TTAC newcomer Ken Elias reckons his most excellent Chrysler Suicide Watch 37 flushed Auburn Hills' proverbial grouse from its metaphorical heather. Whatever the cause, ChryCo to reassure the world that it's not about to swan dive by revealing some of its financials. Automotive News [sub] reports that the ailing American automaker claims "operating income" of $1.1b for the first half of 2008. Jim Press, Chrysler co-president, said the $1.1 billion was Chrysler's earnings before interest, taxes, depreciation and amortization. Chrysler also had $11.7 billion 'in cash and marketable securities.'" CFO Ron Kolka claimed the number included $2.3b in "restricted cash" and excluded $2.3b in Voluntary Employee Benefits Association assets. The overall number is higher than a lot of analysts expected, but it includes the $2b ChyrCo borrowed recently. The main question: is Chrysler playing silly buggers with the books?
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That would be “play-d’oh!”
Burn baby burn! Disco inferno! (Oops! sorry, I was reliving my youth.) Anyway, it seems that they have enough money to get thru the year (if the figures are correct). But GM losing 15b, however much is “one-time” charges seems much more serious, hence the rumors that Rick is toast.
Chrysler has become a joke with their spin doctors screaming how everything is ok after never ending bad news. Sales crashed 29% and they talk about having enough money? “Chrysler LLC said Friday that it is ahead of its financial goals for the first half of this year, despite slumping U.S. vehicle demand and tough economic conditions.”
Wow Chrysler must be the only company that can have sales crash 29% and still be ahead of it financial goals? Ya , ok Chrysler whatever you say.
listen if chrysler wanted to be anything more than average they better make a change at the top this whole canadian looking out for canadian makes me ill.closing plants in the usa to build vehicles/vans in canada that sell mostly in the usa seems short sighted. in a world where the word loyalty is almost nonexistent chrysler seems ready to show theirs to canada. if you dont build it in the usa dont sell it here!!!
if you dont build it in the usa dont sell it here!!!
What have you got against Walmart?
It seems I remember that at the time Cerberus took Chrysler private the big advantage was suppose to be that they would not have to worry about financial criticism because they would not have to report financial data.
But now the lack of financial data is fueling bankruptcy speculation since the only reliable information that is public is very negative.
Chrysler’s models do not inspire confidence or customers except for the Challenger that makes Chrysler look like something for the history books. Their sales units are way down. And they do not seem to have much of a plan to deal with the situation except to take on some mediocre partners from abroad.
Yes, Chrysler is playing silly buggers with the books. They think they can get away with it is the reason. But being private is no guarantee against bankruptcy as evidenced by the the rising bankruptcy tide crossing the economic beach.
Crumblerbus has the worst product line in the United States and Ethics to match.
prousa1, Chrysler hasn’t added new plants here for eons. They have also closed plants here. The only assembly plant still operating is the Brantford plant they purchased from AMC back in the day.
BTW, if you don’t make it here don’t sell it here…does that include oil?
Small correction the Chrysler Plant is in Brampton, Ontario NW of Toronto and not as Nick R wrote! Its a real jem of a plant, very modern and I am sure when Cerberus sell there “God child” some Car maker will snap it up promptly
prousa1:
You’re right, the word loyalty is nonexistent in the world. Just about everything is sold and produced globally from globally sourced components and engineering. Consumers demand the lowest prices, markets are very competitive, and raw material/energy prices are increasing. One would have to go very far back in time to be able to only purchase what is produced in their own country.
Hey another correction, Chrysler also has a Canadian Plant in Windsor making Vans! The only advantage to making vehicles here in Canada was when our Dollar was at .65 cents, now that its above or at Par most days and therefore Chrysler and others dont make as much money at they used too!
We have lots of Oil here, and you people in the USA get most of it, so I dont know why you are complaining about Canada making vehicles, you have no need to Drill offshore as 60 percent of Alberta crude goes directly to Chicago and a new pipeline will take that crude to the Gulf as well, com on people lighten up! Next to the Middle East Canada has the second largest Supply of Petrol including Natural Gas as well as three new Diamond Mines in the NW Territories!
I’m inclined to believe Nardelli’s numbers, sort of.
I’ll spare you the back-of-the-envelope calculations that got me here, but I’m guessing that Chrysler could have hit those numbers if they managed to cut their operating expenses by about 25% as compared to what they had under Daimler.
The two-tier wage contract probably got them a bit of that savings. I think that it is likely that Cerberus should have a lot less administrative overhead going onto Chrysler’s books than Daimler would have, which should also save them something.
However, I would bet that the lion share of the savings probably came from the money saved from slowing production and by slashing R&D, and by capitalizing as many of those R&D costs as possible so that they don’t impact the earnings calculation.
I’m going to go against the grain here, and say that Cerberus has a way to go before this thing crashes and burns. My bet is that they will continue to try to outsource production to third parties, so that they don’t have to carry the costs and the risks of making the product. I doubt that it will work, but they’re going to try.
I am in agreement with pch101- do we have visibility into opex?
Cerberus has a bad track record. They have / had several companies recently taken into bankruptcy and they don’t inspire any confidence with their management of GMAC or Chrysler. Management is known to be disengaged from the organizations they have purchased and managed. They seem to be two or three steps behind with every action they take. Don’t see that changing in this crisis.
They rely on expensive turn-around specialists and consultants from outside the industry. Hopefully they’ll have the courage to take the financial hit and get out of the business. Otherwise, we’ll see more surprises and hear more spin.
Here’s my question. If Chrysler has so much damn money, why did they borrow $2B more?
For cash flow? Not for keeping leasing as a marketing tool, that’s for sure. Nobody would lend them anything for that as we found out last week. Why incur interest costs on $2B if you don’t need it? The mind reels.
We don’t need accounting subleties to tell us the situation is totally dire. I’d wager that $1.1 billion in operating income includes about $3.1 billion of unpaid supplier bills that have been put off for 180 days. (1.1 plus 2)
Still, it’s a private business and they can say what they want as they live in their own private hell, which Cerberus doggedly guards.
Unlax, all is well, They are just being “aggressively conservative ” heh heh
I’d wager that $1.1 billion in operating income includes about $3.1 billion of unpaid supplier bills that have been put off for 180 days. (1.1 plus 2)
You wouldn’t win that bet. Chrysler is almost certainly reporting its earnings numbers on an accrual basis, not on a cash basis. Those earnings are not a measure of cash flow, and stalling out the vendors would not change their earnings at all.
If Chrysler has so much damn money, why did they borrow $2B more?
They probably borrowed it because they could. Companies use some amount of debt in order to improve their returns and to hold onto their own cash.
But that $11.7 billion is really not very much money at all. GM has double that amount, and it’s very much in trouble. That amount of cash in the bank tells me that if this outsourcing plan doesn’t work, this venture is going to fail.
Dropping the leasing made perfect sense, given the present situation with falling SUV and truck residuals. They make no sense for Chrysler, Chrysler’s creditors or for third-party leasing companies, that couldn’t possibly offer leases at prices that are low enough to appeal to anyone.
Ending the leasing will not be good for revenue, but it avoids creating the losses that leasing would create in the current environment.
What the termination of the leasing program illustrates is that it is important for car companies to not neglect their product lines, otherwise they end up with this sort of situation. If they had a lineup of vehicles that maintained strong, predictable residuals, they would probably still have a leasing program.
What Chrysler needs to do if it is going to survive is starting selling cars that people want. That’s a tough challenge, and I wouldn’t place high odds on it.
“If Chrysler has so much damn money, why did they borrow $2B more?”
“They probably borrowed it because they could. Companies use some amount of debt in order to improve their returns and to hold onto their own cash.”
Actually they borrowed it becuase it was a “use or lose it” deal from Dumbler. It was part the deal to sell Chrysler to Cerberus. If they didn’t borrow the money by August of this year it was off the table. They borrowed early because since June sales have fallen off a cliff (for just about everybody). Has anybody wondered why Dumbler kept a 19.1% share of a company that some of their people said was “worthless”?
Chrysler has 28 assembly, component, and stamping plants in North America. Three are in Canada and four are in Mexico. The other 21 are in the good ‘ole US of A. They are also building 2 new plants in Michigan, one for rwd axels and one for the new DSG transmisions. I am mystified when I hear comments about Chrysler not making anything in the US.
“If Chrysler has so much damn money, why did they borrow $2B more?” That was part of the deal when they bought Chrysler from daimler. It seems no other lenders are willing to lend Cerberus any money thus good-bye leases. Cerberus is run by a bunch of idiots IMO. When they bought a 51% in GMAC I couldn’t believe how clueless these people were to the obvious bubble in housing/mortgages. Cerberus buying chrysler just as the credit crunch exploded proves IMO that these people are not as clever as their money seems to indicate. The bath they must be taking on GMAC and Chrysler is funny to watch.
i was likely asleep, but did Cerberes buy GMAC?; i thought it was KKR
I feel a bit sad at the demise of Chrylser. My first car was a Chrysler (a ’91 Jeep Wrangler), my mother had a great K-car derived ’89 Caravan, and there is a Chrysler plant in my old hometown that employs a good number of workers…
On the other hand, Chrysler has very few appealing vehicles these days, they diluted the Jeep line, the Avenger is a joke, the Sebring is hailed as the worst domestic car made, and while the 300C/Charger/Magnum/Challenger could have been beautiful success stories they continue to put such crap interiors into them that even for the great value they have on the used market in the Hemi trim, I can’t face myself to buy one.
Then again, my alma mater is poised to buy the land from the Chrysler plant in my old home town (which being the fount of Durangos and Aspens, is quite ready to be sold) and since a new football stadium will result, I can’t be that upset. Also, since I sell Fords now, and Chrysler and GM are both in a steep nose dive, it only helps my own bottom line more…
It’s a shame to say goodbye to a company that has pioneered some wonderful vehicles in its time, and which bears its name to possibly the most beatiful building on the NYC skyline, but I suppose Chrysler has really been dead since the ‘merger’ with Daimler. Alas, what could have been…
Plenty of cash for Campi and Nardelli to take with with they get sold or BK’d.
Do they think we are stupid.
When you borrow cash it is not yours in the way it is when you earn it and wheelbarrow it to the vault like Toyota, Honda, Daimler to name a few.
One of the crushing things that will soon put all three of the (we have plenty of money companies)away is that word interest. A good credit worthy company has to pay say prime rate for borrowed money, a badly rated company has to pay much more and sign all kind of clauses triggering advanced repayment of the money if they cross under the guidlines set by the lender (again we say this is not really the big Three’s money).
Like the Government, a huge and useless for developement of future products (or improving existing ones) is that monthly interest weight payment around their neck. And just like Joe Sixpack who borrows against his house, the auto makers are putting up the real estate also (and anything else of auctionable value).
So, unless they turn the corner like old fashioned stemming the losses in market share and finally going positive, the taking or more money is counterproductive to survival.
As another blogger said, if you are shrinking your way into profitability (because you can’t grow your way there) then why need more money all the time?
“prousa1 :
August 2nd, 2008 at 2:02 am
listen if chrysler wanted to be anything more than average they better make a change at the top this whole canadian looking out for canadian makes me ill.closing plants in the usa to build vehicles/vans in canada that sell mostly in the usa seems short sighted. in a world where the word loyalty is almost nonexistent chrysler seems ready to show theirs to canada. if you dont build it in the usa dont sell it here!!!”
You don’t know much do you? They have already made a change at the top, LaSorda is not in charge, Press and Nardelli are in charge.
Furthermore, remember that they cut four vehicles last year. Not one of those cuts was at an American facility. Two were Canadian sourced, one from Mexico and another from Germany.
So no, Chrysler has not shown its loyalty to Canada. At least no moreso than it has to the US, Mexico or anywhere else. It is a business after all and loyalty means far less than the almighty dollar.
“mirkothetruthaboutcars :
August 2nd, 2008 at 10:30 pm
i was likely asleep, but did Cerberes buy GMAC?; i thought it was KKR”
Cerberus bought 51%. GM retained the rest.