Hard as it is to imagine, we're coming up on the first anniversary of Chrysler's takeover by the folks at Cerberus Capital Management. It's been a year of turmoil and one involving some massive change, both in the industry as a whole and at Chrysler in particular. Plants have been ordered closed; thousands of jobs have been cut; but despite it all, CEO Bob Nardelli says there's good news.

In a letter to employees marking the first anniversary, the former Home Depot boss reveals the automaker generated $1.1 billion in cash during just the first half of 2008. What the bottom line itself looks like, well, you'd have to be a senior Cerberus insider to know, but some good news is better than none, it seems.

Wondering what else Nardelli had to say? Here's the full text of his e-mail:

Dear Employees,

One year ago, we began to write a new chapter in Chrysler’s proud history as Cerberus acquired the majority stake in our company. In spite of the severe economic and industry challenges of the past 12 months, we have laid the groundwork for a successful turnaround and transformation of our business. Today, we are working together with a clear direction and with a sense of urgency to return Chrysler to profitability and its rightful place as an iconic American company. On behalf of the Office of the Chairman -– Tom LaSorda, Jim Press, Ron Kolka and me –- I want to thank you for your hard work, and pass along the personal appreciation of Steve Feinberg as well as our partners at Cerberus and Daimler. I’d also like to share some thoughts with you on the occasion of this anniversary.

As a privately held company, we operate with some real advantages. Being private helps us be agile and decisive, highly responsive to our customers and fast to act on market opportunities. We are re-establishing our own culture and identifying our own measures for success based on operating as a single team focused on the common goals of “customer first” and “quality ... period.”

We also have a clear focus on achieving the key financial expectations of our owners, which include EBITDA (earnings before interest, taxes, depreciation and amortization) and cash flow performance. As a private company, we’re now able to generate cash more easily through the sale of non-earning assets. This enhances our ongoing operational improvement efforts, enabling us to continue to invest in new products as we work to reduce our fixed costs, inventory and working capital.

Working together with the UAW, we signed a landmark labor contract that provides a framework to improve our competitiveness. Over the past year, our leadership also made some difficult decisions to "right-size" our company in line with the realities of a tough economy and an auto industry caught in the rapid shift in consumer preferences driven in part by escalating fuel prices. I can assure you that these gut-wrenching decisions are not taken lightly by me or anyone on the leadership team. Going forward, we will do what’s necessary to remain competitive in the short term, while balancing the need for continued investment in support of our long-term strategy.

Our company strategy can be boiled down to what I call the three E’s:

• Enhance our Core
• Extend our Business
• Expand our Markets

We’re making progress on all fronts.

Enhancing the Core includes an intense focus on customers and quality, our product line and our dealers. We hired the industry’s first Chief Customer Officer to help lead efforts to better define, measure and improve quality. Creating a new online Customer Advisory Board has enabled us to get fast feedback on important issues. The Let’s Refuel America program, for example, was a direct response to customer concerns over fuel prices.

In line with our customer focus, enhancing the quality of our current and future products is critical to our success. Launch performance results for the past year are encouraging: from our own teams and from our dealers, we’ve heard that our recent launches have been among our best. During the last year, we approved more than 400 product enhancements designed to improve interiors, upgrade materials, and reduce noise and vibration. To date, more than 250 of these changes have been implemented, and the remainder will be in production during the 2009 model year and the start of 2010.

Although we did not perform as well as we should have in the recent J.D. Power and Associates Initial Quality Study, our company did improve five points overall, our Chrysler and Dodge brands were up in the ratings, and the Durango and Dakota were first in their segment. A more significant gauge of our progress in quality is that, since last August, we’ve seen a 29 percent reduction in our warranty claims. In addition, we expect a 20 percent improvement for our 2009 models. While we’re early in our launches, the results we’re seeing –- like reduced NVH (noise, vibration and harshness) in the Challenger, the Ram truck interior quality -- are greatly improved.

In the area of productivity, the recent Harbour Report showed that Chrysler equaled Toyota as the most productive auto manufacturer in North America. This is a remarkable turnaround from seven years ago, when Chrysler was dead last among major manufacturers. In addition to boosting our productivity, this achievement has the added benefit of increasing our capacity utilization significantly. It really shows what we can do when we work together with a commitment to continuous improvement.

We are continually re-evaluating our model lineup to ensure that we’re focusing our resources on the best opportunities in the market, and we made a decision during the year to drop four models from our portfolio. Many industry analysts continue to bemoan the “light truck” bias of our product mix. They miss a salient point: most customers do not consider our Compass, Patriot, PT Cruiser, Pacifica, Journey or minivans to be “trucks,” although they are classified as such. So, from the customer’s perspective, our current mix is 59 percent car, compact SUV and minivan, and 41 percent pickup, medium and large SUV.

Meanwhile, our product portfolio is becoming more balanced, and our newest models are right for the times. The Dodge Journey, which received a rave review from USA Today, is a “right-sized” crossover that offers class-leading 25 miles per gallon highway, starting at under $20,000 in the United States. The Dodge Challenger, a modern muscle car, will come with a fuel-efficient V-6 option and an aggressive entry-level price of $21,995 in the United States. Customers focused on fuel economy will find six vehicles that offer 28 mpg or better on the highway in our 2009 model lineup -- the Compass, Patriot, Avenger, Sebring Sedan and Sebring Convertible -- and the Caliber achieves 30 mpg highway fuel economy.

There will be a viable and sustainable light-truck market going forward. It’s just likely to look more similar to the truck market before the light-truck boom of the '90s, with the notable exception that we expect to capture a greater share of it. For example, the crew cab segment represents half of the truck market. With our new all-new 2009 Dodge Ram crew cab offering we’ll be able to compete in this segment for the first time. We think the current economic climate, in spite of its challenges, provides us a real opportunity to gain even more ground. Our new Ram full-size pickup will be a "game changer," thanks to its outstanding performance, technical innovations, breakthrough design and top quality. We elected not to delay this launch as our competitors have, therefore, we will be first to market with a better product, along with marketing, advertising and retail launch support that’s truly world class.

To develop future products with greater appeal to customers, we are in the midst of investing $3 billion into powertrains to create multiple driveline solutions that will increase our overall fuel efficiency, including new engines, axles and transmissions.

And we created a group called ENVI that will develop electric-drive vehicles that support the vision of our Chrysler, Dodge and Jeep brands. Derived from the word "environment," ENVI is a dedicated in-house organization charged with making Chrysler the leader in advanced-propulsion technologies. Our electric vehicle program will really send a shock through the industry -- so stay tuned for more details!

Rebuilding strong relationships with dealers has been a major priority this past year. One example of how we’re listening to our dealers is that we have reduced inventory by 67,000 units compared with a year ago. We’ve changed our dealer incentive program and put dealers back in charge of our regional advertising associations because they know their local markets better than we ever will. We’re also working with our dealers to "right-size" our network. Fifty-eight percent of our dealers now carry all three of our brands under one roof, up from 53 percent just last year.

The latest J.D. Power Customer Satisfaction Index (CSI) shows progress in the way our company and dealers are serving our customers. Chrysler LLC scored 865, a 10-point improvement with Jeep and Chrysler brands among the most-improved brands in the industry, and the Chrysler brand (882) outperformed the non-premium average (879) in the 2008 study. We have implemented a number of efforts with our dealer partners that we believe will continue to improve customer satisfaction.

The second part of our strategy is Extending our Business, which means capitalizing on adjacent opportunities in a number of ways. For example, consumers tend to keep vehicles longer in a slow economy, which represents a significant opportunity for us to capture more of the growing service and parts business. And we’re extending our business by investing in new products that give us coverage in new segments. Last year, we extended into the class 4 and 5 medium-duty truck markets with entries that offer best-in-class fuel economy. This followed our return to the class 3 truck market in 2006 with the all-new Dodge Ram 3500 Chassis Cab, which quickly achieved a 29 percent market share.

We’re working diligently to fill gaps in our portfolio by adding small car programs both through internal development as well as partnering initiatives. Later this year we’ll launch our first hybrids, the Chrysler Aspen and Dodge Durango. Both deliver a 25 percent overall improvement in fuel economy without sacrificing performance or the towing capabilities our customers need and expect.

We’re also extending our business through innovative new technologies, including in-vehicle wireless Internet connectivity available from Mopar by the end of the year. Our next generation of innovations also includes a segment-first Blind Spot Monitoring system for our minivans and a Chrysler-first Rear Cross Path System that notifies the driver of any car crossing his or her path when backing up.

In June, we announced our new uconnect family of technologies that provides consumers with phone, GPS, music, video and Web connectivity. Uconnect phone provides voice-controlled wireless communication between the occupants’ mobile phones and the hands-free system that automatically downloads up to 1,000 phone book entries from supported phones. Uconnect tunes features a 30-gigabytes hard drive to store music, videos and photographs. Uconnect GPS offers navigation and real-time traffic reports combined with voice recognition and an easy to use touch screen. Uconnect web turns the vehicle into WiFi “hot spot," delivering Internet connectivity directly to the vehicle.

Expanding the Market is the third part of our strategy, and it involves increasing our participation in vehicle segments and international markets where there is significant growth. Our international sales continue to grow, and we’ve established Global Centers of Excellence to support design, engineering, sourcing, manufacturing and distribution activities for local and regional markets.

We are currently engaged in more than two dozen alliances and partnerships with other OEMs and suppliers around the world to help extend our product portfolio and better use our manufacturing capacity. In January, we struck a deal with Nissan to supply us with a version of its B-segment sedan, the Versa, for limited distribution in South American markets beginning in 2009. Then in April, we reached another agreement under which Nissan will manufacture an all-new, fuel-efficient small car based on a unique Chrysler concept and designed for sale in North America, Europe and other markets in 2010. In return, Chrysler will manufacture a full-size pickup for Nissan in 2011.

Enhance the Core, Extend the Business and Expand the Market. Still, there’s one more “E” -– it’s the need to Execute. Going into this second year as an independent, we need to flawlessly execute our strategy and commit to improving everything we touch. We must pull together to design, build, sell and service aspirational vehicles with true competitive advantages –- vehicles that can be proudly displayed in showrooms around the world. We will continue to face the realities of the economic environment and our global industry, see them for what they are, and do what’s necessary to return Chrysler to profitability and sustained growth. As we have for the past year, we will work to shape the future before it shapes us.

While I’m proud of how we’ve faced business challenges together this year, I’m also proud that we’ve never lost sight of our commitment to support the communities we’re privileged to be a part of. Our philanthropic fund changed its named to The Chrysler Foundation and continues its work around the world to strengthen the communities where our employees and customers live and work. One example of how the foundation is tying together our dealers, business centers and communities is our partnership with KaBOOM! to build playgrounds, helping ensure every child has a safe place to play. We’ve identified 25 new playground sites and many of them already have been completed.

Building on our proud American heritage of support for those who wear the uniform, we also inaugurated the “Honoring Those Who Serve” program and forged partnerships with groups like Operation Gratitude and the Freedom Calls Foundation. Our military support efforts won several awards, including the Secretary of Defense 2008 Employer Support Freedom Award. At our Military Appreciation Month celebration held in May, employees put together 500 packages for Operation Gratitude to send to service men and women on active duty abroad in addition to the 300,000 packages already sent and distributed. At the event, we also revived the wonderful military tradition of the service flag. We are prominently displaying a Blue Star flag for every employee on active duty. In addition, we unveiled a Gold Star flag to honor an employee whose life was taken while on active duty, and presented it to his loving family.

Our continuing efforts in diversity also were recognized during the year. Chrysler was named “Company of the Year” at the Urban Wheel Awards; we were named to Black Enterprise magazine’s list of “40 Best Companies for Diversity”; we received the top grade in the automotive sector in the annual NAACP Economic Reciprocity Report; and Chrysler was recognized as a “Top 50 Company for Supplier Diversity” by Hispanic Enterprise magazine.

Perhaps the highlight of the year for many of us came on June 26 with the long overdue return of Lee Iacocca to the building and to the company he so strongly influenced. If you were able to attend this event, you saw first hand some of the energy, spirit and passion that Lee brought to Chrysler. He took time to talk with the leadership team and was extremely impressed as he reviewed the next generation of Chrysler, Jeep and Dodge products in our styling dome. He was particularly moved by the warm reception he received from our employees, and as he departed from the Tech Plaza event, he stopped and shook hands with everyone he could. In my remarks that day, I quoted from the speech Lee gave in 1979, just about one year after he joined Chrysler. He spoke about the people of Chrysler, and his words are just as true today:

“If the old-fashioned American virtues of hard work and dedication still work in this country –- and I believe they do –- we will not fail. Our people are the hardest working, most dedicated individuals I have ever been associated with, and they believe in this company.”

Looking ahead, we face a sobering reality of an economy and an industry in North America that continues to contract. But we continue to meet the challenges head-on, never losing sight of our goals. For example, this week Chrysler Financial announced that they will discontinue offering new lease products in the United States. But we will also significantly enhance our incentive and financing options to make our vehicles available to customers at affordable payments. Here are a few more facts on this change to keep in mind: Current vehicle owners who lease through Chrysler Financial are not affected, and the terms of their contract will remain in force. Chrysler dealers are still able to offer lease financing arrangements with other financial institutions. Employee lease and Company Car Programs for current and retired salaried employees whose vehicles were obtained through the company are not affected, and we’re working to protect this program for the future.

Our July sales, which we will announce today, while disappointing, continue to reflect the downward trend of this market and economy. Our challenge is to return to profitability and to profitable growth, which begins with a focus on revenue generation and sales.

So, let’s meet this challenge together. As we mark this first anniversary, let’s all focus on revenue, put our sales hats on and talk up our products to everyone we know and make a sale. And to help get started, I’m pleased to announce that all employees and retirees will be given a CDI (Certain Designated Individuals) number. More details will be sent to you next week, but similar to the Employee Choice program, this number will enable anyone to purchase a new Chrysler, Jeep or Dodge vehicle at the employee price through Sept. 30.

In closing, I can tell you that I am very proud to be part of this great team, a team with the experience, the intellect and the passion to bring Chrysler back to its historic place. I thank you for your hard work and many accomplishments of the past 12 months, and ask each of you to bring the same dedication to the coming year. Chrysler may be down, but we’re a long way from out. It’s time for us to prove the naysayers wrong with another one of our patented comebacks!\

Sincerely,
Bob

Might as well keep the bad news coming. In this case, it's Chrysler rolling up a wave of red ink - $431 million, to be precise, during the second quarter of the year.

The decision to release financial data came as something of a surprise; as part of the privately held Cerberus Capital Management, the automaker has not been required to provide the figures since last August, when it was sold off by former German parent, Daimler AG.

Comments by CEO Bob Nardelli suggest Chrysler lost about $1.7 billion last year. Officials insist that the April-June 2008 numbers were not all that bad - they certainly looked good in light of Ford Motor Co.'s record $8.7 billion second-quarter deficit - and that they have a "clear strategy" for turning things around. Yet industry analysts are generally more concerned about Chrysler's viability than they are about either Ford or General Motors, which is running deeply in the red as well.

Chrysler sales were down a punishing 22 percent during the first half of 2008, as demand for models like the big Ram pickup and Jeep Grand Cherokee stumbled. Light trucks traditionally account for about two-thirds of the Detroit maker's total volume. But it has had a rougher time regaining traction on the passenger car side of its lineup than either Ford or GM. A number of recent models, such as the Sebring sedan, have fallen short of expectations, partially as the result of poor reviews, but also due to low scores in recent quality reports - such as J.D. Power and Associates' Initial Quality Survey, where Chrysler ranked well below industry average.

Its cross-town rivals have substantial overseas operations, which are helping prop up the weak U.S. market; both Ford and Chrysler are turning to smaller passenger cars and crossovers developed overseas to rebuild their lineups, moving away from trucks. But Chrysler sold off most of its foreign operations decades ago, and it has struggled to set up new operations overseas. The smallest of Detroit's Big Three is now turning to competitors, such as Nissan, and the emerging Chinese maker, Chery, to supply it the small cars American consumers are demanding.

But in the meantime, Chrysler is paring away, announcing, just this week, new plans for large cuts in its white-collar workforce.

While the company insists it is well positioned to survive the current U.S. downturn, observers continue to question how long Cerberus' patience will last if Chrysler's performance doesn't improve soon.

Chrysler is about to begin the third round of white-collar job cuts it has made in 18 months, announcing plans to eliminate about 1,000 salaried jobs worldwide.

As the maker is primarily based in North America, most of the cutting will come at its global headquarters and technical center in the Detroit suburbs.

The latest reduction follows a dismal 22 percent decline in the automaker’s sales during the first half of 2008. But it leaves observers wondering just how much further the company can continue to cut, especially as it struggles to develop the smaller cars and crossovers it desperately needs to replace the big pickups and SUVs American motorists have largely walked away from.

“The signs of economic challenge continue for the U.S. market and as a result, further actions must be taken to improve our business and return to profitability,” Chrysler’s director of human resources, told employees in an e-mail.

The cutbacks began even before the break-up of DaimlerChrysler AG, but have accelerated since the U.S. maker was sold off by its former German partner, Daimler AG. New parent Cerberus Capital Management does not release financial figures, but it is considered likely that Chrysler is rolling up serious losses.

Chrysler is by no means alone. General Motors announced last week plans to trim salaried job costs by 20 percent, while Ford has targeted a 15 percent reduction. It remains unclear how much of those cuts will be focused on U.S. operations and Detroit, in particular.

Is Chrysler getting charged up about electric vehicles? That's the word going around in Detroit this week, as the automakers confirms published reports that it is working up a line of extended-range EVs, often referred to as plug-in hybrid-electric vehicles, or PHEVs.

Chrysler has taken its share of lumps from environmentalists for being slow to market with greener technology, and in the current environment of $4-a-gallon gas, buyers haven't been too pleased, either. The automaker's first hybrids, including a version of the big Dodge Durango SUV, will just hit market later this year. Meanwhile, the automaker will market a high-mileage diesel version of its Jeep Grand Cherokee, which was developed with its former partner, the German automaker Daimler AG.

To take things further, the automaker created a new unit last autumn, dubbed ENVI, to help it push into alternative propulsion systems. And one of its highest priorities is to develop a line of PHEVs, spokesman Nick Capa has confirmed, and possibly other forms of electric propulsion.

Specific details haven't been released. "It's too early to get down and dirty with this technology," cautioned Chrysler spokesman Nick Capa. But he pointed to three concept vehicles the automaker unveiled at the Detroit Auto Show last January, which can provide a few hints.

The little Dodge Zeo has a pure electric drive system, with an oversize battery pack to extend range. The ecoVoyager mates fuel cell and range-extender technology, while the Jeep Renegade's plug-in drive is backed up by a clean diesel.

It appears Chrysler's push into extended-range and related technology is driven, at least in part, by the overwhelming response to General Motors' own extended-range EV, the Chevrolet Volt. GM promises that sedan will get at least 40 miles on a single charge, more than enough for the typical daily commute. For longer drives, Volt's compact internal combustion engine will kick in, allowing it effectively unlimited range.

What's unclear is which technical path Chrysler will take. Conventional gasoline-electric models, such as the Durange Hybrid - or Toyota's best-selling Prius - are so-called parallel hybrids. That means their wheels can be directly driven by either the vehicle's gasoline engine or its electric motors - or both. Volt, however, is a series hybrid. The production version's wheels will only be driven by electric motors. When the battery runs down, the internal combustion engine will act as a generator, sending current to either the vehicle's battery or its motors.

How broad a range of plug-ins Chrysler plans has not been revealed, but given the shift in the American market, the automaker is clearly under pressure to expand a green lineup likely to include more conventional hybrids, next-generation clean diesels - and plug-in technology.

As to timing, Capa said it's unclear when ENVI will bring these new products to market, though, "We feel pretty confident...with three to five years."

Hit hard by the slump in sales of SUVs, pickups, and other light trucks - which normally account for two-thirds of its volume - Chrysler LLC plans to close an assembly plant later this year and sharply reduce production at another.

Chrysler's St. Louis South plant, one of two producing minivans for the maker, will close indefinitely, starting October 31. The neighboring St. Louis North factory, which makes the big Dodge Ram, will meanwhile go from two shifts to one, reflecting the huge drop in demand for full-size trucks.

The situation is all the more significant for Chrysler since it only recently launched a new version of its Town & Country and Dodge Caravan minivans, and is just now preparing for the rollout for an all-new version of the Ram pickup.

The cutbacks will idle 2,400 workers, according to Chrysler, including 1,500 at the minivan plant. A second minivan assembly line, in Windsor, Ontario, will continue operating.

"We see no need for the capacity in the future," said Chrysler President Tom LaSorda, during a conference call.

Meanwhile, LaSorda derided as "hogwash" growing rumors that Chrysler's private equity owner, Cerberus Capital, was preparing to sell the company off in pieces. Among the many reports that have circulated, Cerberus would close Chrysler's carmaking operations and keep its Jeep line, or sell the Jeep and Chrysler brands and keep Dodge.

Such plans are "absolutely not being considered at all," he forcefully declared, adding that, "I don't even want to entertain those questions."

LaSorda, who was bumped out of the CEO job after Chrysler was sold to Cerberus, last year, by its former German owner, Daimler AG, insisted Chrysler is meeting all its targets. But he did concede it was being forced to make "some difficult decisions" by the current automotive downturn.

Chrysler's crosstown rivals have also had to take some tough steps in recent months, including a number of plant closings and cutbacks of their own. Investors have responded by driving General Motors and Ford Motor Co. stock prices down to historic lows. As a privately held company, Chrysler and its parent, Cerberus, do not report their financial data.