Post by jeffolie on Dec 22, 2007 13:26:49 GMT -6
Chrysler Suicide Watch 28: The End of the Beginning of the End
By Robert Farago
December 21, 2007
"Are we bankrupt? Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." Another milestone: Chrysler CEO Bob Nardelli used the “b word’ in public. What’s more, Boot ‘em Bob told the Wall Street Journal (WSJ) that he’s on a leash so short he can feel the hot breath of his Cerberusian owners tickling his neck hairs. Why’s that then? Because all Hell's about to break loose.
More specifically, Chrysler is about to follow GM and Ford’s lead and break loose anything that isn’t nailed down and sell it. This forthcoming “Staving Off Bankruptcy” sale should come as no surprise; this fall, Nardelli announced his intention to flog bits of the biz just after Christmas. His “operationally bankrupt” shocker is PR hyperbole, preparing Chrysler's camp followers for the divestiture to follow.
Saying that, Nardelli's “backs up against the wall” spin is a double bluff; or, if you prefer, the truth. Chrysler really is “operationally bankrupt.” Have a look at their new product plans. What product plans? Well, exactly. While $10b is a lot of money for you and me, that’s the amount of cash GM needs just to keep the lights on. Ten billion bucks ain't enough money for Chrysler to make the long-term investment in the new product designs and technology it needs to compete for the American car buyer’s customer AND keep the company going. Period.
So what? That was never the plan. Chrysler’s new owners did not– and do not– have any intentions of investing their hard-earned money in the bottomless pit known as a product-lead turnaround. The purchase was– and still is– all about stripping and flipping. That’s why the smartest guys in the room installed Nardelli, who’s about as much of a car guy as I am a numismatist. The Home Depot despot was charged with cutting costs and stabilizing the company until such time as it could be sold; which was to be sooner, rather than later.
And here’s where Cerberus and their main minion came a cropper. As the private equity boys knew sweet FA about cars, they failed to realize that Chrysler’s German owners had left behind a mortally wounded automaker. Perhaps the incoming execs were dazzled by the new minivan, or the company’s total turnover. But they didn't understand that carmaking is a consumer-driven– not cost driven– business; an enterprise that depends entirely on brand strength and an endless stream of class-leading products for its survival.
Cerberus never imagined that Chrysler would get this bad this fast– because they didn’t know cars. Nor did they clock the fact that the overall new car market was headed rapidly, radically, dramatically south. Cuts or no cuts, bad intelligence and bad timing have quickly destroyed any possibility of stabilization in Auburn Hills.
Needless to say, none of this does anything more than accelerate Cerberus’ original time lines. Nardelli will continue to wield his axe even as he begins the inevitable process of dissolution. To that end, the Chrysler CEO told the WSJ that “the company will move very aggressively to dispose of about $1b in land, old plants and other assets, even if it has to sell them below book value.”
Don’t be fooled by the implications of that list. Chrysler doesn’t own any “non-core” businesses. The only thing Chrysler has to sell that’s worth a damn are its MOPAR parts operation, its production facilities and the Jeep name. The “book value” of these “assets” is a Hell of a lot less now than it was when Cerberus bought them, and falling by the day. In fact, unless the Chinese, Indians or Canadians (Magna) are interested in buying Chrysler’s U.S. production facilities, they are worthless.
Where does that leave Chrysler? Nowhere. Ten billion dollars isn’t enough to do anything more than pretty-up their current products’ dreadful interiors a bit and help the automaker hold on for another year or so– albeit cutting every step of the way, facing ever-diminishing market share. Meanwhile and in any case, Chrysler will either sell itself to someone “below book value,” or its private equity masters will throw in the towel and file for Chapter 11.
If we had any doubts before, Nardelli’s willingness to mention the dreaded bankruptcy word leaves no doubt whatsoever that Cerberus is prepared to cauterize its Chrysler wound and use federal bankruptcy court to amputate the automaker from its portfolio. Cerberus will hive off Chrysler Financial, take their tax write-off and call it a day. And consign one of America's greatest automakers to the scrap heap of history.
www.thetruthaboutcars.com/editorials/chrysler-suicide-watch-28-the-end-of-the-beginning-of-the-end/
By Robert Farago
December 21, 2007
"Are we bankrupt? Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." Another milestone: Chrysler CEO Bob Nardelli used the “b word’ in public. What’s more, Boot ‘em Bob told the Wall Street Journal (WSJ) that he’s on a leash so short he can feel the hot breath of his Cerberusian owners tickling his neck hairs. Why’s that then? Because all Hell's about to break loose.
More specifically, Chrysler is about to follow GM and Ford’s lead and break loose anything that isn’t nailed down and sell it. This forthcoming “Staving Off Bankruptcy” sale should come as no surprise; this fall, Nardelli announced his intention to flog bits of the biz just after Christmas. His “operationally bankrupt” shocker is PR hyperbole, preparing Chrysler's camp followers for the divestiture to follow.
Saying that, Nardelli's “backs up against the wall” spin is a double bluff; or, if you prefer, the truth. Chrysler really is “operationally bankrupt.” Have a look at their new product plans. What product plans? Well, exactly. While $10b is a lot of money for you and me, that’s the amount of cash GM needs just to keep the lights on. Ten billion bucks ain't enough money for Chrysler to make the long-term investment in the new product designs and technology it needs to compete for the American car buyer’s customer AND keep the company going. Period.
So what? That was never the plan. Chrysler’s new owners did not– and do not– have any intentions of investing their hard-earned money in the bottomless pit known as a product-lead turnaround. The purchase was– and still is– all about stripping and flipping. That’s why the smartest guys in the room installed Nardelli, who’s about as much of a car guy as I am a numismatist. The Home Depot despot was charged with cutting costs and stabilizing the company until such time as it could be sold; which was to be sooner, rather than later.
And here’s where Cerberus and their main minion came a cropper. As the private equity boys knew sweet FA about cars, they failed to realize that Chrysler’s German owners had left behind a mortally wounded automaker. Perhaps the incoming execs were dazzled by the new minivan, or the company’s total turnover. But they didn't understand that carmaking is a consumer-driven– not cost driven– business; an enterprise that depends entirely on brand strength and an endless stream of class-leading products for its survival.
Cerberus never imagined that Chrysler would get this bad this fast– because they didn’t know cars. Nor did they clock the fact that the overall new car market was headed rapidly, radically, dramatically south. Cuts or no cuts, bad intelligence and bad timing have quickly destroyed any possibility of stabilization in Auburn Hills.
Needless to say, none of this does anything more than accelerate Cerberus’ original time lines. Nardelli will continue to wield his axe even as he begins the inevitable process of dissolution. To that end, the Chrysler CEO told the WSJ that “the company will move very aggressively to dispose of about $1b in land, old plants and other assets, even if it has to sell them below book value.”
Don’t be fooled by the implications of that list. Chrysler doesn’t own any “non-core” businesses. The only thing Chrysler has to sell that’s worth a damn are its MOPAR parts operation, its production facilities and the Jeep name. The “book value” of these “assets” is a Hell of a lot less now than it was when Cerberus bought them, and falling by the day. In fact, unless the Chinese, Indians or Canadians (Magna) are interested in buying Chrysler’s U.S. production facilities, they are worthless.
Where does that leave Chrysler? Nowhere. Ten billion dollars isn’t enough to do anything more than pretty-up their current products’ dreadful interiors a bit and help the automaker hold on for another year or so– albeit cutting every step of the way, facing ever-diminishing market share. Meanwhile and in any case, Chrysler will either sell itself to someone “below book value,” or its private equity masters will throw in the towel and file for Chapter 11.
If we had any doubts before, Nardelli’s willingness to mention the dreaded bankruptcy word leaves no doubt whatsoever that Cerberus is prepared to cauterize its Chrysler wound and use federal bankruptcy court to amputate the automaker from its portfolio. Cerberus will hive off Chrysler Financial, take their tax write-off and call it a day. And consign one of America's greatest automakers to the scrap heap of history.
www.thetruthaboutcars.com/editorials/chrysler-suicide-watch-28-the-end-of-the-beginning-of-the-end/