an increased proportion of truck shipments to total vehicle shipments. In addition, Costs, other than items below in 1995 included a charge of $263 million related to production changes at the Newark assembly plant and a $115 million charge related to a voluntary minivan owner service action. Costs, other than items below increased in 1995 as compared with 1994 primarily as a result of increased product costs, costs associated with the changeover and launch of Chrysler's all-new minivans and costs associated with production changes at the Newark assembly plant, partially offset by the effect of a decrease in vehicle shipments of three percent. Costs, other than items below as a percent of sales of manufactured products were 80 percent, 83 percent and 77 percent in 1996, 1995 and 1994, respectively. Depreciation and special tools amortization increased in 1996 as compared with 1995 primarily as a result of higher levels of property and equipment in use. Depreciation and special tools amortization increased in 1995 as compared with 1994 primarily as a result of higher levels of property and equipment in use as well as increased tooling costs related to Chrysler's new products. Selling and administrative expenses increased in 1996 as compared with 1995 primarily as a result of increased advertising expenses, increased profit-based employee compensation costs, and increased expenses associated with Chrysler's expanding international operations. Selling and administrative expenses increased in 1995 as compared with 1994 primarily as a result of increased advertising expenses. Employee retirement benefits increased in 1996 as compared with 1995 primarily as a result of a decrease in the discount rates used to determine 1996 pension expense and nonpension postretirement benefit expense, costs associated with a voluntary early retirement program for certain salaried employees in 1996, and increased pension benefits related to Chrysler's new collective bargaining agreements. This increase was partially offset by the favorable effect of higher expected returns on pension plan assets in 1996. Employee retirement benefits decreased in 1995 as compared with 1994 primarily due to improved funding of the pension plans, an increase in the discount rates used to determine 1995 pension expense and nonpension postretirement benefit expense, and favorable health care inflation experience. Chrysler contributed $941 million, $838 million and $2.6 billion to the pension funds during 1996, 1995 and 1994, respectively. Interest expense increased slightly in 1995 as compared with 1994 primarily as a result of higher average levels of term debt at CFC largely offset by a decrease in average non-CFC debt levels. In 1996, Chrysler completed the sale of ESI and CTAS for net proceeds of $476 million. ESI and CTAS were engaged principally in the manufacture of defense electronics and aircraft modification, respectively, and represented substantially all of the operations of Chrysler Technologies Corporation, a wholly owned 29 30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- COMPARISON OF SELECTED ELEMENTS OF REVENUES AND EXPENSES -- CONTINUED - --------------------------------------------------------------------- subsidiary of Chrysler. The sale resulted in a pretax gain of $101 million ($87 million after taxes) which is included in Costs, other than items below in the consolidated statement of earnings for 1996. Consistent with its strategy to focus on its core automotive business, in 1996, Chrysler committed to a plan of disposal for Thrifty. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," a pretax loss of $65 million ($100 million after taxes) was recognized in 1996 to write down Thrifty's carrying value to estimated fair value less cost to sell. Chrysler's estimate of the fair value of Thrifty is based principally on an analysis of non-binding bids. The pretax loss is included in Costs, other than items below in the consolidated statement of earnings for 1996. The after-tax loss includes the effect of not being able to claim a tax deduction for the capital loss on Chrysler's investment in Thrifty. Thrifty's assets and liabilities at December 31, 1996 and its results of operations for 1996 were immaterial to Chrysler's consolidated assets and liabilities and results of operations, respectively. Chrysler is continuing with its efforts to sell Thrifty and is uncertain when the sale of Thrifty may occur. In the fourth quarter of 1996, Chrysler signed an agreement to sell PEI for net proceeds of $17 million. PEI produces automatic test equipment for military applications and represents the remaining operations of Chrysler Technologies Corporation. In accordance with SFAS No. 121, a pretax loss of $77 million ($51 million after taxes) was recognized in the fourth quarter of 1996 to write down PEI's carrying value to estimated fair value less cost to sell. Chrysler's estimate of the fair value of PEI was based on the terms of the agreement. Included in the cost to sell PEI is an estimate for job security benefits, special early retirement benefits and other employee costs related to employees which Chrysler agreed to retain. The pretax loss is included in Costs, other than items below in the consolidated statement of earnings for 1996. PEI's assets and liabilities at December 31, 1996 and its results of operations for 1996 were immaterial to Chrysler's consolidated assets and liabilities and results of operations, respectively. The sale of PEI was completed on January 10, 1997. In 1995, Chrysler recorded a $263 million provision ($162 million after income taxes) for costs associated with production changes at its Newark assembly plant. Newark production of the Chrysler Concorde and Dodge Intrepid was reduced to one shift in August 1995 and terminated in July 1996. Production of an all-new sport-utility vehicle, the Dodge Durango, is scheduled to begin at the Newark assembly plant in the fall of 1997. The provision reflects the recognition of supplemental unemployment benefits, job security benefits and other related employee costs, and the write-down of certain equipment and tooling. The provision is included in Costs, other than items below in the consolidated statement of earnings for 1995. Chrysler's effective tax rates in 1996, 1995 and 1994 were 38.9 percent, 38.5 percent and 36.3 percent, respectively. The provision for income taxes in 1994 included favorable adjustments aggregating $132 million, including $100 million for the recognition of tax credits related to expenditures in prior years for qualifying research and development activities. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Chrysler's consolidated combined cash, cash equivalents and marketable securities totaled $7.8 billion at December 31, 1996 (including $797 million held by CFC and Car Rental Operations), $8.1 billion at December 31, 1995 (including $1.2 billion held by CFC and Car Rental Operations), and $8.4 billion at December 31, 1994 (including $756 million held by CFC and Car Rental Operations). At December 31, 1996, CFC had approximately $400 million of marketable securities which were limited for use in its 30 31 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED - -------------------------------------------- insurance operations in accordance with various statutory requirements. The decrease in Chrysler's consolidated combined cash, cash equivalents and marketable securities in 1996 was primarily the result of capital expenditures, common stock repurchases, net debt repayments and dividend payments, largely offset by cash generated by operating activities, marketable securities acquired in non-cash transactions related to the securitization of retail receivables and net proceeds from the sales of nonautomotive assets. The decrease in Chrysler's consolidated combined cash, cash equivalents and marketable securities in 1995 was primarily the result of capital expenditures, net finance receivables acquired and common stock repurchases, largely offset by cash generated by operating activities and cash provided by an increase in long-term debt. Chrysler's long-term profitability will depend significantly on its ability to continue its capital expenditure and vehicle development programs and to market its vehicles successfully in an increasingly competitive environment. Chrysler's expenditures for new product development and the acquisition of productive assets were $17.1 billion for the three-year period ended December 31, 1996. Expenditures for these items during the succeeding three-year period are expected to be at similar or higher levels. At December 31, 1996, Chrysler had commitments for capital expenditures, including commitments for assets currently under construction, totaling approximately $1.6 billion. In May 1996, Chrysler declared a two-for-one stock split in the form of a 100 percent stock dividend which was distributed on July 15, 1996 to shareholders of record on June 15, 1996. All per share data and the average common and dilutive equivalent shares outstanding have been adjusted to reflect this stock split for all periods presented. The number of common shares issued, outstanding and held in treasury for 1996 have been adjusted to reflect this stock split. In addition, the par value of the new shares issued as a result of the two-for-one stock split has been transferred from additional paid-in capital to common stock. Additional paid-in capital, common stock balances, common shares issued, outstanding and held in treasury for prior periods have not been restated for the two-for-one stock split. During 1996, Chrysler repurchased 66 million shares of its common stock at a cost of $2.0 billion (including $16 million in unsettled repurchases at December 31, 1996). In December 1996, Chrysler's Board of Directors approved an increase in Chrysler's planned 1997 common stock repurchases from $1 billion to $2 billion. The planned 1997 common stock repurchases are subject to market and general economic conditions. Since beginning its common stock repurchase program in 1995, Chrysler has repurchased 112 million shares of its common stock at a cost of $3.1 billion. In the second quarter of 1996, Chrysler increased its quarterly dividend from $0.30 to $0.35 per common share. In the fourth quarter of 1996, Chrysler increased its quarterly dividend from $0.35 to $0.40 per common share. Dividends per common share have been adjusted to reflect the two-for-one stock split. In December 1996, Chrysler prepaid certain 1997 nonpension employee benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary Association trust and other employee benefit plans. In December 1996, Chrysler extinguished $550 million, or 50 percent, of the outstanding principal amount of its Auburn Hills Trust Guaranteed Exchangeable Certificates Due 2020 at a cost of $859 million. At December 31, 1996, $550 million of the Certificates remained outstanding. The remaining Certificates outstanding are not redeemable prior to maturity and carry a current interest rate of 12 percent. In addition, Chrysler entered into forward contracts (notional amount $520 million) to mitigate interest rate risk related to debt Chrysler intends to incur in the first quarter of 1997 to refinance the extinguished Certificates. The refinancing is subject to market and general economic conditions. At December 31, 1996, Chrysler (excluding CFC) had aggregate debt maturities of $1.1 billion through 1999. At December 31, 1996, Chrysler had a $2.4 billion revolving credit agreement which expires in April 31 32 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED - -------------------------------------------- 2001. The revolving credit agreement was not drawn upon at December 31, 1996. Chrysler believes that cash from operations and its cash position will be sufficient to enable it to meet its capital expenditure, debt maturity, common stock repurchase, dividend payment and other funding requirements. Chrysler's ability to market its products successfully depends significantly on the availability of vehicle financing for its dealers and, to a lesser extent, the availability of financing for retail and fleet customers, both of which are provided by CFC. Term debt, commercial paper and receivable sales are CFC's primary funding sources. CFC decreased its term debt outstanding by $0.8 billion during 1996 and increased its term debt outstanding by $3.1 billion during 1995. CFC's commercial paper outstanding increased by $0.2 billion during 1996 and decreased by $1.9 billion in 1995. CFC realized $8.1 billion and $6.5 billion of net proceeds from the sales of automotive retail receivables during 1996 and 1995, respectively. In addition, securitization of revolving wholesale account balances provided funding for CFC which aggregated $6.8 billion and $6.7 billion at December 31, 1996 and 1995, respectively. At December 31, 1996, CFC had debt maturities of $5.7 billion in 1997 (including $2.6 billion of short-term notes), $2.6 billion in 1998, and $1.6 billion in 1999. CFC's U.S. and Canadian revolving credit facilities, which total $8 billion, consist of a $2 billion facility expiring in April 1997 and a $6 billion facility expiring in April 2001. Neither of the revolving credit facilities was drawn upon at December 31, 1996. CFC believes that cash provided by operations, receivable sales, securitizations, and the issuance of term debt and commercial paper will provide sufficient liquidity to meet its debt maturity and other funding requirements. During 1996, Chrysler completed the sale of ESI and CTAS for net proceeds of $476 million. Also during 1996, CFC completed the sale of certain nonautomotive assets for net proceeds of $225 million, which approximated the net book value of the assets. Chrysler's strategy is to focus on its core automotive business. As part of this strategy, Chrysler has sold certain assets and businesses in past years which are not related to its core automotive business, and is exploring the sale of other such assets and businesses in the near term. OUTLOOK ------- The statements contained in this Outlook section are based on management's current expectations. With the exception of the historical information contained herein, the statements presented in this Outlook section are forward-looking statements that involve numerous risks and uncertainties. Actual results may differ materially. Chrysler's worldwide vehicle production in the fourth quarter of 1996 was 711,217 units, an increase of 11,857 units or two percent as compared with the fourth quarter of 1995. Worldwide vehicle production for the first quarter of 1997 is expected to be approximately 779,000 units, an increase of 36,000 units or five percent as compared with the first quarter of 1996. This expected production level is heavily dependent on continued favorable economic conditions in the U.S. and Canada, where Chrysler's sales are concentrated. A significant weakening of Chrysler's competitive position or economic conditions in the U.S. and Canada could result in the lowering of first-quarter 1997 planned production. Chrysler projects that 1997 retail (including fleet) industry sales for the U.S. will range from 15.0 million to 15.5 million units and that 1997 retail (including fleet) industry sales for Canada will range from 1.1 million to 1.2 million units. Retail (including fleet) industry sales in 1996 were 15.4 million units and 1.2 million units in the U.S. and Canada, respectively. Actual levels of industry retail (including fleet) sales will depend on, 32 33 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PART II -- CONTINUED --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED ---------------------------------------------------------- OUTLOOK -- CONTINUED - -------------------- among other things, economic conditions in the U.S. and Canada. Accordingly, there can be no assurance that Chrysler's estimates will be accurate. Chrysler's business plan for 1997 is predicated on several broad economic assumptions, including, among others, that 1997 inflation and interest rates in the U.S. will remain stable and will be comparable to 1996 rates; there will be a moderate expansion in the U.S. economy during 1997, with real economic growth between 2.0 percent and 2.5 percent; and average 1997 gasoline and oil prices in the U.S. will be comparable to 1996 prices. As with most economic projections, actual conditions in 1997 could vary substantially from Chrysler's assumptions. In addition, Chrysler wishes to caution readers that several factors, as well as those factors described elsewhere in this discussion or in other Securities and Exchange Commission filings, in some cases have affected, and in the future could affect, Chrysler's actual results, and could cause Chrysler's actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Chrysler. Those factors include: business conditions and growth in the automotive industry and general economy; changes in gasoline and oil prices; changes in consumer debt levels and interest rates; changes in consumer preferences away from pickup trucks, sport-utility vehicles and minivans; competitive factors, such as domestic and foreign rival car and truck offerings, sales incentives, acceptance of new products and price pressures; excess or shortage of manufacturing capacity; risks and uncertainties associated with Chrysler's expansion into international markets; and changes in foreign exchange rates and the resulting impact on pricing strategies of major foreign competitors. Additionally, several of Chrysler's competitors have larger worldwide sales volumes and greater financial resources, which may, over time, place Chrysler at a competitive disadvantage in responding to its competitors' offerings, substantial changes in consumer preferences, government regulations, or adverse economic conditions in the U.S. and Canada. Finally, the automotive industry historically has been highly cyclical and the duration of these cycles has been difficult to predict. NEW ACCOUNTING STANDARDS ------------------------ In June 1996, the Financial Accounting Standards Board issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. Chrysler believes that the implementation of this new accounting standard will not have a material impact on its consolidated operating results or financial position. Chrysler will adopt this accounting standard on a prospective basis on January 1, 1997, as required. 33 34 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA ------------------ CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31 ----------------------------- 1996 1995 1994 ------- ------- ------- (IN MILLIONS OF DOLLARS) Sales of manufactured products................................... $57,587 $49,601 $49,363 Finance and insurance revenues................................... 1,746 1,589 1,384 Other revenues................................................... 2,064 2,005 1,488 ------- ------- ------- TOTAL REVENUES 61,397 53,195 52,235 ------- ------- ------- Costs, other than items below (Notes 14, 15, 16)................. 45,842 41,304 38,032 Depreciation and special tools amortization (Notes 1 and 5)...... 2,312 2,220 1,955 Selling and administrative expenses.............................. 4,730 4,064 3,933 Employee retirement benefits (Note 12)........................... 1,414 1,163 1,548 Interest expense................................................. 1,007 995 937 ------- ------- ------- TOTAL EXPENSES 55,305 49,746 46,405 ------- ------- ------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 6,092 3,449 5,830 Provision for income taxes (Note 8).............................. 2,372 1,328 2,117 ------- ------- ------- EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 3,720 2,121 3,713 Extraordinary item - Loss on early extinguishment of debt, net of taxes (Note 13)................................................ (191) -- -- Cumulative effect of a change in accounting principle, net of taxes (Note 1)................................................. -- (96) -- ------- ------- ------- NET EARNINGS $ 3,529 $ 2,025 $ 3,713 Preferred stock dividends (Note 11).............................. 3 21 80 ------- ------- ------- NET EARNINGS ON COMMON STOCK $ 3,526 $ 2,004 $ 3,633 ======= ======= ======= (IN DOLLARS OR MILLIONS OF SHARES) PRIMARY EARNINGS PER COMMON SHARE (NOTES 1, 11, 13): Earnings before extraordinary item and cumulative effect of a change in accounting principle.............................. $ 5.03 $ 2.78 $ 5.06 Extraordinary item............................................. (0.26) -- -- Cumulative effect of a change in accounting principle.......... -- (0.13) -- ------- ------- ------- Net earnings per common share.................................. $ 4.77 $ 2.65 $ 5.06 ======= ======= ======= Average common and dilutive equivalent shares outstanding...... 738.6 756.3 718.4 FULLY DILUTED EARNINGS PER COMMON SHARE (NOTES 1, 11, 13): Earnings before extraordinary item and cumulative effect of a change in accounting principle.............................. $ 5.00 $ 2.68 $ 4.55 Extraordinary item............................................. (0.26) -- -- Cumulative effect of a change in accounting principle.......... -- (0.12) -- ------- ------- ------- Net earnings per common share.................................. $ 4.74 $ 2.56 $ 4.55 ======= ======= ======= Average common and dilutive equivalent shares outstanding...... 744.2 792.3 815.5 DIVIDENDS DECLARED PER COMMON SHARE.............................. $ 1.40 $ 1.00 $ 0.55
See notes to consolidated financial statements. 34 35 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31 ------------------ 1996 1995 ------- ------- (IN MILLIONS OF DOLLARS) ASSETS: Cash and cash equivalents (Note 1)........................................ $ 5,158 $ 5,543 Marketable securities (Note 2)............................................ 2,594 2,582 ------- ------- Total cash, cash equivalents and marketable securities.................. 7,752 8,125 Accounts receivable -- trade and other (less allowance for doubtful accounts: 1996 and 1995 -- $44 million and $58 million, respectively)... 2,126 2,003 Inventories (Notes 1 and 3)............................................... 5,195 4,448 Prepaid employee benefits, taxes and other expenses (Note 12)............. 1,929 985 Finance receivables and retained interests in sold receivables (Note 4)... 12,339 13,623 Property and equipment (Note 5)........................................... 14,905 12,595 Special tools (Note 1).................................................... 3,924 3,566 Intangible assets (Note 1)................................................ 1,995 2,082 Other assets (Note 12).................................................... 6,019 6,329 ------- ------- TOTAL ASSETS $56,184 $53,756 ======= ======= LIABILITIES: Accounts payable.......................................................... $ 8,981 $ 8,290 Short-term debt (Note 7).................................................. 3,214 2,674 Payments due within one year on long-term debt (Note 7)................... 2,998 1,661 Accrued liabilities and expenses (Note 6)................................. 8,864 7,032 Long-term debt (Note 7)................................................... 7,184 9,858 Accrued noncurrent employee benefits (Note 12)............................ 9,431 9,217 Other noncurrent liabilities.............................................. 3,941 4,065 ------- ------- TOTAL LIABILITIES 44,613 42,797 ------- ------- SHAREHOLDERS' EQUITY (Note 11): (shares in millions) Preferred stock -- $1 per share par value; authorized 20.0 shares; Series A Convertible Preferred Stock; issued and outstanding: 1996 and 1995 -- 0.04 and 0.14 shares, respectively (aggregate liquidation preference $21 million and $68 million, respectively).................................. * * Common stock -- $1 per share par value; authorized 1,000.0 shares; issued: 1996 and 1995 -- 821.6 and 408.2 shares, respectively................... 822 408 Additional paid-in capital................................................ 5,129 5,506 Retained earnings......................................................... 8,829 6,280 Treasury stock -- at cost: 1996 -- 119.1 shares; 1995 -- 29.9 shares...... (3,209) (1,235) ------- ------- TOTAL SHAREHOLDERS' EQUITY 11,571 10,959 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $56,184 $53,756 ======= =======
- ------------------------- * Less than $1 million See notes to consolidated financial statements. 35 36 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 -------------------------------- 1996 1995 1994 -------- -------- -------- (IN MILLIONS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings.................................................. $ 3,529 $ 2,025 $ 3,713 Adjustments to reconcile to net cash provided by operating activities: Depreciation and special tools amortization.............. 2,312 2,220 1,955 Provision for credit losses.............................. 373 372 203 Deferred income taxes.................................... 1,120 186 1,065 Extraordinary item -- Loss on early extinguishment of debt (Note 13)......................................... 191 -- -- Cumulative effect of a change in accounting principle (Note 1)............................................... -- 96 -- Change in receivables.................................... (224) 848 (1,158) Change in inventories.................................... (691) (435) 129 Change in prepaid expenses and other assets.............. (1,394) (681) (1,888) Change in accounts payable and accrued and other liabilities............................................ 2,143 2,092 2,613 Other.................................................... (58) 231 161 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,301 6,954 6,793 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities....................... (4,346) (5,160) (5,425) Sales and maturities of marketable securities............ 5,294 6,122 3,519 Finance receivables acquired............................. (19,906) (24,437) (20,149) Finance receivables collected............................ 3,062 3,795 5,772 Proceeds from sales of finance receivables............... 16,809 17,602 13,138 Proceeds from sales of nonautomotive assets.............. 701 94 -- Expenditures for property and equipment.................. (3,271) (2,597) (2,666) Expenditures for special tools........................... (1,364) (1,049) (1,177) Purchases of vehicle operating leases.................... (794) (460) (143) Other.................................................... 248 179 173 -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (3,567) (5,911) (6,958) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt................................ 410 (1,971) 1,348 Proceeds under long-term borrowings and revolving lines of credit.............................................. 1,390 4,731 1,305 Payments on long-term borrowings and revolving lines of credit................................................. (2,167) (1,687) (1,011) Payment for early extinguishment of debt................. (853) -- -- Repurchases of common stock (Note 11).................... (2,041) (1,047) -- Dividends paid........................................... (963) (710) (399) Other.................................................... 105 39 27 -------- -------- -------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (4,119) (645) 1,270 -------- -------- -------- Change in cash and cash equivalents........................... (385) 398 1,105 Cash and cash equivalents at beginning of year................ 5,543 5,145 4,040 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR...................... $ 5,158 $ 5,543 $ 5,145 ======== ======== ========
See notes to consolidated financial statements. 36 37 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------- CONSOLIDATION AND FINANCIAL STATEMENT PRESENTATION The consolidated financial statements of Chrysler Corporation and its consolidated subsidiaries ("Chrysler") include the accounts of all significant majority-owned subsidiaries and entities. Affiliates that are 20 percent to 50 percent owned and subsidiaries where control is expected to be temporary, primarily investments in certain dealerships, are generally accounted for on an equity basis. Intercompany accounts and transactions have been eliminated in consolidation. Amounts for 1995 and 1994 have been reclassified to conform with current period classifications. ESTIMATES The preparation of Chrysler's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION In 1995, the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board ("FASB") reached a consensus on EITF Issue 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." The consensus on EITF Issue 95-1 (the "consensus") affects Chrysler's accounting treatment for vehicle sales (principally to non-affiliated rental car companies) for which Chrysler conditionally guarantees the minimum resale value of the vehicles. In accordance with the consensus, these vehicle sales are accounted for as operating leases with the related revenues and costs deferred at the time of shipment. A portion of the deferred revenues and costs is recognized over the corresponding guarantee period, with the remainder recognized at the end of the guarantee period. The average guarantee period for these vehicles is approximately nine months. Chrysler changed its accounting treatment in accordance with the consensus effective January 1, 1995 which resulted in the recognition of an after-tax charge of $96 million (net of income tax benefit of $59 million), or $0.13 per common share, for the cumulative effect of this change in accounting principle. The ongoing effect of this accounting change was not material to 1996 and 1995 earnings. Vehicle and parts sales are generally recognized when such products are shipped to dealers, except for sales under which Chrysler conditionally guarantees the minimum resale value of the vehicles. Provisions for sales incentives, returns and allowances are recognized at the time the related sale is recognized and are treated as revenue reductions. Finance revenue from finance receivables of Chrysler Financial Corporation ("CFC"), a wholly owned subsidiary, is recognized using the interest method. Certain loan and lease origination costs are deferred and amortized to finance revenue over the contractual terms. Recognition of finance revenue is generally suspended when a loan or lease becomes contractually delinquent for periods ranging from 60 to 90 days. Finance revenue recognition is resumed when the loan or lease becomes contractually current, at which time all past due finance revenue is recognized. CFC sells significant amounts of automotive retail and wholesale receivables in transactions subject to limited recourse provisions. CFC generally sells its receivables to a trust and remains as servicer, for which it is paid a servicing fee. Normal servicing fees are earned on a level yield basis over the remaining terms of the related sold receivables. In a subordinated capacity, CFC retains residual cash flows, a limited interest in the 37 38 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED - --------------------------------------------------------------- REVENUE RECOGNITION -- CONTINUED principal balances of the sold receivables and certain cash deposits provided as credit enhancements for investors. Gains or losses from the sales of retail receivables are recognized in the period in which such sales occur. In determining the gain or loss for each qualifying sale of retail receivables, the investment in the sold receivable pool is allocated between the portion sold and the portion retained, based on their relative fair values on the date of sale. DEPRECIATION AND SPECIAL TOOLS AMORTIZATION Property and equipment are stated at cost less accumulated depreciation. Depreciation is generally provided on a straight-line basis. Special tooling costs are amortized over the years that a model using that tooling is expected to be produced and within each year based on the units produced. Amortization is deducted directly from the asset account. During any given model year, special tools will contain tooling with varying useful lives. In 1994, Chrysler revised the estimated service lives of certain special tools and property and equipment. These revisions were based on updated assessments of the service lives of the related assets and resulted in the recognition of additional amortization of special tools of $246 million in 1994 and lower depreciation of property and equipment of $45 million in 1994. PRODUCT-RELATED COSTS Expenditures for research and development, advertising, sales promotion and other product-related costs are expensed as incurred. Provisions for product warranty costs are recognized at the time the related sale is recognized. Research and development costs were $1.6 billion, $1.4 billion and $1.3 billion in 1996, 1995 and 1994, respectively. Advertising expense was $1.5 billion, $1.2 billion and $1.1 billion in 1996, 1995 and 1994, respectively. CASH AND CASH EQUIVALENTS Highly liquid investments with a maturity of three months or less at the date of purchase are classified as cash equivalents. ALLOWANCE FOR CREDIT LOSSES An allowance for credit losses is generally established during the period in which receivables or vehicle leases are acquired. The allowance for credit losses is maintained at a level deemed appropriate, based primarily on loss experience. Other factors affecting collectibility are also evaluated and appropriate adjustments are recorded. Retail automotive receivables and vehicle leases not supported by a dealer guaranty are charged to the allowance for credit losses net of the estimated value of repossessed collateral at the time of repossession. Nonautomotive finance receivables are reduced to the estimated fair value of the collateral when such loans are deemed to be impaired. INVENTORIES Inventories are valued at the lower of cost or market. The cost of approximately 39 percent and 42 percent of inventories at December 31, 1996 and 1995, respectively, was determined on a Last-In, First-Out ("LIFO") basis. The balance of inventory cost was determined on a First-In, First-Out ("FIFO") basis. 38 39 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED - --------------------------------------------------------------- INTANGIBLE ASSETS The purchase price of companies in excess of the fair value of net identifiable assets acquired ("goodwill") is amortized on a straight-line basis over periods of up to 40 years, with a weighted average period of 38 years. The amount reported is net of accumulated amortization totaling $778 million and $767 million at December 31, 1996 and 1995, respectively. Chrysler periodically evaluates the carrying value of goodwill for impairment. Such evaluations are based principally on the projected, undiscounted cash flows of the operations to which the goodwill relates. Intangible assets also include intangible pension assets of $161 million and $37 million at December 31, 1996 and 1995, respectively. LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF Effective January 1, 1996, Chrysler adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and long-lived assets and certain identifiable intangibles to be disposed of. The Statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In addition, the Statement requires that certain long-lived assets and identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The initial adoption of this new accounting standard did not have a material effect on Chrysler's consolidated operating results or financial position. See also Note 15. STOCK-BASED COMPENSATION Effective January 1, 1996, Chrysler adopted SFAS No. 123, "Accounting for Stock-Based Compensation." This Statement defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. Under the intrinsic value based method, compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. Chrysler has elected to continue to account for its employee stock compensation plans under APB Opinion No. 25. Pro forma disclosures of net earnings and earnings per share, as if the fair value based method of accounting defined in SFAS No. 123 had been applied, are presented in Note 10. DERIVATIVE FINANCIAL INSTRUMENTS Chrysler manages risk arising from fluctuations in interest rates and currency exchange rates by using derivative financial instruments. Chrysler manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to fully perform under the terms of such agreements. Chrysler does not use derivative financial instruments for trading purposes. 39 40 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED - --------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS -- CONTINUED When Chrysler (excluding CFC) sells vehicles outside the United States or purchases components from suppliers outside the United States, transactions are frequently denominated in currencies other than U.S. dollars. Periodically, Chrysler initiates hedging activities by entering into currency exchange agreements, consisting principally of currency forward contracts and purchased options, to minimize revenue and cost variations which could result from fluctuations in currency exchange rates. These instruments, consistent with the underlying purchase or sale commitments, typically mature within three years of origination. Fees paid for purchased currency options are deferred and included in Other assets. The currency exchange agreements are treated as off-balance-sheet financial instruments, with the deferred fees and related gains and losses recognized in earnings upon the settlement of the underlying transactions. In the event of an early termination of a currency exchange agreement designated as a hedge, the gain or loss and any fees paid continue to be deferred and are included in the settlement of the underlying transaction. Chrysler also uses written currency options to effectively close out existing purchased options, both of which are then carried at fair value. Previously unrecognized gains and losses on the purchased options continue to be deferred and are included in earnings upon the settlement of the underlying transaction. Forward contracts are used to manage exposure to fluctuations in funding costs for the anticipated issuance of debt. Unrealized gains or losses on forward contracts that qualify for hedge accounting treatment are deferred and recorded as an adjustment to interest expense over the term of the new debt. In the event of an early termination of a forward contract designated as a hedge, the gain or loss is deferred and recorded as an adjustment to interest expense over the remaining term of the underlying debt. CFC utilizes interest rate swaps and currency exchange agreements to reduce the sensitivity of earnings to various market risks and manage funding costs. CFC's primary market risks include: fluctuations in interest rates, variability in spread relationships (i.e., Prime to LIBOR spreads), mismatches of repricing intervals between finance receivables and related funding obligations, and exchange rate variability for foreign debt issuances. CFC uses interest rate swap agreements to change the characteristics of its fixed and variable rate exposures and to manage its asset/liability match. Interest rate basis swaps are used to manage variability in spread relationships. Interest differentials resulting from interest rate swap agreements used to change the interest rate characteristics of CFC's debt are recorded on an accrual basis as an adjustment to interest expense. Interest rate swaps are either matched with specific term debt obligations or with groups of commercial paper on a layered basis. In the event of an early termination of an interest rate swap agreement designated as a hedge, the gain or loss is deferred, recorded in Other assets, and recognized as an adjustment to interest expense over the remaining term of the underlying debt. In addition, CFC enters into currency exchange agreements, consisting primarily of currency swaps, to manage its exposure to fluctuations in currency exchange rates related to specific borrowings denominated in currencies other than the local currency of the borrowing entity. As a result, such borrowings are translated in the consolidated balance sheet at the rates of exchange established under the related currency exchange agreement. Cash flows related to currency swaps are reflected in financing activities and cash flows related to all other derivative financial instruments are reflected in operating activities in the consolidated statement of cash flows. NOTE 2. MARKETABLE AND OTHER SECURITIES - --------------------------------------- Effective January 1, 1994, Chrysler adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of this accounting standard did not have a material effect on Chrysler's consolidated operating results or financial position. 40 41 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. MARKETABLE AND OTHER SECURITIES -- CONTINUED - ---------------------------------------------------- Under SFAS No. 115, debt and equity securities with readily determinable fair values are segregated into one of the following categories: trading, available-for-sale or held-to-maturity. Chrysler does not hold securities for trading purposes. Available-for-sale securities are carried at their fair values. Changes in the fair values of available-for-sale securities are recognized as a component of shareholders' equity until such securities are sold. Held-to-maturity securities are carried at cost adjusted for amortized premium or discount. Investments in marketable securities were as follows:
AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------------- ----------- ----------- --------------- DECEMBER 31 ------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ---- ---- ---- ---- ------ ------ (IN MILLIONS OF DOLLARS) AVAILABLE-FOR-SALE SECURITIES: U.S. and Canadian government and agency securities............................ $1,454 $ 682 $ 6 $ 9 $(11) $(2) $1,449 $ 689 Corporate debt securities................ 965 783 8 22 (5) (1) 968 804 Other marketable securities.............. 162 386 2 9 -- -- 164 395 ------ ------ --- --- ---- --- ------ ------ Total available-for-sale securities... 2,581 1,851 16 40 (16) (3) 2,581 1,888 ------ ------ --- --- ---- --- ------ ------ HELD-TO-MATURITY SECURITIES: U.S. and Canadian government and agency securities............................ -- 234 -- -- -- -- -- 234 Corporate debt securities................ -- 184 -- 1 -- -- -- 185 Other marketable securities.............. 13 276 -- -- -- -- 13 276 ------ ------ --- --- ---- --- ------ ------ Total held-to-maturity securities..... 13 694 -- 1 -- -- 13 695 ------ ------ --- --- ---- --- ------ ------ Total................................. $2,594 $2,545 $16 $41 $(16) $(3) $2,594 $2,583 ====== ====== === === ==== === ====== ======
At December 31, 1996, contractual maturities of marketable debt securities were as follows: within one year -- $534 million; after one year through five years -- $1,822 million; after five years through ten years -- $59 million; and after ten years -- $139 million. Proceeds from sales and maturities of available-for-sale securities were $4.5 billion and $3.1 billion in 1996 and 1995, respectively. The gross gains and losses realized related to these sales were immaterial. Chrysler uses the specific identification method as a basis for determining cost and calculating realized gains or losses. Other securities classified as cash equivalents were $4.3 billion and $4.8 billion at December 31, 1996 and 1995, respectively, and consisted primarily of commercial paper, repurchase agreements, and certificates of deposit. 41 42 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. INVENTORIES AND COST OF SALES - ------------------------------------- Inventories, summarized by major classification, were as follows:
DECEMBER 31 ------------------ 1996 1995 ------ ------ (IN MILLIONS OF DOLLARS) Finished products, including service parts................. $1,569 $1,232 Raw materials, finished production parts and supplies...... 1,540 1,456 Vehicles held for short-term lease......................... 2,086 1,760 ------ ------ Total................................................. $5,195 $4,448 ====== ======
Inventories valued on the LIFO basis would have been $439 million and $334 million higher than reported had they been valued on the FIFO basis at December 31, 1996 and 1995, respectively. Vehicles held for short-term lease include the carrying value of vehicles for which Chrysler conditionally guarantees the minimum resale value of the vehicles. The carrying value of these vehicles were $900 million and $746 million at December 31, 1996 and 1995, respectively. Total manufacturing cost of sales aggregated $46.5 billion, $41.7 billion and $39.0 billion for 1996, 1995 and 1994, respectively. NOTE 4. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SOLD RECEIVABLES - ---------------------------------------------------------------------- Finance receivables and retained interests in sold receivables were as follows:
DECEMBER 31 -------------------- 1996 1995 ------- ------- (IN MILLIONS OF DOLLARS) Automotive financing..................................... $ 6,920 $ 8,726 Nonautomotive financing.................................. 3,219 3,222 Retained senior interests in wholesale receivables held in trusts.............................................. 677 935 ------- ------- Total finance receivables........................... 10,816 12,883 Retained interests in sold receivables................... 3,488 3,039 Unearned income.......................................... (1,418) (1,682) Allowance for credit losses.............................. (547) (617) ------- ------- Total............................................... $12,339 $13,623 ======= =======
Retained interests in sold receivables are generally restricted and subject to limited recourse provisions. Contractual maturities of total finance receivables as of December 31, 1996, were (in millions of dollars): 1997 -- $4,193; 1998 -- $1,560; 1999 -- $1,269; 2000 -- $744; 2001 -- $615; and 2002 and thereafter -- $2,435. Actual cash flows will vary from contractual maturities due to future sales of finance receivables, prepayments and charge-offs. 42 43 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. FINANCE RECEIVABLES AND RETAINED INTERESTS IN SOLD RECEIVABLES -- CONTINUED - ------------------------------------------------------------------------- Changes in the allowance for credit losses were as follows:
YEAR ENDED DECEMBER 31 ------------------------- 1996 1995 1994 ----- ----- ----- (IN MILLIONS OF DOLLARS) Balance at beginning of year......................... $ 617 $ 522 $ 507 Provision for credit losses.......................... 373 372 203 Net credit losses.................................... (398) (252) (159) Other adjustments.................................... (45) (25) (29) ----- ----- ----- Balance at end of year............................... $ 547 $ 617 $ 522 ===== ===== =====
Nonearning finance receivables, including receivables sold subject to limited recourse, totaled $278 million and $333 million at December 31, 1996 and 1995, respectively, which represented 0.8 percent and 1.0 percent of such receivables outstanding, respectively. NOTE 5. PROPERTY AND EQUIPMENT - ------------------------------ Property and equipment, summarized by major classification, were as follows:
DECEMBER 31 WEIGHTED AVERAGE ------------------- SERVICE LIVES 1996 1995 ---------------- ------- ------- (YEARS) (IN MILLIONS OF DOLLARS) Land...................................................... -- $ 405 $ 399 Buildings................................................. 33 5,467 5,171 Machinery and equipment................................... 14 12,364 11,865 Furniture and fixtures.................................... 10 630 549 Vehicles under purchased operating leases................. 3 1,311 593 Construction in progress.................................. -- 2,875 1,891 ------- ------- 23,052 20,468 Accumulated depreciation (8,147) (7,873) ------- ------- Total................................................ $14,905 $12,595 ======= =======
Depreciation of property and equipment was $1,317 million, $1,100 million and $994 million in 1996, 1995 and 1994, respectively. 43 44 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. ACCRUED LIABILITIES AND EXPENSES - ---------------------------------------- Accrued liabilities and expenses consisted of the following:
DECEMBER 31 ------------------- 1996 1995 ------ ------ (IN MILLIONS OF DOLLARS) Customer and dealer allowances and claims............................... $2,660 $2,097 Employee compensation and benefits...................................... 2,477 1,892 Deferred revenue related to vehicles sold with guaranteed minimum resale values................................................. 1,190 991 Other................................................................... 2,537 2,052 ------ ------ Total.............................................................. $8,864 $7,032 ====== ======
NOTE 7. DEBT - --------------- Debt consisted of the following:
DECEMBER 31 ----------------------------------------------- WEIGHTED AVERAGE INTEREST MATURITY RATE(1) --------- ------------ 1996 1996 1995 1996 1995 --------- ---- ---- ------- ------- (IN MILLIONS OF DOLLARS) Chrysler, excluding CFC: Short-term debt.................................. 6.8% 6.7% $ 419 $ 160 Long-term debt payable within one year........... 23 49 ------- ------- Total debt payable within one year............ 442 209 ------- ------- Debentures....................................... 2017 11.0% 11.0% 265 265 Notes and other debt............................. 1998-2020 9.2% 10.1% 1,444 1,950 ------- ------- Total long-term debt.......................... 1,709 2,215 ------- ------- Total....................................... 2,151 2,424 ------- ------- CFC: Short-term debt (primarily commercial paper)..... 5.1% 6.2% 2,795 2,514 Long-term debt payable within one year........... 2,975 1,612 ------- ------- Total debt payable within one year............ 5,770 4,126 ------- ------- Senior notes and debentures...................... 1998-2018 6.9% 7.2% 5,462 7,625 Mortgage notes, capital leases and other......... 13 18 ------- ------- Total long-term debt.......................... 5,475 7,643 ------- ------- Total....................................... 11,245 11,769 ------- ------- Total Chrysler: Total long-term debt............................. $ 7,184 $ 9,858 ======= ======= Total debt....................................... $13,396 $14,193 ======= =======
- ------------------------- (1) The weighted average interest rates include the effects of interest rate exchange agreements. 44 45 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. DEBT -- CONTINUED - ------------------------- At December 31, 1996, aggregate annual maturities of consolidated debt, including principal payments on capital leases, were as follows (in millions of dollars): 1997 -- $6,212; 1998 -- $2,826; 1999 -- $2,125; 2000 -- $943; and 2001 - -- $462. CFC enters into currency exchange agreements to manage its exposure to fluctuations in currency exchange rates related to specific borrowings denominated in currencies other than the local currency of the borrowing entity. As a result, such borrowings are translated in the consolidated balance sheet at the rates of exchange established under the related currency exchange agreement. The reported amount of such borrowings was $75 million at December 31, 1996. If CFC had not entered into currency exchange agreements, the amount would have been $22 million higher. To mitigate risks associated with changing interest rates on certain of its debt, CFC has entered into interest rate swap agreements. CFC manages exposure to counterparty credit risk by entering into such agreements only with major financial institutions that are expected to fully perform under the terms of such agreements. The notional amounts are used to measure the volume of these agreements and do not represent exposure to credit loss. The impact of interest rate exchange agreements on interest expense was immaterial in 1996, 1995 and 1994. The following table summarizes CFC's interest rate derivatives related to its debt:
NOTIONAL AMOUNTS OUTSTANDING AND WEIGHTED AVERAGE RATES --------------------- DECEMBER 31 VARIABLE MATURING --------------------- UNDERLYING FINANCIAL INSTRUMENTS RATE INDICES THROUGH 1996 1995 - ------------------------------------- ------------------- -------- ------ ------ (IN MILLIONS OF DOLLARS) PAY FIXED INTEREST RATE SWAPS Short-term notes................... 1998 $ 250 $ 250 Weighted average pay rate....... 9.1% 9.1% Weighted average receive rate... Money Market 5.6% 5.9% Senior notes and debentures........ 1998 $ 369 $ 74 Weighted average pay rate....... 5.4% 7.4% Weighted average receive rate... Bankers Acceptances 4.4% 6.6% RECEIVE FIXED INTEREST RATE SWAPS Senior notes and debentures........ 2002 $1,436 $ 750 Weighted average pay rate....... LIBOR 8.1% 7.5% Weighted average receive rate... 9.0% 8.3% VARIABLE INTEREST RATE SWAPS Senior notes and debentures........ 1999 $1,611 $1,611 Weighted average pay rate....... LIBOR 5.5% 5.9% Weighted average receive rate... Federal Funds 5.6% 6.1%
CFC's U.S. and Canadian revolving credit facilities, which total $8 billion, consist of a $2 billion facility expiring in April 1997 and a $6 billion facility expiring in April 2001. Neither of the revolving credit facilities was drawn upon at December 31, 1996. At December 31, 1996, Chrysler (excluding CFC) had a $2.4 billion revolving credit agreement which expires in April 2001. The revolving credit agreement was not drawn upon at December 31, 1996. See also Note 13. Extraordinary Item -- Loss on Early Extinguishment of Debt. 45 46 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. INCOME TAXES - -------------------- Earnings before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle were attributable to the following sources:
YEAR ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------ ------ ------ (IN MILLIONS OF DOLLARS) United States................................................... $5,631 $3,179 $5,239 Foreign......................................................... 461 270 591 ------ ------ ------ Total...................................................... $6,092 $3,449 $5,830 ====== ====== ======
The provision for income taxes included in the consolidated statement of earnings was as follows:
YEAR ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------ ------ ------ (IN MILLIONS OF DOLLARS) Provision for income taxes before extraordinary item and the cumulative effect of a change in accounting principle......... $2,372 $1,328 $2,117 Income tax benefit of the extraordinary item.................... (118) -- -- Income tax benefit of the cumulative effect of a change in accounting principle.......................................... -- (59) -- ------ ------ ------ Total...................................................... $2,254 $1,269 $2,117 ====== ====== ======
YEAR ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------ ------ ------ (IN MILLIONS OF DOLLARS) Currently Payable: United States................................................. $ 963 $ 879 $ 876 Foreign....................................................... 52 63 60 State and local............................................... 119 200 116 ------ ------ ------ 1,134 1,142 1,052 ------ ------ ------ Deferred: United States................................................. 883 116 820 Foreign....................................................... 76 48 73 State and local............................................... 161 (37) 172 ------ ------ ------ 1,120 127 1,065 ------ ------ ------ Total...................................................... $2,254 $1,269 $2,117 ====== ====== ======
Chrysler does not provide for U.S. income taxes or foreign withholding taxes on $2.3 billion in cumulative undistributed earnings of foreign subsidiaries because these earnings are intended to be permanently reinvested in those operations. It is not practicable to estimate the amount of unrecognized deferred tax liability for these undistributed foreign earnings. 46 47 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. INCOME TAXES -- CONTINUED - --------------------------------- A reconciliation of income taxes determined using the statutory U.S. rate of 35 percent to actual income taxes provided was as follows:
YEAR ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------ ------ ------ (IN MILLIONS OF DOLLARS) Tax at U.S. statutory rate...................................... $2,132 $1,207 $2,041 State and local taxes, net of federal tax benefit............... 197 116 191 Recognition of prior years' research and development tax credits....................................................... -- -- (100) Adjustments to reflect assessment of realizability of deferred tax assets.................................................... -- (29) (32) Other........................................................... 43 34 17 ------ ------ ------ Provision for income taxes before extraordinary item and the cumulative effect of a change in accounting principle...... $2,372 $1,328 $2,117 ====== ====== ====== Effective income tax rate.................................. 38.9% 38.5% 36.3% ====== ====== ======
The adjustment to the provision for income taxes for the recognition of prior years' research and development tax credits in 1994 represented the tax benefits related to expenditures in prior years for qualifying research and development activities, in accordance with an Internal Revenue Service settlement which was based on U.S. Department of Treasury income tax regulations issued in 1994. The tax-effected temporary differences and carryforwards which comprised deferred tax assets and liabilities were as follows:
DECEMBER 31, 1996 DECEMBER 31, 1995 ----------------------------- ----------------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES ---------- --------------- ---------- --------------- (IN MILLIONS OF DOLLARS) Nonpension postretirement benefits............. $3,251 $ -- $3,121 $ -- Pensions....................................... 14 1,911 8 1,966 Accrued expenses............................... 2,692 2 2,698 2 Lease transactions............................. -- 1,828 -- 1,734 Depreciation................................... -- 2,056 -- 1,769 Prepaid employee benefits...................... -- 394 -- -- Tax credit carryforwards....................... 211 -- 211 -- Alternative minimum tax credit carryforwards... 107 -- 282 -- State and local taxes.......................... 105 129 160 109 Net operating loss ("NOL") carryforwards....... 42 -- 77 -- Other.......................................... 160 845 346 825 ------ ------ ------ ------ 6,582 7,165 6,903 6,405 Valuation allowance............................ (8) -- (3) -- ------ ------ ------ ------ Total..................................... $6,574 $ 7,165 $6,900 $ 6,405 ====== ====== ====== ======
Chrysler's tax credit carryforwards expire at various dates through the year 2010 and alternative minimum tax credit carryforwards have no expiration dates. NOL carryforwards totaled $119 million at December 31, 1996, of which $82 million may be used through the year 2008, and $37 million of which have 47 48 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. INCOME TAXES -- CONTINUED - --------------------------------- no expiration date. The valuation allowance was principally related to subsidiaries' NOL carryforwards. Changes in the valuation allowance were as follows:
YEAR ENDED DECEMBER 31 ------------------------ 1996 1995 1994 ---- ---- ---- (IN MILLIONS OF DOLLARS) Balance at beginning of year........................................ $ 3 $ 77 $146 Utilization of NOL carryforwards.................................... -- (45) (25) Adjustments to reflect assessment of realizability of deferred tax assets............................................................ -- (29) (32) Other............................................................... 5 -- (12) --- ---- ---- Balance at end of year.............................................. $ 8 $ 3 $ 77 === ==== ====
NOTE 9. COMMITMENTS AND CONTINGENCIES - ------------------------------------- LITIGATION Various claims and legal proceedings have been asserted or instituted against Chrysler, including some purporting to be class actions, and some which demand large monetary damages or other relief which could result in significant expenditures. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. It is reasonably possible that the final resolution of some of these matters may require Chrysler to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. The term "reasonably possible" is used herein to mean that the chance of a future transaction or event occurring is more than remote but less than likely. Although the final resolution of any such matters could have a material effect on Chrysler's consolidated operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, Chrysler believes that any resulting adjustment should not materially affect its consolidated financial position. ENVIRONMENTAL MATTERS Chrysler is subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against Chrysler concerning environmental matters. Estimates of future costs of such environmental matters are necessarily imprecise due to numerous uncertainties, including the enactment of new laws and regulations, the development and application of new technologies, the identification of new sites for which Chrysler may have remediation responsibility and the apportionment and collectibility of remediation costs among responsible parties. Chrysler establishes reserves for these environmental matters when a loss is probable and reasonably estimable. Chrysler's reserves for these environmental matters totaled $238 million and $271 million as of December 31, 1996 and 1995, respectively. It is reasonably possible that the final resolution of some of these matters may require Chrysler to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated. Although the final resolution of any such matters could have a material effect on Chrysler's consolidated operating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, Chrysler believes that any resulting adjustment should not materially affect its consolidated financial position. 48 49 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9. COMMITMENTS AND CONTINGENCIES -- CONTINUED - -------------------------------------------------- OTHER MATTERS The majority of Chrysler's lease payments are for operating leases. At December 31, 1996, Chrysler had the following minimum rental commitments under operating leases with noncancelable lease terms in excess of one year: 1997 - $240 million; 1998 - $187 million; 1999 - $139 million; 2000 - $109 million; 2001 - $60 million; and 2002 and thereafter - $206 million. Future minimum lease commitments have not been reduced by minimum sublease rentals of $202 million due in the future under noncancelable subleases. Rental expense under operating leases were $470 million, $436 million and $407 million in 1996, 1995 and 1994, respectively. Sublease rentals of $58 million, $58 million and $60 million were received in 1996, 1995 and 1994, respectively. Chrysler had commitments for capital expenditures, including commitments for assets currently under construction, approximating $1.6 billion at December 31, 1996. At December 31, 1996, Chrysler had guaranteed obligations of others in the amount of $89 million, none of which were secured by collateral. NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION - -------------------------------------------------- STOCK-BASED COMPENSATION Chrysler accounts for stock option grants and awards under its two stock-based compensation plans in accordance with APB Opinion No. 25 and related Interpretations. Accordingly, no compensation cost has been recognized for fixed stock option grants since the options have exercise prices of not less than the market value of Chrysler common stock at the date of grant. However, compensation cost was recognized for performance-based stock unit awards ("Performance Shares") since the awards have no exercise price. Compensation cost recognized for Performance Share awards was $30 million, $19 million and $4 million for 1996, 1995 and 1994, respectively. If compensation cost for stock option grants and Performance Share awards had been determined based on the fair value at the grant dates for 1996 and 1995 consistent with the method prescribed by SFAS No. 123, Chrysler's net earnings and earnings per share would have been adjusted to the pro forma amounts indicated below:
1996 1995 ------ ------ Net earnings -- As reported................................ $3,529 $2,025 -- Pro forma.................................. 3,527 2,025 Primary earnings per share -- As reported.................. $ 4.77 $ 2.65 -- Pro forma.................... 4.79 2.65 Fully diluted earnings per share -- As reported............ $ 4.74 $ 2.56 -- Pro forma.............. 4.76 2.56
During the initial phase-in period, as required by SFAS No. 123, the pro forma amounts were determined based on stock option grants and Performance Share awards in 1996 and 1995 only. Since Chrysler's fixed stock option grants do not vest, except upon retirement from Chrysler, compensation cost is recognized over the expected life of the option (i.e., five years). In addition, Performance Share awards are recognized over performance cycles of two to five years. Therefore, the pro forma amounts for compensation cost may not be indicative of the effects on net earnings and earnings per share for future years. 49 50 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION -- CONTINUED - --------------------------------------------------------------- STOCK-BASED COMPENSATION -- CONTINUED Fixed Stock Option Compensation Plans - ------------------------------------- In accordance with Chrysler's stock-based compensation plans, Chrysler may grant stock options, stock appreciation rights, and other stock-related incentives to officers, key employees and nonemployee directors of Chrysler. Outstanding options, consisting of ten-year nonqualified stock options, generally become exercisable on up to 40 percent, 70 percent and 100 percent of the shares after one year, two years and three years, respectively, from the date of grant. The outstanding options do not vest, except upon retirement from Chrysler, and are contingent upon continued employment during the applicable ten-year period. Shares available for granting options at the end of 1996, 1995 and 1994 were 11.6 million, 22.4 million and 30.2 million, respectively. Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995, respectively: dividend yield of 4.8 and 4.8 percent, expected volatility of 31 and 36 percent, risk-free interest rates of 6.7 and 5.8 percent, and expected lives of five and five years. A summary of the status of fixed stock option grants under Chrysler's stock-based compensation plans as of December 31, 1996, 1995 and 1994, and changes during the years ending on those dates is presented below:
1996 1995 1994 ------------------------ ------------------------ ------------------------ WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG. OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE (MILS) PRICE (MILS) PRICE (MILS) PRICE ------- ------------- ------- ------------- ------- ------------- Outstanding at beginning of year......................... 29.4 $ 19.40 26.2 $ 15.61 22.3 $ 11.92 Granted........................ 9.2 28.66 7.3 24.42 6.5 23.97 Exercised...................... (7.2) 16.11 (3.7) 10.58 (2.5) 9.76 Forfeited...................... (2.9) 14.79 (0.4) 14.56 (0.1) 15.80 ----- ----- ----- Outstanding at end of year..... 28.5 23.68 29.4 19.40 26.2 15.61 ===== ===== ===== Options exercisable at year end.......................... 13.3 $ 20.12 17.0 $ 17.20 15.0 $ 14.02 Weighted-average fair value of options granted during the year......................... $6.87 $6.49
The following table summarizes information about fixed stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------- ------------------------- WEIGHTED-AVG. WEIGHTED-AVG. RANGE OF OPTIONS WEIGHTED-AVG. EXERCISE OPTIONS EXERCISE EXERCISE PRICES (MILS) REMAINING LIFE PRICE (MILS) PRICE - ---------------- ------- -------------- ------------- ------- ------------- $ 5.87 to $10.00 1.3 3.7years $ 7.39 1.3 $ 7.39 10.01 to 15.00 2.1 4.0 10.59 2.1 10.59 15.01 to 20.00 0.3 4.8 16.68 0.3 16.68 20.01 to 25.00 15.4 7.1 23.91 9.3 23.68 25.01 to 30.00 9.0 8.9 28.48 0.1 27.43 30.01 to 33.83 0.4 5.8 32.17 0.2 31.35 ---- ---- $ 5.87 to $33.83 28.5 7.2 $ 23.68 13.3 $ 20.12 ==== ====
50 51 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. STOCK-BASED AND PROFIT-BASED COMPENSATION -- CONTINUED - --------------------------------------------------------------- STOCK-BASED COMPENSATION -- CONTINUED Performance-Based Stock Compensation Plan - ----------------------------------------- Chrysler's stock-based compensation plans also provide for the awarding of Performance Shares, which reward attainment of performance objectives. Performance Shares are awarded at the commencement of a performance cycle (two to five years) to each eligible executive (officers and a limited number of senior executives). At the end of each cycle, participants may earn no shares, or a number of Performance Shares ranging from a set minimum to a maximum of 125 percent of the award for that cycle, as determined by a committee of the Board of Directors based on Chrysler's performance in relation to the performance goals established at the beginning of the performance cycle. Under SFAS No. 123, the fair value of each Performance Share award is estimated at the date of grant based on the market value of a share of Chrysler common stock on the date of grant. Unearned Performance Share awards outstanding as of December 31, 1996, 1995 and 1994 were 0.8 million, 1.1 million and 0.6 million, respectively. As of December 31, 1996, the 0.8 million Performance Share awards outstanding have a weighted-average remaining life of 1.4 years. PROFIT-BASED COMPENSATION Chrysler has programs under which additional incentive compensation and profit sharing is paid to certain hourly and salaried employees based primarily on Chrysler's profitability. 51 52 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. SHAREHOLDERS' EQUITY - ----------------------------- Information with respect to shareholders' equity was as follows (shares in millions):
YEAR ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------- ------- ------ (IN MILLIONS OF DOLLARS) PREFERRED STOCK: Balance at beginning of year......................................... $ * $ 2 $ 2 Conversions into common stock..................................... * (2) -- ------- ------- ------ Balance at end of year............................................... $ * $ * $ 2 ======= ======= ====== COMMON STOCK: Balance at beginning of year......................................... $ 408 $ 364 $ 364 Effect of two-for-one stock split................................. 410 -- -- Conversions of preferred stock.................................... 4 44 -- ------- ------- ------ Balance at end of year............................................... $ 822 $ 408 $ 364 ======= ======= ====== ADDITIONAL PAID-IN CAPITAL: Balance at beginning of year......................................... $ 5,506 $ 5,536 $5,533 Effect of two-for-one stock split................................. (410) -- -- Conversions of preferred stock.................................... (4) (42) -- Shares issued under employee benefit plans........................ 37 12 3 ------- ------- ------ Balance at end of year............................................... $ 5,129 $ 5,506 $5,536 ======= ======= ====== RETAINED EARNINGS: Balance at beginning of year......................................... $ 6,280 $ 5,006 $1,170 Net earnings...................................................... 3,529 2,025 3,713 Dividends declared................................................ (1,016) (777) (470) Adjustment of additional minimum pension liability................ 24 (42) 626 Net unrealized gains (losses) on investments in certain debt and equity securities............................................ (23) 44 (21) Other adjustments................................................. 35 24 (12) ------- ------- ------ Balance at end of year............................................... $ 8,829 $ 6,280 $5,006 ======= ======= ====== TREASURY STOCK: Balance at beginning of year......................................... $(1,235) $ (214) $ (233) Shares of common stock repurchased (1996 -- 66; 1995 -- 23 (on a pre-split basis)).......................................... (2,041) (1,047) -- Shares issued under employee benefit plans (1996 -- 7; 1995 -- 2 and 1994 -- 1 (on a pre-split basis))............................ 67 26 19 ------- ------- ------ Balance at end of year............................................... $(3,209) $(1,235) $ (214) ======= ======= ======
- ------------------------- * Less than $1 million In May 1996, Chrysler declared a two-for-one stock split in the form of a 100 percent stock dividend which was distributed on July 15, 1996 to shareholders of record on June 15, 1996. All per share data and the average common and dilutive equivalent shares outstanding have been adjusted to reflect this stock split for all periods presented. The number of common shares issued, outstanding and held in treasury for 1996 have been adjusted to reflect this stock split. In addition, the par value of the new shares issued as a result of the 52 53 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. SHAREHOLDERS' EQUITY -- CONTINUED - ------------------------------------------ two-for-one stock split has been transferred from additional paid-in capital to common stock. Additional paid-in capital, common stock balances, common shares issued, outstanding and held in treasury for prior periods have not been restated for the two-for-one stock split. During 1996, Chrysler repurchased 66 million shares of its common stock at a cost of $2.0 billion (including $16 million in unsettled repurchases at December 31, 1996). In December 1996, Chrysler's Board of Directors approved an increase in Chrysler's planned 1997 common stock repurchases from $1 billion to $2 billion. The planned 1997 common stock repurchases are subject to market and general economic conditions. Since beginning its common stock repurchase program in 1995, Chrysler has repurchased 112 million shares of its common stock at a cost of $3.1 billion. As of December 31, 1996, 42,131 shares of Preferred Stock were outstanding and convertible into 2.3 million shares of Chrysler common stock. The annual dividend on the Series A Convertible Preferred Stock (the "Preferred Stock") is $46.25 per share. The Preferred Stock is convertible, unless previously redeemed, at a rate (subject to adjustment in certain events) of 55.56 shares of common stock for each share of Preferred Stock. The Preferred Stock is not redeemable prior to January 22, 1997. Thereafter, Chrysler may redeem the Preferred Stock, in whole or in part, at $523.13 per share of Preferred Stock for the period ending December 31, 1997 and thereafter declining ratably annually to $500.00 per share after December 31, 2001, plus accrued and unpaid dividends. In February 1988, the Board of Directors declared and distributed a dividend of one Preferred Share Purchase Right (a "Right") for each then outstanding share of Chrysler's common stock and authorized the distribution of one Right with respect to each subsequently issued share of common stock. Each Right, as most recently amended and as adjusted to reflect the May 1996 two-for-one stock split, entitles a shareholder to purchase one two-hundredth of a share of Junior Participating Cumulative Preferred Stock of Chrysler at a price of $60. The Rights are attached to the common stock and are not represented by separate certificates or exercisable until the earliest to occur of (i) 10 days following the time (the "Stock Acquisition Time") of a public announcement or communication to Chrysler that a person or group of persons has acquired or obtained the right to acquire 15 percent or more of Chrysler's outstanding common stock, other than as a result of a "Qualifying Offer" -- an all-cash, fully-financed tender offer for all shares of Chrysler's common stock that is held open for at least 60 business days and is accompanied by an investment banker's fairness opinion -- and (ii) 10 business days after a person or group of persons announces or commences a tender offer that would result, if successful, in the bidder owning 15 percent or more of Chrysler's outstanding common stock, other than as a result of a Qualifying Offer. If the acquiring person or group acquires 15 percent or more of the common stock (except pursuant to a tender offer made for all of Chrysler's common stock, and determined by Chrysler's independent directors to be fair and in the best interests of Chrysler and its shareholders), then each Right (other than those held by the acquiror) will entitle its holder to buy, for $60, a number of shares of Chrysler's common stock having a market value of $120. Similarly, if after the Stock Acquisition Time, Chrysler is acquired in a merger or other business combination and is not the surviving corporation, or 50 percent or more of its assets, cash flow or earning power is sold, each Right (other than those held by the surviving or acquiring company) will entitle its holder to purchase, for $60, shares of the surviving or acquiring company having a market value of $120. Chrysler's directors may redeem the Rights at $0.05 per Right, and may amend the Rights or extend the time during which the Rights may be redeemed, only prior to the Stock Acquisition Time. Additionally, at any time after a person or group acquires 15 percent or more, but less than 50 percent, of Chrysler's common stock, Chrysler's directors may exchange the Rights (other than those held by the acquiror), in whole or in part, at an exchange ratio of one share of common stock (or a fractional share of preferred stock with equivalent voting rights) per Right. The Rights will expire on February 22, 1998. 53 54 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. SHAREHOLDERS' EQUITY -- CONTINUED - ------------------------------------------ Of the 1.0 billion shares of authorized common stock at December 31, 1996, 44 million shares were reserved for issuance under Chrysler's various employee benefit plans and the conversion of the Preferred Stock. Primary earnings per-common-share amounts were computed by dividing earnings after deduction of preferred stock dividends by the average number of common and dilutive equivalent shares outstanding. Fully diluted per-common-share amounts assume conversion of the Preferred Stock, the elimination of the related preferred stock dividend requirement, and the issuance of common stock for all other potentially dilutive equivalents outstanding. NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS - ----------------------------------------------- PENSION PLANS Chrysler's pension plans provide noncontributory and contributory benefits. The noncontributory pension plans cover substantially all of the hourly and salaried employees of Chrysler and certain of its consolidated subsidiaries. Benefits are based on a fixed rate for each year of service. Additionally, contributory benefits are provided to substantially all salaried employees of Chrysler and certain of its consolidated subsidiaries under the Salaried Employees' Retirement Plan. This plan provides benefits based on the employee's cumulative contributions, years of service during which employee contributions were made, and the employee's average salary during the consecutive five years in which salary was highest in the 15 years preceding retirement. Contributions to the pension trust fund for U.S. plans are in compliance with the Employee Retirement Income Security Act of 1974, as amended. All pension trust fund assets and income accruing thereon are used solely to pay pension benefits and administer the plans. Chrysler contributed $941 million, $838 million and $2.6 billion to the pension funds during 1996, 1995 and 1994, respectively. At December 31, 1996, plan assets were invested in a diversified portfolio that consisted primarily of debt and equity securities, including 5.0 million shares of Chrysler common stock with a market value of $166 million. During 1996, $23 million of dividends were received on Chrysler common stock. The components of pension expense were as follows:
YEAR ENDED DECEMBER 31 ----------------------------------------------------------------------------------------- 1996 1995 1994 --------------------------- --------------------------- --------------------------- NON- NON- NON- U.S. U.S. U.S. U.S. U.S. U.S. PLANS PLANS TOTAL PLANS PLANS TOTAL PLANS PLANS TOTAL ------- ----- ------- ------- ----- ------- ------- ----- ------- (IN MILLIONS OF DOLLARS) Service cost -- benefits earned during the year.... $ 305 $ 29 $ 334 $ 233 $ 20 $ 253 $ 275 $ 29 $ 304 Interest on projected benefit obligation........ 915 99 1,014 903 90 993 833 86 919 Return on plan assets: Actual return............. (1,953) (249) (2,202) (2,572) (168) (2,740) 183 11 194 Deferred (loss) gain...... 687 139 826 1,465 67 1,532 (1,106) (116) (1,222) ------- ----- ------- ------- ----- ------- ------- ----- ------- Expected return........... (1,266) (110) (1,376) (1,107) (101) (1,208) (923) (105) (1,028) Net amortization and other..................... 523 62 585 328 39 367 471 48 519 ------- ----- ------- ------- ----- ------- ------- ----- ------- Total................... $ 477 $ 80 $ 557 $ 357 $ 48 $ 405 $ 656 $ 58 $ 714 ======= ===== ======= ======= ===== ======= ======= ===== =======
54 55 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED - ------------------------------------------------------------ PENSION PLANS -- CONTINUED Pension expense is determined using assumptions at the beginning of the year. The projected benefit obligation ("PBO") is determined using the assumptions at the end of the year. Assumptions used to determine pension expense and the PBO were:
DECEMBER 31 ------------------------------------------------------------------------ U.S. PLANS NON-U.S. PLANS ------------------------------------ -------------------------------- 1996 1995 1994 1993 1996 1995 1994 1993 ------ ------ ------ ------ ----- ----- ----- ----- Discount rate............... 7.25% 7.00% 8.63% 7.38% 7.50% 8.25% 9.75% 8.25% Rate of increase in future compensation levels....... 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Long-term rate of return on plan assets............... 10.00% 10.00% 10.00% 10.00% 9.00% 9.00% 9.00% 9.00%
The increase in the discount rate for U.S. Plans from 7.00 percent as of December 31, 1995 to 7.25 percent as of December 31, 1996 resulted in a $306 million decrease in the PBO at December 31, 1996 and is expected to result in a $16 million decrease in 1997 pension expense. Scheduled increases in benefits under the 1996 U.S. collective bargaining agreements resulted in a $706 million increase in the PBO in 1996 and is expected to result in a $101 million increase in 1997 pension expense. The increase in 1997 pension expense as a result of the 1996 U.S. collective bargaining agreements is expected to be more than offset by a reduction in 1997 pension expense resulting from an increase in expected return on U.S. plan assets. 55 56 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED - ------------------------------------------------------------ PENSION PLANS -- CONTINUED The following table presents a reconciliation of the funded status of the plans with amounts recognized in the consolidated balance sheet:
DECEMBER 31, 1996 -------------------------------------------------------------------------- U.S. PLANS NON-U.S. PLANS ----------------------------- -------------------------------- ASSETS ACCUM. ASSETS ACCUM. EXCEED BENEFITS EXCEED BENEFITS ACCUM. EXCEED U.S. ACCUM. EXCEED NON-U.S. BENEFITS ASSETS TOTAL BENEFITS ASSETS TOTAL TOTAL -------- -------- ------- -------- -------- ---------- ------- (IN MILLIONS OF DOLLARS) Actuarial present value of benefits: Vested................................... $ 11,055 $ 336 $11,391 $1,363 $ -- $1,363 $12,754 Nonvested................................ 2,270 91 2,361 28 -- 28 2,389 ------- ----- ------- ------ ---- ------ ------- Accumulated benefit obligation............. 13,325 427 13,752 1,391 -- 1,391 15,143 Effect of projected future salary increases................................ 319 6 325 19 -- 19 344 ------- ----- ------- ------ ---- ------ ------- PBO........................................ 13,644 433 14,077 1,410 -- 1,410 15,487 Plan assets at fair value.................. 15,107 279 15,386 1,481 -- 1,481 16,867 ------- ----- ------- ------ ---- ------ ------- PBO less than/(in excess of) plan assets... 1,463 (154) 1,309 71 -- 71 1,380 Unrecognized net loss/(gain)............... 489 41 530 492 -- 492 1,022 Unrecognized prior service cost............ 1,847 160 2,007 166 -- 166 2,173 Unamortized net obligation at date of adoption................................. 713 1 714 6 -- 6 720 Adjustment required to recognize minimum liability................................ -- (200) (200) -- -- -- (200) ------- ----- ------- ------ ---- ------ ------- Net prepaid pension asset/(liability) recognized in the consolidated balance sheet.................................... $ 4,512 $ (152) $ 4,360 $ 735 $ -- $ 735 $ 5,095 ======== ====== ======= ====== ==== ====== =======
DECEMBER 31, 1995 -------------------------------------------------------------------------- U.S. PLANS NON-U.S. PLANS ----------------------------- -------------------------------- ASSETS ACCUM. ASSETS ACCUM. EXCEED BENEFITS EXCEED BENEFITS ACCUM. EXCEED U.S. ACCUM. EXCEED NON-U.S. BENEFITS ASSETS TOTAL BENEFITS ASSETS TOTAL TOTAL -------- -------- ------- -------- -------- ---------- ------- (IN MILLIONS OF DOLLARS) Actuarial present value of benefits: Vested................................... $ 9,644 $ 376 $10,020 $1,132 $ 9 $1,141 $11,161 Nonvested................................ 2,622 79 2,701 23 1 24 2,725 ------- ------ ------- ------ ---- ------ ------- Accumulated benefit obligation............. 12,266 455 12,721 1,155 10 1,165 13,886 Effect of projected future salary increases................................ 252 9 261 12 2 14 275 ------- ------ ------- ------ ---- ------ ------- PBO........................................ 12,518 464 12,982 1,167 12 1,179 14,161 Plan assets at fair value.................. 13,353 86 13,439 1,218 -- 1,218 14,657 ------- ------ ------- ------ ---- ------ ------- PBO less than/(in excess of) plan assets... 835 (378) 457 51 (12) 39 496 Unrecognized net loss/(gain)............... 1,292 79 1,371 485 (1) 484 1,855 Unrecognized prior service cost............ 1,258 39 1,297 187 -- 187 1,484 Unamortized net obligation at date of adoption................................. 855 1 856 4 4 8 864 Adjustment required to recognize minimum liability................................ -- (114) (114) -- (1) (1) (115) ------- ------ ------- ------ ---- ------ ------- Net prepaid pension asset/(liability) recognized in the consolidated balance sheet.................................... $ 4,240 $ (373) $ 3,867 $ 727 $(10) $ 717 $ 4,584 ======= ====== ======= ====== ==== ====== =======
56 57 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED - ------------------------------------------------------------ PENSION PLANS -- CONTINUED Included in Other assets on the consolidated balance sheet as of December 31, 1996 and 1995, was noncurrent prepaid pension expense of $4.9 billion and $4.7 billion, respectively. NONPENSION POSTRETIREMENT BENEFITS Chrysler provides health and life insurance benefits to substantially all of its hourly and salaried employees and those of certain of its consolidated subsidiaries. Upon retirement from Chrysler, employees may become eligible for continuation of these benefits. However, benefits and eligibility rules may be modified periodically. The components of nonpension postretirement benefit expense were as follows:
YEAR ENDED DECEMBER 31 ------------------------ 1996 1995 1994 ---- ---- ---- (IN MILLIONS OF DOLLARS) Benefits attributed to employees' service........................... $191 $136 $178 Interest on accumulated nonpension postretirement benefit obligation........................................................ 671 670 665 Net amortization.................................................... (5) (48) (9) ---- ---- ---- Total........................................................ $857 $758 $834 ==== ==== ====
The following table reconciles the components of the accumulated nonpension postretirement benefit obligation with amounts recognized in the consolidated balance sheet:
DECEMBER 31 -------------------- 1996 1995 ------ ------- (IN MILLIONS OF DOLLARS) Accumulated nonpension postretirement benefit obligation ("ANPBO") attributable to: Retirees............................................................. $4,976 $ 4,798 Active employees eligible for benefits............................... 1,935 1,761 Other active employees............................................... 3,010 3,273 ------ ------- Total ANPBO....................................................... 9,921 9,832 Unrecognized prior service cost...................................... (36) 237 Unrecognized net loss................................................ (760) (1,344) ------ ------- Total........................................................... $9,125 $ 8,725 ====== =======
57 58 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. EMPLOYEE RETIREMENT AND OTHER BENEFITS -- CONTINUED - ------------------------------------------------------------ NONPENSION POSTRETIREMENT BENEFITS -- CONTINUED Nonpension postretirement benefit expense is determined using assumptions at the beginning of the year. The ANPBO is determined using the assumptions at the end of the year. Assumptions used to determine nonpension postretirement benefit expense and the ANPBO were:
DECEMBER 31 ------------------------ 1996 1995 1994 ---- ---- ---- Discount rate......................................................... 7.3% 7.0% 8.6% Health care inflation rate in following (or "base") year.............. 7.0% 7.5% 7.5% Ultimate health care inflation rate (2002)(1)......................... 5.0% 5.4% 5.5% Average health care inflation rate (base year through 2002)........... 5.4% 5.8% 6.1%
- ------------------------- (1) Rate decreases annually through the year 2002 The increase in the discount rate from 7.0 percent as of December 31, 1995 to 7.3 percent as of December 31, 1996 resulted in a $221 million decrease in the ANPBO in 1996, and is expected to result in a $5 million decrease in nonpension postretirement benefit expense in 1997. A one percentage point increase in the assumed health care inflation rate in each year would have increased the ANPBO at December 31, 1996, by $1.2 billion and would have increased the aggregate of the service and interest cost components of nonpension postretirement benefit expense in 1996 by $117 million. VOLUNTARY EARLY RETIREMENT PROGRAMS During 1996, 1995 and 1994, the cost of voluntary early retirement programs, which are periodically offered to certain salaried and hourly employees, was $97 million, $22 million and $77 million, respectively, and is included in employee retirement benefit expense. PREPAID EMPLOYEE BENEFITS In December 1996, Chrysler prepaid certain 1997 nonpension employee benefits by contributing $1.1 billion to a Voluntary Employees' Beneficiary Association trust and other employee benefit plans. NOTE 13. EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT - ------------------------------------------------------------------- In December 1996, Chrysler extinguished $550 million, or 50 percent, of the outstanding principal amount of its Auburn Hills Trust Guaranteed Exchangeable Certificates Due 2020 (the "Certificates") at a cost of $859 million. The extinguishment of the Certificates resulted in an extraordinary after-tax loss of $191 million (net of income tax benefit of $118 million), or $0.26 per common share. At December 31, 1996, $550 million of the Certificates remained outstanding. The remaining Certificates outstanding are not redeemable prior to maturity and carry a current interest rate of 12 percent. In addition, Chrysler entered into forward contracts (notional amount $520 million) to mitigate interest rate risk related to debt Chrysler intends to incur in the first quarter of 1997 to refinance the extinguished Certificates. The refinancing is subject to market and general economic conditions. 58 59 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14. SALES OF ASSETS - ------------------------ In 1996, Chrysler sold Electrospace Systems, Inc. ("ESI") and Chrysler Technologies Airborne Systems, Inc. ("CTAS") for net proceeds of $476 million. ESI and CTAS were engaged principally in the manufacture of defense electronics and aircraft modification, respectively, and represented substantially all of the operations of Chrysler Technologies Corporation, a wholly owned subsidiary of Chrysler. The sale resulted in a pretax gain of $101 million ($87 million after taxes) which is included in Costs, other than items below in the consolidated statement of earnings for 1996. Also in 1996, CFC sold certain nonautomotive assets for net proceeds of $225 million, which approximated the net book value of the assets. In 1994, Chrysler sold its wire harness operations and certain of its soft trim operations, and entered into five-year supply agreements with each of the purchasers. Aggregate net proceeds from the sales and the supply agreements were $315 million. The related pretax gains of $254 million were deferred and are being recognized over the periods of the respective supply agreements. NOTE 15. LOSSES ON ASSETS TO BE SOLD - ------------------------------------ Consistent with its strategy to focus on its core automotive business, in 1996, Chrysler committed to a plan of disposal for Thrifty Rent-A-Car System, Inc. ("Thrifty"). In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," a pretax loss of $65 million ($100 million after taxes) was recognized in 1996 to write down Thrifty's carrying value to estimated fair value less cost to sell. Chrysler's estimate of the fair value of Thrifty is based principally on an analysis of non-binding bids. The pretax loss is included in Costs, other than items below in the consolidated statement of earnings for 1996. The after-tax loss includes the effect of not being able to claim a tax deduction for the capital loss on Chrysler's investment in Thrifty. Thrifty's assets and liabilities at December 31, 1996, and its results of operations for 1996 were immaterial to Chrysler's consolidated assets and liabilities and results of operations, respectively. Chrysler is continuing with its efforts to sell Thrifty and is uncertain when the sale of Thrifty may occur. In the fourth quarter of 1996, Chrysler signed an agreement to sell Pentastar Electronics, Inc. ("PEI") for net proceeds of $17 million. PEI produces automatic test equipment for military applications and represents the remaining operations of Chrysler Technologies Corporation. In accordance with SFAS No. 121, a pretax loss of $77 million ($51 million after taxes) was recognized in the fourth quarter of 1996 to write down PEI's carrying value to estimated fair value less cost to sell. Chrysler's estimate of the fair value of PEI was based on the terms of the agreement. Included in the cost to sell PEI is an estimate for job security benefits, special early retirement benefits and other employee costs related to employees which Chrysler agreed to retain. The pretax loss is included in Costs, other than items below in the consolidated statement of earnings for 1996. PEI's assets and liabilities at December 31, 1996, and its results of operations for 1996 were immaterial to Chrysler's consolidated assets and liabilities and results of operations, respectively. The sale of PEI was completed on January 10, 1997. NOTE 16. SPECIAL PLANT PROVISION - -------------------------------- In 1995, Chrysler recorded a $263 million provision ($162 million after taxes) for costs associated with production changes at its Newark assembly plant. Newark production of the Chrysler Concorde and Dodge Intrepid was reduced to one shift in August 1995 and terminated in July 1996. Production of an all-new sport utility vehicle, the Dodge Durango, is scheduled to begin at the Newark assembly plant in the fall of 1997. The provision reflects the recognition of supplemental unemployment benefits, job security benefits and other 59 60 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16. SPECIAL PLANT PROVISION -- CONTINUED - --------------------------------------------- related employee costs, and the write-down of certain equipment and tooling. The provision is included in Costs, other than items below in the consolidated statement of earnings for 1995. NOTE 17. SUPPLEMENTAL CASH FLOW INFORMATION - ------------------------------------------- Supplemental disclosures to the consolidated statement of cash flows were as follows:
YEAR ENDED DECEMBER 31 -------------------------- 1996 1995 1994 ------ ---- ---- (IN MILLIONS OF DOLLARS) Interest paid (net of amounts capitalized): Chrysler, excluding CFC......................................... $ 227 $105 $195 CFC............................................................. 788 847 733 Interest capitalized.............................................. 156 204 177 Income taxes paid, net of refunds received........................ 1,206 944 910
CFC acquired $1.0 billion, $250 million and $300 million of asset-backed securities in non-cash transactions relating to the securitization of retail receivables during 1996, 1995 and 1994, respectively. NOTE 18. FINANCIAL INSTRUMENTS - ------------------------------ The estimated fair values of financial instruments have been determined by Chrysler using available market information and the valuation methodologies described below. However, judgment is often required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that Chrysler could realize in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to Chrysler's financial instruments were as follows:
DECEMBER 31, 1996 DECEMBER 31, 1995 --------------------- --------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- ------- -------- ------- (IN MILLIONS OF DOLLARS) BALANCE SHEET FINANCIAL INSTRUMENTS Marketable securities.......................... $ 2,594 $ 2,594 $ 2,582 $ 2,583 Finance receivables and retained interests(1)................................ 10,353 10,315 11,823 11,827 Debt........................................... 13,448 13,929 14,368 15,331 Currency exchange agreements(2)................ 52 57 175 200
- ------------------------- (1) The carrying value of finance receivables and retained interests excludes $1,986 million and $1,800 million of direct finance and leveraged leases classified as finance receivables in the consolidated balance sheet at December 31, 1996 and 1995, respectively. (2) Currency exchange agreements are recorded on the consolidated balance sheet as a net reduction to the carrying value of debt. 60 61 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. FINANCIAL INSTRUMENTS -- CONTINUED - -------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995 --------------------------- --------------------------- CONTRACT OR UNREALIZED CONTRACT OR UNREALIZED NOTIONAL GAINS/ NOTIONAL GAINS/ AMOUNT (LOSSES) AMOUNT (LOSSES) ----------- ---------- ----------- ---------- (IN MILLIONS OF DOLLARS) OTHER FINANCIAL INSTRUMENTS Interest rate swaps With unrealized gains.................. $ 1,246 $ 14 $ 750 $ 26 With unrealized losses................. 2,420 (22) 1,935 (33) Forward contracts......................... 520 (3) -- -- Currency forward contracts With unrealized gains.................. 2,028 90 573 14 With unrealized losses................. 680 (47) 885 (26) Purchased currency options(1) With unrealized gains.................. 35 2 328 23 With unrealized losses................. -- -- 418 (10)
- ------------------------- (1) Includes purchased currency options with a notional amount of $351 million at December 31, 1995 which have been effectively closed out with written currency options also with a notional amount of $351 million. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximated fair values due to the short-term maturities of these instruments. The methods and assumptions used to estimate the fair values of balance sheet and other financial instruments are summarized as follows: Marketable securities - ---------------------- The fair values of marketable securities were estimated using quoted market prices. Finance receivables and retained interests in sold receivables - --------------------------------------------------------------- The carrying value of variable-rate finance receivables was assumed to approximate fair value since they are priced at current market rates. The fair value of fixed-rate finance receivables was estimated by discounting expected cash flows using rates at which loans of similar maturities would be made as of the date of the consolidated balance sheet. The fair values of residual cash flows and other subordinated amounts due CFC arising from receivable sale transactions were estimated by discounting expected cash flows at current market rates. Debt - ---- The fair value of public debt was estimated using quoted market prices. The fair value of other long-term debt was estimated by discounting future cash flows using rates currently available for debt with similar terms and remaining maturities. 61 62 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. FINANCIAL INSTRUMENTS -- CONTINUED - ------------------------------------------- Currency exchange agreements - ---------------------------- The fair values of currency exchange agreements were estimated by discounting the expected cash flows using market exchange rates and relative market interest rates over the remaining terms of the agreements. Currency exchange agreements are more fully described in Notes 1 and 7. Interest rate swaps - ------------------- The fair values of interest rate swaps were estimated by discounting expected cash flows using quoted market interest rates. Interest rate swaps are more fully described in Notes 1 and 7. Forward contracts - ----------------- The fair values of forward contracts were estimated by discounting expected cash flows using quoted market interest rates. Forward contracts are more fully described in Note 1. Currency forward and option contracts - ------------------------------------- The fair values of currency forward and option contracts were estimated based on quoted market prices for contracts of similar terms. Currency forward and option contracts are more fully described in Note 1. The fair value estimates presented herein were based on information available as of the date of the consolidated balance sheet. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been revalued since the date of the consolidated balance sheet and, therefore, current estimates of fair value may differ from the amounts presented herein. NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA - -------------------------------------------------- INDUSTRY SEGMENT DATA - --------------------- Chrysler operates in two principal industry segments: Car and Truck and Financial Services. The Car and Truck segment is comprised of the automotive operations of Chrysler, which includes the research, design, manufacture, assembly and sale of cars, trucks and related parts and accessories. Based on assets, revenues and earnings, automotive operations represent the majority of Chrysler's business activities. The Financial Services segment is comprised of CFC, which is engaged principally in retail and lease financing for vehicles, dealer inventory and other financing needs, dealer property and casualty insurance, and dealership facility development and management. Chrysler also participates in short-term vehicle rental activities through its Car Rental Operations. The Car Rental Operations represent less than 10 percent of revenues, operating profits and identifiable assets, and have been included in the Car and Truck segment. Chrysler's operations are conducted primarily in North America including the United States, Canada and Mexico. 62 63 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA -- CONTINUED - --------------------------------------------------------------- INDUSTRY SEGMENT DATA -- CONTINUED - ---------------------------------- Information concerning operations by industry segment was as follows:
CAR FINANCIAL AND TRUCK SERVICES CONSOLIDATED --------- --------- ------------ (IN MILLIONS OF DOLLARS) DECEMBER 31, 1996 - ----------------- Revenues: Unaffiliated customers...................................... $59,006 $ 2,391 $ 61,397 Intersegment................................................ 15 160 -- ------- ------- ------- Total revenues................................................ 59,021 2,551 61,397 Operating earnings............................................ 5,767 613 6,269 Interest expense.............................................. 288 -- 177 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....... 5,479 613 6,092 Depreciation and special tools amortization................... 2,194 118 2,312 Capital expenditures.......................................... 5,035 394 5,429 Identifiable assets........................................... 41,251 17,721 56,184 Liabilities................................................... 33,028 14,373 44,613 DECEMBER 31, 1995 - ----------------- Revenues: Unaffiliated customers...................................... $50,966 $ 2,229 $ 53,195 Intersegment................................................ 13 210 -- ------- ------- ------- Total revenues................................................ 50,979 2,439 53,195 Operating earnings............................................ 3,202 522 3,550 Interest expense.............................................. 275 -- 101 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....... 2,927 522 3,449 Depreciation and special tools amortization................... 2,139 81 2,220 Capital expenditures.......................................... 3,774 332 4,106 Identifiable assets........................................... 38,358 17,835 53,756 Liabilities................................................... 30,701 14,533 42,797 DECEMBER 31, 1994 - ----------------- Revenues: Unaffiliated customers...................................... $50,381 $ 1,854 $ 52,235 Intersegment................................................ 7 141 -- ------- ------- ------- Total revenues................................................ 50,388 1,995 52,235 Operating earnings............................................ 5,826 315 6,020 Interest expense.............................................. 311 -- 190 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....... 5,515 315 5,830 Depreciation and special tools amortization................... 1,880 75 1,955 Capital expenditures.......................................... 3,796 190 3,986 Identifiable assets........................................... 36,001 16,648 49,539 Liabilities................................................... 28,580 13,375 38,845
Interest expense of the Financial Services segment has been netted against operating earnings, which is consistent with industry practice. Certain line items do not add to the consolidated amounts due to the elimination of intersegment transactions. 63 64 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA -- CONTINUED - -------------------------------------------------------------------------- GEOGRAPHIC AREA DATA - ------------------------ Information concerning operations by principal geographic area was as follows:
UNITED ADJMTS. STATES CANADA OTHER AND ELIMS. CONSOLIDATED ------- ------- ------ ---------- ------------ (IN MILLIONS OF DOLLARS) DECEMBER 31, 1996 - -------------------- Revenues: Unaffiliated customers..................... $53,171 $ 4,446 $3,780 $ -- $ 61,397 Transfers between geographic areas......... 10,540 7,999 5,121 (23,660) -- ------- ------- ------ -------- ------- Total revenues............................... 63,711 12,445 8,901 (23,660) 61,397 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....................... 5,631 224 237 -- 6,092 Identifiable assets.......................... 47,843 5,497 2,844 -- 56,184 Net assets................................... 8,847 1,435 1,289 -- 11,571 DECEMBER 31, 1995 - -------------------- Revenues: Unaffiliated customers..................... $47,289 $ 3,834 $2,072 $ -- $ 53,195 Transfers between geographic areas......... 6,888 5,913 2,919 (15,720) -- ------- ------- ------ -------- ------- Total revenues............................... 54,177 9,747 4,991 (15,720) 53,195 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....................... 3,179 78 192 -- 3,449 Identifiable assets.......................... 46,794 4,531 2,431 -- 53,756 Net assets................................... 8,411 1,310 1,238 -- 10,959 DECEMBER 31, 1994 - -------------------- Revenues: Unaffiliated customers..................... $45,655 $ 3,888 $2,692 $ -- $ 52,235 Transfers between geographic areas......... 7,452 7,301 2,385 (17,138) -- ------- ------- ------ -------- ------- Total revenues............................... 53,107 11,189 5,077 (17,138) 52,235 Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle....................... 5,239 208 383 -- 5,830 Identifiable assets.......................... 42,752 3,977 2,810 -- 49,539
Transfers between geographic areas are based on prices negotiated between the buying and selling locations. 64 65 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- [DELOITTE & TOUCHE LETTERHEAD] ---------------------------------------------------------------- Suite 900 Telephone: (313) 396-3000 600 Renaissance Center Detroit, Michigan 48243-1704 INDEPENDENT AUDITORS' REPORT Shareholders and Board of Directors Chrysler Corporation Auburn Hills, Michigan We have audited the accompanying consolidated balance sheet of Chrysler Corporation and consolidated subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Chrysler Corporation and consolidated subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in the notes to the financial statements, in 1995 the Company changed its method of accounting for sales of vehicles for which it has guaranteed a minimum resale value. DELOITTE & TOUCHE LLP January 21, 1997 [DELOITTE TOUCHE TOHMATSU INTERNATIONAL LOGO] 65 66 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- CONFORMED MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING Chrysler's management is responsible for preparing the financial statements and other financial information in this Annual Report. This responsibility includes maintaining the integrity and objectivity of financial data and the presentation of Chrysler's results of operations and financial position in accordance with generally accepted accounting principles. The financial statements include amounts that are based on management's best estimates and judgments. Chrysler's financial statements have been audited by Deloitte & Touche LLP, independent auditors. Their audits were conducted in accordance with generally accepted auditing standards and included consideration of the internal control system and tests of transactions as part of planning and performing their audits. Chrysler maintains a system of internal controls that provides reasonable assurance that its records reflect its transactions in all material respects and that significant misuse or loss of assets will be prevented. Management believes the system of internal controls is adequate to accomplish these objectives on a continuous basis. Chrysler maintains a strong internal auditing program that independently assesses the effectiveness of the internal controls and recommends possible improvements. Management considers the recommendations of the General Auditor and Deloitte & Touche LLP concerning the system of internal controls and takes appropriate actions to respond to these recommendations. The Board of Directors, acting through its Audit Committee composed solely of nonemployee directors, is responsible for determining that management fulfills its responsibilities in the preparation of financial statements and the maintenance of internal controls. In fulfilling its responsibility, the Audit Committee recommends independent auditors to the Board of Directors for appointment by the shareholders. The Audit Committee also reviews the consolidated financial statements and adequacy of internal controls. The Audit Committee meets regularly with management, the General Auditor and the independent auditors. Both the independent auditors and the General Auditor have full and free access to the Audit Committee, without management representatives present, to discuss the scope and results of their audits and their views on the adequacy of internal controls and the quality of financial reporting. It is the business philosophy of Chrysler to obey the law and to require that its employees conduct their activities according to the highest standards of business ethics. Management reinforces this philosophy by numerous actions, including issuing a Code of Ethical Behavior and maintaining a Business Practices Committee and a Business Practices Office to support compliance with Chrysler's policies. R. J. Eaton G. C. Valade - -------------------------------------------- -------------------------------------------- R. J. EATON G. C. VALADE Chairman of the Board, President and Executive Vice President and Chief Executive Officer Chief Financial Officer
66 67 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- SUPPLEMENTAL INFORMATION ------------------------ CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA (unaudited)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ----------------- ----------------- ----------------- ----------------- 1996 1995(1) 1996(2) 1995(3) 1996(4) 1995(3) 1996(5) 1995 ------- ------- ------- ------- ------- ------- ------- ------- (IN MILLIONS OF DOLLARS EXCEPT PER-COMMON-SHARE DATA) Sales of manufactured products..... $14,044 $12,829 $14,858 $11,653 $13,396 $11,184 $15,289 $13,935 Finance, insurance & other revenues......................... 912 784 981 863 960 825 957 1,122 ------- ------- ------- ------- ------- ------- ------- ------- Total revenues................. 14,956 13,613 15,839 12,516 14,356 12,009 16,246 15,057 Total expenses................. 13,286 12,643 14,119 12,278 13,245 11,427 14,655 13,398 ------- ------- ------- ------- ------- ------- ------- ------- Earnings before income taxes, extraordinary item, and cumulative effect of a change in accounting principle............. 1,670 970 1,720 238 1,111 582 1,591 1,659 Provision for income taxes......... 665 378 683 103 431 228 593 619 ------- ------- ------- ------- ------- ------- ------- ------- Earnings before extraordinary item and cumulative effect of a change in accounting principle.......... 1,005 592 1,037 135 680 354 998 1,040 Extraordinary item -- Loss on early extinguishment of debt........... -- -- -- -- -- -- (191) -- Cumulative effect of a change in accounting principle............. -- (96) -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings................... $ 1,005 $ 496 $ 1,037 $ 135 $ 680 $ 354 $ 807 $ 1,040 Preferred stock dividends.......... 1 14 1 3 1 2 -- 2 ------- ------- ------- ------- ------- ------- ------- ------- Net earnings on common stock....... $ 1,004 $ 482 $ 1,036 $ 132 $ 679 $ 352 $ 807 $ 1,038 ======= ======= ======= ======= ======= ======= ======= ======= PRIMARY EARNINGS PER COMMON SHARE: Earnings before extraordinary item and cumulative effect of a change in accounting principle.......... $ 1.32 $ 0.80 $ 1.39 $ 0.17 $ 0.93 $ 0.45 $ 1.39 $ 1.35 Extraordinary item................. -- -- -- -- -- -- (0.27) -- Cumulative effect of a change in accounting principle............. -- (0.14) -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings per common share...... $ 1.32 $ 0.66 $ 1.39 $ 0.17 $ 0.93 $ 0.45 $ 1.12 $ 1.35 ======= ======= ======= ======= ======= ======= ======= ======= FULLY DILUTED EARNINGS PER COMMON SHARE: Earnings before extraordinary item and cumulative effect of a change in accounting principle.......... $ 1.30 $ 0.73 $ 1.38 $ 0.17 $ 0.93 $ 0.45 $ 1.38 $ 1.33 Extraordinary item................. -- -- -- -- -- -- (0.26) -- Cumulative effect of a change in accounting principle............. -- (0.12) -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings per common share...... $ 1.30 $ 0.61 $ 1.38 $ 0.17 $ 0.93 $ 0.45 $ 1.12 $ 1.33 ======= ======= ======= ======= ======= ======= ======= =======
- ------------------------- (1) Results for the first quarter of 1995 included a $96 million after-tax charge for the cumulative effect of a change in accounting principle related to the consensus reached on Emerging Issues Task Force ("EITF") Issue 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." First quarter results also included a $115 million charge ($71 million after taxes) for a voluntary minivan owner service action. (2) Results for the second quarter of 1996 included a gain of $101 million ($87 million after taxes) from the sale of Electrospace Systems, Inc. and Chrysler Technologies Airborne Systems, Inc. and a charge of $65 million ($100 million after taxes) to write down the carrying value of Thrifty Rent-A-Car System, Inc. to estimated fair value less cost to sell. (3) Results for the second quarter of 1995 included a $232 million provision ($143 million after taxes) for costs associated with production changes at Chrysler's Newark assembly plant. The provision includes the recognition of supplemental unemployment benefits, job security benefits and other related employee costs, and the write-down of certain equipment and tooling. During the third quarter of 1995, this provision was increased by $31 million to $263 million, primarily reflecting changes in the estimate for job security benefit costs. (4) Results for the third quarter of 1996 included a charge of $88 million ($55 million after taxes) for costs associated with a voluntary early retirement program for certain salaried employees. (5) Results for the fourth quarter of 1996 included a charge of $77 million ($51 million after taxes) to write down the carrying value of Pentastar Electronics, Inc. ("PEI") to estimated fair value less cost to sell and a charge of $50 million ($31 million after taxes) for lump sum retiree pension costs related to the new UAW collective bargaining agreement. The sale of PEI was completed on January 10, 1997. 67 68 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- SUPPLEMENTAL INFORMATION ------------------------ CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) STATEMENT OF EARNINGS (unaudited)
YEAR ENDED DECEMBER 31 --------------------------------- 1996 1995 1994 ------- ------- ------- (IN MILLIONS OF DOLLARS) Sales of manufactured products.............................. $58,004 $49,747 $49,534 Equity in earnings of unconsolidated subsidiaries and affiliates................................................ 565 535 237 Interest income and other revenues.......................... 748 688 323 ------- ------- ------- TOTAL REVENUES 59,317 50,970 50,094 ------- ------- ------- Costs, other than items below............................... 45,454 40,653 37,485 Depreciation and special tools amortization................. 2,186 2,132 1,873 Selling and administrative expenses......................... 3,985 3,408 3,146 Employee retirement benefits................................ 1,383 1,132 1,532 Interest expense............................................ 217 196 228 ------- ------- ------- TOTAL EXPENSES 53,225 47,521 44,264 ------- ------- ------- EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM, AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 6,092 3,449 5,830 Provision for income taxes.................................. 2,372 1,328 2,117 ------- ------- ------- EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 3,720 2,121 3,713 Extraordinary item -- Loss on early extinguishment of debt, net of taxes.............................................. (191) -- -- Cumulative effect of a change in accounting principle, net of taxes.................................................. -- (96) -- ------- ------- ------- NET EARNINGS $ 3,529 $ 2,025 $ 3,713 ======= ======= =======
This Supplemental Information, "Chrysler (with CFC and Car Rental Operations on an Equity Basis)," reflects the results of operations of Chrysler with its investments in Chrysler Financial Corporation ("CFC") and its investments in short-term vehicle rental subsidiaries (the "Car Rental Operations") accounted for on an equity basis rather than as consolidated subsidiaries. This Supplemental Information does not purport to present results of operations in accordance with generally accepted accounting principles because it does not comply with Statement of Financial Accounting Standards ("SFAS") No. 94, "Consolidation of All Majority-Owned Subsidiaries." Because the operations of CFC and the Car Rental Operations are different in nature than Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. 68 69 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- SUPPLEMENTAL INFORMATION ------------------------ CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) BALANCE SHEET (unaudited)
DECEMBER 31 -------------------- 1996 1995 ------- ------- (IN MILLIONS OF DOLLARS) ASSETS: Cash and cash equivalents.............................................. $ 4,825 $ 4,980 Marketable securities.................................................. 2,122 1,908 ------- ------- Total cash, cash equivalents and marketable securities............... 6,947 6,888 Accounts receivable -- trade and other (net)........................... 630 816 Inventories............................................................ 4,364 3,762 Prepaid employee benefits, taxes and other expenses.................... 1,893 948 Property and equipment................................................. 13,877 11,717 Special tools.......................................................... 3,924 3,566 Investments in and advances from/to unconsolidated subsidiaries and affiliated companies................................................. 2,874 3,755 Intangible assets...................................................... 1,627 1,718 Deferred tax assets.................................................... 1,624 1,978 Other assets........................................................... 5,448 5,327 ------- ------- TOTAL ASSETS $43,208 $40,475 ======= ======= LIABILITIES: Accounts payable....................................................... $ 8,238 $ 7,654 Short-term debt........................................................ 346 140 Payments due within one year on long-term debt......................... 22 48 Accrued liabilities and expenses....................................... 8,525 6,741 Long-term debt......................................................... 1,206 1,763 Accrued noncurrent employee benefits................................... 9,365 9,156 Other noncurrent liabilities........................................... 3,935 4,014 ------- ------- TOTAL LIABILITIES 31,637 29,516 ------- ------- SHAREHOLDERS' EQUITY: (shares in millions) Preferred stock -- $1 per share par value; authorized 20.0 shares; Series A Convertible Preferred Stock; issued and outstanding: 1996 and 1995 -- 0.04 and 0.14 shares, respectively (aggregate liquidation preference $21 million and $68 million, respectively)................ * * Common stock -- $1 per share par value; authorized 1,000.0 shares; issued: 1996 and 1995 -- 821.6 and 408.2 shares, respectively........ 822 408 Additional paid-in capital............................................. 5,129 5,506 Retained earnings...................................................... 8,829 6,280 Treasury stock -- at cost: 1996 -- 119.1 shares; 1995 -- 29.9 shares... (3,209) (1,235) ------- ------- TOTAL SHAREHOLDERS' EQUITY 11,571 10,959 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,208 $40,475 ======= =======
- ------------------------- * Less than $1 million This Supplemental Information, "Chrysler (with CFC and Car Rental Operations on an Equity Basis)," reflects the financial position of Chrysler with its investments in CFC and the Car Rental Operations accounted for on an equity basis rather than as consolidated subsidiaries. This Supplemental Information does not purport to present financial position in accordance with generally accepted accounting principles because it does not comply with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries." The financial covenant contained in Chrysler's revolving credit facility is based on this Supplemental Information. In addition, because the operations of CFC and the Car Rental Operations are different in nature than Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. 69 70 ITEM 8. FINANCIAL STATEMENTS AND PART II -- CONTINUED ------------------------ SUPPLEMENTARY DATA -- CONTINUED ------------------------------- SUPPLEMENTAL INFORMATION ------------------------ CHRYSLER (WITH CFC AND CAR RENTAL OPERATIONS ON AN EQUITY BASIS) STATEMENT OF CASH FLOWS (unaudited)
YEAR ENDED DECEMBER 31 ----------------------------- 1996 1995 1994 ------- ------- ------- (IN MILLIONS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings..................................................... $ 3,529 $ 2,025 $ 3,713 Adjustments to reconcile to net cash provided by operating activities: Depreciation and special tools amortization................. 2,186 2,132 1,873 Equity in earnings of unconsolidated subsidiaries and affiliates................................................ (565) (535) (237) Deferred income taxes....................................... 1,120 186 1,065 Extraordinary item -- Loss on early extinguishment of debt...................................................... 191 -- -- Cumulative effect of a change in accounting principle....... -- 96 -- Change in accounts receivable............................... 104 (358) 345 Change in inventories....................................... (546) (460) (201) Change in prepaid expenses and other assets................. (1,310) (631) (2,095) Change in accounts payable and accrued and other liabilities............................................... 2,113 2,094 2,856 Dividends received from CFC................................. 382 335 40 Other....................................................... 159 261 131 ------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 7,363 5,145 7,490 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities............................. (2,436) (2,971) (3,412) Sales and maturities of marketable securities.................. 2,198 3,736 1,463 Proceeds from sales of nonautomotive assets.................... 476 -- -- Expenditures for property and equipment........................ (3,218) (2,573) (2,611) Expenditures for special tools................................. (1,364) (1,049) (1,177) Purchases of vehicle operating leases.......................... (428) (139) -- Other.......................................................... 203 63 183 ------- ------- ------- NET CASH USED IN INVESTING ACTIVITIES (4,569) (2,933) (5,554) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in short-term debt...................................... 76 -- 40 Payments on long-term borrowings............................... (37) (485) (412) Payment for early extinguishment of debt....................... (853) -- -- Advances from CFC.............................................. 750 -- -- Repurchases of common stock.................................... (2,041) (1,047) -- Dividends paid................................................. (963) (710) (399) Other.......................................................... 119 38 30 ------- ------- ------- NET CASH USED IN FINANCING ACTIVITIES (2,949) (2,204) (741) ------- ------- ------- Change in cash and cash equivalents.............................. (155) 8 1,195 Cash and cash equivalents at beginning of year................... 4,980 4,972 3,777 ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR......................... $ 4,825 $ 4,980 $ 4,972 ======= ======= =======
This Supplemental Information, "Chrysler (with CFC and Car Rental Operations on an Equity Basis)," reflects the cash flows of Chrysler with its investments in CFC and the Car Rental Operations accounted for on an equity basis rather than as consolidated subsidiaries. This Supplemental Information does not purport to present cash flows in accordance with generally accepted accounting principles because it does not comply with SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries." Because the operations of CFC and the Car Rental Operations are different in nature than Chrysler's manufacturing operations, management believes that this disaggregated financial data enhances an understanding of the consolidated financial statements. 70 71 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS PART II -- CONTINUED --------------------------------------------- ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------- None. PART III -------- Items 10, 11, 12, and 13 Information required by Part III (Items 10, 11, 12, and 13) of this Form 10-K is incorporated by reference from Chrysler Corporation's definitive Proxy Statement for its 1997 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K, except that the information required by Item 10 with respect to executive officers of the Registrant is included in Part I of this report. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, ----------------------------------------- AND REPORTS ON FORM 8-K ----------------------- (a) The following documents are filed as part of this report: 1. Financial Statements Financial statements filed as part of this Form 10-K are listed under Part II, Item 8. 2. Financial Statement Schedules No schedules are included because they are not required under the instructions contained in Regulation S-X or because the information called for is shown in the financial statements and notes thereto. 3. Exhibits: 3-A-1 Copy of Certificate of Incorporation of Chrysler Corporation, as amended and restated and in effect on May 21, 1987. Filed as Exhibit 3-A-1 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 3-A-2 Copy of Certificate of Amendment of Certificate of Incorporation of Chrysler Corporation dated May 19, 1994, as in effect on May 20, 1994. Filed as Exhibit 3-A-2 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 3-B Copy of By-Laws of Chrysler Corporation, as amended as of February 8, 1996. Filed as Exhibit 3-B to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 incorporated herein by reference. 3-C Copy of Certificate of Designation for Chrysler Corporation Junior Participating Cumulative Preferred Stock. Filed as Exhibit 3-C to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 3-D Copy of Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock. Filed as Exhibit 3-D to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference.
71 72 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 4-A Certificate of Incorporation and By-Laws of Chrysler Corporation. See Exhibits 3-A through 3-D above. 4-B-1 Copy of Certificate of Ownership and Merger merging Chrysler Motors Corporation into Chrysler Corporation, effective on December 31, 1989. Filed as Exhibit 4-B-1 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 4-B-2 Copy of Agreement of Merger and Plan of Reorganization, dated as of March 6, 1986, among Chrysler Corporation, Chrysler Holding Corporation (now Chrysler Corporation) and New Chrysler, Inc., annexed as Exhibit A to Registration Statement No. 33-4537 on Form S-4 of Chrysler Holding Corporation (now Chrysler Corporation), and incorporated herein by reference. 4-C-1 Copy of Rights Agreement, dated as of February 4, 1988, and amended and restated as of December 14, 1990, between Chrysler Corporation and First Chicago Trust Company of New York (formerly Morgan Shareholder Services Trust Company), as Rights Agent, relating to Rights to purchase Chrysler Corporation Junior Participating Cumulative Preferred Stock. Filed as Exhibit 1 to Chrysler Corporation Current Report on Form 8-K, dated December 14, 1990, and incorporated herein by reference. 4-C-2 Amendment No. 1, dated as of December 1, 1994, to the Rights Agreement, dated as of February 4, 1988, and amended and restated as of December 14, 1990, between Chrysler Corporation and First Chicago Trust Company of New York (formerly known as Morgan Shareholder Services Trust Company), as Rights Agent. Filed as Exhibit 1 to Chrysler Corporation Current Report on Form 8-K, dated December 1, 1994, and incorporated herein by reference. 4-C-3 Amendment No. 2, dated as of February 8, 1996, to the Rights Agreement, dated as of February 4, 1988, and amended and restated as of December 14, 1996, between Chrysler Corporation and First Chicago Trust Company of New York (formerly known as Morgan Shareholder Services Trust Company) as Rights Agent. Filed as Exhibit 1 to Chrysler Corporation Current Report on Form 8-K, dated February 13, 1996, and incorporated herein by reference. 4-D-1 Conformed copy of Indenture, dated as of July 15, 1987, between Chrysler Corporation and Manufacturers Hanover Trust Company, as Trustee, State Street Bank and Trust Company, as successor Trustee, relating to Debt Securities, Appendix B thereto relating to 10.95% Debentures Due 2017 and Appendix C thereto relating to 10.40% Notes Due 1999. Filed as Exhibit 4-D-1 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 4-D-2 Conformed copy of Indenture, dated as of March 1, 1985, between Chrysler Corporation and Manufacturers Hanover Trust Company, as Trustee, State Street Bank and Trust Company, as successor Trustee, relating to Debt Securities and Appendix B thereto relating to 13% Debentures Due 1997. Filed as Exhibit 4-B to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1985, and incorporated herein by reference. 4-D-3 Form of Supplemental Indenture, dated as of May 30, 1986, between Chrysler Holding Corporation (now Chrysler Corporation), Chrysler Corporation and Manufacturers Hanover Trust Company, as Trustee, State Street Bank and Trust Company, as successor Trustee, relating to Debt Securities. Filed as Exhibit 4-E-2 to the Post-Effective Amendment No. 1 to Registration Statement No. 33-4537 on Form S-4 of Chrysler Holding Corporation (now Chrysler Corporation), and incorporated herein by reference.
72 73 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 4-D-4 Copy of Supplemental Indenture, dated as of December 31, 1989, between Chrysler Corporation and Manufacturers Hanover Trust Company, as Trustee, State Street Bank and Trust Company, as successor Trustee, relating to Debt Securities. Filed as Exhibit 4-D-4 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated herein by reference. 4-D-5 Conformed copy of Third Supplemental Indenture, dated as of May 1, 1990, between Chrysler Corporation and Manufacturers Hanover Trust Company, as Trustee, State Street Bank and Trust Company, as successor Trustee, relating to Debt Securities and Appendix D to Indenture dated as of March 1, 1985 between Chrysler Corporation and Manufacturers Hanover Trust Company relating to Debentures Due 2020. Filed as Exhibit 4-D-5 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference. 4-D-6 Conformed copy of Trust Agreement, dated as of May 1, 1990, between Chrysler Corporation and Manufacturers Hanover Bank (Delaware), Trustee, relating to the Auburn Hills Trust. Filed as Exhibit 4-D-6 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1990, and incorporated herein by reference. 4-E Copy of $2,400,000,000 Revolving Credit Agreement, dated as of April 26, 1996, among Chrysler Corporation, Chrysler Canada Ltd., the several Banks party to the Agreement, Royal Bank of Canada, as Canadian Administrative Agent, and Chemical Bank, as Administrative Agent for the Banks. Filed as Exhibit 4-E to Chrysler Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference. 4-F-1 Copy of Indenture, dated as of June 15, 1984, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, as Trustee, United States Trust Company of New York, as successor Trustee, related to Senior Debt Securities of Chrysler Financial Corporation. Filed as Exhibit (1) to the Current Report of Chrysler Financial Corporation on Form 8-K, dated June 26, 1984, and incorporated herein by reference. 4-F-2 Copy of Supplemental Indenture, dated as of August 24, 1995, between Chrysler Financial Corporation and the United States Trust Company of New York, as Trustee, to the Indenture, dated as of June 15, 1984, related to Senior Debt Securities of Chrysler Financial Corporation. Filed as Exhibit 4-K to the Current Report of Chrysler Financial Corporation on Form 8-K, dated August 24, 1995, and incorporated herein by reference. 4-F-3 Copy of Indenture, dated as of September 15, 1986, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as Successor Trustee, related to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-E to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended September 30, 1986, and incorporated herein by reference. 4-F-4 Copy of Amended and Restated Indenture, dated as of September 15, 1986, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as Successor Trustee, related to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-H to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended June 30, 1987, and incorporated herein by reference.
73 74 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 4-F-5 Copy of Indenture, dated as of February 15, 1988, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as Successor Trustee, related to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-A to Registration No. 33-23479 of Chrysler Financial Corporation, and incorporated herein by reference. 4-F-6 Copy of First Supplemental Indenture, dated as of March 1, 1988, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as successor Trustee, to the Indenture, dated as of February 15, 1988, between such parties, related to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-L to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 4-F-7 Copy of the Second Supplemental Indenture, dated as of September 7, 1990, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as Successor Trustee, to the Indenture, dated as of February 15, 1988, between such parties, related to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-M to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended September 30, 1990, and incorporated herein by reference. 4-F-8 Copy of Third Supplemental Indenture, dated as of May 4, 1992, between Chrysler Financial Corporation and United States Trust Company of New York, as Successor Trustee, to the Indenture, dated as of February 15, 1988 between such parties, relating to Chrysler Financial Corporation Senior Debt Securities. Filed as Exhibit 4-N to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended June 30, 1992, and incorporated herein by reference. 4-G-1 Copy of Indenture, dated as of February 15, 1988, between Chrysler Financial Corporation and IBJ Schroder Bank & Trust Company, Trustee, related to Chrysler Financial Corporation Subordinated Debt Securities. Filed as Exhibit 4-B to Registration No. 33-23479 of Chrysler Financial Corporation, and incorporated herein by reference. 4-G-2 Copy of First Supplemental Indenture, dated as of September 1, 1989, between Chrysler Financial Corporation and IBJ Schroder Bank & Trust Company, Trustee, to the Indenture, dated as of February 15, 1988, between such parties, related to Chrysler Financial Corporation Subordinated Debt Securities. Filed as Exhibit 4-N to the Current Report of Chrysler Financial Corporation on Form 8-K dated September 1, 1989 and filed September 13, 1989, and incorporated herein by reference. 4-H-1 Copy of Indenture, dated as of February 15, 1988, between Chrysler Financial Corporation and Manufacturers Hanover Trust Company, Trustee, United States Trust Company of New York, as successor Trustee, related to Chrysler Financial Corporation Junior Subordinated Debt Securities. Filed as Exhibit 4-C to Registration No. 33-23479 of Chrysler Financial Corporation, and incorporated herein by reference. 4-H-2 Copy of First Supplemental Indenture dated as of September 1, 1989, between Chrysler Financial Corporation and Irving Trust Company, Trustee, to the Indenture, dated as of February 15, 1988, between such parties, related to Chrysler Financial Corporation Junior Subordinated Debt Securities. Filed as Exhibit 4-O to the Current Report of Chrysler Financial Corporation on Form 8-K dated September 1, 1989 and filed on September 13, 1989, and incorporated herein by reference.
74 75 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-A-1 Copy of Chrysler Corporation Stock Option Plan, as amended and in effect on and after May 14, 1986 and before November 5, 1987, assumed by Chrysler Corporation (formerly Chrysler Holding Corporation). Filed as Exhibit 10-A-8 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1986, and incorporated herein by reference. 10-A-2 Copy of Chrysler Corporation Stock Option Plan, as amended and in effect on and after November 5, 1987 and before February 4, 1988. Filed as Exhibit 10-A-8 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10-A-3 Copy of Chrysler Corporation Stock Option Plan, as amended and in effect on and after February 4, 1988 and before June 7, 1990. Filed as Exhibit 10-A-9 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated herein by reference. 10-A-4 Copy of Chrysler Corporation Stock Option Plan, as amended and in effect on and after June 7, 1990. Filed as Exhibit 10-A-10 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. 10-A-5 Copy of Chrysler Corporation Stock Option Plan, as amended through December 2, 1993. Filed as Exhibit 10-A-6 to the Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. 10-A-6 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as in effect on and after May 16, 1991 and before December 2, 1993. Filed as Exhibit 10-A-32 to the Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated herein by reference. 10-A-7 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as amended and in effect on and after December 2, 1993 and before May 19, 1994. Filed as Exhibit 10-A-9 to the Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference. 10-A-8 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as amended and in effect on and after May 19, 1994. Filed as Exhibit 10-A-10 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. 10-A-9 Copy of Chrysler Corporation 1991 Stock Compensation Plan, as amended and in effect on and after May 31, 1995. Filed as Exhibit 2 to Chrysler Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated July 6, 1995 and incorporated herein by reference. 10-B-1 Copy of Chrysler Corporation Incentive Compensation Plan, as amended and in effect on and after May 31, 1995. Filed as Exhibit 10-B-1 to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 and incorporated herein by reference. 10-B-2 Copy of Chrysler Corporation Long-Term Performance Plan, as amended and in effect on and after May 19, 1994. Filed as Exhibit 10-B-2 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference. *10-B-3 Copy of Chrysler Supplemental Executive Retirement Plan, as amended through July 8, 1996 and in effect as of October 1, 1996.
75 76 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-B-4 Copy of Chrysler Corporation Discretionary Incentive Compensation Plan as in effect on and after May 31, 1995. Filed as Exhibit 10-B-4 to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 and incorporated herein by reference. 10-B-5 Copy of Chrysler Corporation Long-Term Incentive Plan, as amended and in effect on and after May 31, 1995. Filed as Exhibit 10-B-5 to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 and incorporated herein by reference. 10-C-1 Copy of agreement, dated March 14, 1992, between Chrysler Corporation and Robert J. Eaton. Filed as Exhibit 10-C-8 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein by reference. 10-C-2 Copy of Employment Agreement, dated as of June 1, 1995, between Chrysler Corporation and Robert J. Eaton. Filed as Exhibit 12 to Chrysler Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated July 6, 1995 and incorporated herein by reference. 10-C-3 Copy of Employment Agreement, dated as of June 1, 1995, between Chrysler Corporation and Robert A. Lutz. Filed as Exhibit 13 to Chrysler Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated July 6, 1995 and incorporated herein by reference. 10-C-4 Copy of Employment Agreement dated as of June 1, 1995 between Chrysler Corporation and Thomas G. Denomme. Filed as Exhibit 14 to Chrysler Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated July 6, 1995 and incorporated herein by reference. 10-C-5 Copy of Employment Agreement dated as of June 1, 1995 between Chrysler Corporation and Gary C. Valade. Filed as Exhibit 15 to Chrysler Corporation Solicitation/Recommendation Statement on Schedule 14D-9 dated July 6, 1995 and incorporated herein by reference. 10-C-6 Form of Employment Continuation Agreement, dated as of July 6, 1995, between Chrysler Corporation and each of Robert J. Eaton, Robert A. Lutz, Thomas G. Denomme and Gary C. Valade. Filed as Exhibit 10-C-9 to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995 and incorporated herein by reference. 10-C-7 Form of Employment Continuation Agreement, dated as of July 6, 1995, between Chrysler Corporation and each Executive Officer of Chrysler Corporation other than Messrs. Eaton, Lutz, Denomme and Valade. Filed as Exhibit 10-C-10 to Chrysler Corporation Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995 and incorporated herein by reference. 10-D Conformed copy of Participation Agreement for Sale and Leaseback Financing of Chrysler Technology Center Facilities among Chrysler Corporation, Manufacturers Hanover Bank (Delaware), as Trustee, and AH Service Corporation, dated as of May 1, 1990. Filed as Exhibit 10-E-11 to Chrysler Corporation Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. 10-E-1 Copy of Income Maintenance Agreement made December 20, 1968 among Chrysler Financial Corporation, Chrysler Corporation and Chrysler Motors Corporation (now dissolved). Filed as Exhibit 13-D to Registration Statement No. 2-32037 of Chrysler Financial Corporation, and incorporated herein by reference.
76 77 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-E-2 Copy of Agreement made April 19, 1971 among Chrysler Financial Corporation, Chrysler Corporation and Chrysler Motors Corporation (now dissolved), amending the Income Maintenance Agreement among such parties. Filed as Exhibit 13-B to Registration Statement No. 2-40110 of Chrysler Financial Corporation and Chrysler Corporation, and incorporated herein by reference. 10-F-1 Copy of Agreement made May 29, 1973 among Chrysler Financial Corporation, Chrysler Corporation and Chrysler Motors Corporation (now dissolved), further amending the Income Maintenance Agreement among such parties. Filed as Exhibit 5-C to Registration Statement No. 2-49615 of Chrysler Financial Corporation, and incorporated herein by reference. 10-F-2 Copy of Agreement made as of July 1, 1975 among Chrysler Financial Corporation, Chrysler Corporation and Chrysler Motors Corporation (now dissolved), further amending the Income Maintenance Agreement among such parties. Filed as Exhibit D to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1975, and incorporated herein by reference. 10-G Copy of Agreement made June 4, 1976 between Chrysler Financial Corporation and Chrysler Corporation further amending the Income Maintenance Agreement between such parties. Filed as Exhibit 5-H to Registration Statement No. 2-56398 of Chrysler Financial Corporation, and incorporated herein by reference. 10-H Copy of Agreement made March 27, 1986 between Chrysler Financial Corporation, Chrysler Holding Corporation (now Chrysler Corporation) and Chrysler Corporation further amending the Income Maintenance Agreement among such parties. Filed as Exhibit 10-F to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1986, and incorporated herein by reference. 10-I Copy of Short Term Revolving Credit Agreement, dated as of April 26, 1996, among Chrysler Financial Corporation, Chrysler Credit Canada Ltd., the several commercial banks party thereto, as Managing Agents, Royal Bank of Canada, as Canadian Administrative Agent, and Chemical Bank, as Administrative Agent. Filed as Exhibit 10-G to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference. 10-J Copy of Long Term Revolving Credit Agreement, dated as of April 26, 1996, among Chrysler Financial Corporation, Chrysler Credit Canada Ltd., the several commercial banks party thereto, as Managing Agents, Royal Bank of Canada, as Canadian Administrative Agent, and Chemical Bank, as Administrative Agent. Filed as Exhibit 10-H to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference. 10-K Copy of Sixth Amended and Restated Commitment Transfer Agreement, dated as of April 26, 1996, among Chrysler Financial Corporation, the several financial institutions parties thereto and Chemical Bank, as agent. Filed as Exhibit 10-I to the quarterly report of Chrysler Financial Corporation on Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference. 10-L Copy of Amended and Restated Trust Agreement, dated as of April 1, 1993, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1993-2. Filed as Exhibit 4.1 to the Quarterly Report of Premier Auto Trust 1993-2 on Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by reference.
77 78 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-M Copy of Indenture, dated as of April 1, 1993, between Premier Auto Trust 1993-2 and Bankers Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1993-2. Filed as Exhibit 4.2 of the Quarterly Report of Premier Auto Trust 1993-2 on Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by reference. 10-N Copy of Amended and Restated Trust Agreement, dated as of June 1, 1993, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1993-3. Filed as Exhibit 4.1 to the Quarterly Report of Premier Auto Trust 1993-3 on Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by reference. 10-O Copy of Indenture, dated as of June 1, 1993, between Premier Auto Trust 1993-3 and Bankers Trust Company, as Indenture Trustee. Filed as Exhibit 4.2 to the Quarterly Report of Premier Auto Trust 1993-3 on Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by reference. 10-P Copy of Series 1993-1 Supplement, dated as of February 1, 1993, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust, Series 1993-1. Filed as Exhibit 3 to the Trust's Registration Statement on Form 8-A dated March 15, 1993, and incorporated herein by reference. 10-Q Copy of Receivables Purchase Agreement, made as of April 7, 1993, among Chrysler Credit Canada Ltd., Chrysler Financial Corporation and Association Assets Acquisition Inc., with respect to CARS 1993-1. Filed as Exhibit 10-OOOO to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference. 10-R Copy of Pooling and Servicing Agreement, dated as of August 1, 1993, among Auto Receivables Corporation, Chrysler Credit Canada Ltd., Montreal Trust Company of Canada and Chrysler Financial Corporation, with respect to CARCO 1993-1. Filed as Exhibit 10-QQQQ to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference. 10-S Copy of Standard Terms and Conditions of Agreement, dated as of August 1, 1993, among Auto Receivables Corporation, Chrysler Credit Canada Ltd. and Chrysler Financial Corporation, with respect to CARCO 1993-1. Filed as Exhibit 10-RRRR to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference. 10-T Copy of Purchase Agreement, dated as of August 1, 1993, between Chrysler Credit Canada Ltd., and Auto Receivables Corporation, with respect to CARCO 1993-1. Filed as Exhibit 10-SSSS to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference. 10-U Copy of Amended and Restated Loan Agreement, dated as of June 1, 1993, between Chrysler Realty Corporation and Chrysler Credit Corporation. Filed as Exhibit 10-XXXX to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference.
78 79 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-V Copy of Origination and Servicing Agreement, dated as of June 4, 1993, among Chrysler Leaserve, Inc., General Electric Capital Auto Lease, Inc., Chrysler Credit Corporation and Chrysler Financial Corporation. Filed as Exhibit 10-ZZZZ to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1993, and incorporated herein by reference. 10-W Copy of Amended and Restated Trust Agreement, dated as of September 1, 1993, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Trustee, with respect to Premier Auto Trust 1993-5. Filed as Exhibit 4.1 to the Quarterly Report of Premier Auto Trust 1993-5 on Form 10-Q for the quarter ended September 30, 1993, and incorporated herein by reference. 10-X Copy of Indenture, dated as of September 1, 1993, between Premier Auto Trust 1993-5 and Bankers Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1993-5. Filed as Exhibit 4.2 to the Quarterly Report of Premier Auto Trust 1993-5 on Form 10-Q for the quarter ended September 30, 1993, and incorporated herein by reference. 10-Y Copy of Secured Loan Purchase Agreement, dated as of December 15, 1993, among Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial Corporation. Filed as Exhibit 10-PPPP to the Annual Report on Form 10-K of Chrysler Financial Corporation for the year ended December 31, 1993, and incorporated herein by reference. 10-Z Copy of Series 1993-2 Supplement, dated as of November 1, 1993, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust. Filed as Exhibit 3 to the Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated December 6, 1993, and incorporated herein by reference. 10-AA-1 Copy of Amended and Restated Trust Agreement, dated as of November 1, 1993, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1993-6. Filed as Exhibit 4-A to the Annual Report on Form 10-K of Premier Auto Trust 1993-6 for the year ended December 31, 1993, and incorporated herein by reference. 10-AA-2 Copy of Indenture, dated as of November 1, 1993, between Premier Auto Trust 1993-6 and The Fuji Bank and Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1993-6. Filed as Exhibit 4-B to the Annual Report on Form 10-K of Premier Auto Trust 1993-6 for the year ended December 31, 1993, and incorporated herein by reference. 10-BB Copy of Secured Loan Purchase Agreement, dated as of March 29, 1994, among Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial Corporation. Filed as Exhibit 10-ZZZ to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended March 31, 1994, and incorporated herein by reference. 10-CC-1 Copy of Amended and Restated Trust Agreement, dated as of February 1, 1994, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1994-1. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-1 for the quarter ended March 31, 1994, and incorporated herein by reference.
79 80 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-CC-2 Copy of Indenture, dated as of February 1, 1994, between Premier Auto Trust 1994-1 and The Fuji Bank and Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1994-1. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-1 for the quarter ended March 31, 1994, and incorporated herein by reference. 10-DD Copy of Secured Loan Purchase Agreement, dated as of July 6, 1994, among Chrysler Credit Canada Ltd., Leaf Trust and Chrysler Financial Corporation. Filed as Exhibit 10-BBBB to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended June 30, 1994, and incorporated herein by reference. 10-EE Copy of Amended and Restated Trust Agreement, dated as of May 1, 1994, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank, Delaware, as Owner Trustee, with respect to Premier Auto Trust 1994-2. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-2 for the Quarter ended June 30, 1994, and incorporated herein by reference. 10-FF Copy of Indenture, dated as of May 1, 1994, between Premier Auto Trust 1994-2 and The Fuji Bank and Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1994-2. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-2 for the quarter ended June 30, 1994, and incorporated herein by reference. 10-GG Copy of Amended and Restated Trust Agreement, dated as of June 1, 1994, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank, Delaware, with respect to Premier Auto Trust 1994-3. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-3 for the quarter ended June 30, 1994, and incorporated herein by reference. 10-HH Copy of Indenture, dated as of June 1, 1994, between Premier Auto Trust 1994-3 and The Fuji Bank and Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1994-3. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-3 for the quarter ended June 30, 1994, and incorporated herein by reference. 10-II Copy of Master Receivables Purchase Agreement among Chrysler Credit Canada Ltd., CORE Trust and Chrysler Financial Corporation, dated as of November 29, 1994. Filed as Exhibit 10-FFF to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10-JJ Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE Trust and Chrysler Financial Corporation dated as of December 2, 1994, with respect to the sale of retail automotive receivables to CORE Trust. Filed as Exhibit 10-GGG to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10-KK Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE Trust and Chrysler Financial Corporation dated as of December 22, 1994, with respect to the sale of retail automotive receivables to CORE Trust. Filed as Exhibit 10-HHH to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10-LL Copy of Asset Purchase Agreement dated as of December 14, 1994, between Chrysler Capital Income Partners, L.P. and First Union Commercial Corporation. Filed as Exhibit 10-III to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference.
80 81 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-MM Copy of Purchase Agreement, dated as of December 15, 1994, among Chrysler Financial Corporation, Premier Auto Receivables Company and ABN AMRO Bank, N.V., as Agent with respect to the sale of retail automotive receivables to Windmill Funding Corporation. Filed as Exhibit 10-JJJ to the Annual Report of Chrysler Financial Corporation on Form 10-K for the year ended December 31, 1994, and incorporated herein by reference. 10-NN Copy of Series 1992-2 Supplement to the Pooling and Servicing Agreement, dated as of October 1, 1992, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust, Series 1992-2. Filed as Exhibit 3 to Form 8-A of CARCO Auto Loan Master Trust on October 30, 1992, and incorporated herein by reference. 10-OO Copy of Master Custodial and Servicing Agreement, dated as of September 1, 1992 between Chrysler Credit Canada Ltd. and The Royal Trust Company, as Custodian. Filed as Exhibit 10-TTTTT to the Registration Statement on Form S-2 of Chrysler Financial Corporation (Registration Statement No. 33-51302) on November 24, 1992, and incorporated herein by reference. 10-PP Copy of Series 1995-1 Supplement, dated as of September 20, 1995, among Chrysler Credit Canada Ltd., The Royal Trust Company, Pure Trust, Auto Receivables Corporation and Chrysler Financial Corporation, to the Master Custodial and Servicing Agreement, dated as of September 1, 1992. Filed as Exhibit 10-NNN to the Quarterly Report of Chrysler Financial Corporation on Form 10-Q for the quarter ended September 30, 1995, and incorporated herein by reference. 10-QQ Copy of Trust Indenture, dated as of September 1, 1992, among Canadian Dealer Receivables Corporation and Montreal Trust Company of Canada, as Trustee. Filed as Exhibit 10-UUUUU to the Registration Statement on Form S-2 of Chrysler Financial Corporation (Registration Statement No. 33-51302) on November 24, 1992, and incorporated herein by reference. 10-RR Copy of Servicing Agreement, dated as of October 20, 1992, between Chrysler Leaserve, Inc. (a subsidiary of General Electric Capital Auto Lease, Inc.) and Chrysler Credit Corporation, with respect to the sale of Gold Key Leases. Filed as Exhibit 10-YYYYY to the Registration Statement on Form S-2 of Chrysler Financial Corporation (Registration Statement No. 33-51302) on November 24, 1992, and incorporated herein by reference. 10-SS Copy of Amended and Restated Trust Agreement, dated as of August 1, 1993, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1993-4. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1993-4 for the quarter ended September 30, 1993, and incorporated herein by reference. 10-TT Copy of Indenture, dated as of August 1, 1993, between Premier Auto Trust 1993-4 and Bankers Trust Company, as Indenture Trustee, with respect to Premier Auto Trust 1993-4. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1993-4 for the quarter ended September 30, 1993, and incorporated herein by reference. 10-UU Copy of Amended and Restated Trust Agreement, dated as of August 1, 1994, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1994-4. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-4 for the quarter ended September 30, 1994, and incorporated herein by reference.
81 82 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-VV Copy of Indenture, dated as of August 1, 1994, between Premier Auto Trust 1994-4 and Bankers Trust Company, as Indenture Trustee. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1994-4 for the quarter ended September 30, 1994, and incorporated herein by reference. 10-WW Copy of Receivables Purchase Agreement, dated as of February 28, 1995, among Chrysler Financial Corporation, Premier Auto Receivables Company and ABN AMRO Bank, N.V., with respect to the sale of retail automotive receivables to Windmill Funding Corporation. Filed as Exhibit 10-GGGG to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended March 31, 1995, and incorporated herein by reference. 10-XX Copy of Series 1994-1 Supplement, dated as of September 30, 1994, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust, Series 1994-1. Filed as Exhibit 3 to the Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated November 23, 1994, and incorporated herein by reference. 10-YY Copy of Series 1994-2 Supplement, dated as of October 31, 1994, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust 1994-2. Filed as Exhibit 3 to the Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated December 22, 1994, and incorporated herein by reference. 10-ZZ Copy of Series 1994-3 Supplement, dated as of November 30, 1994, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust, Series 1994-3. Filed as Exhibit 4-W to the Annual Report on Form 10-K of CARCO Auto Loan Master Trust for the year ended December 31, 1994, and incorporated herein by reference. 10-AAA Copy of Series 1995-1 Supplement, dated as of December 31, 1994, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust, Series 1995-1. Filed as Exhibit 3 to the Registration Statement on Form 8-A of CARCO Auto Loan Master Trust dated January 19, 1995, and incorporated herein by reference. 10-BBB Copy of Series 1995-2 Supplement, dated as of February 28, 1995, among U.S. Auto Receivables Company, as Seller, Chrysler Credit Corporation, as Servicer, and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust 1995-2. Filed as Exhibit 3 to CARCO Auto Loan Master Trust's Registration Statement on Form 8-A dated March 27, 1995, and incorporated herein by reference. 10-CCC Copy of Amended and Restated Trust Agreement, dated as of February 1, 1995, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1995-1. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 of Premier Auto Trust 1995-1, and incorporated herein by reference.
82 83 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-DDD Copy of Indenture, dated as of February 1, 1995, between Premier Auto Trust 1995-1 and The Bank of New York, as Indenture Trustee, with respect to Premier Auto Trust 1995-1. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 of Premier Auto Trust 1995-1, and incorporated herein by reference. 10-EEE Copy of Sale and Servicing Agreement, dated as of February 1, 1995, among Premier Auto Trust 1995-1, Chrysler Credit Corporation and Chrysler Financial Corporation, with respect to Premier Auto Trust 1995-1. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 of Premier Auto Trust 1995-1, and incorporated herein by reference. 10-FFF Copy of Amended and Restated Trust Agreement, dated as of April 1, 1995, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1995-2. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 of Premier Auto Trust 1995-2, and incorporated herein by reference. 10-GGG Copy of Indenture, dated as of April 1, 1995, between Premier Auto Trust 1995-2 and The Bank of New York, as Indenture Trustee, with respect to Premier Auto Trust 1995-2. Filed as Exhibit 4.2 to the Quarterly report on Form 10-Q for the quarter ended June 30, 1995 of Premier Auto Trust 1995-2, and incorporated herein by reference. 10-HHH Copy of Sale and Servicing Agreement, dated as of April 1, 1995, among Premier Auto Trust 1995-2, Chrysler Credit Corporation and Chrysler Financial Corporation, with respect to Premier Auto Trust 1995-2. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 of Premier Auto Trust 1995-2, and incorporated herein by reference. 10-III Copy of Series 1995-3 Supplement, dated as of April 30, 1995, among U.S. Auto Receivables Company, Chrysler Credit Corporation and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust 1995-3. Filed as Exhibit 4-Z to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 of CARCO Auto Loan Master Trust, and incorporated herein by reference. 10-JJJ Copy of Series 1995-4 Supplement, dated as of April 30, 1995, among U.S. Auto Receivables Company, Chrysler Credit Corporation and Manufacturers and Traders Trust Company, as Trust, with respect to CARCO Auto Loan Master Trust Series 1995-4. Filed as Exhibit 4-AA to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 of CARCO Auto Loan Master Trust, and incorporated herein by reference. 10-KKK Copy of Series 1995-4A Supplement, dated as of April 30, 1995, among U.S. Auto Receivables Company, Chrysler Credit Corporation and Manufacturers and Traders Trust Company, as Trustee, with respect to CARCO Auto Loan Master Trust Series 1995-4A. Filed as Exhibit 4-BB to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 of CARCO Auto Loan Master Trust, and incorporated herein by reference. 10-LLL Copy of Master Receivables Purchase Agreement, made as of July 24, 1995, among Chrysler Credit Canada Ltd., The Royal Trust Company and Chrysler Financial Corporation, with respect to Pure Trust 1995-1. Filed as Exhibit 10-RRRR to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1995, and incorporated herein by reference.
83 84 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-MMM Copy of Terms Schedule, dated as of July 24, 1995, among Chrysler Credit Canada Ltd., The Royal Trust Company and Chrysler Financial Corporation, with respect to Pure Trust 1995-1. Filed as Exhibit 10-SSSS to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1995, and incorporated herein by reference. 10-NNN Copy of Receivables Purchase Agreement, dated as of December 14, 1995, among Chrysler Financial Corporation, Premier Auto Receivables Company, Chrysler Credit Corporation, and ABN AMRO Bank N.V., as Agent, with respect to the sale of retail automotive receivables to Windmill Funding Corporation, Series 1995-2. Filed as Exhibit 10-KKKK to the Annual Report on Form 10-K of Chrysler Financial Corporation for the year ended December 31, 1995, and incorporated herein by reference. 10-OOO Copy of Certificate of Trust of Premier Auto Trust 1995-3. Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the quarter ended September 30, 1995, and incorporated herein by reference. 10-PPP Copy of Amended and Restated Trust Agreement, dated as of July 1, 1995, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1995-3. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the quarter ended September 30, 1995, and incorporated herein by reference. 10-QQQ Copy of Indenture, dated as of July 1, 1995, between Premier Auto Trust 1995-3 and The Bank of New York, as Indenture Trustee, with respect to Premier Auto Trust 1995-3. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the quarter ended September 30, 1995, and incorporated herein by reference. 10-RRR Copy of Sale and Servicing Agreement, dated as of July 1, 1995, among Premier Auto Trust 1995-3, Chrysler Credit Corporation and Chrysler Financial Corporation, with respect to Premier Auto Trust 1995-3. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1995-3 for the quarter ended September 30, 1995, and incorporated herein by reference. 10-SSS Copy of Terms Schedule among Chrysler Credit Canada Ltd., CORE Trust and Chrysler Financial Corporation, dated as of December 14, 1995, with respect to CORE Trust 1995-1. Filed as Exhibit 10-PPPP to the Annual Report on Form 10-K of Chrysler Financial Corporation for the year ended December 31, 1995, and incorporated herein by reference. 10-TTT Copy of Agreement and Plan of Merger, dated as of December 31, 1995, between Chrysler Financial Corporation and Chrysler Credit Corporation, providing for the merger of these two corporations on December 31, 1995, with Chrysler Financial Corporation being the surviving corporation. Filed as Exhibit 10-QQQQ to the Annual Report on Form 10-K of Chrysler Financial Corporation for the year ended December 31, 1995, and incorporated herein by reference. 10-UUU Copy of Amended and Restated Trust Agreement, dated as of November 1, 1995, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Receivables 1995-4. Filed as Exhibit 4.1 to the Annual Report on Form 10-K of Premier Auto Trust 1995-4 for the year ended December 31, 1995, and incorporated herein by reference. 10-VVV Copy of Certificate of Trust of Premier Auto Trust 1995-4. Filed as Exhibit 3 to the Annual Report on Form 10-K of Premier Auto Trust 1995-4 for the year ended December 31, 1995, and incorporated herein by reference.
84 85 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-WWW Copy of Indenture, dated as of November 1, 1995, between Premier Auto Trust 1995-4 and The Bank of New York, as Indenture Trustee, with respect to Premier Auto Trust 1995-4. Filed as Exhibit 4.2 to the Annual Report on Form 10-K of Premier Auto Trust 1995-4 for the year ended December 31, 1995, and incorporated herein by reference. 10-XXX Copy of Sale and Servicing Agreement, dated as of November 1, 1995, among Premier Auto Trust 1995-4, Chrysler Credit Corporation and Chrysler Financial Corporation, with respect to Premier Auto Trust 1995-4. Filed as Exhibit 4.3 to the Annual Report on Form 10-K of Premier Auto Trust 1995-4 for the year ended December 31, 1995, and incorporated herein by reference. 10-YYY Copy of Receivables Purchase Agreement, dated as of May 30, 1996, among Premier Auto Receivables Company, Chrysler Financial Corporation, and ABN AMRO Bank, N.V., as Agent, with respect to the sale of retail automotive receivables to Windmill Funding Corporation, Series 1996-1. Filed as Exhibit 10-OOOO to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended June 30, 1996, and incorporated herein by reference. 10-ZZZ Copy of Certificate of Trust of Premier Auto Trust 1996-1. Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-1 for the quarter ended March 31, 1996, and incorporated herein by reference. 10-AAAA Copy of Amended and Restated Trust Agreement, dated as of March 1, 1996, among Premier Auto Receivables Company, Chrysler Financial Corporation and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1996-1. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-1 for the quarter ended March 31, 1996, and incorporated herein by reference. 10-BBBB Copy of Indenture, dated as of March 1, 1996, between Premier Auto Trust 1996-1 and The Bank of New York, as Indenture Trustee (excluding Schedule A), with respect to Premier Auto Trust 1996-1. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-1 for the quarter ended March 31, 1996, and incorporated herein by reference. 10-CCCC Copy of Sale and Servicing Agreement, dated as of March 1, 1996, between Premier Auto Trust 1996-1 and Chrysler Financial Corporation (excluding Schedules A and C), for Premier Auto Trust 1996-1. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-1 for the quarter ended March 31, 1996, and incorporated by reference. 10-DDDD Copy of Receivables Sale Agreement, dated as of June 27, 1996, among Premier Receivables L.L.C., Chrysler Financial Corporation, Asset Securitization Cooperative Corporation and Canadian Imperial Bank of Commerce, as Administrative Agent. Filed as Exhibit 10-TTTT to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended June 30, 1996, and incorporated herein by reference. 10-EEEE Copy of Asset Purchase Agreement, dated as of August 30, 1996, between Chrysler First Business Credit Corporation and Berkeley Federal Bank & Trust, F.S.B. Filed as Exhibit 10-IIII to the Quarterly Report on Form 10-Q of Chrysler Financial Corporation for the quarter ended September 30, 1996, and incorporated herein by reference. 10-FFFF Copy of Asset Purchase Agreement, dated as of August 30, 1996, between Chrysler First Business Credit Corporation and Blackrock Capital Finance, L.P. Filed as Exhibit 10-JJJJ to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, and incorporated herein by reference.
85 86 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-GGGG Copy of Certificate of Trust of Premier Auto Trust 1996-2. Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-2 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-HHHH Copy of Amended and Restated Trust Agreement, dated as of May 1, 1996, among Premier Auto Receivables Company, Chrysler Financial Corporation, and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1996-2. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-2 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-IIII Copy of Indenture, dated as of May 1, 1996, between Premier Auto Trust 1996-2 and The Bank of New York, as Indenture Trustee (excluding Schedule A), with respect to Premier Auto Trust 1996-2. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-2 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-JJJJ Copy of Sale and Servicing Agreement, dated as of May 1, 1996, between Premier Auto Trust 1996-2 and Chrysler Financial Corporation (excluding Schedules A and C), with respect to Premier Auto Trust 1996-2. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-2 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-KKKK Copy of Certificate of Trust of Premier Auto Trust 1996-3. Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-3 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-LLLL Copy of Amended and Restated Trust Agreement, dated as of June 1, 1996, among Premier Auto Receivables Company, Chrysler Financial Corporation, and Chemical Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1996-3. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-3 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-MMMM Copy of Indenture, dated as of June 1, 1996, between Premier Auto Trust 1996-3 and The Bank of New York, as Indenture Trustee (excluding Schedule A), with respect to Premier Auto Trust 1996-3. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-3 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-NNNN Copy of Sale and Servicing Agreement, dated as of June 1, 1996, between Premier Auto Trust 1996-3 and Chrysler Financial Corporation (excluding Schedules A and C), with respect to Premier Auto Trust 1996-3. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-3 for the quarter ended June 30, 1996, and incorporated herein by reference. 10-OOOO Copy of Receivables Sale Agreement, dated as of November 25, 1996, among Premier Receivables L.L.C., Chrysler Financial Corporation, Asset Securitization Cooperative Corporation, and Canadian Imperial Bank of Commerce, as Administrative Agent. 10-PPPP Copy of Certificate of Trust of Premier Auto Trust 1996-4. Filed as Exhibit 3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-4 for the quarter ended September 30, 1996, and incorporated herein by reference. 10-QQQQ Copy of Amended and Restated Trust Agreement, dated as of August 1, 1996, among Premier Receivables L.L.C., Chrysler Financial Corporation,and Chase Manhattan Bank Delaware, as Owner Trustee, with respect to Premier Auto Trust 1996-4. Filed as Exhibit 4.1 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-4 for the quarter ended September 30, 1996, and incorporated herein by reference.
86 87 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, PART IV -- CONTINUED ---------------------------------------- AND REPORTS ON FORM 8-K -- CONTINUED ------------------------------------ 10-RRRR Copy of Indenture, dated as of August 1, 1996, between Premier Auto Trust 1996-4 and The Bank of New York, as Indenture Trustee, with respect to Premier Auto Trust 1996-4. Filed as Exhibit 4.2 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-4 for the quarter ended September 30, 1996, and incorporated herein by reference. 10-SSSS Copy of Sale and Servicing Agreement, dated as of August 1, 1996, between Premier Auto Trust 1996-4 and Chrysler Financial Corporation, with respect to Premier Auto Trust 1996-4. Filed as Exhibit 4.3 to the Quarterly Report on Form 10-Q of Premier Auto Trust 1996-4 for the quarter ended September 30, 1996, and incorporated herein by reference. 10-TTTT Copy of Receivables Sale Agreement, dated as of December 12, 1996, among Premier Receivables L.L.C., Chrysler Financial Corporation, Monte Rosa Capital Corporation, and Union Bank of Switzerland, New York Branch, as Administrative Agent. 10-UUUU Copy of Receivables Sale Agreement, dated as of December 12, 1996, among Premier Receivables L.L.C., Chrysler Financial Corporation, Old Line Funding Corp., and Royal Bank of Canada, as Agent. 10-VVVV Copy of Receivables Sale Agreement, dated as of December 18, 1996, among Chrysler Credit Canada, Ltd., Chrysler Financial Corporation, Canadian Master Trust, and Nesbitt Burns, Inc. *11 Statement regarding computation of earnings per common share. *12 Statement regarding computation of ratios of earnings to fixed charges and preferred stock dividends. *21 Subsidiaries of the Registrant. *23 Consent of Deloitte & Touche LLP, independent auditors for Chrysler Corporation. *24 Powers of Attorney executed by officers and directors who signed this Annual Report on Form 10-K by an attorney-in-fact. *27 Financial Data Schedule for year ended December 31, 1996.
- ------------------------- * Filed herewith In lieu of filing certain instruments with respect to the long-term debt of the type described in Item 601 (b)(4) of Regulation S-K with respect to the long-term debt of Chrysler Corporation and its consolidated subsidiaries, Chrysler Corporation agrees to furnish a copy of such instruments to the Securities and Exchange Commission on request. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended December 31, 1996. 87 88 SIGNATURES ---------- Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHRYSLER CORPORATION By /s/ R. J. EATON ------------------------------------ R. J. EATON Chairman of the Board, President and Chief Executive Officer January 21, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Principal executive officer: /s/ R. J. EATON Chairman of the Board, President January 21, 1997 - ------------------------------------- and Chief Executive Officer R. J. EATON Principal financial officer: /s/ G. C. VALADE Executive Vice President and Chief January 21, 1997 - ------------------------------------- Financial Officer G. C. VALADE Principal accounting officer: /s/ J. D. DONLON, III Vice President and Controller January 21, 1997 - ------------------------------------- J. D. DONLON, III
88 89 Board of Directors: /s/ LILYAN H. AFFINITO* Director January 21, 1997 - ------------------------------------- LILYAN H. AFFINITO /s/ JAMES D. ALJIAN* Director January 21, 1997 - ------------------------------------- JAMES D. ALJIAN /s/ ROBERT E. ALLEN* Director January 21, 1997 - ------------------------------------- ROBERT E. ALLEN /s/ JOSEPH A. CALIFANO, JR.* Director January 21, 1997 - ------------------------------------- JOSEPH A. CALIFANO, JR. /s/ THOMAS G. DENOMME* Director January 21, 1997 - ------------------------------------- THOMAS G. DENOMME /s/ ROBERT J. EATON* Director January 21, 1997 - ------------------------------------- ROBERT J. EATON /s/ EARL G. GRAVES* Director January 21, 1997 - ------------------------------------- EARL G. GRAVES /s/ KENT KRESA* Director January 21, 1997 - ------------------------------------- KENT KRESA /s/ ROBERT J. LANIGAN* Director January 21, 1997 - ------------------------------------- ROBERT J. LANIGAN /s/ ROBERT A. LUTZ* Director January 21, 1997 - ------------------------------------- ROBERT A. LUTZ /s/ PETER A. MAGOWAN* Director January 21, 1997 - ------------------------------------- PETER A. MAGOWAN /s/ JOHN B. NEFF* Director January 21, 1997 - ------------------------------------- JOHN B. NEFF /s/ MALCOLM T. STAMPER* Director January 21, 1997 - ------------------------------------- MALCOLM T. STAMPER /s/ LYNTON R. WILSON* Director January 21, 1997 - ------------------------------------- LYNTON R. WILSON
*By /s/ R. D. HOUTMAN ------------------------------------ R. D. HOUTMAN Attorney-in-Fact January 21, 1997 89 90 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE - -------- ----------------------------------------------------------------------------- ---- *10-B-3 Chrysler Supplement Executive Retirement Plan Consolidated as of October 1, 1996. *11 Statement regarding computation of earnings per common share. *12 Statement regarding computation of ratios of earnings to fixed charges and preferred stock dividends. *21 Subsidiaries of the Registrant. *23 Consent of Deloitte & Touche LLP, independent auditors for Chrysler Corporation. *24 Powers of Attorney executed by officers and directors who signed this Annual Report on Form 10-K by an attorney-in-fact. *27 Financial Data Schedule for year ended December 31, 1996.
- ------------------------- * Filed herewith 90 EX-10.(B)3 2 EXHIBIT 10-B-3 1 EXHIBIT 10-B-3 COUNTERPART NUMBER________ EXECUTED IN ___ COUNTERPARTS AS AMENDED THROUGH JULY 8, 1996 __________________________________________ CHRYSLER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN CONSOLIDATED AS OF OCTOBER 1, 1996 __________________________________________ 2 CHRYSLER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN DATED AS OF OCTOBER 1, 1996 Chrysler Corporation (or between June 1, 1986 and December 31, 1989 its subsidiary Chrysler Motors Corporation), a corporation organized and existing under the laws of the State of Delaware (hereinafter called the "Corporation"), has had in effect since January 1, 1985 a plan called the Chrysler Supplemental Executive Retirement Plan (prior to June 1, 1986 called the Chrysler Corporation Supplemental Executive Retirement Plan and hereinafter called the "Plan"). The Corporation has from time to time amended the Plan in certain respects. The Plan was last consolidated as of June 1, 1995 and was subsequently amended as of July 8, 1996. The Corporation now desires to consolidate the Plan as of this date. 3 CHRYSLER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AS OF OCTOBER 1, 1996
PAGE ---- ARTICLE I Purpose of Plan 4 ARTICLE II Definitions 9 ARTICLE III Participation 17 ARTICLE IV Retirement and Deferred Retirement Benefits 17 4.01 Normal Retirement 17 4.02 Special Early Retirement 20 4.03 Early Retirement at Employee Option 23 4.04 PTD Retirement 25 4.05 Retirement Under Employment Contract 27 4.06 Deferred Vested Benefits 29 4.07 - 4.15 Other Provisions 31 ARTICLE V Death Benefits 41 ARTICLE VI Payment of Benefits 46 ARTICLE VII Contributions 57 ARTICLE VIII Plan Administration 57
2 4 ARTICLE IX Amendment, Termination 62 ARTICLE X General 64 ARTICLE XI Special Provisions Applicable to Designated Participants 67 APPENDIX A Actuarial Assumptions Under the Plan 69
3 5 CHRYSLER SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I. PURPOSE OF PLAN 1.01 The Plan is maintained for the purpose of providing the following supplemental retirement benefits to Employees: A. Incentive Compensation Retirement Benefit This benefit is based on the aggregate awards earned out and paid to Employees under the Incentive Compensation Plan, the Long Term Incentive Plan, the Long Term Performance Plan, the Discretionary Incentive Compensation Plan, and any benefits paid pursuant to Subsection 401A.5. of the Plan. B. ERISA Excess Retirement Benefit This benefit is based on the excess of retirement benefits calculated under the Salaried Employees' Retirement Plan without regard to the limitations under Section 415 or Section 401(a)(17) of the Internal Revenue Code, as amended, over the benefits payable under the Salaried Employees' Retirement Plan because of such limitations. This benefit includes a contributory benefit based on any Employee contributions made pursuant to Section VII of this Plan that otherwise could have been contributed under the Salaried Employees' Retirement Plan were it not for contribution limitations imposed under Section 401(a)(17) of the Internal Revenue Code, as amended. Although this benefit shall be calculated and paid based solely on contributions made within this Plan, it shall be computed in the same manner as the contributory benefit is calculated under the Salaried Employees' Retirement Plan. 4 6 The Benefit as calculated above, shall be further increased (prior to the time the Salaried Employees' Retirement Plan is amended to comply with applicable provisions of the Tax Reform Act of 1986) to include the amount, if any, of additional non-contributory benefits excluded from payment under the Salaried Employees' Retirement Plan by provisions of the Internal Revenue Service Model Amendment #2, included in IRS Notice 88-31, as referenced in Subsection 4.01C of the Salaried Employees' Retirement Plan. In respect to Employees who are participants in the Chrysler First Retirement Account, all above references in this paragraph to the Salaried Employees' Retirement Plan shall be deemed to mean the Chrysler First Retirement Account. In respect to Employees who are participants in the Gulfstream Aerospace Corporation Pension Plan, all such references in this paragraph to the Salaried Employees' Retirement Plan shall be deemed to mean the Gulfstream Aerospace Corporation Pension Plan. The forms of benefits payable under this Plan to Employees who are participants in the Chrysler First Retirement Account or the Gulfstream Aerospace Corporation Pension Plan are the forms of benefits payable under such plans. C. Post Retirement Supplemental Benefit This benefit is payable to Employees who retired as elected officers of Chrysler Corporation and is based on the excess, if any, of the Basic Pension Rate in effect on January 1, 1986 under the Chrysler Pension Plan over the Basic Pension Rate in effect under the Pension Plan on the date the officers 5 7 retired, multiplied by the Employees' years of Credited Service. D. American Motors Supplemental Pension Plan Benefit This benefit is payable to Employees eligible for benefits under the American Motors Corporation Supplemental Pension Plan, a plan terminated by merger into this Plan effective December 31, 1989. Benefits under the American Motors Supplemental Pension Plan shall be frozen as of date of merger. If any Employee is eligible to receive a benefit under the non-contributory part of the Chrysler Salaried Employees' Retirement Plan and under an American Motors Corporation Pension Plan (including for this purpose any frozen American Motors Corporation Pension Plan that has been merged into this or any other Chrysler Pension Plan) and if his total benefit amount under Chrysler and American Motors Corporation Pension Plans exceeds the amount he would have received under Chrysler plans had he participated under Chrysler plans for the entire period he was employed by American Motors Corporation and Chrysler, his benefit under the non-contributory part of the Chrysler Salaried Employees' Retirement Plan will be reduced (but not below zero) by the amount of such excess. This reduction shall supersede the minimum benefit guarantee that would otherwise be applicable under the American Motors Supplemental Pension Plan benefit payable under this Plan. 6 8 E. Modified Special Early Retirement Program Special Leave of Absence Benefit This benefit is payable, prior to retirement under the Salaried Employees' Retirement Plan, to all very highly compensated employees (within the meaning of the Internal Revenue Code) and highly compensated employees (as defined by such Code) designated by the Corporation who choose to cease active employment with the Corporation between July 31, 1989 and October 31, 1989 or between January 31, 1990 and May 31, 1990 under terms of the 1989 or 1990 Chrysler Modified Special Early Retirement Programs. The benefit payable pursuant to this paragraph shall equal the benefit which would have been payable under the Salaried Employees' Retirement Plan, the Pension Plan and the ERISA Excess Retirement Benefits portion of this Plan had the Employees retired at Corporation option under the Salaried Employees' Retirement Plan at the date he ceased active employment. 7 9 SUPPLEMENTARY MINIMUM BENEFIT This benefit is payable to Salaried Employees (as defined in the Salaried Employees' Retirement Plan) who cease active employment with the Corporation under the 1989 or 1990 Chrysler Modified Special Early Retirement Programs (either through retirement or through a Special Leave of Absence as described in the first paragraph of this Section 1.01E). Such benefit is equal to the amount by which a Salaried Employee's combined monthly benefit for retirement at Corporation option under whichever is applicable of the Salaried Employees' Retirement Plan, the Pension Plan, the ERISA Excess Retirement Benefits portion of this Plan and the Special Leave of Absence Benefit provisions of this Section 1.01E are less than 115% of what his total retirement benefits would have been under the Salaried Employees' Retirement Plan, the Pension Plan and, if applicable, the ERISA Excess Retirement Benefits portion of this Plan had he retired at his own option. Notwithstanding the foregoing provisions of this Section 1.01E, no benefits of any kind shall be payable pursuant to this Section 1.01E for periods commencing on or after January 1, 1992. 8 10 ARTICLE II. DEFINITIONS Unless the text clearly indicates otherwise: 2.01 "Actuarial Equivalent" means an amount of equal value actuarially, determined pursuant to actuarial tables or factors adopted by the Committee as set forth in Appendix A to this Plan. 2.02 "Actuary" means the actuary for the Plan appointed by Chrysler Corporation. 2.03 "Adjusted Tax Rate" means the Tax Rate determined without regard to any employment taxes imposed under Section 3101(b) of the Internal Revenue Code (or any successor section thereto). 2.04 "Additional Retirement Benefit" means the benefit described in Article IV of the SERP and set forth in Appendix F thereto. 2.05 "Applicable Service and Compensation" means the service and compensation of an Employee as of a Calculation Date, as determined pursuant to Section 4.15. 2.06 "Annuity" means an annuity as defined in Section 4.15 of the Plan. Any Annuity purchased in substitution of an Employee's accrued benefit as of the corresponding Calculation Date shall be held separate and distinct from the Plan and any assets of the Corporation or any of its Subsidiaries, regardless of whether such assets are separately accounted for and segregated from other corporate assets in order to meet the liability of any such entity for benefits accrued hereunder. 2.07 "Basic Pension Rate" means the monthly basic pension rate for each year of service as established from time to time under the Pension Plan. 9 11 2.08 "Beneficiary" means any one or more individuals, partnerships, corporations, fiduciaries or other entities designated under the Salaried Employees' Retirement Plan as the beneficiary or contingent beneficiary to receive any death benefits payable under this Plan, unless a separate designation under the Plan is received by the Committee. If no beneficiary designation has been filed under the Salaried Employees' Retirement Plan or under the Plan, the beneficiary shall be the executor of the former Employee's will or the probate administrator, on behalf of the former Employee's estate. 2.09 "Calculation Date" means the calculation date as defined in Section 4.15 of the Plan. 2.10 "Committee" means the Employee Benefits Committee established by the Board of Directors of Chrysler Corporation by Resolution dated December 10, 1975, as constituted from time to time. 2.11 "Commuted Value" means an amount equal to the lump sum value at the date of determination of periodic payments payable thereafter discounted from the respective payment dates of such periodic payments to the date of determination at the rate of interest adopted by the Committee and set forth in Appendix A to this Plan. 2.12 "Corporation" means Chrysler Corporation and (i) any corporation organized under the laws of the United States or any state thereof, all or substantially all of the stock of which is owned by Chrysler Corporation directly or through one or more subsidiaries which the Committee has designated by resolution as a corporation to which, and to the salaried employees of which, this 10 12 Plan shall apply, and (ii) any corporation organized under the laws of a foreign government or subdivision thereof, all or substantially all of the stock of which is owned by Chrysler Corporation directly or through one or more subsidiaries, which is a subsidiary corporation with respect to which there is in effect an agreement entered into by Chrysler Corporation under Section 3121 (1) of the Internal Revenue Code or under any amendment thereof in effect at the relevant time, and which at the time the Committee shall have designated by resolution as a corporation to which, and to the salaried employees of which, this Plan shall apply, but such corporation shall be included in the term "Corporation" only with respect to those of its Employees who have been transferred to such employment with such subsidiary from employment in the United States with Chrysler Corporation or one of its subsidiary corporations, and (iii) for purposes of the Incentive Compensation Retirement Benefits only, any corporation organized under the laws of a foreign government or subdivision thereof, all or substantially all of the stock of which is owned by Chrysler Corporation directly or through one or more subsidiaries, which the Committee has designated by resolution as a corporation to which, and to the salaried employees of which, this Plan shall apply. 2.13 "Credited Service" means the credited service an Employee has under a Pension Plan or, in the case of an Employee who is an elected officer or director of the Corporation, the credited service he would have if elected officers and directors were eligible under a pension plan. Notwithstanding the above, however, in the case of an individual who has become an Employee of the 11 13 Corporation or of Chrysler Corporation or one of its subsidiaries (excluding American Motors Corporation and its subsidiaries as of August 5, 1987) upon transfer after August 5, 1987 from employment with American Motors Corporation or one of its subsidiaries, employment by American Motors Corporation or any of its subsidiaries up to and including the last day he was so employed shall be deemed to be included in Credited Service under this Plan for all purposes other than for computation of benefit amounts. 2.14 "Employee" means a person (i) who, at the time, is employed by the Corporation or a Non-Participating Subsidiary, or (ii) who, for the purposes of the Incentive Compensation Retirement Benefits only, is employed by Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., and (iii) who is, or who has been but no longer is, a Salaried Employee. Notwithstanding the foregoing, the term "Employee" shall in no event include (i) persons employed on a temporary, fixed term, project or daily basis, (ii) persons who are retained under a consultant or independent contractor agreement, or on a Service Agreement basis or who are assigned by an employment agency, supplier, subcontractor or other provider of personnel. Where used in this Plan the terms "former Employee," "retired Employee" or "terminated Employee" shall mean a person who at one time was an Employee but who, by reason of retirement or other termination of employment is no longer employed by the Corporation, a Non-Participating Subsidiary, Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., as applicable. 2.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 12 14 2.16 "ERISA Excess Death Benefits" means the death benefit calculated by reference to the ERISA Excess Retirement Benefit of an Employee or former Employee as determined in whichever is applicable of Sections 5.01, 5.02, or 5.03. 2.17 "ERISA Excess Retirement Benefit" means a monthly retirement benefit equal to the excess of the retirement benefit calculated under the Salaried Employees' Retirement Plan without regard to the benefit and compensation limitations set forth in that plan or imposed under Section 415 or Sub-paragraph 401(a)(17) of the Internal Revenue Code over the benefit payable under the Salaried Employees' Retirement Plan, determined as provided in Section 4.01, because of such limitation. 2.18 "Incentive Compensation Plan" means the Chrysler Corporation Incentive Compensation Plan, as in effect from time to time, established under a stockholders' resolution adopted in 1929, as amended. 2.19 "Incentive Compensation Death Benefit" means the death benefit calculated by reference to Incentive Compensation Retirement Benefits of an Employee or retired Employee as determined in whichever is applicable of Sections 5.01, 5.02, 5.03, or 5.04. 2.20 "Incentive Compensation Retirement Benefit" means a monthly retirement benefit calculated by reference to the aggregate awards made to an Employee under (a) the Incentive Compensation Plan, (b) the Chrysler Corporation Long-Term Incentive Plan under the Incentive Compensation Plan (herein called the "Long-Term Incentive Plan") (c) the Chrysler Corporation Long-Term Performance Plan under the Chrysler Corporation 1991 Stock Compensation Plan 13 15 (herein called the "Long-Term Performance Plan"), (d) the Chrysler Corporation Discretionary Incentive Compensation Plan (herein called the "Discretionary Incentive Compensation Plan"), and (e) any benefits paid pursuant to Subsection 4.01A.5. of the Plan determined as provided in Section 4.01. 2.21 "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended." 2.22 "Non-Participating Subsidiary" means any branch of Chrysler Corporation, or any of its wholly-owned subsidiaries, located outside the United States and its possessions and any subsidiary of Chrysler Corporation whether organized under the laws of the United States or of any state thereof or of a foreign government or subdivision thereof, a majority of the voting stock of which Chrysler Corporation owns at the time directly or through one or more wholly-owned subsidiaries, and which branch or subsidiary the Committee shall at the time have designated by resolution as a branch or corporation to which and to the Employees of which the provisions of the Plan relating to a Non-Participating Subsidiary shall apply. A branch of Chrysler Corporation, or any of its wholly-owned subsidiaries, located outside the United States and its possessions or a subsidiary described in clause (ii) of Section 2.07 may be a Non-Participating Subsidiary with respect to those of its Employees who were not transferred to such branch or subsidiary from employment in the United States with Chrysler Corporation or one of its subsidiary corporations. 2.23 "Normal Retirement Date" means the last day of the month in which an Employee attains his 65th birthday. 14 16 2.24 "Pension Plan" means the Chrysler Pension Plan or the Chrysler Financial Corporation Pension Plan, as applicable. 2.25 "Permanent Total Disability" means that the person is receiving permanent total disability benefits under a Pension Plan or a group insurance program of the Corporation. 2.26 "Plan" means this Supplemental Executive Retirement Plan. 2.27 "Plan Year" means the period of 12 calendar months ending with the last day of the month of December in each year. 2.28 "Post Retirement Supplemental Benefit" means a monthly retirement benefit payable to an Employee who retired or retires as an elected officer of Chrysler Corporation, determined as provided in Section 4.08. 2.29 "Salaried Employee" means a person (i) who at the relevant time is employed by the Corporation or a Non-Participating Subsidiary, or (ii) who, for purposes of the Incentive Compensation Retirement Benefits only, is employed by Chrysler Canada Ltd., or Chrysler Credit Canada Ltd., and who receives regular compensation in the form of a base Salary, except that a person who is employed either by a subsidiary of Chrysler Corporation described in clause (ii) of Section 2.07 or a branch of Chrysler Corporation located outside the United States and its possessions shall, in either such case, be deemed to be a Salaried Employee only if he has been transferred to such employment, either with such subsidiary or such branch, from employment in the United States. 2.30 "Salaried Employees' Retirement Plan (SERP)" means the Chrysler Salaried Employees' Retirement Plan or the Chrysler Financial Corporation Salaried Employees' Retirement Plan, as applicable, as in effect from time to time. 15 17 2.31 "Salary" means the base salary payable monthly (after any deductions or any salary deferral pursuant to an agreement entered into under the Chrysler Salaried Employees' Savings Plan, as amended, or the Chrysler Salaried Employees' Supplemental Savings Plan, as amended) not including any contingent, incentive or deferred compensation, bonuses, or other forms of extra compensation. The term "Salary" shall include base salary amounts deferred pursuant to the Chrysler Stock Unit Investment Program. The term "Salary" shall further include amounts deducted from base salary under provisions of the Chrysler Flexible Benefits Program but shall not include amounts added to base compensation payments pursuant to the Flexible Benefits Program. 2.32 "Supplemental Payment" means the supplemental payment described in, and payable to an Employee on the terms and subject to the conditions set forth in, Section 4.15D of the Plan. 2.33 "Tax Rate" means the highest marginal rate of income taxation paid by individuals in the jurisdiction in which the Employee resides on the Calculation Date, plus the rate of tax imposed under Section 3101(b) of the Code (or any successor section thereto)." 16 18 ARTICLE III. PARTICIPATION 3.01 An Employee who has received or receives an award of incentive compensation under the Incentive Compensation Plan for the year 1983 or any subsequent year shall participate in the Plan with respect to the Incentive Compensation Retirement Benefit and the Incentive Compensation Death Benefit. 3.02 An Employee who retires under the SERP and whose retirement or termination benefits as calculated under SERP are in excess of the benefit and compensation limitations set forth in that plan or imposed under Section 415 or Sub-paragraph 401(a)(17) of the Internal Revenue Code shall participate in the Plan with respect to the ERISA Excess Retirement Benefit and ERISA Excess Death Benefit. 3.03 An Employee who retired as an elected officer of Chrysler Corporation prior to January 1, 1986 shall participate in the Plan with respect to the Post Retirement Supplemental Benefit. 3.04 Notwithstanding anything else contained in this Plan to the contrary, an Employee who has received an Annuity in accordance with Section 4.15 hereof shall, as a condition of continued participation in the Plan with respect to benefits accrued in respect of services performed and compensation payable other than the Applicable Service and Compensation, irrevocably consent to the payment of any such Annuity and Supplemental Payment in accordance with and subject to the terms and conditions of such Section 4.15. ARTICLE IV. RETIREMENT AND DEFERRED RETIREMENT BENEFITS 4.01 Except as otherwise expressly provided in Section 4.15 below, an Employee who retires under the SERP, or for purposes of the Incentive Compensation Retirement Benefits also under the 17 19 Chrysler Canada Ltd. Salaried Employees' Retirement Plan on or after his Normal Retirement Date shall be entitled to receive under this Plan, commencing on the first day of the month next following his retirement date, retirement benefits equal to the excess of (i) the sum of (1) any Incentive Compensation Retirement Benefit for which he may be eligible as provided in Subsection A, and (2) any ERISA Excess Retirement Benefit for which he may be eligible as provided in Subsection B over (ii) any Additional Retirement Benefit for which he may be eligible as provided in Section C. A. The Incentive Compensation Retirement Benefit of an Employee retiring as provided above in this Section 4.01 shall be a monthly amount equal to the sum of the following: 1. An amount equal to .5 of 1 percent (.5%) of his Incentive Compensation Plan awards for 1983 and 1984, plus 2. An amount equal to such percentage of his combined (a) Incentive Compensation Plan award for each of the years 1985 through 1992 and (b) Long-Term Incentive Plan award (whether such award is payable in cash or Chrysler Stock) earned out and paid for performance cycles ending in each of the years 1987 through 1992, as the Incentive Compensation Committee of the Board of Directors shall determine, but not more than .5 of 1 percent (.5%) of his combined award for any such year, plus 3. An amount equal to such percentage of his combined (a) Incentive Compensation Plan award for 1993 and (b) Long-Term Performance Plan award for the 18 20 performance cycle ending in 1993 as the Incentive Compensation Committee of the Board of Directors shall determine, but not more than .5 of 1 percent (.5%) of his combined award for 1993 plus 4. An amount equal to such percentage of his combined (a) Incentive Compensation Plan award for 1994 and each year thereafter, (b) Long Term Performance Plan award for performance cycles ending in 1994 and each year thereafter, and (c) Discretionary Incentive Compensation Plan award for 1994 and each year thereafter as the Incentive Compensation Committee of the Board of Directors shall determine, but not more than .5 of 1 percent (.5%) of his combined award for any such year plus 5. An amount equal to .5 of a percent (.5%) of his Incentive Compensation Plan awards, Long Term Performance Plan awards, Long Term Incentive Plan awards, and Discretionary Incentive Compensation Plan awards, payable under such plans in the event of a Change in Control (as defined in Section 4.13). B. The ERISA Excess Retirement Benefit of an Employee retiring as provided above in this Section 4.01 shall be a monthly amount equal to the excess of: 1. The retirement benefit calculated under the provisions of Section 4.01 of the SERP (irrespective of whether payments under the SERP are actually made in the form described in Section 4.01 of the SERP) without regard to the benefit and 19 21 compensation limitations set forth in that plan or imposed under Section 415 or Sub-paragraph 401(a)(17) of the Internal Revenue Code over 2. The retirement benefit calculated under Sections 4.01 A and B of the SERP. Notwithstanding anything to the contrary in this Plan, the retirement benefits of an Employee of the Corporation or a Non-Participating Subsidiary, who continues active service until his 65th birthday, shall be nonforfeitable. C. The amount of any Additional Retirement Benefit of an Employee shall be as defined in Section 2.04. 4.02 Except as otherwise expressly provided under Section 4.15 below, an Employee who retires under the Special Early Retirement provisions of the SERP or, for purposes of the Incentive Compensation Retirement Benefit, retires at the option of the Corporation under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan on or after his 55th birthday but before his 62nd birthday and who at the date of his early retirement has 10 years or more of Credited Service (or who shall have attained such lesser age or years of Credited Service as may be required under terms of a specific Early Retirement Program if he retires pursuant to such program) shall be entitled to receive under this Plan, commencing on the first day of the month next following the date of his retirement, retirement benefits equal to the excess of (i) the sum of (1) any Incentive Compensation Retirement Benefit for which he may be eligible as provided in Section A., and (2) any ERISA Excess Retirement Benefit for which he may be eligible as provided in 20 22 Section B over (ii) any Additional Retirement Benefit for which he may be eligible as provided in Section C. A. The Incentive Compensation Retirement Benefit of an Employee retiring early as provided in this Section 4.02 shall be a monthly amount calculated as described in Section 4.01A. B. The ERISA Excess Retirement Benefit of an Employee retiring early as provided in this Section 4.02 shall be a monthly amount calculated as described in Section 4.01B. C. The amount of any Additional Retirement Benefit of an Employee shall be as defined in Section 2.04. D. The reduced age, Credited Service, and date specifications applicable to specific Special Early Retirement Programs are as follows: 1. 1991 Program a. Minimum age: 53 b. Minimum Credited Service: 10 years c. Eligibility date: August 31, 1991 d. Retirement date: April 30, 1991 or, if later, the end of the month prior to September, 1991 when age and Credited Service requirements are first met (Retirements may occur at a later date as approved by the Corporation and agreed to by the Employee but not beyond December 31, 1991) 2. 1992 Program a. Minimum age: 55 21 23 b. Minimum Credited Service: 7 years c. Eligibility date: December 31, 1992 (Must be actively at work during the March 1, 1992 to May 31, 1992 period) d. Retirement date: August 31, 1992 or as early as May 31, 1992 if age and Credited Service requirements are met or, in the case of an Employee who first meets the age and Credited Service requirements of the Program between September 1, 1992 and December 31, 1992, the end of the month the Employee first meets such requirements (Retirement may occur at a later date as approved by the Corporation and agreed to by the Employee but not beyond December 31, 1992) 3. 1993 Program a. Minimum age: 54 b. Minimum Credited Service: 10 years c. Eligibility date: December 31, 1993 d. Retirement date: April 30, 1993 or, if later, the end of the month prior to January 1, 1994 when age and Credited Service requirements are first met (Retirements may occur at a later date as approved by the Corporation and agreed to by the Employee but not beyond December 31, 1993) 4. 1994 Program a. Minimum age 54 22 24 b. Minimum Credited Service: 10 years c. Eligibility Date: December 31, 1994 d. Retirement Date: Not later than December 31, 1994 (Retirement can not be earlier than September 15, 1994. However, incentives under the program are also applicable, effective January 1, 1995, to employees who retired under Section 4.03 of the plan between May 31, 1994 and July 31, 1994). Provided, however, that in the case of an Employee retiring under this Section 4.02 who is employed or becomes employed by any competing firm, as determined by the Committee, payment of his monthly retirement benefits provided under Section 4.02A shall not be made for any month during which he is so employed by any such competing firm prior to the first day of the month next following his 65th birthday. 4.03 Except as otherwise provided in Section 4.15 below, an Employee who retires under the SERP, or for purposes of the Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan at his option on or after his 55th birthday but before his 65th birthday and (a) who has not attained age 60 and whose combined years of age and years of Credited Service (to the nearest 1/12 in each case) shall total 85 or more, or (b) who has attained age 60 but not 65 and has 10 or more years of Credited Service, shall in any such case be entitled to receive under this Plan, commencing on the first day of the month next following the date of his retirement, retirement benefits equal to the excess of (i) the sum of (1) any Incentive 23 25 Compensation Retirement Benefit for which he may be eligible as provided in Section A, and (2) any ERISA Excess Retirement Benefit for which he may be eligible as provided in Section B over (ii) Any Additional Retirement Benefit for which he may be eligible as provided in Section C subject to the provisions of Section D, below. A. The Incentive Compensation Retirement Benefit of an Employee retiring early as provided in this Section 4.03 shall be a monthly amount calculated as described in Section 4.01A. B. The ERISA Excess Retirement Benefit of an Employee retiring early as provided in this Section 4.03 shall be a monthly amount calculated as described in Section 4.01B. C. The amount of any Additional Retirement Benefit of an Employee shall be as defined in Section 2.04. D. The retirement benefits described above in Sections 4.03A and 4.03B shall be reduced by multiplying such benefits by a percentage as set forth in the following table:
Age When Benefit Commences Percentage* ----------------- ----------- 55 57.9% 56 63.5 57 69.4 58 75.2 59 80.8 60 86.7 61 93.3
24 26 62 100.0 63 100.0 64 100.0 === =====
* Prorated for intermediate ages computed to the nearest whole month Provided, however, that in the case of an Employee retiring under this Section 4.03 who is employed or becomes employed by any company other than the Corporation, payment of his monthly retirement benefit provided under Section 4.03A shall not be made for any month during which he is so employed by any company other than the Corporation prior to the first day of the month next following his 65th birthday, unless the Committee approves such payment annually. 4.04 Except as otherwise expressly provided in Section 4.15 below, an Employee who retires under the SERP, or for purposes of the Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd. Salaried Retirement Plan because of Permanent Total Disability with 10 years or more of Credited Service (i) on or after his 55th birthday but before his Normal Retirement Date or (ii) before his 55th birthday and who has been a participant for at least 10 years since he attained age 35, or (iii) before his 55th birthday and who has been a participant for five years but less than 10 years since he attained age 35, shall be entitled to receive under this Plan, retirement benefits equal to the excess of (i) the sum of (1) any Incentive Compensation Retirement Benefit for which he may be eligible as provided in Section A and (2) any ERISA Excess Retirement Benefit for which he may be eligible as 25 27 provided in Section B below over (ii) any Additional Retirement Benefit for which he may be eligible as provided in Section C. A. The Incentive Compensation Retirement Benefits of an Employee retiring as provided in this Section 4.04 shall be a monthly amount calculated as described in Section 4.01A and B. The ERISA Excess Retirement Benefits of an Employee retiring as provided in this Section 4.04 shall be a monthly amount as calculated in Section 4.01B and such monthly retirement benefits shall commence on the first day of the month next following the date of his retirement, except that with respect to an Employee retiring as described in (iii) above in this Section 4.04, such monthly retirement benefits shall commence on the first day of the month immediately following the month in which he attains age 55. Provided, however, that in the case of an Employee retiring under this Section 4.04 who is employed or becomes employed by any competing firm, as determined by the Committee, payment of his monthly retirement benefits provided under Section 4.04A shall not be made for any month during which he is so employed by such competing firm prior to the first day of the month next following his 65th birthday. C. The amount of any Additional Retirement Benefit of an Employee shall be as defined in Section 2.04. 26 28 4.05 A. Except as otherwise provided in Section 4.15 below, an Employee who retires under an employment contract at the option of the Corporation or because of Permanent Total Disability on or after his 55th birthday but before his 65th birthday shall be entitled to receive under this Plan, commencing on the first day of the month next following his retirement date, an Incentive Compensation Retirement Benefit in a monthly amount calculated as described in Section 4.01A. Provided, however, that in the case of an Employee retiring under this Section 4.05A who is employed or becomes employed by any competing firm, as determined by the Committee, payment of his monthly retirement benefits provided under Section 4.05A shall not be made for any month during which he is so employed by any such competing firm prior to the first day of the month next following his 65th birthday. B. Except as otherwise provided in Section 4.15 below, an Employee who retires under an employment contract at his option on or after his 55th birthday but before his 65th birthday shall be entitled to receive under this Plan, commencing on the first day of the month next following his retirement date, an Incentive Compensation Retirement Benefit in a monthly amount calculated as described in Section 4.01A, reduced by multiplying such benefits by a percentage as set forth in the following table:
Age When Benefit Commences Percentage* ----------------- -----------
27 29 55 57.9 56 63.5 57 69.4 58 75.2 59 80.8 60 86.7 61 93.3 62 100.0 63 100.0 64 100.0 ==== ========
*Prorated for intermediate ages computed to the nearest whole month Provided, however, that in the case of an Employee retiring under this Section 4.05B who is employed or becomes employed by any company other than the Corporation, payment of his monthly retirement benefit provided under Section 4.05B shall not be made for any month during which he is so employed by any company other than the Corporation prior to the first day of the month next following his 65th birthday, unless the Committee approves such payment annually. C. Except as otherwise provided in Section 4.15 below, an Employee who retires under an employment contract, and who on his retirement date has not attained age 55, shall be entitled to receive under this Plan, commencing on the first day of the month next following his Normal Retirement Date, an Incentive Compensation Retirement Benefit in a monthly amount calculated as described in Section 4.01 A. 28 30 D. Notwithstanding any other contrary provision, each of the benefits described in Sections 4.05A, B, and C above shall be reduced by the amount of any Additional Retirement Benefit of an Employee. 4.06 Except as otherwise provided in Section 4.15 below, an Employee whose employment terminates under the SERP, or for purposes of the Incentive Compensation Retirement Benefits also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan otherwise than by death or retirement shall be entitled to receive under this Plan a deferred retirement benefit equal to the excess of (i) the sum of (1) any Incentive Compensation Retirement Benefit for which he is eligible as provided in Section A below, and (2) any ERISA Excess Retirement Benefit for which he is eligible as provided in Section B below over (ii) any Additional Retirement Benefit for which he is eligible as provided in Section C below, subject to the provisions of Sections D and E below. A. If he has 5 years or more of Credited Service at the date his employment terminates and (i) his employment terminated other than because of discharge for cause or resignation to work for a competitor or (ii) his employment terminated because of discharge for cause, or resignation to work for a competitor and, in either case, the Committee approves vesting of the terminated Employee's accrued Incentive Compensation Retirement Benefit, he shall be entitled to receive Incentive Compensation Retirement Benefits in a monthly amount calculated as described in Section 4.01A. Any non-vested Incentive Compensation Retirement Benefits are forfeited. 29 31 Notwithstanding the preceding provisions of this Subsection A.(a) all Incentive Compensation Retirement Benefits accrued as of December 31, 1993 shall be fully vested as of such date in respect to Band 96 and above employees who are actively at work and who have five or more years of Credited Service as of such date and (b) all Incentive Compensation Retirement Benefits accrued as of January 1, 1994 shall be fully vested as of such date in respect to employees below Band 96 who are actively at work and who have five or more years of Credited Service as of such date. B. The deferred age 65 ERISA Excess Retirement Benefit he shall be entitled to receive shall be a monthly amount equal to the excess of (i) the deferred retirement benefit calculated under the provisions of Section 4.06 of the SERP without regard to the benefit limitations contained in section 415(b)(1) and/or Section 415(e) of the Internal Revenue Code, as amended, over (ii) the deferred retirement benefit payable under SERP because of such limitation. C. The amount of any Additional Retirement Benefit of an Employee shall be as defined in Section 2.04. D. Any deferred retirement benefits under this Section 4.06 except as otherwise provided below in Subsection D, shall be a monthly pension commencing as of the first day of the first month after the Employee attains age 65 in the full unreduced amount for which he is eligible under this Section 4.06. 30 32 E. Deferred retirement benefits paid to a terminated Employee may, if such Employee makes written application, begin prior to age 65 (but in no event earlier than the month the terminated Employee attains age 60) on a reduced Actuarial Equivalent basis but shall not be paid for any month prior to age 65 in which the terminated Employee is employed by any company other than the Corporation, unless the Committee approves such payment annually, or is employed by any competing firm, as determined by the Committee. 4.07 A. If a retired Employee who has commenced receiving retirement benefits under this Plan is reemployed on or after the effective date of the Plan he shall continue to receive during such reemployment the retirement benefits to which he is otherwise entitled (taking into account the provisions of Section 4.15 below), provided, however, that such reemployment shall not result in the accrual of any additional benefits under the Plan. B. If a former Employee eligible for a deferred retirement benefit under this Plan, who has not yet commenced receiving such benefit, is reemployed, then his eligibility therefore shall cease and the accrued retirement benefit, if any, he had at the date his employment terminated (taking into account the provisions of Section 4.15 below) shall be reinstated. C. If a former employee whose employment had terminated as a result of resignation or discharge is subsequently reemployed, the Committee may, at its discretion, reinstate all or apart of any Incentive Compensation Retirement Benefit 31 33 that had been previously forfeited pursuant to provisions of Section 4.06 of this Plan. 4.08 Except as otherwise provided in Section 4.15 below, a retired Employee who on the date of his retirement was an elected officer of Chrysler Corporation and who retired under Section 4.01, 4.02, 4.03, 4.04, or 4.05 of the SERP shall be entitled to receive under this Plan, commencing on January 1, 1986, a Post Retirement Supplemental Benefit which shall be a monthly amount equal to the excess of (i) the highest Basic Pension Rate in effect on January 1, 1986 under the Chrysler Pension Plan for employees who retired when the Employee retired over (ii) the highest Basic Pension Rate in effect under the Chrysler Pension Plan on the date the Employee retired, multiplied by the Employee's years of Credited Service. 4.09 Except as otherwise expressly provided in Section 4.15 below, no Employee shall be entitled to retirement benefits under this Plan except as set forth in Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.08 and 4.12, of this Plan, and no Employee shall have any vested right under the Plan except such rights, if any, as may accrue to him under Section 4.06 or Section 4.12. At his Normal Retirement Date, he shall not be entitled to receive any retirement benefits payable to him pursuant to the terms hereof until his subsequent retirement. At that time he shall be entitled to receive a monthly retirement benefit commencing on the first day of the month next following the date of his retirement in the amount computed as provided in Section 4.01 (but adjusted as provided in Section 4.15 below). 32 34 4.10 Except as otherwise provided in Section 4.15 below, an Employee who performs any service after December 31, 1987 shall be entitled to have both his Salary and service taken into account for purposes of calculating his retirement benefit under this Plan, irrespective of whether such service occurs before or after the Employee's Normal Retirement Date. 4.11 Except as otherwise provided in Section 4.15 below, a Special Incentive Compensation Benefit is payable, prior to retirement under the Salaried Employees' Retirement plan, to those entitled to a Special Leave of Absence benefit pursuant to the first paragraph of Section 1.01E who would, if they were retired, be entitled to an Incentive Compensation Retirement Benefit under this Article IV. The Special Incentive Compensation Benefit shall be calculated and paid in the same manner as the Incentive Compensation Retirement Benefit under this Article IV. 4.12 Notwithstanding any other provisions hereof, upon the occurrence of a 'Change in Control' (as defined in Section 4.13), each Employee who has participated in the Plan with respect to the Incentive Compensation Retirement Benefit shall be vested in his accrued Incentive Compensation Retirement Benefit (reduced to reflect receipt by such Employee of an Additional Retirement Benefit and/or an Annuity and Supplemental Payment in respect of all or any portion thereof). If the employment of any such Employee by the Corporation is terminated by the Corporation without 'cause' (as defined below) within the two-year period immediately following a Change in Control, the Corporation shall pay such Employee, within ten (10) days of such termination, the Commuted Value of his adjusted Incentive Compensation Retirement 33 35 Benefit, calculated as described in Section 4.01A (and adjusted in accordance with Section 4.01C and 4.15) and as if payment of such monthly retirement benefit were to commence on the first day of the month next following the later of his termination date or the date he attains age 65. The Commuted Value shall be determined for this purpose by using the interest rate set forth in Appendix A to this Plan. Cause, for purposes of this Section 4.12, shall mean the willful engaging by the Employee in conduct which is demonstrably injurious to the Corporation, monetarily or otherwise. 4.13 'Change in Control' shall mean a change in control of Chrysler Corporation, which shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: A. Any Person (defined below) shall become the Beneficial Owner (defined below) of securities of Chrysler Corporation representing 20% or more of the combined voting power of Chrysler Corporation's then outstanding securities (unless the event causing the 20% threshold to be crossed is an acquisition of securities directly from Chrysler Corporation); B. During any period of two consecutive years beginning after June 7, 1990, individuals who at the beginning of such period constitute the Board of Directors of Chrysler Corporation and any new director (other than a director designated by a Person who has entered into an agreement with Chrysler Corporation to effect a transaction described in paragraph A, C or D of this Change in Control definition) whose election or nomination for election was approved by a vote of at least two-thirds of the directors then in office 34 36 who either were directors at the beginning of such two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors; C. The stockholders of Chrysler Corporation approve a merger or consolidation of Chrysler Corporation (other than a merger or consolidation which would result in the voting securities of Chrysler Corporation outstanding immediately prior to such merger or consolidation 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 Corporation or such surviving entity held by a trustee or other fiduciary pursuant to any employee benefit plan of Chrysler Corporation or such surviving entity of any subsidiary of Chrysler Corporation or such surviving entity, at least 80% of the combined voting power of the securities of Chrysler Corporation or such surviving entity outstanding immediately after such merger or consolidation); or D. The stockholders of Chrysler Corporation approve a plan of complete liquidation or dissolution of Chrysler Corporation or an agreement for the sale or disposition by Chrysler Corporation of all or substantially all of Chrysler Corporation's assets. The following terms, as used in this Change in Control definition, shall have the meanings stated below: "Beneficial Owner", with respect to any securities, means any Person who, directly or indirectly, has the right to vote 35 37 or dispose of such securities or otherwise has "Beneficial Ownership" of such securities (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the 'Exchange Act')), 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 security (x) arising solely from a revocable proxy or consent given in response to a public proxy or 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. "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act, provided, however, that 36 38 Person shall not include (i) Chrysler Corporation, any subsidiary of Chrysler Corporation or any other Person controlled by Chrysler Corporation, (ii) any trustee or other fiduciary holding securities under any employee benefit plan of Chrysler Corporation or any subsidiary of Chrysler Corporation, or (iii) a corporation owned, directly or indirectly, by the stockholders of Chrysler Corporation in substantially the same proportions as their ownership of securities of Chrysler Corporation. 4.14 Notwithstanding any other provision of this Article IV or of this Plan, a Salaried Employee who retires prior to age 55 pursuant to provisions of the Chrysler Canada, Ltd. Salaried Employees' Retirement Plan, shall be considered an employment termination rather than a retirement for purposes of determining the nature, amount, and timing of any benefits to which he may be entitled under this Plan. 4.15 A. Notwithstanding anything else contained in the Plan to the contrary, the Corporation may at any time, and from time to time, substitute an individual annuity contract or an interest in a group annuity contract meeting the terms and conditions of this Section 4.15 (an "Annuity") for all or any portion of the benefits of any Employee, any class of Employees or all Employees accrued under this Article IV as of a date (the "Calculation Date") determined by the committee of the Board then responsible for the compensation of officers of the Corporation (the "Board Committee") in its sole discretion. The amount payable in respect of any Employee under such Annuity shall (i) be based on the Employee's service completed and compensation earned through the Calculation 37 39 Date or such earlier date as may be specified by the Board Committee (the "Applicable Service and Compensation") and (ii) be, on a net after tax basis (as determined pursuant to this Section 4.15), substantially the same amount that he or she would have received under Article IV hereof, based on the Applicable Service and Compensation. For purposes of the immediately preceding sentence, the amount payable to the Employee on a net after tax basis shall be determined assuming that (i) all amounts that would have been payable under Article IV would have been taxable at the Tax Rate, (ii) all taxable income received by the Employee from the Annuity (i.e., all amounts in excess of the Employee's return of basis, as determined by applying the exclusion ratio determined under Section 72 of the Internal Revenue Code (or any successor section thereon)) is taxable at the Adjusted Tax Rate, and (iii) for purposes of determining the effect of any state, local or foreign tax, at the time the Employee would receive any retirement income, whether under Article IV hereof or pursuant to the terms of the Annuity, such Employee will be deemed to reside in the same jurisdiction as it used to determine the Tax Rate for such Employee. The remaining terms and conditions applicable to such Annuity, or the receipt thereof, shall be determined by the Committee and communicated by the Corporation to the Employee at such time and in such manner as the Committee shall determine, but subject to any disclosure requirements under applicable law. B. Except as otherwise provided in this Section 4.15 or as required under applicable law, the retirement income payable pursuant to an Annuity shall be payable on substantially the same terms and 38 40 conditions as set forth in Article VI as in effect on the corresponding Calculation Date. C. Notwithstanding the purchase of any Annuity pursuant to Section 4.15A, unless the Committee otherwise determines, the death benefits described in Article V hereof shall continue to be provided pursuant to any such Annuity. Nothing in the Section 4.15C shall be construed to obligate the Corporation, following the purchase of an Annuity, to pay under this Plan any survivor benefits payable under Article VI with respect to the Applicable Service and Compensation used to calculate the benefits payable under such an Annuity. D. Notwithstanding the provisions of Article VI, no Annuity shall permit an Employee to surrender such Annuity and receive a lump sum payment equal to the cash value of the Annuity, provided, however, that the Board Committee (or its delegate) may offer to any or every Employee the opportunity to receive, in lieu of an Annuity, a lump sum distribution equal to the present value of such Employee's retirement benefits accrued as of the applicable Calculation Date under Article IV, or under Section 1.01C (Post Retirement Supplemental Benefit) or Section 1.01D (American Motors Supplemental Pension Plan Benefit)of Article I, determined on a basis and using such assumptions as the Board Committee (or its delegate) shall determine. E. If the Board Committee elects to distribute retirement benefits in the form of an Annuity to, or permit a lump sum option to be exercised by, any Employee or class of Employees pursuant to this Section 4.15, the Board Committee shall not be obligated or otherwise required to provide an Annuity or a lump sum to each 39 41 Employee or to all similarly situated Employees. Moreover, the distribution of an Annuity or lump sum with respect to accrued benefits on one or more occasions shall not obligate the Corporation to make such a distribution with respect to benefits accrued thereafter. To the extent an Employee does not receive retirement benefits in the form of an Annuity or a lump sum pursuant to this Section 4.15, the retirement benefits for such Employee shall continue to be determined in accordance with the terms of the Plan other than this Section 4.15. F. Subject to the conditions of this Section 4.15, if the Board Committee determines that, in lieu of a distribution of retirement benefits accrued under Article IV thereof, an Employee shall receive an Annuity pursuant to this Section 4.15, it shall also direct the Corporation to make a supplemental payment, which may be provided under the Plan, to each such Employee in an amount equal to the amount of the applicable income and employment taxes, if any, payable in respect of the distribution of the Annuity, calculated assuming that an employee pays such taxes at the Tax Rate (the "Supplemental Payment"). In no event shall a Supplemental Payment be made to any Employee who received a lump sum payment in lieu of an Annuity pursuant to Section 4.15D hereof. Payment of an Annuity and a Supplemental Payment, shall be in lieu of, and in full and complete substitution for the Employee's rights hereunder (other than with respect to the death benefits described in Article V) in respect of all benefits accrued under Article IV as of the corresponding Calculation Date as to which the Annuity pertains. Any Employee who, after receiving a Supplemental Payment pursuant to this Section 4.15F, objects to the distribution of the Annuity 40 42 or asserts a claim against the Corporation by reason of his or her participation in the Plan for any retirement benefits or any other amounts in respect of the Applicable Service and Compensation used in calculating the amount of such Annuity shall be obligated to return to the Corporation the amount of such Supplemental Payment, plus interest thereon, compounded annually at 120% of the long-term "Applicable Federal Rate" (as defined in Section 1274(d) of the Internal Revenue Code) in effect on the date such Supplemental payment was made. ARTICLE V. DEATH BENEFITS 5.01 If a former Employee dies (a) on or after the date of his retirement under the SERP, or for purposes of the Incentive Compensation Retirement Benefits also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan in the case of a former Employee who retired under any of such plans, or (b) on or after the date his employment terminated, in the case of a former Employee whose employment terminated otherwise than by retirement under the SERP, or for purposes of the Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan, and who was eligible for a deferred retirement benefit under Section 4.06 at the time of such termination, and if in either such case no election under Section 6.04 was in effect for such former Employee at the time of his death, then in any such case the Beneficiary of any such former Employee shall be entitled to receive under this Plan (i) any Incentive Compensation Death Benefit for which he was eligible as a former Employee as provided in Subsection A below, (ii) any ERISA Excess Death Benefits for which he was eligible as provided in 41 43 Subsection B below, and (iii) any Modified Special Early Retirement Program Death Benefit, for which he was eligible as provided in Subsection C below. A. The Incentive Compensation Death Benefit of such a former Employee shall be: 1. If at the time of his death the former Employee was receiving an Incentive Compensation Retirement Benefit (whether due to retirement or termination of employment) or if commencement of receipt of an Incentive Compensation Retirement Benefit was deferred as provided in Section 6.03, an amount equal to the Commuted Value of any unpaid guaranteed payments of the Incentive Compensation Retirement Benefit. B. The ERISA Excess Death Benefit of such a former Employee shall be: 1. If at the time of his death he was receiving an ERISA Excess Retirement Benefit (whether due to retirement or termination of employment) or if commencement of receipt of an ERISA Excess Retirement Benefit was deferred as provided in Section 6.03, an amount equal to the Commuted Value of any unpaid guaranteed payments of the ERISA Excess Retirement Benefit. 2. If he was entitled to an ERISA Excess Retirement Benefit under Section 4.06B and if he dies prior to 42 44 the date payment of such ERISA Excess Retirement Benefit commences, and a. If such ERISA Excess Retirement Benefit includes a monthly amount of contributory retirement benefit as provided for under the provisions of either or both of Section(s) 4.06A of the SERP, or 1.01B of this Plan, his ERISA Excess Death Benefit based on such contributory retirement benefit shall be in an amount equal to 100 times the amount of such monthly benefit, and b. If such ERISA Excess Retirement Benefit includes a monthly amount of the SERP non-contributory retirement benefit calculated under the provisions of Section 4.06B of the SERP, his ERISA Excess Death Benefit based on such non-contributory retirement benefit shall be in an amount equal to the Commuted Value of the 120 monthly payments of such benefit that he would have received under the Plan had he elected to receive immediate payment of benefits commencing on the date immediately preceding the date of his death. C. The Modified Special Early Retirement Program Death Benefit of such a former Employee shall be: 1. An amount equal to the Commuted Value of the remainder of 120 guaranteed monthly payments for the contributory and non-contributory Supplementary 43 45 Minimum Benefit to which the Employee is entitled pursuant to Section 1.01E of this Plan and/or 2. An amount equal to the Commuted Value of the remainder of 120 guaranteed monthly payments for the contributory and non-contributory Special Leave of Absence Benefit (excluding, however, monthly payments under the Pension Plan which shall not be guaranteed) to which the Employee is entitled pursuant to Section 1.01E of this Plan. 5.02 If an Employee dies while participating in the SERP, or for purposes of the Incentive Compensation Retirement Benefits also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan and after his Normal Retirement Date and if he is not deemed to have made the election provided in Section 6.05, his Beneficiary shall be entitled to receive the sum of (i) any Incentive Compensation Death Benefit for which the Employee was eligible as provided in Subsection A and (ii) any ERISA Excess Death Benefit for which the Employee was eligible as provided in Subsection B below. A. The Incentive Compensation Death Benefit of such an Employee shall be an amount equal to the Commuted Value of 120 monthly payments of the monthly Incentive Compensation Retirement Benefit which would have been payable to the Employee if he had retired under the Plan on the date of his death. B. The ERISA Excess Death Benefit of such an Employee shall be an amount equal to the Commuted Value of 120 monthly payments of the monthly ERISA Excess Retirement Benefit that 44 46 he would have received under the Plan had he retired on the date of his death. 5.03 If an Employee dies while participating in the SERP, or for purposes of the Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan and on or prior to his Normal Retirement Date, his Beneficiary shall be entitled to receive the sum of (i) any Incentive Compensation Death Benefit for which the Employee was eligible at the time of his death as provided in Subsection A and (ii) any ERISA Excess Death Benefit for which the Employee was eligible as provided in Subsection B below. A. The Incentive Compensation Death Benefit of such an Employee shall be an amount equal to the Actuarial Equivalent of his accrued age 65 monthly Incentive Compensation Retirement Benefit. B. The ERISA Excess Death Benefit of such an Employee shall be an amount equal to the excess of (i) the death benefit calculated under the SERP without regard to the benefit and compensation limitations set forth in that plan or imposed under Section 415 or Sub-paragraph 401(a)(17) of the Internal Revenue Code over (ii) the death benefit payable under the SERP because of such ERISA limitations. Any death benefit payable under this Plan shall be computed based on any contributions under Section VII of this Plan. 45 47 ARTICLE VI. PAYMENT OF BENEFITS 6.01 An Employee desiring to retire and receive a retirement benefit under the Plan or a terminated Employee desiring to apply for a deferred retirement benefit under the Plan shall, in either such case, obtain a form of application for that purpose and shall file his written application with the Committee, furnishing the information the Committee shall request together with documentary evidence in support of the same, satisfactory to the Committee, and any authority in writing that the Committee may request authorizing it to obtain pertinent information or records, certificates or transcripts from any public office. 6.02 A Retirement benefit, except as provided under Section 6.10 of the Plan, shall be paid in monthly installments. The first installment shall be payable on the first day of the month following the actual retirement of an Employee retiring from the employ of the Corporation or of a Non-Participating Subsidiary or, in the case of an Employee whose employment terminates otherwise than by retirement, on the first day of the first month after the Employee attains age 65. Subsequent installments of the retirement benefit shall be payable on the first day of each month thereafter during the lifetime of the retired or former Employee, and the standard form of payment of the retirement benefit shall be for the lifetime of the retired or former Employee with a guarantee of 120 monthly payments, except for the Post Retirement Supplemental Benefit described in Section 4.05., for which the standard form of payment shall be monthly payments during the lifetime of the former Employee without any guaranteed number of payments. 46 48 6.03 Anything to the contrary in this Plan notwithstanding, monthly retirement benefit payments under the Plan shall not commence until the first day of the month following the ceasing of any sickness or accident benefits (including payments under the Disability Absence Plan of the Corporation, disability benefits under the Salary Continuation Plan of the Corporation, and payments or benefits of like purpose or kind under any similar plan of the Corporation or of a Non-Participating Subsidiary in effect at the time) toward which the Corporation or a Non-Participating Subsidiary contributes by payment of premiums, taxes or otherwise; provided, however, that commencement of a monthly retirement benefit shall not be deferred by reason of receipt of (a) a Permanent Total Disability Benefit under any pension plan or group life insurance policy of the Corporation or of a Non-Participating Subsidiary, or (b) a disability benefit under the Federal Social Security Act, or (c) a benefit under the Long Term Disability Plan or the Extended Disability Plan of the Corporation or a benefit or payment of like purpose or kind under any similar plan of the Corporation or of a Non-Participating Subsidiary at the time in effect. 6.04 In lieu of payment of a retirement benefit in the standard form as described in Section 6.02 and lieu of payment of a death benefit as described in Article V, payment of all such benefits shall be made in the form of a surviving spouse option, as provided in Subsection A below, to an Employee who retires and who is entitled to a retirement benefit. The Employee or former Employee shall automatically be deemed to have elected the form of surviving spouse option provided in Subsection A below (sometimes 47 49 called "Qualifying Option" in this Article VI) except where otherwise provided in such Subsection A. The surviving spouse option in the form provided below shall be applicable only with respect to an Employee or former Employee who is married on the date such election is deemed to have been made. A. The retirement benefit under the Qualifying Option for an Employee or former Employee who automatically elects it, as hereinabove provided, shall consist of reduced monthly payments after the effective date of his election during his lifetime with a guarantee of 120 monthly payments, with provision that if his death occurs on or after the effective date of his election and if the person who was his spouse at the date of his retirement (or in the case of a former Employee entitled to a deferred retirement benefit under Section 4.06, on the date he files his application) is living at the last to occur of his death or the expiration of such 120-month period, benefits in the amount specified below shall be payable monthly to such surviving spouse during her remaining lifetime. Notwithstanding anything to the contrary in this Subsection A, the above provisions relating to a guarantee of 120 monthly payments do not apply to the Post Retirement Supplemental Benefit. The Qualifying Option shall automatically apply, in respect to the Post Retirement Supplemental Benefit, to the extent payable by the Corporation from its general assets, in respect to employees or former employees who have the Qualifying Option under the Chrysler Salaried Employees' Retirement Plan pursuant to Section 6.05 of that plan. Those participants in this Plan who do not have 48 50 the Qualifying Option under the Chrysler Salaried Employees' Retirement Plan may elect to receive Post Retirement Supplemental Benefit payments payable until the death of both the Employee or former Employee and his spouse but such election shall not be automatic. 1. The reduced monthly payment of a retirement benefit payable to the Employee or former Employee whose age does not differ from that of his spouse by more than 5 years shall be an amount equal to the monthly payment that would have been payable to him in the standard form, reduced by an amount equal to 5% of the amount of the retirement benefits that would be payable to him in the standard form at his Normal Retirement Date if he had elected the standard form of payment. If the age of the spouse is less than the age of such Employee or former Employee, the percentage shall be 5% increased by 1/2 of 1% for each year in excess of 5 years that the age of the spouse is less than the age of the Employee or former Employee. If the age of the spouse is greater than the age of the Employee or former Employee, the percentage shall be 5% decreased by 1/2 of 1% for each year in excess of 5 years that the age of the spouse exceeds the age of the Employee or former Employee (but not less than 0%). For this purpose, the ages of the Employee or former Employee and his spouse shall each be the age at his or her last birthday prior to the 49 51 effective date of election as provided in Subsection B below. The reductions provided in this paragraph shall be made in all monthly payments paid to the Employee or former Employee on or after the date on which his election becomes effective, except as otherwise provided below in Subsections E and F of this Section 6.04. 2. The benefits payable to the surviving spouse, if the death of the Employee or former Employee occurs on or after the effective date of his election (or in the case of a former Employee entitled to a deferred retirement benefit under Section 4.06, on or after the date he files his application) and the person who was his spouse is living at the last to occur of his death or the expiration of the 120 guaranteed monthly payments, shall be monthly payments equal to 60% of the reduced monthly payments determined as provided in paragraph 1 above. Notwithstanding anything to the contrary in this Subsection 2, any monthly amount payable to a surviving spouse which is calculated on the basis of the Post Retirement Supplemental Benefit under the provisions of Section 4.05 shall commence on the first day of the month following the month in which the Employee died and terminate with the last monthly payment before her death. 50 52 B. An election of the surviving spouse option that is deemed to have been made as provided in Subsection A above, shall be deemed to have been made at the time the Employee or former Employee files his application for a retirement benefit or a deferred retirement benefit, and the effective date of the election shall be the date payment of the retirement benefit commences, except that, in the case of an Employee or former Employee who is married when his election would otherwise become effective, but whose marriage at that date has been continuously in effect for less than one year, the effective date of his election shall be the first day of the month following the month in which such marriage has been continuously in effect for one year. However, in the case of an Employee or former Employee who marries during the twelve month period immediately preceding the date payment of a retirement benefit commences and has been married to that spouse for at least one year ending on the date of the Employee's or former Employee's death, he shall be deemed to have been married for one year ending on the date payment of his retirement benefit commenced. C. If an Employee or former Employee is deemed to have made the election provided above in Subsection A of this Section 6.04 and if his spouse dies or should otherwise cease to be his spouse after he has made such election but before the effective date of such election, the election shall be revoked automatically. The election shall be irrevocable on or after the effective date of the election if the Employee or former Employee and his designated spouse are both living on such 51 53 date except as otherwise provided below in Subsections E and F of this Section 6.04. If such designated spouse dies or should otherwise cease to be the spouse of the Employee or former Employee after the effective date of the election and during his lifetime, the reduced monthly payments payable to him shall not be affected, except as otherwise provided below in Subsections E and F of this Section 6.04. D. Upon the request of the Committee an Employee or former Employee deemed to have made the election provided in Subsection A of this Section 6.04 must produce an official marriage certificate or other evidence of his marriage to his spouse satisfactory to the Committee. E. An Employee or former Employee who is deemed to have made the election provided above in Subsection A of this Section 6.04 and whose designated spouse predeceases him may have his monthly payments restored to the amount payable without reduction for such election, and shall become eligible for all death benefits as provided in Article V, effective the first day of the month following the month in which the Committee receives evidence satisfactory to it of the spouse's death. F. If an Employee or former Employee is deemed to have made the election provided above in Subsection A of this Section 6.04 and if the Employee or former Employee and his spouse are divorced by court decree or judgment, such Employee or former Employee is deemed to have canceled such election and will have his monthly payments restored to the amount payable without reduction for such election and shall become eligible for death benefits as provided in Article V, effective the 52 54 first day of the third month following the month in which the Committee receives such Employee's or former Employee's written revocation of the election because of divorce, on a form approved by the Committee, and accompanied by evidence satisfactory to the Committee of a final decree or judgment of divorce. G. A retired Employee who (i) was deemed to have made the election provided above in Subsection A of this Section 6.04 and whose designated spouse dies or otherwise ceases to be his designated spouse or (ii) was not married on the date provided for such election in Subsection B of this Section 6.04, and who marries or remarries shall automatically be deemed to have reelected the form of surviving spouse option provided above in Subsection A of this Section 6.04. Such election shall become effective on the first day of the month following the month in which the retired Employee has been married one year. 6.05 Every Employee for whom Section 6.04 is inapplicable may designate a Beneficiary to receive payments in the event of his death by filing with the Committee a designation in writing signed by him in such form as the Committee shall prescribe, and may change or revoke the designation from time to time and at any time by filing with the Committee a new designation; provided, however, that an Employee shall be deemed to have designated as his Beneficiary the beneficiary designated in the SERP, or for purposes of the Incentive Compensation Retirement Benefit also under the Chrysler Canada Ltd. Salaried Employees' Retirement Plan, unless the Participant specifically designates another Beneficiary. 53 55 6.06 Any death benefit provided in Article V with respect to an Employee for whom there is in effect no election as provided in Section 6.04 shall be paid in a lump sum. 6.07 No benefit or right to payment under this Plan shall be subject to any claim of any creditor of any Employee, Beneficiary or surviving spouse of a deceased Employee or former Employee and shall not be subject to attachment or garnishment or other legal process by any creditor, nor shall any Employee, former Employee, Beneficiary or surviving spouse have any right to alienate, anticipate, commute, pledge, encumber or assign any of the benefits under this Plan. 6.08 In the event of the death of a person entitled to any benefit under the Plan, or in the event that the Committee shall find that any such person is unable to care for his affairs because of illness or accident, the Committee may cause any benefit payments due, unless claim shall have been made therefor by a duly appointed legal representative, to be paid to the spouse, a child, a parent or other blood relative, or to any person deemed by the Committee to have incurred expense for such person, and any such payments so made shall be a complete discharge of the liabilities of the Plan therefor. In the event that, at the time a benefit becomes payable to any persons under the Plan, the Committee after reasonably diligent search is unable, within six years from the time the benefit is payable, to find the person to whom the benefit is payable, then the benefit shall be treated as a forfeiture and all right, title, and interest of the person therein and thereto shall terminate. 54 56 6.09 Notwithstanding anything to the contrary herein, the Committee shall pay the Actuarial Equivalent of any amount(s) payable under this Plan to a participant or Beneficiary before such amount(s) would otherwise be paid (and in discharge of all obligations with respect thereto) if, based on any of the following events, the Committee determines, in good faith based on consultation with counsel, that such participant or Beneficiary has or will recognize income for federal income tax purposes with respect to such amount(s) before such amount(s) are otherwise to be paid: A. a change in the Internal Revenue Code or Title 1 of ERISA, or the Treasury or Department of Labor Regulations thereunder, respectively, or a binding or predominant judicial construction thereof, B. a published ruling or similar announcement issued by the Internal Revenue Service or the Department of Labor, C. a decision by a court of competent jurisdiction involving a participant in the Plan, a Beneficiary of the Plan, the Corporation, or any entity involved in making payments under the Plan, or D. a final determination of tax liability following a contested tax or ERISA dispute or audit (or a closing agreement made under section 7121 of the Internal Revenue Code) that involves a participant in the Plan, a Beneficiary of the Plan, the Corporation, or any entity involved in making payments under the Plan. 6.10 55 57 A. An employee eligible to receive an Incentive Compensation Retirement Benefit under Article IV of the Plan may elect to receive such benefit in a lump sum payment. Such lump sum payment shall be equal to the lesser of (a) an amount equal to 80% of the cost of a typical commercial insurance policy equivalent in value to the Plan's 10 years certain and life standard form of payment or (b) an amount calculated based on the Plan's cost/funding assumptions, except that a 10% interest rate shall be used. An election to receive an immediate lump sum payment may be made at retirement. If such election is not made at retirement, a subsequent election may be made subject to a waiting period of one year. Eligible recipients of Incentive Compensation Retirement benefits who retired prior to January 1, 1994 shall be provided a one time 90 day window election period, as determined by the Corporation, to make a lump sum payment election without a one year waiting period. The value of the lump sum payment will be determined based on the remaining value of the Plan's 10 years certain and life normal provision. B. A terminated employee eligible to receive a deferred Incentive Compensation Retirement Benefit under Section 4.06 of the Plan may elect to receive such benefit in a lump sum payment subject to Committee approval. Such lump sum payments, however, may not be elected prior to age 65. In addition, if such lump sum payment election is made later than age 65, it is subject to a waiting period of one year. If benefits have commenced prior to the lump sum payment, the value of the lump sum payment will be determined based on the 56 58 remaining value of the Plan's 10 years certain and life normal provision, assuming the terminated employee had elected such normal provision when his benefits commenced. ARTICLE VII. CONTRIBUTIONS 7.01 Employee contributions shall be permitted under this Plan solely for the purpose of providing an ERISA Excess Retirement Contributory Benefit pursuant to Section 1.01B of this Plan and an ERISA Excess Death Benefit pursuant to Paragraph 5.01B.2.a of this Plan. 7.02 Employee contributions under this Plan shall be voluntary and shall be permitted in the amount and to the extent they would have been permitted under the Salaried Employees' Retirement Plan ("SERP") had they not been curtailed by limitations imposed by Sub-paragraph 401(a)(17) of the Internal Revenue Code, as amended, as embodied in Subsection 4.01C of SERP. ARTICLE VIII. PLAN ADMINISTRATION 8.01 The Committee shall have exclusive authority to control and manage the operation and administration of this Plan except as specifically set forth in Section 4.15 and in Section 8.04 below. 8.02 The Committee may make rules and regulations for the administration of the Plan which are not inconsistent with the terms and provisions of the Plan. The Committee shall have discretionary authority to construe and interpret the Plan and decide all questions of eligibility, benefit settlement and payment. It may correct any defect or supply any omission or reconcile any inconsistency in such manner and to such extent as it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. In addition the 57 59 Committee, or such person or persons it shall designate for that purpose as provided in Section 8.03, shall maintain the following claim review procedure: A. Claim Review Procedure. (a) If any former Employee or any Beneficiary has not received a benefit under the Plan to which he thinks he is entitled, he or his authorized representative, within 180 days after the event that he thinks entitled him to the benefit, may file with the Committee a written claim for the benefit, in any form reasonably calculated to bring the nature of his claim to the attention of the Committee. If the claim is wholly or partially denied, the Committee within 180 days of its receipt of the claim, shall give to the claimant written notice of the denial, setting forth in a manner calculated to be understood by the claimant the specific reason or reasons for the denial. A claimant whose claim to benefits under the Plan has been wholly or partially denied, or his authorized representative, may request a review of his claim by the Committee by making written application for review to the Committee within 90 days after the claimant's receipt of written notification of denial of his Claim. In connection with the review, the claimant or his authorized representative may submit issues and comments in writing. Not later than 90 days after the receipt by the Committee of the claimant's request for review, the Committee shall give its decision in writing, setting forth the specific reasons for the decision, written in a manner calculated to be understood by the claimant. Subject to any rights to remedies accorded by applicable law, the final decision of the 58 60 Committee shall be conclusive and binding upon the Corporation, the claimant and all other persons interested in the claim. B. The Committee shall also make arrangements for authorizing the payment of benefits to retired Employees, former Employees, surviving spouses and Beneficiaries entitled thereto. The payment of such benefits shall commence as of the first day of the first calendar month beginning after the date which is 90 days following the Committee's decision in 8.02 A. 8.03 The Committee may appoint a secretary and one or more assistant secretaries and such other agents and representatives as it may deem advisable, who may but need not be Employees otherwise covered by this Plan, to keep its records or assist it in doing any other acts or things, and any such appointment shall be deemed a designation. 8.04 A. In the performance of its duties under this Plan the Committee may act by a majority of its members then in office and any action expressed from time to time by a vote at a meeting or in writing without a meeting shall constitute action of such Committee and shall have the same effect for all purposes as if assented to by all of the members of such Committee then in office. B. Any action which this Plan authorizes or requires the Committee to do shall, if done in good faith by such committee, be final and binding upon Employees, retired Employees, former Employees, surviving spouses, Beneficiaries, and the Corporation. The fact that any member of either such 59 61 Committee is an Employee, officer, director or stockholder of Chrysler Corporation or is covered by this Plan shall not disqualify him from doing any act or thing which this Plan authorizes or requires him to do as a member of such Committee or render him accountable for any benefit received by him as an Employee covered by this Plan. No Committee member shall participate in any decision of the Committee that would directly and specifically affect the timing or amount of his benefits under the Plan. C. The members of the Committee shall discharge their duties under the Plan solely in the interest of the Employees and their Beneficiaries and (i) for the exclusive purpose of providing benefits to such Employees and their Beneficiaries and defraying reasonable expenses of administering the Plan (ii) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (iii) in accordance with the provisions of the Plan, as the same may be from time to time amended. D. The Committee and the members of the Committee shall be entitled to rely upon all information certified to it by the Corporation, all certificates and reports furnished by the Actuary or by any qualified public accountant and all opinions given by any duly appointed legal counsel (who may be also counsel for Chrysler Corporation); and neither the Committee nor any member of the Committee shall be deemed imprudent in respect of any action taken or permitted by them in good faith 60 62 in reliance upon any such certificates, reports or opinions. Except to the extent otherwise provided by law neither the Committee nor any of the members of the Committee shall be liable to the Corporation or to any Employee or to any Beneficiary on account of any act done or omitted or determination made by the Committee acting in good faith in the performance of its duties under the Plan, nor for any act done or omitted by any agent or representative of the Committee selected by such Committee with reasonable care, nor shall any member of the Committee be liable to any person for any act done or omitted by any other member of the Committee in which he did not concur. The Corporation agrees, to the extent permitted by law, to indemnify and hold the Committee and each of the members of the Committee harmless from and against any liability it or they may incur in connection with the Plan, unless arising from their own negligent or willful breach of their fiduciary responsibility as set forth in subsection C of this section. E. Any act that the Plan authorizes or requires the Committee to do, or any determination in good faith by the Committee of any matter or question under the Plan shall, in any such case, be final and binding upon any Employee, retired Employee, former Employee, surviving spouse or Beneficiary. F. All expenses of the Committee in the performance of its duties under this Plan shall be payable by the Corporation. 8.05 The Corporation, as long as the Plan remains in effect, shall pay or cause to be paid the benefits provided by the Plan and the incurred costs and expenses of the Plan. 61 63 ARTICLE IX. AMENDMENT, TERMINATION 9.01 The Board of Directors of Chrysler Corporation shall have the right to amend the Plan at any time and from time to time, to any extent that it may deem advisable, except that no such amendment shall adversely affect the rights of any Employee with respect to retirement benefits theretofore accrued under the Plan. 9.02 The Committee shall have the right to amend this Plan at any time and from time to time, to any extent that it may deem advisable, except that no such amendment shall A. adversely affect the rights of any Employee with respect to retirement benefits theretofore accrued under the Plan; or B. change the benefit formula for determining the amount of retirement or death benefits provided under the Plan unless approved by the Board of Directors of Chrysler Corporation. (The Committee shall, however, have full authority to approve amendments that provide additional benefit incentives under special early retirement programs and, except as limited by the first sentence of this Section 9.02B, to approve basic design and administrative amendments that affect retirement eligibility and the amount of benefits); C. decrease the age or length of service that employees are required to have under the Plan in order to be eligible for benefits upon early retirement or termination of employment (notwithstanding the preceding sentence, however, the Committee shall have specific authority to establish reduced age or service requirements pursuant to special early retirement programs designed to achieve work force reductions provided, however, that (i) special early retirement offers 62 64 for officers and other Board roll employees must be approved in advance by the Management Resources Committee and (ii) special early retirement programs that lower the age of retirement below 50 or the number of years of Credited Service below seven must be approved by the Board of Directors of Chrysler Corporation); D. permit the termination of this Plan other than by the authority of the Board of Directors of Chrysler Corporation; or E. alter the provisions of Article VIII or of this Article IX; or F. alter the provisions of Section 4.15. 9.03 Any amendment to this Plan shall be set out in an instrument in writing executed on behalf of Chrysler Corporation under its corporate seal by the President or a Vice President or the Treasurer and by the Secretary or an Assistant Secretary, and authorized by a resolution of the Committee or of the Board of Directors. 9.04 Chrysler Corporation by action of its Board may direct the Committee to terminate the Plan in whole or in part at any time. In the case of complete or partial termination of the Plan, no further benefits shall be accrued under the affected portions of the Plan with respect to affected Employees, and benefits theretofore accrued shall be paid in accordance with the provisions of Articles IV through VI of the Plan. Except with the consent of the Employee, no such termination of the Plan shall adversely affect the rights of any Employee with respect to retirement benefits theretofore accrued under the Plan. 63 65 9.05 Notwithstanding any other provisions hereof, during the two-year period beginning on the date of a Change in Control, the Plan shall not be terminated (whether in whole or in part) and the Plan shall not be amended in any way which detrimentally affects the right of any Employee (i) to participate in the Plan, (ii) to accrue, or to continue to accrue, supplemental retirement benefits under the Plan, or (iii) to vest in any such supplemental retirement benefits. ARTICLE X. GENERAL 10.01 This Plan is purely voluntary on the part of the Corporation. Neither the establishment of this Plan nor the payment of any benefit shall be construed as giving any Employee or any other person any legal or equitable right against the Corporation or the Committee, unless the same shall be expressly provided for in this Plan or conferred by affirmative action of the Committee or the Corporation in accordance with the terms and provisions of the Plan, or as giving any Employee the right to be retained in the service of the Corporation, and all Employees shall remain subject to discharge to the same extent as if this Plan had never been established. 10.02 The validity and construction of this Plan shall be determined according to the laws of the United States and of the State of Michigan. 10.03 Titles of articles are for general information only and this Plan is not to be construed by reference thereto. 10.04 In all cases where they would so apply, words used in the masculine or feminine shall be construed to include the 64 66 opposite gender, and words used in the singular shall be construed to include the plural. 10.05 In case any provisions of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Plan, but this Plan shall be construed and enforced as if such illegal or invalid provisions had never been inserted herein. 10.06 Any payment or distribution to any Employee, retired Employee, former Employee, Beneficiary, or surviving spouse in accordance with the provisions of this Plan shall be in full satisfaction of all claims against the Committee and the Corporation. 10.07 No liability shall attach to or be incurred by members of the Committee, stockholders, officers or directors, as such, of the Corporation, under or by reason of any of the provisions of this Plan or implied therefrom, and all liability of every kind and nature and all rights and claims against the Corporation and every member of the Committee, any stockholder, officer or director, past, present or future, as such, whether arising in common law or in equity or created by statute or constitution or otherwise are hereby expressly waived and released as a condition of and part of the consideration for the contributions of the Corporation under this Plan. Each Employee, retired Employee, former Employee, surviving spouse, or Beneficiary, as a condition of receiving any benefits under the Plan, shall be conclusively deemed for all purposes to have assented to the Plan and shall be bound hereby with the same force and effect as if he had executed a consent to all the terms and provisions of the Plan. 65 67 10.08 The Corporation shall not be required to segregate any assets which may at any time be represented as compensation reduction amounts, accrued benefits or earnings credited to a participant. The Corporation shall not, by any provisions of this Plan, be deemed to be a trustee of any property, and the liabilities of the Corporation to any participant shall be those of a debtor pursuant to such contract obligations as are created by the Plan, and no such obligation of the Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of the Corporation. 10.09 The Committee is authorized to satisfy all requirements for tax withholding on distributions under the Plan, through a deduction from the participant's benefit payment, excluding any tax imposed on the employer. 66 68 ARTICLE XI. SPECIAL PROVISIONS APPLICABLE TO DESIGNATED PARTICIPANTS 11.01 Additional years of Credited Service shall be granted in respect of any individual listed below, for all purposes under the Plan, including, without limitation, determining the individual's (i) total retirement benefits under Chrysler pension plans and (ii) right to vest in the benefits, and to be eligible for any early retirement or other benefits based on Credited Service, provided under this Plan. The total amount of additional Chrysler pension benefits attributable to such additional years of Credited Service shall be paid under the ERISA Excess Retirement Benefit part of this plan described in Section 1.01B. Individuals eligible for such additional years of Credited Service and the amount of such additional Credited Service to be recognized shall be as follows: A. L. A. Iacocca (Social Security ####-##-####)-4 years, 10 months (After recognition of 3 additional years of credited service under the 1992 Salaried Employees' Special Early Retirement Program.) B. R. J. Eaton (Social Security ####-##-####)-5 years C. R. A. Lutz (Social Security ####-##-####)-5 years 11.02 Special conditions shall apply, in respect to any individual listed below, for purposes of determining certain Chrysler retirement benefits payable to him from this Plan. Individuals to whom such special conditions apply and a description of such special conditions are as follows: A. J.A. Pilulas. (Social Security ####-##-####) Additional benefits that would have been paid Mr. Pilulas under the Chrysler Pension Plan and the Chrysler Salaried 67 69 Employees Retirement Plan had he retired on June 1, 1989 under the Special Early Retirement provisions of such plans will be paid under the ERISA Excess Retirement Benefit part of this Plan described in Section 1.01B. In addition, benefits he had forfeited under the Incentive Compensation Retirement Benefit part of this Plan described in Section 1.01A shall be paid on an unreduced basis. Benefits provided under this Section 11.02A shall be provided prospectively only commencing November 1, 1992. B. R. J. Eaton, (Social Security ####-##-####) R. A. Lutz, (Social Security ####-##-####) T. G. Denomme, (Social Security ####-##-####) and G. C. Valade, (Social Security ####-##-####) In the event that any of the above named individuals retires or otherwise terminated employment on or prior to the second anniversary of the date as of which a Change of Control (as defined in Section 4.13) occurs, such individual shall be deemed to have retired under the Special Early Retirement provisions of the SERP. Any benefits not payable under SERP will be paid under the ERISA Excess Retirement Benefit part of this Plan. 68 70 APPENDIX A ACTUARIAL ASSUMPTIONS UNDER THE PLAN SECTION PURPOSE ACTUARIAL ASSUMPTIONS OR BASIS FOR DETERMINATION 1. 2.06 To determine the The basis for single sum value or determining these lump sum value of commuted values will periodic payments be amounts determined payable in the future. using an interest rate as set forth hereafter in this Appendix. 2. 4.12 To determine the The rate of interest Commuted Value of used in computing the Incentive Compen- Commuted Value will be sation Retirement the FAS 87 Discount Benefits for payout to Rate which was used in participants at the determining the Plan's time of the part- liabilities for icipants' termination Chrysler Corporation's of employment fol- financial statement lowing a change in purposes as of the control. latest December 31, or, if no determin- ation was made as of such date - 9% compounded annually. 3. 5.01A1 To determine the The number of payments Commuted Value of any remaining in the unpaid guaranteed certain period at the payments of Incentive time of death will be Compensation discounted to the last Retirement Benefits at day of the month in the time of a former which death occurs at Employee's death. a rate of interest of 10% compounded annually. 69 71 SECTION PURPOSE ACTUARIAL ASSUMPTIONS OR BASIS FOR DETERMINATION 4. 5.01B1 To determine the The number of payments Commuted Value of any remaining in the unpaid guaranteed certain period at the payments of ERISA time of death will be Excess Retirement discounted to the last Benefits at the time day of the month in of a former Employee's which death occurs at death. a rate of 9% compounded annually. 5. 5.01B2 To determine the The Commuted Value Commuted Value of 120 will be based on the monthly payments of rate of interest of 9% ERISA Excess compounded annually Retirement Benefit of and the monthly a former Employee payment the former whose death occurs Employee would have prior to the date received had he monthly payments elected to have commence. benefits commence on the date immediately preceding the date of his death. 6. 5.02A To determine the The Commuted Value Commuted Value of 120 will be determined monthly payments of based on a rate of 10% the monthly Incentive compounded annually Compensation and the monthly Retirement Benefits Incentive Compensation with respect to an Retirement Benefit the Employee who dies Employee would have while still employed received had he after his Normal retired on the date of Retirement Date. his death. 7. 5.02B To determine the The Commuted Value Commuted Value of 120 will be determined monthly payments of based on a rate of the monthly * ERISA interest of 9% Excess Retirement compounded annually Benefits with respect and the monthly ERISA to an Employee who Excess Retirement dies while still Benefit the Employee employed but after his would have received Normal Retirement had he retired on the Date. date of his death. 70 72 SECTION PURPOSE ACTUARIAL ASSUMPTIONS OR BASIS FOR DETERMINATION 8. 5.03A To determine an The actuarial Actuarial Equivalent. assumptions that will be used in determining an Actuarial Equivalent will be the 1971 Group Annuity Mortality Table (weighted 70% for males and 30% for females), an interest rate of 10% compounded annually, and an expected retirement date of the latter of a) the date immediately preceding the date of the Employee's death or b) the date the Employee would have first become eligible to retire at his option. 9. 5.03B To determine the ERISA The death benefit of Excess Death Benefit such an Employee shall of an Employee whose be the Commuted Value, death occurs on or at 9% interest after his 60th compounded annually, birthday with ten of 120 monthly years or more of payments equal to the Credited Service. monthly Non-Contributory Retirement Benefit that he would have received had he retired on the date of his death reduced by 5/8 of 1% for each full month by which the date of his death precedes his Normal Retirement Date. 71 73 SECTION PURPOSE ACTUARIAL ASSUMPTIONS OR BASIS FOR DETERMINATION 10. 6.02 To determine the The actuarial equivalent lump sum, assumptions used in quarterly, half determining the yearly, or yearly equivalent benefits benefits with respect will be the 1971 Group to monthly benefits Annuity Mortality that are less than Table (weighted 70% $10. for males and 30% for females), and 9% (10% for an Incentive Compensation Retirement Benefit) interest compounded annually. 11. 6.10 To determine the value The lump sum value of a lump sum will be determined Incentive Compensation based on a rate of Retirement Benefit interest of 10% compounded annually and the provisions specified in Section 6.10 of the Plan. 72 74 SECTION PURPOSE ACTUARIAL ASSUMPTIONS OR BASIS FOR DETERMINATION 12. Sections not listed To determine an The actuarial above Actuarial Equivalent. assumptions that will be used in determining an Actuarial Equivalent will be the 1971 Group Annuity Mortality table (weighted 70% for males and 30% for females), an interest rate of 9% (10% for an Incentive Compensation Retirement Benefit) compounded annually, and an expected Normal Retirement Date of the 1st day of the month following Age 65. 73 75 SECOND ARTICLE The Plan, except as modified in this Instrument, shall continue in full force and effect. IN WITNESS WHEREOF, the Corporation has caused this Instrument to be executed by its duly authorized officers and its corporate seal to be hereunto affixed as of the 1st day of October, 1996. CHRYSLER CORPORATION By /S/ K. M. Oswald ---------------------------- K. M. Oswald Vice President - Human Resources October 1, 1996 -------------------------------- Date Executed Attest: /S/ H. E. Leese - ------------------------- H. E. Leese Assistant Secretary (CORPORATE SEAL) 74 EX-11 3 EXHIBIT 11 1 EXHIBIT 11 CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES -------------------------------------------------- EARNINGS PER COMMON SHARE DATA APB 15 CALCULATION
YEAR ENDED DECEMBER 31 ------------------------------ 1996 1995 1994 ------ ------ ------ (IN MILLIONS OF DOLLARS AND SHARES, EXCEPT PER-COMMON-SHARE AMOUNTS) PRIMARY: - --------- Net earnings................................................. $3,529 $2,025 $3,713 Preferred stock dividends.................................... (3) (21) (80) ------ ------ ------ Earnings attributable to common stock........................ $3,526 $2,004 $3,633 ====== ====== ====== Weighted average shares outstanding.......................... 730.3 748.4 708.6 Shares issued on exercise of dilutive options................ 26.5 21.1 20.6 Shares purchased with proceeds of options.................... (19.1) (14.0) (11.5) Shares contingently issuable................................. 0.9 0.8 0.7 ------ ------ ------ Shares applicable to primary earnings........................ 738.6 756.3 718.4 ====== ====== ====== FULLY DILUTED: - -------------- Earnings attributable to common stock........................ $3,529 $2,025 $3,713 ====== ====== ====== Weighted average shares outstanding.......................... 730.3 748.4 708.6 Shares issued on exercise of dilutive options................ 26.5 24.1 22.2 Shares purchased with proceeds of options.................... (18.7) (16.4) (13.0) Shares applicable to convertible preferred stock............. 4.4 34.7 95.8 Shares contingently issuable................................. 1.7 1.5 1.9 ------ ------ ------ Shares applicable to fully diluted earnings.................. 744.2 792.3 815.5 ====== ====== ====== PER COMMON SHARE DATA: - ---------------------- Primary: Earnings before extraordinary item and cumulative effect of a change in accounting principle..................... $ 5.03 $ 2.78 $ 5.06 Extraordinary item........................................ (0.26) -- -- Cumulative effect of a change in accounting principle..... -- (0.13) -- ------ ------ ------ Net earnings per common share............................. $ 4.77 $ 2.65 $ 5.06 ====== ====== ====== Fully Diluted: Earnings before extraordinary item and cumulative effect of a change in accounting principle..................... $ 5.00 $ 2.68 $ 4.55 Extraordinary item........................................ (0.26) -- -- Cumulative effect of a change in accounting principle..... -- (0.12) -- ------ ------ ------ Net earnings per common share............................. $ 4.74 $ 2.56 $ 4.55 ====== ====== ======
NOTE: Primary earnings per common share amounts were computed by dividing earnings after deduction of preferred stock dividends by the average number of common and dilutive equivalent shares outstanding. Fully diluted per common share amounts assume conversion of the convertible preferred stock, the elimination of the related preferred stock dividend requirement, and the issuance of common stock for all other potentially dilutive equivalent shares outstanding. Computations of primary earnings per common share exclude the effect of common stock equivalents and shares contingently issuable for any year in which their inclusion would have the effect of increasing the earnings per common share amount or decreasing the loss per common share amount otherwise computed. All per share data has been adjusted to reflect the two-for-one stock split. EX-12 4 EXHIBIT 12 1 EXHIBIT 12 CHRYSLER CORPORATION AND CONSOLIDATED SUBSIDIARIES -------------------------------------------------- COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
YEAR ENDED DECEMBER 31 ----------------------------------------------- 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------- (IN MILLIONS OF DOLLARS) Net earnings before extraordinary item and cumulative effect of changes in accounting principles........................................ $3,720 $2,121 $3,713 $2,415 $ 505 Add back: Taxes on income................................ 2,372 1,328 2,117 1,423 429 Fixed charges.................................. 1,339 1,359 1,267 1,433 1,732 Amortization of previously capitalized interest..................................... 111 103 87 94 87 Deduct: Capitalized interest........................... 156 204 177 176 176 Undistributed earnings from less than fifty-percent owned affiliates............... 14 18 15 2 7 ------ ------ ------ ------ ------ Earnings available for fixed charges................ $7,372 $4,689 $6,992 $5,187 $2,570 ------ ------ ------ ------ ------ Fixed charges: Interest expense.................................. $1,007 $ 995 $ 937 $1,104 $1,405 Capitalized interest.............................. 156 204 177 176 176 Credit line commitment fees....................... 15 10 10 10 10 Interest portion of rent expense.................. 161 150 143 143 139 Gross-up of preferred stock dividends of majority-owned subsidiaries (CFC) to a pretax basis.......................................... -- -- -- -- 2 ------ ------ ------ ------ ------ Total fixed charges................................. $1,339 $1,359 $1,267 $1,433 $1,732 ------ ------ ------ ------ ------ Ratio of earnings to fixed charges.................. 5.51 3.45 5.52 3.62 1.48 ====== ====== ====== ====== ====== Preferred stock dividend requirements............. $ 5 $ 33 $ 125 $ 127 $ 128 ====== ====== ====== ====== ====== Ratio of earnings to fixed charges and preferred stock dividend requirements....................... 5.49 3.37 5.02 3.33 1.38 ====== ====== ====== ====== ====== Equity taken up in earnings of less than fifty-percent owned affiliates.................... $ 14 $ 18 $ 15 $ 2 $ 11 Deduct: Dividends paid by affiliates...................... -- -- -- -- 4 ------ ------ ------ ------ ------ Undistributed earnings from less than fifty-percent owned affiliates.................................. $ 14 $ 18 $ 15 $ 2 $ 7 ====== ====== ====== ====== ======
NOTE: The ratio of earnings to fixed charges is computed by dividing Earnings available for fixed charges by Total fixed charges. The ratio of earnings to fixed charges and preferred stock dividend requirements is computed by dividing Earnings available for fixed charges by the sum of Total fixed charges and Preferred stock dividend requirements. EX-21 5 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1996 Registrant: CHRYSLER CORPORATION (DELAWARE) (AUTOMOTIVE) Chrysler Corporation subsidiaries (excluding Chrysler Financial Corporation) ---------------------------------------------------------------------------- (In connection with the companies named, all voting securities are owned, ---------------------------------------------------------------------------- directly or indirectly by the Registrant, except where otherwise indicated): ---------------------------------------------------------------------------- American Motors Pan American Corporation (Delaware)(Automotive) American Motors Overseas Corporation (Netherlands Antilles)(Financial Services) Automotive Exporters Inc. (Delaware)(Automotive) Compania Importadora, S.A. (Argentina)(Automotive) Automotive Financial Services, Inc. (Michigan)(Financial Services) Chrysler Canada Ltd. (Canada)(Automotive) American Motors (Canada) Inc. (Canada)(Automotive) Bramco Satellite, Inc. (Canada)(Automotive) Chrysler (Taiwan) Co., Ltd. (Taiwan)(Automotive) Commuter Van Pooling Services Ltd. (Canada)(Transportation Services) Chrysler Corporation Fund (Michigan)(Non-profit, Charitable) Chrysler de Venezuela, S.A. (Venezuela)(Automotive) Chrysler Foreign Sales Corporation (U.S. Virgin Islands)(Automotive) Chrysler Institute of Engineering (Michigan)(Automotive Training) Chrysler International Corporation (Delaware)(Automotive) Chrysler Argentina S.A. (99.9% owned by Chrysler International Corporation)(Argentina)(Automotive) Chrysler Austria Gesellschaft m.b.H. (Austria)(Automotive) Eurostar Gesellschaft m.b.H. (50.01% owned)(Austria)(Automotive) Eurostar Gesellschaft m.b.H. & Co. KG (50.01% owned)(Austria)(Automotive) Chrysler Automotive Services GmbH (Germany)(Automotive) Chrysler de Venezuela, L.L.C. (90% owned by Chrysler International Corporation and 10% owned by Chrysler International Services, S.A.) (Delaware)(Automotive) Chrysler Europe B.V. (99% owned by Chrysler International Corporation and 1% owned by Chrysler International Services, S.A.)(Netherlands)(Automotive) Chrysler Europe S.A. (99.9% owned by Chrysler International Corporation and 0.1% owned by Chrysler International Services, S.A.)(Belgium) (Automotive) Chrysler France SAS (95% owned by Chrysler International Corporation and 5% owned by Chrysler International Services, S.A.)(France)(Automotive) Chrysler Italia S.R.L. (Italy)(Automotive) Chrysler International S.A. (Switzerland)(Automotive) Chrysler Engineering S.A. (Switzerland)(Automotive) CISA Financial Services S.A. (Switzerland)(Automotive) Chrysler Japan Sales Limited (70% owned by Chrysler International Corporation)(Japan)(Automotive) Chrysler Korea Sales Limited (Korea)(Automotive) Chrysler Sales and Services (Thailand) Ltd. (99.9% owned by Chrysler International Corporation) (Thailand)(Automotive) Chrysler Southeast Asia Pte. Ltd. (Singapore)(Automotive) Chrysler Vietnam Limited (70% owned by Chrysler International Corporation)(Vietnam)(Automotive)
2 EXHIBIT 21 -- CONTINUED SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1996 International Marine & Management S.A.M. (Monaco)(Holding Company) Mercostar S.A. (99.9% owned by Chrysler International Corporation)(Argentina)(Automotive) Chrysler International Services, S.A. (Delaware)(Automotive) Chrysler do Brasil Ltda. (99% owned by Chrysler International Services, S.A. and 1% owned by Chrysler International Corporation)(Brazil) (Automotive) Chrysler Mauritius International Company (Mauritius)(Holding Company) Chrysler Motors de Venezuela, S.A. (Venezuela)(Automotive) Ensambladora Carabobo, C.A. (Venezuela)(Automotive) Jeep Caracas, S.A. (Venezuela)(Automotive) Chrysler Overseas Trading Co., Ltd. (United Kingdom)(Automotive) Chrysler Pentastar Aviation, Inc. (Delaware)(Commercial Aviation) Chrysler Technologies Corporation (Michigan)(Defense Electronics) Chrysler Technologies Middle East Ltd.(Delaware)(Defense Electronics) Pentastar Electronics, Inc. (Delaware)(Defense Electronics) Chrysler Transport, Inc. (Delaware)(Automotive) Dealer Capital, Inc. (Delaware)(Financial Services) Grupo Chrysler de Mexico, S.A. de C.V. (96.65% owned by Chrysler Corporation and 3.35% owned by Chrysler Financial Corporation)(Mexico)(Holding Company) Chrysler Comercial S.A. de C.V. (Mexico)(Financial Services) Chrysler de Mexico S.A. (99.99% owned by Grupo Chrysler de Mexico, S.A. de C.V.) (Mexico)(Automotive) Aire y Temperatura S.A. (Mexico)(Air Conditioning) Fundacion Chrysler Mexico, IAP (Mexico)(Non-Profit Charitable Foundation) Inmeubles Chrysler de Mexico, S.A. de C.V.(98% owned by Chrysler de Mexico, S.A.; 2% owned by Grupo Chrysler de Mexico, S.A. de C.V.) (Mexico)(Realty Company) Jeep Australia, Pty., Ltd. (Australia)(Automotive) Jeep of Canada Limited (Canada)(Automotive) New Venture Gear, Inc. (64% owned)(Delaware)(Automotive) Pentastar Transportation Group, Inc. (Oklahoma)(Automotive Leasing) Dollar Rent A Car Systems, Inc. (Oklahoma)(Automotive Leasing) Combined Shuttle Services, Inc. (Virginia)(Automotive Rental Shuttle Services) Dollar Rent A Car Finance Company (Oklahoma)(Vehicle Financing) Dollar Rent A Car Pty. Limited (Australia)(Automobile Leasing) Dollar Rent A Car Systems, Ltd. (75% owned)(New Zealand)(Automotive Leasing) Dollar Rent A Car Systems (U.K.) (United Kingdom)(Automotive Leasing) Dollar Supply, Inc. (Oklahoma)(Auto Rental Supply Company) Pentastar Services, Inc. (Oklahoma)(Automotive Leasing) Manatee Leasing, Inc. (Oklahoma)(Automotive Leasing) PTG, Inc. (Oklahoma)(Automotive Leasing) Pentastar Transportation Group Canada, Inc. (Ontario)(Automotive Leasing) Thrifty Rent-A-Car System, Inc. (Oklahoma)(Automotive Leasing) Tartan, Inc. (Oklahoma)(Automotive Leasing) Thrifty Canada, Ltd. (Canada)(Automotive Leasing) 840594 Ontario, Ltd. (Canada)(Automotive Leasing) Thrifty Car Rental Finance Corporation (Oklahoma)(Automotive Leasing) Thrifty Europe, S.A. (99.8% owned)(France)(Automotive Leasing) Thrifty (Europe) Limited (United Kingdom)(Automotive Leasing) Thrifty Rent-A-Car Limited (United Kingdom)(Automotive Leasing)
3 EXHIBIT 21 -- CONTINUED SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1996 Thrifty Rent-A-Car Limited (Ireland)(Automotive Leasing) Thrifty Rent-A-Car Limited (New Zealand)(Automotive Leasing) Thrifty Rent-A-Car Limited (Scotland)(Automotive Leasing) TRAC Team, Inc. (Oklahoma)(Automotive Leasing) TRAC Asia Pacific, Inc. (75% owned)(Oklahoma)(Automotive Leasing) Other Chrysler Corporation subsidiaries (including Chrysler Financial Corporation) - ----------------------------------------------------------------------------------------- CHRYSLER FINANCIAL CORPORATION (MICHIGAN)(FINANCIAL SERVICES) Advanced Leasing Services Number 3, Inc. (Delaware)(Financial Services) American Auto Receivables Company (Delaware)(Financial Services) Auto Receivables Corporation (Canada)(Financial Services) Chrysler Auto Receivables Company (Delaware)(Financial Services) Chrysler Capital Corporation (Delaware)(Financial Services) Adelaide FSC, Ltd. (U.S. Virgin Islands)(Financial Services) Alice Springs, Ltd. (U.S. Virgin Islands)(Financial Services) Artesia Turbine Cogeneration Corporation (Delaware)(Financial Services) Baltimore Compost I Corp. (Delaware)(Financial Services) Baltimore Compost II Corp. (Delaware)(Financial Services) Cara FSC, Ltd. (U.S. Virgin Islands)(Financial Services) CC Funding Corporation (Delaware)(Financial Services) Chrysler Asset Management Corporation (Delaware)(Financial Services) Lauren 90 Corporation (Delaware)(Financial Services) Laurissa 85 Corporation (Delaware)(Financial Services) Marine Asset Management Corporation (Delaware)(Financial Services) Chrysler Capital Financing Corporation (Delaware)(Financial Services) Chrysler Capital Fund Management Corporation (Delaware)(Financial Services) Chrysler Capital Funding Corporation (Delaware)(Financial Services) Chrysler Capital Investment Services, Inc. (Delaware)(Financial Services) Chrysler Capital Public Finance Corp. (Delaware)(Financial Services) Chrysler Capital Realty, Inc. (Delaware)(Real Estate Holding Company) Chrysler Glenview Corporation (Delaware)(Financial Services) Chrysler Capital Transportation Services, Inc. (Delaware)(Financial Services) Chrysler Concord Corporation (Delaware)(Financial Services) Chrysler M.S. Corporation (Delaware)(Financial Services) Chrysler Natural Resources Development Corporation (Delaware)(Financial Services) Chrysler Rail Transportation Corporation (Delaware)(Financial Services) Chrysler RRPF (UK) Limited (United Kingdom)(Financial Services) CLG Apache Limited, Inc. (Delaware)(Financial Services) CLG Apache Preferred, Inc. (Delaware)(Financial Services) CLG Media, Inc. (Delaware)(Financial Services) CLG Media of Denver, Inc. (Delaware)(Financial Services) CLG Media of Jackson, Inc. (Delaware)(Financial Services) CLG Media of Monroe, Inc. (Delaware)(Financial Services) CLG Media of Seattle, Inc. (Delaware)(Financial Services) CLG Media of Wilmington, Inc. (Delaware)(Financial Services) Conemaugh Hydroelectric Projects, Inc. (Delaware)(Financial Services) Cross Lane Properties, Inc. (Delaware)(Financial Services) Emily FSC, Ltd. (U.S. Virgin Islands)(Financial Services)
4 EXHIBIT 21 -- CONTINUED SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1996 EPC Corporation (Delaware)(Financial Services) Fourfold Cogeneration Corporation (Delaware)(Financial Services) FPB California Cogeneration Corporation (Delaware)(Financial Services) Fresno Biomass Power Corporation (Delaware)(Financial Services) Hacogen Corporation (Delaware)(Financial Services) Harper Lake Solar IX Corporation (Delaware)(Financial Services) Harper Lake IX, L.P. (Delaware)(Financial Services) Hartford Turbine Cogeneration Corporation (Delaware)(Financial Services) HCCF Corporation (Delaware)(Financial Services) High Ridge Holdings No 2, Inc. (Delaware)(Financial Services) HLLSLC Corporation (Delaware)(Financial Services) HLSP IX, Inc. (Delaware)(Financial Services) Jasmin EOR Cogeneration Corporation (Delaware)(Financial Services) Klair, Ltd. (Delaware)(Financial Services) Pasir Puteh Ltd. (U.S. Virgin Islands)(Financial Services) Larvik Holdings, Inc. (Delaware)(Financial Services) Mathilda FSC, Ltd. (U.S. Virgin Islands)(Financial Services) New Canaan Road Holdings, Inc. (Delaware)(Financial Services) Niagara Turbine Cogeneration Corporation (Delaware)(Financial Services) Ormesageo IE Geothermal Corporation (Delaware)(Financial Services) Perth Ltd. (U.S. Virgin Islands)(Financial Services) Piney Point Properties, Inc. (Delaware)(Financial Services) Poso EOR Cogeneration Corporation (Delaware)(Financial Services) Rocklin Biomass Power Corporation (Delaware)(Financial Services) Stamford Holdings No. 2, Inc. (Delaware)(Financial Services) Stillwater Geothermal Corporation (Delaware)(Financial Services) Suffolk Leasing, Inc. (Delaware)(Financial Services) Summit Avenue Properties, Inc. (Delaware)(Financial Services) Toquam Properties, Inc. (Delaware)(Financial Services) Trona Cogeneration Corporation (Delaware)(Financial Services) TTC Corporation (Delaware)(Financial Services) UMB Properties, Inc. (Delaware)(Financial Services) Westover Holdings, Inc. (Delaware)(Financial Services) Whitewater Holdings, Inc. (Delaware)(Financial Services) Wilson Street Holdings, Inc. (Delaware)(Financial Services) Chrysler Commercial Leasing Corporation (Michigan)(Financial Services) Chrysler Cadre, Inc. (Delaware)(Financial Services) Chrysler Consortium Corporation (Delaware)(Financial Services) Chrysler Credit Canada Ltd. (Canada)(Financial Services) Chrysler Credit Holdings Ltd. (Ontario)(Financial Services) Chrysler Finance Limited (Ontario)(Financial Services) Chrysler Life Insurance Company of Canada (Canada)(Insurance) Chrysler Credit de Puerto Rico N.V. (Netherlands Antilles)(Financial Services) Chrysler Credit Realvest, Inc. (Delaware)(Financial Services) Chrysler Factoring, S.A. de C.V. (Mexico)(Financial Services) Chrysler Financial Financing Corporation (Delaware)(Financial Services) Chrysler Financial Japan Limited (Japan)(Financial Services) Chrysler Financial Overseas Capital N.V. (Netherlands Antilles)(Financial Services)
5 EXHIBIT 21 -- CONTINUED SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1996 Chrysler Financial Receivables Corporation (Michigan)(Financial Services) Premier Receivables L.L.C. (98% owned by Chrysler Financial Receivables Corporaion, 1% owned by Premier Auto Receivables Company, and 1% owned by Chrysler Auto Receivable Corporation)(Michigan)(Financial Services) Chrysler Finanziaria Italia S.p.A. (Italy)(Financial Services) Chrysler First Inc. (Pennsylvania)(Financial Services) AIA, Inc. of Pennsylvania (Pennsylvania)(Insurance) Chrysler First Acceptance Corporation (Delaware)(Financial Services) Chrysler First Business Credit Corporation (Delaware)(Financial Services) Chrysler First Commercial Corporation (Pennsylvania)(Financial Services) Chrysler First Consumer Discount Company (Pennsylvania)(Financial Services) Chrysler First Financial Services Corporation (Delaware)(Financial Services) Chrysler First Financial Services Corporation of America (Delaware) (Financial Services) Chrysler First Financial Services Corporation of Florida (Florida) (Financial Services) Chrysler First Mortgage Corporation of Florida (Florida)(Financial Services) Chrysler First Industrial Loan Company (Washington)(Financial Services) Chrysler Insurance Company (Michigan)(Insurance) Chrysler Life Insurance Company (Michigan)(Insurance) Pentastar Insurance Agency, Inc. (Michigan)(Insurance) Chrysler Leasing Corporation (Delaware)(Financial Services) Chrysler Macnally Corporation (Delaware)(Financial Services) Chrysler Meadowcroft Corporation (Delaware)(Financial Services) Chrysler Dunwoody, Inc. (Delaware)(Financial Services) Chrysler Meridian Corporation (Delaware)(Financial Services) Clinton Holding Corporation (Delaware)(Financial Services) Chrysler Realty Corporation (Delaware)(Real Estate Holding Company) Chrysler Servicios Corporativos, S.A. de C.V. (Mexico)(Employee Services Company) Chrysler Timberlake Corporation (Delaware)(Financial Services) EFH Leasing Corporation (Delaware)(Financial Services) 1981 Helicopters, Ltd. (New York)(Financial Services) 104462 Canada Ltd. (Canada)(Financial Services) Premier Auto Receivables Company (Delaware)(Financial Services) RAE Hotel Corporation (Delaware)(Financial Services) Redisco Canada Ltd. (Canada)(Financial Services) Sovereign Crest Properties, Inc. (Delaware)(Financial Services) U.S. Auto Receivables Company (Delaware)(Financial Services) Unconsolidated subsidiaries owned directly or indirectly by Chrysler: - --------------------------------------------------------------------- 32 majority-owned retail sales outlets in the United States 11 majority-owned retail sales outlets outside the United States
EX-23 6 EXHIBIT 23 1 ---------------------------------------------------------- Suite 900 Telephone: (313) 396-3000 600 Renaissance Center LOGO Detroit, Michigan 48243-1704
EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference of our report dated January 21, 1997, appearing in this Annual Report on Form 10-K of Chrysler Corporation for the year ended December 31, 1996, in the following Registration Statements:
REGISTRATION FORM STATEMENT NO. DESCRIPTION - ---- ------------- ----------- 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 deliverable pursuant to the 1972 (Post-Effective and 1980 American Motors Corporation Stock Option Plans Amendment No. 1) 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 stockholder named therein 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
DELOITTE & TOUCHE LLP January 21, 1997 LOGO EX-24 7 EXHIBIT 24 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Robert J. Eaton -------------------------------- ROBERT J. EATON 2 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Thomas G. Denomme -------------------------------- THOMAS G. DENOMME 3 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Robert A. Lutz -------------------------------- ROBERT A. LUTZ 4 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the 21st day of January, 1997. Lilyan H. Affinito -------------------------------- LILYAN H. AFFINITO 5 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. James J. Aljian -------------------------------- JAMES J. ALJIAN 6 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Robert E. Allen -------------------------------- ROBERT E. ALLEN 7 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Joseph A. Califano, Jr. -------------------------------- JOSEPH A. CALIFANO, JR. 8 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Earl G. Graves -------------------------------- EARL G. GRAVES 9 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Kent Kresa -------------------------------- KENT KRESA 10 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Robert J. Lanigan -------------------------------- ROBERT J. LANIGAN 11 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Peter A. Magowan -------------------------------- PETER A MAGOWAN 12 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. John B. Neff -------------------------------- JOHN B. NEFF 13 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Malcolm T. Stamper -------------------------------- MALCOLM T. STAMPER 14 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Chrysler Corporation hereby constitutes and appoints WILLIAM J. O'BRIEN, R. D. HOUTMAN and HOLLY E. LEESE or any one or more of them, to be his agent, proxy and attorney-in-fact, to sign and execute in his name, place and stead and on his behalf, and to file with the Securities and Exchange Commission pursuant to the Securities Act of 1934, as amended, the Form 10-K Annual Report of Chrysler Corporation for the fiscal year ended December 31, 1996, and any and all amendments to such Annual Report that may be necessary or desirable; hereby approving, ratifying and confirming all that the aforesaid agents, proxies and attorneys-in-fact or any one of them do on his behalf pursuant to this power. IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 21st day of January, 1997. Lynton R. Wilson -------------------------------- LYNTON R. WILSON EX-27 8 EXHIBIT 27
5 1,000,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 5,158 2,594 2,126 44 5,195 0 23,052 8,147 56,184 0 7,184 0 0 822 10,749 56,184 57,587 61,397 45,842 0 0 7 1,007 6,092 2,372 3,720 0 (191) 0 3,529 4.77 4.74 Excludes depreciation and special tools amortization, and employee retirement benefits. Less than $1 million In May 1996, Chrysler declared a two-for-one stock split in the form of a 100 percent stock dividend which was distributed on July 15, 1996 to shareholders of record on June 15, 1996. Financial data schedules for prior years have not been restated for this stock split.
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