Quick question: is there anyone who believes Cerberus managing partner Timothy F. Price's assertion [to The New York Times] that the private equity firm views Chrysler as a long-term play? Even ChryCo CEO Robert Nardelli is not brazen enough to make that sort of statement, preferring to go with "Yeah. What he said." Or, more literally, "Our job here is to run this company. Cerberus down the road will decide what strategic alternatives they intend to pursue.” Reporter Bill Vlasic can't come right out and say Chrysler's full of it; he plays one of those NYT nudge-nudge, hint-hint, these guys may be well and truly fucked games. "With limited access to financial data, analysts are skeptical of its overall health." Nothing like digging for a story, eh? Or sipping the Kool-Aid: "Now, Chrysler’s new leaders are settling in for what appears to be the long haul." Or, as we say in these parts, not.
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Here’s a bit of info mined from this article:
But Mr. LaSorda, who is heading the alliance efforts, said there was no deal on a midsize car, built on what the industry calls the D platform.
“The D car is not on the table with Nissan,” he said. “That’s work we’re doing on our own.”
What do they need Nissan for, if the D car is still on the table?!
So, will the badged Nissans just be “temps”?
Is it me, or should there be raspberry sounds in the background while reading the quotes in this article?
“Our market share is not really relevant this early in the game.” Phwaaat
“There are no plans to sell any of the company’s brands.” Brrrapp
I say to Nardelli & associates, “stay with it”. After all, who is being hurt? The suppliers, bleeding and screwed over as they may be (are), are still alive. They can quit the game at any time I assume, although I seem to remember at least one has filed suit to do just that, so maybe it isn’t so easy. Anyway. The workers are at least getting paid. The dealers will keep going until they starve and close the doors as one Chrysler, two Ford and three GM dealers within 40 or so miles of me have done in the last few months. The point is, Chrysler at whatever degree of being alive they are operating, are still the best option for those dependent on them. Which is a sad commentary for sure, but any income is better than none. So far I haven’t heard any whining for a bailout which is mighty refreshing in comparison.
“Our market share is not really relevant this early in the game.” Phwaaat
That’s actually a credible statement. They have stated that their goal is to increase earnings. That means acheiving better margins, not more market share.
Not that I have faith in their plan, but if they can pull of this partner-distribution strategy, then market share won’t matter that much, because that plan would entail carrying a much smaller capital structure. Their challenge would be to sell the Chry-Nissans for more than they paid for them.
The ten-year window might be believable, although that’s a long hold period for an operator like this. What isn’t credible is that I’m sure that they were expecting to achieve positive cash flow much sooner than they will, and there will be some unhappy investors when they don’t get there.
I think they’re in it for the long haul, whether they want to be or not. Who’d buy it?
I think they’re in it for the long haul, whether they want to be or not. Who’d buy it?
One of the joint venture partners. I would guess that their goal is to create these relationships, turn these (hopefully) into lucrative markets for some of those partners, then have them enter a bidding war to run the joint because they don’t want to lose what they’ve started and it would be cheaper, easier and faster to buy the new Chrysler than to start their own US business from square one.
The thing about Cerberus’ plan is that it all comes down to these joint venture plans. Without some success with those plans, they’re dead in the water.
It’s a race against time. They need to put those partnership deals together before the cash runs out. My guess is that they are closer to running out of cash than they had originally budgeted because the inventory that they inherited from Daimler is not selling for as nearly as much as they expected.
With the timing being what it is, the Nissan deal is probably a make-or-break project. Fortunately for Cerberus, Nissan is probably just as motivated to stop making its own trucks as Chrysler is to get a sedan that people might actually want.
menno: So, will the badged Nissans just be “temps”?
They still have the deal for the smaller Sentra-based car. Just not the bigger D (Altima) sized one.
Isn’t the deal for a Versa-based car?
I’m with Pch101 on this one. The goal is to stir up a bidding war among R-N, VW, and whoever else might be interested.
I don’t see why this one is so hard to believe. I know Cerberus is just in it for the money. But that’s true of ALL companies.
Given that the best way to make money on this seems to be to get Chrysler Lean and Mean then sell them off for much more. All the doom and gloom scenarious just don’t seem to pan out.
Whether they meant to be in this situation or not, they are in it now.
Perfect pic for playing “Guess the Caption” !
There are absolutely none of you who think this could turn Chrysler public again?
There are absolutely none of you who think this could turn Chrysler public again?
A lot can happen, but it’s likely that it would make more sense for Cerberus to sell it to one of these partners than to take it public. A partner would pay a premium for it, because they have something to lose by not winning the bid.
All that assumes that the partnering efforts work out, and that’s something that I would not assume too casually. It’s a gamble, but Cerberus paid little enough for it that it’s at least theoretically worth the risk. If successful, Cerberus will sell it for many times more than they paid for it.
The partner will likely be a foreign company, so you will ultimately end up with the Big 2 when all is said and done.
Pch– I think you’re underestimating the feelgood vibe Cerberus could engender in the American public if they restored a storied American brand and guarded it against being purchased by off-shore investors.
Turning an American brand into a low-end, foreign-product clearinghouse label(akin to what happened to RCA,Magnavox, Zenith, even the ‘Marts’– but those are macrolabels) might bring some consumer backlash. I think the potential for such tremendous negative press(“we fix American companies, and sell them to wealthy foreigners for a profit” is not a mission statement many American car people will find palatable) will keep Cerberus from fumbling with Chrysler.
I will continue to believe that Chrysler is best when she’s down, and that there are quite a few surprises coming that will help her retain her title as the Jean Grey of America’s automobile manufacturers.