TTAC has confirmation from three trusted, independent sources that Chrysler is delaying payments to its suppliers– to the point where certain suppliers have refused to ship parts until the embattled American automaker settles its bill. Even so, we are filing this report as Wild Ass Rumor because none of these sources will go on record. (Hardly surprising consider the economic self-interest involved.) It is equally true that there's no way for TTAC to accurately gauge the full extent of Chrysler's delayed payment situation. IF, as we suspect, Chrysler's owner Cerberus is readying to file for C11 during its company-wide summer holiday, or, as some suggest, preparing for the long-delayed "strip and flip," delayed payments would indicate, at best, ChryCo cash flow problems. We invite both Chrysler and its suppliers (guaranteed anonymity) to use the comments section below or contact us via email to clarify this issue.
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I’m guessing that these parts are for cars that aren’t selling and are piling up on dealer lots. No need to go on building them. Now since Chrysler can’t build cars when they’re missing parts, maybe Cerberus found a loophole in their UAW contract?
wishful thinking..
This nothing new.
Why should they start paying their bills on time now?
The inevitable beginning of the inevitable end?
This sounds like Rover in the UK where suppliers flushed out the truth about Rovers lack of cash by delaying parts until bills were paid. Those parts could not be retro fitted so the production line stopped. Game over.
If suppliers are actually withholding parts, eventually (sooner rather than later), the assembly lines for whatever vehicle those parts go to would stop, and it would become public knowledge. This would probably happen sometime between a few days to a few weeks after the shipments stopped. Now, if the stoppages just happened, within that time period, I suppose it’s possible, but we will find out about it quite quickly.
I don’t see any way Chrysler survives the buyout fund craze intact. Cerberus and others bought up automotive and retail companies like crazy under the theory that the only thing wrong with these companies was that they were stuck operating under the glare of Wall Street. Fact is, that argument is 95% BS, 5% truth.
They are going to have to part this one out, because that is the only way to realize any value from this poor abused dog.
Farago, good post but I have to correct you.
It’s not “Deadbeat Chrysler”, it’s “Dead and Beat Chrysler”. What Cerberus doesn’t kill of the company, it will beat like a dead horse to make a profit.
Sorry for the cynicism, but seeing all this makes me think Chrysler’s finally gonna pull the trigger this time.
I give ’em till late June to end it all.
It definitely sounds like a cash flow problem. So, it won’t be long now.
When asked by folks who know I’m a car guy, about what cars to consider purchasing, I’ve been warning them to avoid Chrysler and General Motors like the plague for about two months now. Plenty of people ask me, but whether they listen to my advice or not isn’t my problem.
However, I strongly suspect that the Jeep curse has finally killed its latest host. Like cancer.
Jeep originated at Willys-Overland, as the main contractor for the General Purpose (GP = Jeep) vehicle of World War II, out of several competing designs, which included:
-Ford (using a 1932 Model B four cylinder non-synchromesh transmission and Fordson tractor four cylinder engine with no power)
-American Bantam (originally called American Austin, yes, tiny British cars were once manufactured in Pennsylvania) – this one had a proprietary Lycoming L-head four cylinder engine and was in fact the first “jeep” prototype
-Willys-Overland, using the 1941 Willys Americar four cylinder “go-devil” (goes like hell?) L-head (flat head) engine
The Willys won the competition, but the Toledo plants were not sufficiently large to produce the numbers required and Ford was ordered to build Jeeps using the Willys patterns, and to hell with copyrights, design laws or anything else – we were at war.
After the war, Willys-Overland struggled along until Kaiser Motors bought it up in 1953.
Willys-Overland died and morphed into Kaiser, which killed off Kaiser and Willys auto production in 1955.
Kaiser-Jeep struggled along until 1970 when American Motors bought it up. Kaiser-Jeep therefore died, and morphed into the Jeep Corporation, a subsidiary of American Motors.
American Motors struggled along, being partly bought up by Renault in the 2nd fuel crisis of 1979, then just as Renault finally could see light at the end of the tunnel, and sales of the Jeep Cherokee (and the SUV craze was just ready to take off), the frogs must have figured that light was a train so they sold AMC (and Jeep) to Chrysler, which only wanted Jeep but had to take AMC with it.
So AMC died and morphed into Chrysler. Which died when absorbed by Daimler-Benz. Which died when the Germans de-absorbed it (spit it out after digesting the good bits?)
So now Cereberus has a bad case of indigestion after eating what’s left of Jeep (and Chrysler).
Or is Jeep like a cat, and there are two more lives ahead of it?
A couple of things here:
menno :
When asked by folks who know I’m a car guy, about what cars to consider purchasing, I’ve been warning them to avoid Chrysler and General Motors like the plague for about two months now.
I’ve been making that same advice for more than TWO DECADES now….
So AMC died and morphed into Chrysler. Which died when absorbed by Daimler-Benz. Which died when the Germans de-absorbed it (spit it out after digesting the good bits?)
“Good bits?” Huh????
A Chapter 11 shedding of UAW’s stranglehold on labor, franchise laws that prevent closing of slow selling stealerships, and then paying pennies on the dollar to settle debt and get a fresh start. If this happens and they create a quality product mix…the Chrysler that rises from the ashes will have a significant and unassailable advantage. Now if only we can stop Cerebus from turning Chrysler into a dealer network for Chinese cars and rebadged Nissans.
What’s the start/end dates for the summer holiday? Is that the time when they retool the assembly lines for next years model line ups?
They still get paid an hourly wage even though they aren’t at work?
Well, after digesting a bunch of money, anyway, thoots….
What a waste.
Sometimes I wonder if Herr Borgward is up there laughing his hiney off at Daimler Benz.
See, there’s this undercurrent of rumor that D-B didn’t like Borgward stepping on their upmarket turf with his quite nice 2300 Grosser Limousine (big sedan) introduced in 1960, and the Swabians (i.e. Stuttgart folks / Daimler-Benz high honchos) fixed Borgward’s wagon by making sure the Bremen government officials killed off Borgward with a bunch of lies…
The Bremen state government declared Borgward insolvent (bankrupt) when in fact it really was not, and this led to death-by-heartbreak for Herr Borgward.
I hear Herr Borgward’s grandson is looking to start building a new car company in Germany.
(Kizmet / Karma?)
Just as Daimler-Benz finishes dining on Chrysler’s money and casts and eye around for a new dish…. yet nobody is stupid enough to be invited into the parlor by the spider this time?
Amazing, isn’t it? How Daimler took a company with billions of dollars of reserve and thoroughly burned it (and the company that surrounded it) in a few short years.
Cerberus is just a vulture picking at the corpse and can’t really be blamed for doing what vultures do. Daimler’s management, though, might find itself in an uncomfortable position if accusations that Chrysler was delierately trainwrecked to the benefit of Benz are investigated by American authorities.
I could see this resulting in a Senate committee if things go truly pear-shaped.
Rumours like these killed Bear Stearns, putting thousands out of work.
Which is not to say TTAC is handling it wrong.
I can confirm the Borgward car in the making speculations above – and maybe it is Karma.
“Chrysler was delierately trainwrecked to the benefit of Benz”
I don’t believe that for a minute. What possible benefit is there to Daimler from loosing billions on a failed merger? Chrysler customers and Daimler-Benz customers had about zero overlap before the deal, and killing Chrsyler does nothing to help the Benz side of things.
jaje :
A Chapter 11 shedding of UAW’s stranglehold on labor, franchise laws that prevent closing of slow selling stealerships, and then paying pennies on the dollar to settle debt and get a fresh start. If this happens and they create a quality product mix…the Chrysler that rises from the ashes will have a significant and unassailable advantage.
But Chrysler’s product line (Jeep largely aside) is rotten from top to bottom. Getting rid of the UAW and dealerships still leaves them with uncompetitive product which will take years to phase out (I doubt they have any kick-ass cars waiting in the wings to be green lit for production). Lousy vehicles got them into this mess, and chapter 11 isn’t going to fix that.
@SherbornSean
Bear died because it was leveraged 35:1 and the underlying paper was pure excrement, worth pennies on the dollar, or less. My source is last week’s Economist; a twenty page overview of the ongoing crisis in banking. Bear was rated AAA the week before it’s implosion, was boosted by Kramer, and was bailed out to prevent a complete seizure of capital markets. Not enough rumors, the smart money, the institutional money bailed, screwing the little guy.
The big three need to be bailed out and protected for basic economic reasons. Under new management, of course. The United States requires a mixed economy in order to be healthy–think of it as a diversified portfolio. It’s time to stop relying on counterproductive economic ideology, and focus on what works, even if it involves borrowing techniques from China, France, or other zones whose practices wrinkle your collective noses, but whose performances run circles around your own.
In reality, American made vehicles are orders of magnitude better than the best of their Chinese badged counterparts. But absolutely nobody here thinks the US industry deserves to survive. Absolutely everyone here expects Chinese products to improve, cross the Pacific and compete here. The difference is protection, and coherent economic policy on the part of the Chinese. Under no circumstance will the Chinese leadership permit the wholesale destruction of their domestic industry.
sitting@home – Chrysler has had several successes – just not able to competitively adapt to the market. The 300, PT Cruiser (when it wasn’t 8 years old), Ram to a degree, Wrangler, Caravan were good sellers and profitable. However Chrysler could never afford to improve the vehicles as they did not have the capital upfront nor the money to redesign every 5 years (GM and Ford did but selectively did the refreshes) – they had the least amount of bargaining power with the unions and have close to the size of Fords # of dealers but with 6% less market share. They were usually 2nd fiddle to anything Ford / GM did.
Ch11 would be best for them as they are much smaller yet have big concerns and now with an owner that can squeeze blood from a turnip – they will restructure for efficiency.
It’s very easy to tell when one of the Det2.8 are about to file for bankruptcy – whichever one hires someone who has taken a company through chapter 11, like when Steve Miller was hired at Delphi. RF – Have you heard of any of them hiring someone or a firm that specializes in bankruptcy? If not, then just read the news flashes as they come down the line and when it happens, get ready for the deathwatch that sends the company down the final spiral to business hell.
jaje:
Chrysler has had several successes – just not able to competitively adapt to the market. The 300, PT Cruiser (when it wasn’t 8 years old), Ram to a degree, Wrangler, Caravan were good sellers and profitable.
They were all great cars, but they’re all past their prime with no replacements in sight. Their newest cars (Sebring, Avenger, Caliber, the latest minivans and the Jeep-etes) are just not competitive, so I can’t see how the company can continue selling vehicles profitably even if it didn’t have the burden of legacy costs.
eh_Politcal:
Bear wasn’t boosted by Kramer, what he said was that it is ok to leave your money in their account, as you wouldn’t lose that. He didn’t say anything about the stock itself.
As a guy who loves Jeeps and owns two, I hate to think poorly of Chrysler or see them struggle. But no matter what improvements they make or GM or Ford, they still have the dead weight of the UAW that better manufacturers do not have.
As I have said before, my next car is going to be a Honda built right in my own home state of Indiana.
Company over.
Bankruptcy = very yes.
Look for the three-headed dog to let loose “The Minivan Company” and Jeep. The rest will rot in Hades.
Airhen:
As I have said before, my next car is going to be a Honda built right in my own home state of Indiana.
Hey, I’m a Hoosier too! Too bad the Fit isn’t made stateside, because that’s what we’re looking at as a replacement for our 180k-mile Saturn.
UAW is not the reason for crappy cars but they are the scapegoat. UAW workers also make Corollas and Tacomas too.
sitting@home: They were all great cars, but they’re all past their prime with no replacements in sight. Their newest cars (Sebring, Avenger, Caliber, the latest minivans and the Jeep-etes) are just not competitive, so I can’t see how the company can continue selling vehicles profitably even if it didn’t have the burden of legacy costs.
With a reduction in legacy costs they will have the money and possibly the management that will change the cycle of allowing an initial hit to not rot on the vine and continually update it. Their new cars are quite bad b/c they are so in debt and with no plan to survive. Cerebus won’t allow this to go on for much longer as they want an ROI and that means new vehicle development and sustain improvements – that’s how Honda or Toyota has won over the American public and have loyal buyers. Though Cerebus may just strip the company into pieces and sell ’em to the highest bidders.
By significantly cutting out an production and dealer infrastruture that needs to sell 2.5m cars a year that cannot be scaled back to 1m cars a year and get back to the basics and build a set core of vehicles – they will have an advantage versus GM / Ford which have much larger infrastructure that they can no longer afford to pay for b/c their market share and sales have dropped substantially.
menno:
Last time I drove through Toledo, ten years ago, the smokestacks at the ancient Jeep plant still said O V E R L A N D on them:
http://upload.wikimedia.org/wikipedia/en/thumb/8/89/Overland_chimneys_Toledo.jpg/250px-Overland_chimneys_Toledo.jpg
Appreciate the kind words th’other day, by the way…
@Axel: Honda’s new Indiana plant goes online later this year, and might be building Fits.
All of this reminds me of a previous Chrysler SW:
Think of Chrysler as a slum landlord who bought a building on the cheap awaiting a buyout offer and you begin to get the picture.
If you really want to know if Chrysler is delaying payment, go spend $120 or $150 bucks and buy a Dun & Bradstreet.com Business Information Report on Chrysler. It will tell you whether their payments are getting later or not.
Slowing payments could also be part of the whole cost savings at the expense of the supplier strategy. Just like that magic 25% cost reduction goal, Chrysler simply thinks the suppliers need them so much that the suppliers will go along with whaever they dole out.
Walmart and Home Depot are notorious for this and I don’t see either headed for Chapter 11.
“Their new cars are quite bad b/c they are so in debt”
Bah humbug. The redesigns stink because the managers who directed the projects were bad at their jobs, simple as that.
As a high school student in the ’70s, robotic manufacturing was going to be the next wave in the auto biz.
The fear of some was the displacement of live people as workers. Now the fear is elimination of whole companies.
It gives me pause to consider what other huge social shifts I may be missing now in ’08.
@ menno :
If your theory holds, Tata is next. After all, it did ingest [que drumroll] LAND-ROVER!