Doth Chrysler President and Vice Chairman Tom LaSorda protest a possible C11 filing too much? You be the judge. Meanwhile, step forward JPMorgan auto analyst Himanshu Patel. And man did that dude set the Wall Street cat amongst the Detroit pigeons this week, most notably flagging GM's "not impossible" bankruptcy. Now that the dust has settled (i.e. GM's stock found a level below the basement) the AP is highlighting Patel's assertion that Chrysler is in worse shape than GM, or Ford. "Patel estimated the automaker will burn through $4 billion this year and could be forced to file for bankruptcy protection or sell off parts of its business in the second half of 2009 if industry conditions don't improve. Patel said it's difficult to predict the most likely outcome for Chrysler, but he said South Korean or Chinese automakers covet Chrysler's U.S. distribution network. A bankruptcy filing could be a hit to Cerberus, which invested $6.1 billion in Chrysler as part of its acquisition and also backed a $500 million line of credit that Chrysler tapped last month." [FYI: The steelworkers union was no big fan's of Patel's.]
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It seems to me that Chrysler might be in better shape than GM as far as ‘having’ to file is concerned. When GM is unable to pay the bills, they’ll have to file unless somebody is willing to kick in some money. I don’t know why anyone would want to do this since it would be good money after bad unless we see a very significant change in the landscape (not likely). But Feinberg might want to keep Chrysler afloat for a period if he thinks things might improve; like for example if he thinks GM is about to fold and that GM’s folding would improve Chrysler’s situation. I can see that any one of them folding would seize up the market for a period, but some people would need to buy soon, and I don’t see many people AT ALL buying from a company in BR.
Just a quick flashback – JP Morgan Chase was the lead bank in underwriting the original sale:
August 2007:
With no investor appetite, seven banks led by JPMorgan Chase & Co. had to keep most of the debt on their books. The banks will front about $10 billion as a loan. They could come back to the market after the summer when investors are more active. Daimler will take on $1.5 billion in debt while Cerberus will take on $500 million.
Question is – does this Patel fellow deal with those who receive information into the books at Chrysler?
Absolute nonsense!
Why would anyone want Chrysler’s dealers?
I keep telling you guys that the next iteration of cars will be sold through Best Buy and Circuit City:-)
What South Korean automaker covets Chrysler dealers? Not Hyundai, they already have dealers. Daewoo already sells through Chevy. Ssangyong…owned by the Chinese now. Kia…it has a fine network and could expand via Hyundai dealers. Samsung just makes imitation Renaults…and Renault already can sell through Nissan if it wants.
I think Fiat is probably more likely. Alfa Romeo brand launches in the US in 2009, Fiat 500 is coming as well (although what brand name, I don’t know).
Could also be one of the Chinese big 5….assuming they can pass crash tests. Not unlikely, but not a chip shot either, given what I have seen of the Brilliance BS6 crash test in Germany…the most catastrophic failure of a car I have ever seen.
Echo what Mel23 says — Cerberus can pump in more capital and keep Chrysler out of Chapter 11 for as long as they want. Just depends on their aims and commitment.
Just checked out the crash test of the Brilliance and a Chinese SUV. Wow, those vehicles had no control of the crash energy, though the dummy did it’s part to absorb energy. Didn’t they do any testing prior to making this thing? Maybe I have been to hard on the NHTSA…
If they do not have any bankruptcy lawyers on their payroll or retained, they will not file chapter 11. Chapter 7 is a different story…
How did Toyota sign up most of their dealer network?
When Studebaker folded in March 1966, Toyota signed up hundreds of the (best) dealers.
Several of the oldest Toyota dealerships in the US today were originally Studebaker dealers.
Daimler-Benz did the same thing in 1956 when Packard folded. At least 10 CA Packard dealers were signed up. Several of these dealerships today are still operated by the same family.
One former Packard, now Mercedes-Benz dealership dates back to 1937.
If I were the AP reporter taking this story, my question would be something along the lines of: how the hell do you know? They’re a private company; they don’t report their numbers. So how the hell does he come up with his predictions and estimates?
Cerberus may be in it for the strip and flip, but as TTAC keeps pointing out, the lineup sucks, there are too many dealerships, and there are many other problems to work out.
I’d bet that Cerberus is at least going to stick it out through these tough times, get some new models out there with some nice plastics, maybe get some of the mid-90’s Chrysler design mojo back, and THEN flip it. Not before (definitely not now).