The Freep reports that Chrysler’s cash reserves will fall well below the $2.5 billion the firm needs to survive sometime in March. Based on a liquidation analysis in Chrysler’s latest viability plan, Auburn Hills will be down to $1.3 billion by the first of April. According to the same analysis, Chrysler would need $25 billion in Debtor-In-Posession (DIP) financing to survive through Chapter 11 reorganization, a process the firm expects to last two years. And if the private sector won’t provide it (it won’t) and the government won’t cough up DIP financing or more loans (it shouldn’t), Chrysler will begin to liquidate its assets in April. After all, why should Cerberus lift a damn finger? But if liquidation does occur, Chrysler would dump $2 billion in pensions and $20 billion in health care obligations on the government, not to mention defaulting on the loans it currently owes the government. Meanwhile . . .
Moody’s has downgraded ChryCo guardian angel Fiat’s credit ratings into junk territory. According to the credit ratings firm the downgrade “reflects the significantly negative free cash flow in FY2008 leading to a material deterioration in Fiat’s financial flexibility with reported net industrial debt deterioration of €6.3 billion to €5.9 billion.” Oh yeah, and GM has announced that it will (finally) announce 2008 full-year financial results on Thursday morning. There won’t be much to enjoy anywhere in that mess, but as with Chrysler, the cash-on-hand and burn rates will be especially important.
The government insures pensions with the self supported PBGC. It does not insure retiree health benefits, so the $20 billion government healthcare liability is a lie (lying is nothing new for Detroit automaker propagandists).
What the PBGC covers:
http://www.pbgc.gov/workers-retirees/benefits-information/content/page13181.html
The PBGC does not guarantee health insurance:
http://www.pbgc.gov/workers-retirees/benefits-information/content/page13178.html
Sure, some people might qualify for Medicaid if they lose their Chrysler health coverage, but that will be a small fraction of the cost of the $20 billion top tier Chrysler health benefits. And those people probably won’t qualify because of their pension income anyway.
Chrysler’s health insurance supplements Medicare, it does not replace it, so there will be no additional Medicare costs.
The “loans” were never going to be repaid anyway, so they don’t count.
I think $2 billion is a pretty good price to be done with this dead company.
And the $2 billion in pensions won’t have to be covered by taxpayers anyway, because right now the PBGC is solvent and funded independently from the government.
–> Chapter 7.
Chrysler buy-out deadline has been extended into March with no hard date set.
I wonder if they plan to save cash by removing the buy-out offers from the table?
I am looking for a loaded T&C for half price, maybe better.
GM financials on a Thursday morning?
Gotta’ be a reason they are breaking the Friday/weekend recovery tradition.
I wonder if the Feds are forcing it. “No more candy until you fess-up”.
Well that should be fun.
Bunter
Frankly, if Cerberus Chrysler were serious about reorganizing the company, they would have already closed down all their front wheel drive offerings, except for the minivan.
That will leave Dodge trucks, the 300/Magnum/Charger, Challenger, minivans and a couple of Jeep platforms.
If they can’t make it or won’t try to make it as a smaller, leaner automaker – then it is time to liquidate.
OldandSlow: I contradict that. It isn’t that they are overtly bloated (ala GM), Chrysler’s main downfall is that their products suck. If Chrysler’s products today were as good as their products in the late 90s, they wouldn’t be in this mess.
Anyone with a buyout option at Chrysler should grab it and run.
My company is currently is currently in Chap 11. After they filed, they announced that when we get cut (massive cuts soon) we get nothing. No severance packages, no termination pay nothing. You get that days pay and a boot out the door.
If there is a buyout option, make sure the payout is soon and take a lump sum over ongoing payments. People who were previously let go with staggered severance benefits were cut off the moment we filed for creditor protection. They can now get in line as a creditor for their lost severance, but they will never see a penny.
“No_Slushbox” is right. I don’t know where that health care number came from. But unless there is something weird going on, the taxpayers are not on the hook for the medical care any workers above and beyond what is offered by Medicare.
Regarding the PBGC, on paper they are currently overdrawn. But unless there is a run a PBGC assets, they still have enough money to keep going and hope their investments recover and close the unrealized liability gap they currently have.
The reason for this is that the pensions they insure have had their investments pummeled. Pensions that used to be fully funded are now underfunded. PBGC is liable for that gap. But that liability is not realized until PBGC takes over because of abandonment or fraud.
What has Nardelli done so far at Chrysler. I mean really you could put a cutout of yogi bear at his desk and it would not make any difference.