The following Q&A was published on Chrysler's Firehouse media blog. TTAC republishes it here in its entirety, without editing, to provide insight into Chrysler's call on the public purse, and the ailing automaker's plans for the future. Such as they are… "The campaign season is in full swing, with the Democrats holding their convention in Denver this week, and the Republicans meeting in Minneapolis-St. Paul next week. John Bozzella, Vice President of External Affairs and Public Policy, will be at both conventions, hoping to win over Congressional support for funding the auto industry’s technology transformation to build a new fleet of fuel-efficient vehicles. We talked to Bozzella from Democratic Convention in Denver about the effort.

Q – Why are you in Denver this week and what are you hoping to accomplish?

Bozzella – We’re in Denver for a number of reasons, most importantly, to work on funding this important technology partnership between the auto industry and government. This partnership will drive forward advanced and alternative propulsion systems at a time when it’s particularly important to deliver improved fuel economy in our vehicles, while reducing greenhouse gases. We have an opportunity this week with the Democrats in Denver, and we’ll be going to Minneapolis next week to meet with Republicans and make our case. We hope to build some momentum to get this technology partnership funded before next year.

Q – Why would something like that be important to both the country and consumers?

Bozzella – The auto industry is an important contributor to the U.S. economy. Not just regionally, but nationally, through dealerships, parts suppliers, etcetera. Millions of jobs depend on a healthy U.S. auto industry.

At the end of the day, the ability to develop and produce this technology ourselves, and here in the U.S., will produce value across the economy. A home grown solution for batteries and other advanced technologies will impact far more than automotive manufacturers. It could also provide a much needed financial shot in the arm to the millions of others who are involved in the development and marketing of the technologies. That means jobs and a boost to our economy.

Also, let’s go back to last year. Chrysler supported a broad energy bill last year that included significant increases in fuel economy standards over the next 10 years. We were pleased to support that initiative. The bill also included a partnership to transform technology and to support the industry during its retooling to produce more fuel-efficient vehicles. We supported the whole bill which includes both of those provisions. If we go back to last year when that bill was signed, it was recognized by us and by the Administration that that was an important initiative and a critical partnership.

This partnership provides loan support to allow us to continue to make these multi-billion dollar investments, to continue to transform Chrysler and the industry at a time when the capital isn’t available to do so. That’s why it’s important to Chrysler because it gives us the access to capital to drive ENVI, to drive our hybrid strategy and to continue to make progress across the fleet on fuel economy. It’s important to the country because we can’t make progress on energy security and reducing greenhouse gases without a significant contribution from the auto industry.

I would add that there’s also a national security component to this. What would happen if the United States completely gives up its manufacturing sector? What would happen? We have as a nation, especially in the last century, called on the auto manufacturers to be the arsenal of democracy and to really provide huge military support during times of crises. That’s another element to this, to retain this manufacturing capacity, and we’re going to develop an advanced manufacturing capacity at the same time.

Q – Some call this a bailout. Is that right?

Bozzella – What we’re talking about is this is a partnership for technology transformation. By partnership, what the government is doing is providing loan support. This is not a blank check. This is not a Freddie Mac and Fannie Mae exercise. This is a partnership and providing loan support at a critical time to improve the country’s fuel economy. The notion that this would be considered anything other than a partnership seems beside the point to me. Last year, when Congress enacted this bill and the President signed it, nobody called it a bailout then. Back in December of 2007, I never once heard that word. Never once heard it. If it wasn’t bailout then, how is it a bailout now?

We have set a course to dramatically increase fuel economy in this country through increases in CAFE standards. What we have said in response to that is we are all in – we are going to deliver it, we are going to do it, and we are going to move forward. What Congress also said is let’s form a partnership to ensure that we in the United States have the capacity to have this technology leadership here. That’s what we talked about last year, and that is what we’re trying to finish this year. We’re finishing that business, and it is nothing more or nothing less than completing the lap on what was established last year.

Q – It sounds like you’re getting some political support this.

Bozzella – We’re seeing momentum to get this done. The support for this was bipartisan when it was enacted last year and remains bipartisan today. And also, we see support in both Houses. We are hopeful that we can complete the funding of the program this year.

Q – You’re also seeing some support in the press for this. One example is a blog by CNBC reporter Phil LeBeau. You can access LeBeau's blog "The Big 3 DO Need Federal Help" by clicking this link)

Bozzella – I think he framed it in a very appropriate way. What he’s essentially saying is, let’s not call this a bailout, let’s call this what it is, which is a significant and robust partnership to make sure we make progress as a nation. I can’t think of a more appropriate role for government – in contrast to bailing out the industry, provide support for the industry as it transforms itself. That’s the point we’re making. You can make a fairly strong contrast between a blank check-type bailout, which we’ve seen in recent months in some sectors of the economy, and a program that helps the industry transform itself."

Chrysler doesn't do well outside it own backyard, or play well with others. The American automaker's attempts to expand globally in the early ‘60s ended with Chrysler selling their European operations (Rootes Group, Simca and Barreiros) to PSA Peugeot Citroën. In the 70's, Chrysler off-loaded their Australian subsidiary to Mitsubishi. ChryCo's last U.S. partnership with a Japanese manufacturer (Mitsubishi again) ended on less than cordial terms. The "merger of equals" with Germany's Mercedes-Benz almost [may actually have] killed it. So why would Chrysler entertain the idea of another off-shore partnership? And why would Nissan ever want to partner with an automaker as moribund as Chrysler?

Chrysler has inked an agreement with Nissan whereby the Yanks will build a full-sized pickup to replace the transplant's dead-in-the-water Titan. Should the deal come to fruition, Nissan will be "free" to stop producing their four-wheeled Dodo. They can then convert their Mississippi Titan plant to produce more commercial, commercial vehicles.

In return, Nissan will build a small car for Chrysler. And now, even as Chrysler says they have "no new alliances" to announce, the media suggests that Nissan will also build some version or another of their Altima midsized sedan for Chrysler dealers. Although the move transforms the much-touted "Project D" into "Project Dead," the automotive "outsourcing" would save Chrysler tens of millions of precious dollars in product development. Oh, did I mention Chrysler's contract with China's Chery to produce a subcompact for Dodge? Same deal.

Connect the dots and you have the meta-strategy outlined here before: Chrysler as K-Mart. It's only a matter of time before ALL of Chrysler and Dodge's products would be, in effect, store brands: other people's products labeled as Chryslers/Dodges. IF it has the time, Chrysler will maintain factories for their truck lines (operating at a reduced capacity) and get out of the automobile manufacturing business entirely. 

So what's in it for Nissan? A line of rebadged Nissans may sound like just what the doctor (Z) ordered for Chrysler, but what chance does a Nissan badged Ram have?

History says not much. In the ‘90s, Ford assembled and sold the first generation Nissan Quest minivan as the Mercury Villager. Splat! After 2002 Ford and Nissan went their separate ways. In fact, American-badged versions of imported brand vehicles have always sold poorly, especially compared to the original. Think Quest/Villager, Matrix/Vibe, Eclipse/Talon, Corolla/Prizm.

Likewise, the import-branded version of American trucks have been sales zombies. Chevy Colorados did nothing as Isuzus. The Ford Ranger goes nowhere as the Mazda B-series. The Dodge Dakota sells even more poorly as a Mitsubishi Raider. A Nissan Dodge Ram might do better than the Titan, but that says nothing good about either truck.  

One can only surmise (as many have) that Nissan's simply testing the waters, trawling for the remnants of Chrysler's production capacity, easing the eventual hauling-up of same. One can also look at history and see why Nissan would consider cozying-up to Chrysler: the company's [once and sole remaining] "crown" jewel. Jeep.  

Obviously, DaimlerChrysler/Chrysler has done much to damage the iconic brand. Jeep sales are down 21.2 percent year-to-date (YTD). The Commander (down 54 percent in July) and the Compass (down 45.9 percent in July) are disasters. And yet the not-so-great Jeep Patriot is up four percent last month. The model offers proof– if proof be needed– that Jeep remains a powerful brand with excellent potential.

European and U.S. fuel economy regulations or no, with Nissan's connections in Asia and Renault's presence in Europe, a Nissan-owned Jeep could become a world-wide brand. Yes, Jeep's cursed; every company that's bought it has gone to the wall or belly-up at some point. But the brand still sings its siren song, all these years later.

The question is, of course, can Cerberus hang on long enough to strip and flip Chrysler/Jeep outside of C11? Moody's just downgraded ChryCo deeper into junk bond territory and bestowed B2 status on Chrysler Financial. Cerberus isn't in the habit of losing money. They'll have to do something soon. Selling off Chrysler NOW seems to be the best way to stop the cash hemorrhage.

Nissan isn't stupid enough to swallow Chrysler whole (especially bits and pieces can be had for pennies on the dollar). Nissan would end up with unneeded production capacity, outdated factories, the UAW, segment-trailing models and an executive staff that seems to excel at losing money. Other than the full-sized truck lines and Jeep, everything else would be surplus to requirements. Any thought of taking Chrysler back upscale would run headlong into Infiniti.

Nissan's supposed production agreements with Chrysler give Cerberus more credibility (i.e. time) with its financial backers. They also give Nissan a chance to see what's under the hood before the auction starts. It's a win – win situation– until someone loses. Whatever happens, that won't be Nissan. 

Chrysler Financial has pulled the plug on new vehicle leases. Given ongoing bankruptcy rumors, the automaker’s co-Prez immediately manned the PR barricades. Jim Press reassured the world that Chrysler is simply diverting lease subsidies into “traditional financing.” That way, “many customers” could enjoy “about” the same monthly payment that they “would have had” in a lease. Meanwhile, ChryCo spokeswoman Shawn Morgan sang the same old song. "Despite the challenges, Chrysler continues to meet or exceed its plan on all financial metrics." C’mon, really?

Talk about the smartest guys in the room! This statement assumes that Cerberus Capital Management knew the U.S. new vehicle market was about to implode when they bought Chrysler in spring 2007. If so, talk about disinformation! At the time of Chrysler's purchase from Daimler, Cerberus Chairman John Snow said: "Cerberus believes in the inherent strength of U.S. manufacturing and of the U.S. auto industry."

Inherent maybe. But since that fateful day last August when Cerberus took ownership of the Pentastar, the domestic auto market’s gone south. South Pole in the winter south.

In fact, truck and fleet car-heavy Chrysler couldn’t be worse positioned for the economic downdraft. Its cash cows are dead; the slaughterhouse is backed-up with carcasses. Their revamped minivan is selling less briskly than the model it replaced. The new Dodge Ram is scheduled for a fall launch, but it won’t/can’t get out of the gate unless dealers can get rid of the old Rams– which are stockpiled to fences. Many Dodge dealers have trucks on the ground that have had birthday celebrations.

The numbers speak for themselves…

In the first half of 2008, ChryCo sales slipped some 250k units compared to ’07. That’s roughly a 22 percent decline. Chrysler’s truck sales are down 25 percent, the biggest loss of any major truck maker. The automaker’s overall market share has dropped 1.8 percent; it’s now less than 12 percent. We already know the impact of sagging sales and lost market share on Ford’s financials. Does Chrysler CEO Bob Nardelli really expect us to believe that his employer’s been meeting or exceeding its projections? 

To accept that assertion we’d have to ignore Daimler’s Q1/08 public financials. These stats suggest that Chrysler Holdings (including the automotive ops and the finance arm) lost a staggering $2.9b in a three month period.

Not at all says Chrysler. Daimler included a whole bunch of items which cannot be used to make such a calculation. We lost only $509m. One of those “excepted items” includes a $200m difference due to US and Euro accounting standards. So Chrysler didn’t recognize certain expenses but Daimler did? 

You’d be forgiven for thinking that under a more "aggressively conservative" accounting approach, Chrysler Holdings lost $700m in the first quarter, maybe more. Any way you cut it, it;s bad. Yet all we get from the CEO's office is an exhortation to ChryCo employees to “stick to the course we have set for ourselves for a return to profitability.”  

No one beyond Cerberus founder Steven Feinberg’s inner circle of executives and bankers knows the exact truth about Chrysler’s financials. In the absence of solid information from Auburn Hills about the automaker’s financial health, speculation about Chrysler’s future, or lack thereof, is running rampant.

And why not? It's clear that there ain’t no mo’ money available to the company. The bankers have put down their ten-foot poles and run. If the well runs dry, that’s it, the gig is up. 

Lenders to Chrysler’s suppliers, vendors and dealers are getting nervous. Extended payment terms, selective invoice discounts, and for some, delayed payments, exacerbate the tension. We’re told that there’s $7b in the kitty. But every dollar is precious. Prudent cash flow management or an internal scramble to manage the cash drawer to keep it from emptying? This could be the prelude to the “run on the bank” scenario RF mooted for GM back in Delphi’s dark days.

The dominoes will start to fall if and when a lender to a Chrysler supplier decides it doesn’t want to continue providing financing. Credit gets cut off. Facing extinction, the supplier puts Chrysler on a “payment on delivery basis.” The fire spreads. Every supplier insists on cash on delivery. Word gets out. Dealers stop ordering vehicles. Chrysler runs short of cash. Game over. 

To forestall foreclosure, Cerberus needs to publish Chrysler’s financials (including the financial arm). If the automaker’s doing better than we think, that’s great. We’d like to share in the brilliance of the turnaround. Chrysler’s camp followers will support Nardelli’s public proclamations. Dealers and suppliers will have more confidence in the company and the stewardship by Cerberus.

If the dark clouds of bankruptcy are hovering over Auburn Hills, well Ford and GM aren’t doing so great either. At least it’s out there for everyone to see. But Chrysler’s continuing drumbeat of plant shutdowns, employee layoffs, sales declines and now a cut-off of leasing just leads to speculation, none of it good. The question remains: how much of it is right?

The breakup of Chrysler has begun. It’s been done quietly, in the open, but under obnubilating nomenclature. That last phrase says it all. Why lie when you can make the truth so damn confusing? While Cerberus denies imminent sell-off, a cadre of automotive executives has Chrysler on a hook, passing around a felt tip pen. In fact, a pre-break up party is the only way of explaining some of the crazy-ass deals the three-headed dog has been fetching lately.

To wit: April 15. Chrysler and Nissan agree to build big vehicles for each other. Nissan will make a small, fuel-efficient car for Chrysler, shoring-up a hole they created by letting the once successful Neon whither and die. This makes sense, kind of, for the dog.  Chrysler has no small car in a blooming small car market. 

Nissan, on the other paw, generates a new competitor for itself. The Versa and Sentra are performing well in the new $4.25 a gallon US. But not as well as Honda’s Fit or Civic, or Toyota’s Corolla.  So let’s see… if you are in third place, what’s the best thing to do? Take a lesson from the leaders and refine your product? Or, take a lesson from the guys running in the opposite direction and badge engineer your current cars into vapor?

And that’s just half the deal. Chrysler’s going to build a new full-size truck for Nissan. Who the what now?  Chrysler’s truck business fell 48.1 percent in June. It’s off 30.4 percent for the year, and last year wasn’t that great. Nissan wants a piece of that? Doesn’t Nissan already have a full-size truck?  Built in Canton, Mississippi? Yeah, let’s ditch that for a Ram knock-off from Saltillo, Mexico. 

Again, let Toyota keep working their platform till they get it right. It’s foolish when you can just go buy a bunch of Dodges. That’s supposing that you need a full-size truck on your lots in the first place, which is debatable when you’ve made it from 1914 to 2004 without one.

Exactly how much of Renault – Nissan’s resurgence can be attributed to CEO Carlos Ghosn’s brilliance is always up for discussion. It’s tough to find someone who says he’s outright stupid, though. Most reports label him smart. Ghosn says the Chrysler deal will save millions in development costs and provide more efficient use of manufacturing capacity. It’s the kind of statement that seems to make sense– until you place it in context. The American market has contracted, the dollar is down against the everything and trucks are no one’s growth potential. 

Ghosn also said he wants a third, preferably North American, leg for his stool. He played with GM two years ago, but that went the way of the Datsun. Nissan and Chrysler forged a transmission deal in 2004 and announced a Versa re-badge for South America back in January. He’s been trying to form a backroom mega manufacturer for years. Ghosn doesn’t want trucks. He wants inroads.

Nissan is not the only “strategic partnership” with a knife and fork, waiting until everyone is seated. Chrysler builds the Routan for Volkswagen (a match made in purgatory.) They buy hybrid systems from General Motors to disguise Durangos and Aspens as modern vehicles. Chrysler has some kind of deal with Chery Motors, though its importance outside of China is unclear. They’ve also had talks with Mahindra & Mahindra. (Although who hasn’t, really.)

Chrysler has lost billions of dollars for its canine overlords, none of who got into the car business to make cars. They want to make money. Exactly how long they are going to wait for a profit is an X in the equation. Anyone looking at current sales figures and all the new product Chrysler’s not preparing can tell you positive cash flow is years away. As opposed to slicing off branches, divisions and units, which can serve-up cash tomorrow.

It is easier to sell to people with whom you are already doing business. If your plant is tooled-up to build Nissan Titans, why not become a Nissan Titan plant? Getting a hold of 3,700 Chrysler dealers across the heartland of America is, conceivably, a good idea for someone who needs a U.S. presence. OK, maybe not all of the Chrysler, Dodge and Jeep shops. But about 1400 stores might look tasty. 

VW wants to increase North American sales by a billion percent. In this economy, if you want to sell cars in the States, you better build them in the states. Yes, VeeDub’s looking to cut a deal down south. Meanwhile, anyone got a Sebring plant they’re not using?

Cerberus can tout all the synergistic original equipment manufacturing global positioning alliances it wants. The lines will have been drawn. Dotted lines. As in, cut here. 

(The following email was sent to Chrysler employees today. It was released to the media with a note which read "'This information should help you cover Chrysler. We also sent it to our employees to help them as ambassadors of the company – Nancy." We leave it to you, our Best and Brightest, to make what you will of it.) 

Keeping Track of the Facts on Chrysler LLC
By Nancy Rae
Senior Vice President, Human Resources and Corporate Communications

As the industry goes through a period of great change and a slowing economy, we all face difficult questions about the status of the industry and our company.  Following are a number of the leading subjects that come up in the media and in our daily conversations, as well as information you need to know and share:

The State of the U.S. Auto Industry in 2008 .

Our full year plan for the market in 2008 has been aggressively conservative, allowing us to be better positioned for the current slowdown.  We are clearly in a challenging environment, but continue to be focused on building a profitable enterprise for the long term. We are committed to good business practices despite the market slowdown such as reducing fleet sales (volume down more than 20% YTD) and dealer inventory (volume is down 67,000 units from a year ago).

The State of Chrysler
. As a private company, we are like a $60 billion startup with a real owner-operator mentality. 
. Despite the challenges, we are meeting or exceeding our financial targets.
. According to Bob Nardelli (in The Wall Street Journal), "Cerberus nor its backers are second-guessing the deal. They are not looking back." 
. According to Tim Price, Cerberus spokesman, "We are comfortable.  We are long-term investors.  Chrysler is ahead of its cash flow forecast by $1 billion."
. We currently have our top 300 leaders going through a comprehensive leadership development program consisting of five segments focusing on strategic thinking, operating excellence and leadership.
. We are developing project-specific alliances to help bring the world's best technology to our customers, as soon as possible. Examples range from working with Nissan on a new small car for global markets to partnering with GM, Daimler and BMW on hybrid technology.
. We enacted a 5 percent cost reduction on certain non-production materials and services as a part of ongoing efforts to reduce our cost footprint in a highly competitive marketplace.

Chrysler's Sales in 2008
. Worldwide sales are down 14% YTD, which includes YTD increases in Canada, Mexico and International Markets. Fleet sales in the U.S. were down 40% in May and 23% for the year.
. Sales are rising for new products, such as Dodge Journey (2nd best selling mid-size crossover in May), Dodge Avenger (+15% YTD), Dodge Caliber (+9% YTD), Chrysler Sebring Sedan/Convertible (+11% YTD), and Jeep Patriot/Compass (+65% YTD).
. Our long-wheelbase minivans' U.S. retail sales are up 30% YTD, and retail share is up.
. In Canada, Chrysler is the #2 best selling manufacturer in the country, and up 5.5% YTD.
. In Mexico, Chrysler's sales are up 5.1% YTD.
. Outside North America, Chrysler's international sales are up 8% YTD, with markets like China and Russia becoming a larger part of our business.
. Dealers have embraced Project Genesis, and we are making progress in transforming the U.S. dealer network. Through May, 58% of our dealers are tri-branded, compared to 50% a year ago.  In the U.S., we now have 3,488 dealers, down from a year ago 3,684.

Chrysler's Alignment with Marketplace
. Chrysler is better aligned than previously for the shift towards smaller, more fuel efficient vehicles.  We also believe there is a strong and viable pickup truck market going forward.
. Through May, our U.S. sales were 41% pickup trucks and traditional SUVs, and 59% cars, car-based crossovers, compact vehicles and minivans.  (Industry is at 33%/67% ratio)
. Chrysler has six vehicles that achieve 28 MPG on the highway: Dodge Caliber, Dodge Avenger, Chrysler Sebring, Chrysler Sebring Convertible, Jeep Patriot and Jeep Compass.

Chrysler's Launch Lineup for 2008
These new vehicles have competitive advantages and are well-suited for today's marketplace:
. Dodge Journey – A crossover with class-leading (25 mpg) with a 4-cylinder engine.
. Chrysler Aspen/Dodge Durango Hybrids – Full-size SUVs offering up to 40% improved fuel economy in the city at a price thousands of dollars less than the competition.
. 2009 Dodge Ram – There is no better way to fight truck buyer malaise than with our best truck lineup ever boasting breakthrough new features. The new Dodge Ram lineup will also soon add optional light duty diesel and hybrid powertrain options.
. Dodge Challenger – This modern muscle car will come with a fuel-efficient V6 option at an aggressive entry-level price of $21,995.

Harbour Report for Manufacturing Productivity
. This year, Chrysler tied Toyota for #1 in manufacturing productivity (avg assembly hours).
. Chrysler has the #1 assembly plant (innovative Toledo Supplier Park) and #1 engine plant (GEMA joint venture with Hyundai and Mitsubishi).
. The combination of lower hours-per-vehicle production and a more competitive wage rate helps us compete with the transplants.

Quality
. In the latest J.D. Power IQS, the company improved six points, and Chrysler and Dodge brands showed improvement.  Unfortunately, the Jeep brand was last in the survey due to concerns about the Wrangler Unlimited.  We can do better and we know it.
. Dodge Durango and Dodge Dakota were tops in segments for least problems per hundred. Chrysler PT Cruiser took second place in the "Compact Multi-Activity Vehicle Segment".
. We have a corporate wide focus on the customer.  As part of this, we have put in place the industry's first Chief Customer Office, Doug Betts, and the Customer Advisory Board. 
. Chrysler LLC has approved more than 400 improvements in areas such as better materials, fit and finish and quieter operation.

Commodity Prices
. In the wake of mounting pressure from ever-increasing steel and other commodity prices, Chrysler is managing its costs and revenues to partially offset spiraling commodity costs.  
. Chrysler will continue its overall commitment to deliver the best values in the business through increasing standard equipment with our New Day packages to creative incentives, such as the $2.99 Gas Guarantee and our industry-leading lifetime powertrain warranty.
. At the beginning of the model year, Chrysler added, on average, $1,200 of new content to the vehicles in its lineup.

Investing in our Future with Advanced Technology
. Chrysler is in the midst of a $3 billion investment in advanced powertrains to develop new fuel efficient engines, axles and transmissions.
. ENVI is Chrysler's in-house organization charged with establishing Chrysler leadership in electric-drive vehicles and related advanced-propulsion technologies.
. Chrysler's UConnect® is a Bluetooth® enabled voice-activated, in-vehicle, hands-free communications system that recognizes more than 100,000 words and is capable of learning new words. Voice commands can input addresses to the navigation system, select satellite radio stations and access voice mail. New for 2009, the hands-free system automatically downloads up to 1,000 phone book entries per phone.

. Examples of new advanced technologies available on 2009 models include:
. In-vehicle wireless Internet connectivity: coming from Mopar® by year end 2008.
. Rear Cross Path: Chrysler-exclusive system warns drivers of approaching traffic in the parking lot aisle during back-up maneuvers.
. Blind Spot Monitoring: exclusive to Chrysler and Dodge in minivan segment.

We are committed to continuing to share information with you.  As an ambassador for this company, we hope you will communicate this information in your conversations about Chrysler.

Nancy

Back when Cerberus bought Chrysler from Daimler, the new owner’s spinmeisters were highly animated. “We’re quicker than quick,” they proclaimed. “Our private equity owners don’t answer to The Street. We can make decisions– and get things done– fast.” The party line was designed to counter fears that Cerberus had bought-in simply strip-and-flip Chrysler. Uh-uh. They were going to restructure the ailing American automaker. Right now. And then… nothing. As Billy Preston said, nothing from nothing leaves nothing. 

There’s plenty of mystery and inconsistency surrounding Chrysler’s short-term future. Several suppliers tell us ChryCo’s changed payment terms from 45 to 60 days, and unilaterally lopped-off five percent from their bills. We know of one supplier that’s owed millions, that hasn’t been paid in months. This indicates a severe and entirely predictable cash crunch for a company whose CEO admitted (just four months after Cerberus’ purchase) that his employer was “operationally bankrupt.” 

But Chrysler’s paying other vendors the full amount owed, on time. And one of our Best and Brightest reports that Chrysler’s upped its seat orders for minivans, Dakotas, Journeys and some Jeeps.  At the same time, we hear rumors that Chrysler will file for Chapter 11 by August, to maintain the option of suing Daimler for selling them a bill of goods. And yet Chrysler’s trotting-out octogenarian legend Lee Iaccoca to rally the troops. Why bother with the warm fuzzies if the pink slips are at the printers?

But it’s what Chrysler HASN’T done that’s the real news. Two months after Jim Press left the top of Toyota to join the over-moneyed executives in Auburn Hills, the nets were all abuzz with model termination. Sure enough, Chrysler Pacifica, Crossfire, convertible PT Cruiser and Dodge Magnum were lopped off the dealer menu. Chrysler signaled that there was carnage more to come. Only… there wasn’t. Despite journalists’ helpful lists of DOA-mobiles– Jeep Commander, Dodge Durango, Jeep Compass, Dodge Nitro and so on– the models are still in production.

That’s as far as anyone knows. Sales of these vehicles are so far down the rat hole (e.g. Durango sales down 68.8 percent in May), their inventories are so large (e.g. there’s a 117-day supply of Jeep Commanders), that Chrysler could stop building them without much impact on, well, anything. With GM closing four truck plants and Ford slicing production as fast as it can, you’ve got to wonder why Chrysler– the “quick one”– doesn’t cut bait and fish. Where’s their “cut your way to prosperity” turnaround plan?

Chrysler can’t afford it. Lest we forget, GM and Ford are paying mega-billions to buyout their excess union workers. ChryCo’s private equity owners have deep pockets, but any large-scale effort to downsize their automotive holding would force them to borrow big bucks, miring Cerberus even deeper into their Chrysler quagmire. Clearly, sensibly, they don’t want to go there.

Besides, the REAL game is strip-and-flip. (Always has been.) Why commission wholesale structural changes when you’re going to break up the parts and sell them off? A lick of paint for curb appeal (i.e. a hybrid or something) and Bob’s your uncle. Alternatively, if Cerberus’ longer-term dreams of The Mother of All strip-and-flips have become a cash conflagrating nightmare, Chapter 11 protections will give Chrysler’s eventual owners the freedom to kill models, shutter factories and “modify” union contracts. Call it the “screw this, we’ll unload this thing as a fixer-upper” strategy.

Again, the signs coming from Chrysler are not clear on ANY of these points. Why would they be? Cerberus didn’t get to a size where it could afford to buy Chrysler (at a whacking great discount) by telegraphing their every move to the press or, for that matter, their own employees. We’ll just have to watch the signs– Company-wide summer break? ResCap going under?– to see if and when Cerberus says draws a line under this misguided misadventure.

In that sense, the real question here is whether or not Cerberus is at the point where they’d rather take a hit to their reputation than a hit to their finances. This makes Chrysler’s immediate future a contest between expediency (i.e. greed) and ego (i.e. hubris). While I don’t think that the fact that Chrysler is purposely mistreating some of its suppliers indicates that the company is preparing to pin the blame on the donkey, as some of our commentators have suggested, it does tell us that the end game is near.

There's no question in my mind that Chrysler is headed for dissolution. If Cerberus was going to “save” Chrysler they would be doing something, anything to that end. Never mind all the announcements about foreign partnerships. Black Tuesday has revealed that the time to act is now. (Well, three years ago.) Chrysler’s silence speaks volumes. It tells us the once-proud automaker’s final chapter is about to be written.

It’s getting close to the first anniversary of Chrysler going to the dog. While there’ve been job cuts and “market adjustments,” the shoes are still hanging. Chrysler is still a long way from being profitable. But it appears to be an equally long way from breakup. What exactly is planned? The truth may be that Cerberus isn't “planning” so much as “waiting.”

For Cerberus, buying Chrysler was a gamble. As you’d expect from New York money men, they did several things to “stack the deck.” First, they got the company for a song (under seven and a half billion) with some working capital included. More importantly, they took the automaker private. With no shareholders to whine about dividends, no “captain Kirks” to try to swing a takeover, Cerberus can afford to take the long view. And the long view says… go public. Or strip and flip. Either way, now’s not the time.

Cerberus’ holding pattern has less to do with ChryCo’s declining fortunes than OTHER carmakers’ declining fortunes. In other words, you can’t flip a company without a flipee. The current U.S. automotive market leaves very few players flush with cash, looking for an American dance partner. And those that are, aren’t. Splitting-up Chrysler’s assets is the only realistic alternative, and that idea poses involves many of the same issues.

At the moment, Jeep is only spinnable hunk of Chrysler. (No surprise there; Jeep’s had more “partners” than the widow next door.) Jeep is the only part of Cerberus’ entire car making operations with a positive cash-flow. While the profits aren’t enormous, the brand’s “trail-ratings” carry enough cachet to allow big mark-ups on simple vehicles. 

There are several problems with Cerberus selling Jeep sooner rather than later. First, while Jeep’s hard-core fan base is less (more?) affected by fashion than most, SUVs are not the flavor of the month. The new U.S. federal corporate average fuel economy (CAFE) regulations are in flux, awaiting clarification and California-compliance (or not). In any case, whatever Cerberus could get for Jeep now pales is comparison to what Jeep would be worth in a hot, relatively settled market. 

Next and again, who’d buy Jeep? With credit in short supply, a US-market outsider would have trouble stumping-up the dough to snag it. And those foreign firms that could afford Jeep (BMW, Toyota, Honda, etc.) either already have off-road products or don’t want them. VW is busy. Daimler is sitting in the corner, grinning.

Renault/Nissan is the only like foreign suitor— only they aren’t. Carlos Ghosn may make noises about mergers, but there ARE limits. And lest we forget, NONE of the imports are brave/stupid enough to buy a unionized company, bringing the (free!) Trojan horse through the gates. Domestically, Ford just sold Land Rover. And although GM has decades of experience cannibalizing itself, even RenCen knows it doesn’t need Hummer AND Jeep.

Besides, what would Cerberus do with the rest of the company after they stripped-out the only part anyone wants? China is often named as a potential buyer, but even for pennies on the dollar for U.S. production capacity and access to thousands of dealers, they’d see Chrysler as the financial sinkhole that it is.

No matter how much— or more likely little— Cerberus made from a larger Chrysler breakup, it could be the volte face that launches a thousand lawsuits. Shuttering Oldsmobile cost GM billions; the General’s terminal brand wasn’t a fraction the size of Chrysler, Dodge or Jeep (never mind the three brands combined). Filing for bankruptcy and THEN selling off the bits would mitigate Cerberus’ legal risk, but it’s hardly a profitable exit strategy. If nothing else, Chapter 11 would decimate the brands’ street value.

As I stated at the beginning, any fool knows that Chrysler is a long, long way from profitability. But who said anything about profitability (other than me)? Cerberus doesn’t have to “build equity;” they don’t have to justify their decisions to institutional shareholders. 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.

Watch as Chrysler reins-in R&D while “consolidating” dealers (i.e. watching them die). This viewpoint explains “quicker than quick” Chrysler’s strange reluctance to cut vehicle lines that everybody (but their few remaining buyers) know are dead in the water. The superabundance of product forces dealers to go tits up, and leave their proverbial apartments.

Remember: Cerberus is in this to make money, not to “save Chrysler.” They need to get their $8b back, plus a little extra (Daimler holds 19.9 percent). To do that, all they have to do is run the business into the ground. When the time comes to “sell Jeep, liquidate the rest,” Chrysler’s corporate coffers will be conveniently bare (or pretty close). The lawyers can fight over the bones. And the “dog” will have had its day.

“It’s a New Day.” Unless you’re terminally ill or the guest of a terrorist cell, this observation won’t come as much of a surprise or, in itself, cause much delight. And yet that’s the tagline for the [now] combined Chrysler, Dodge and Jeep brands. In an explanatory TV ad, an animated child tells viewers that the American automaker will [now] listen to YOU and build cars the cars YOU want. The ad is an excellent example of what Adolph Hitler called The Big Lie: a falsehood so “colossal” that no one would believe that someone “could have the impudence to distort the truth so infamously”. To wit: if any single automaker ISN’T building the cars YOU want, it’s Chrysler.

Ipso facto. Chrysler’s U.S. market share is swirling around the toilet bowl. Although they’re now a privately-held company exempt from full public financial disclosure, analysts reckon Auburn Hills accounts for just 14 percent of the America’s new car sales pie– and falling. Not to mention the bulk sales propping-up that share. And no wonder: Chrysler’s three brands are suffused with poorly-built, hugely discounted, high-depreciation product that YOU would be crazy to buy.

The timing of Chrysler’s new day new tagline adds to the cognitive dissonance. Why would Chrysler announce its newfound desire to build cars customers want (sounds crazy but it just might work) just as it’s about to decimate its entire model lineup? This forthcoming execution of ten or more Chrysler losers makes perfect sense: the first part of making the cars YOU want is shit-canning the cars YOU don’t want. But it’s a PR nightmare. Customers will [rightly] see the bloodletting as an abject admission that Chrysler isn’t clued-in to its customers’ need.

Don’t worry! It’s a New Day! (How Mein Kampf is that?) Yes, well, what about all those customers who helped keep Chrysler alive by buying all the models that the company is now killing? Unless these owners plan to take their lame duck car or truck to the grave (via their very own personal lifetime warranty), Chrysler’s producticide will add depreciation insult to depreciation injury. Should old acquaintance be forgot, and never brought to mind? Guess so.

The discrepancy between Chrysler’s New Day sloganeering and its past and current predicament isn’t the only reason that their new tagline is a Big Lie. The automaker’s inability to implement this consumer-centric philosophy in the future also puts paid to their Napoleonic declaration that history begins… now.

Let’s set aside the fact that Chrysler’s new owners’ intention to sell the company to someone else (talk about commitment: we’re going to build the cars YOU want until we can get SOMEONE ELSE TO DO IT). To bring meaning to Chrysler’s New Day promise to listen and respond to customers’ needs, they’ve got to change they way they do business.

Hence the tagline’s tagline: “you talk, we listen.” The evidence for this communications revolution is weak. The official website proclaims the New Day and invites customers to “see the difference” on 12 models. The majority of the enhancements are options (i.e. extra expense), rather than new “you asked for it, you got it” standard features. Are we really to believe that Charger customers clamored for “Cool Vanilla” paint? At best, these changes result from the same old focus group filtration. At worst, Chrysler’s spinning to create a false sense of consumer “empowerment.”

For evidence of Chrysler’s supposed desire to “get close to the customer,” we turn to their official blog. Not only is Chrysler leaving this electronic forum to rot on the [not Jason] vine, but even a cursory glance reveals that it’s nothing more than corporate propaganda written by insiders, hacks and Spinmeisters. “Yes a truck can be a family vehicle;” “A new day dawns at our dealerships;” “Unleashed.” In a web swimming with millions of car buyers and enthusiasts, most blog posts get single digit (including 0) responses. ‘Nuff said?

It’s too bad that Chrysler’s New Day is a Big Lie. They’ve missed a huge opportunity to make an enormous competitive leap. If Chrysler really wanted to revolutionize its business, to create a genuine new dawn, they could do so by throwing open the company to its customers, dealers and workers. They could use the net to destroy the walls separating “us” and “them,” and establish a sophisticated feedback loop where the company COULD listen to its customers— and act upon that information in a timely way.

Yeah right. Chrysler is owned by Cerberus, a private equity company known for its obsessive, Kremlin-like secrecy. Of all the automakers in the world, Chrysler is the LEAST likely to let its guard down. There will be no Glasnost in Auburn Hills. Chrysler’s New Day is nothing more than a false dawn for those gullible– or desperate– enough to believe that the sun will come out tomorrow for the product-challenged, financially troubled American automaker.

Chrysler’s near-death experience in 1980 had a salutary effect on the company’s culture. Headcount was slashed by over 50 percent. By necessity, the old ways of doing business were consigned to the crusher. “New Chrysler’s” execs, managers, marketers, designers, engineers, union workers and suppliers all had to work together to find creative ways of doing more with less. With Lee Iaccoca at the helm, it was a seminal moment in Chrysler’s history: an opportunity for the once great American car company to thoroughly reinvent itself. 

Necessity was the mother of all platform sharing. Introduced in ’81, Chrysler’s “K” cars offered seemingly endless variations on the same mechanical theme: Plymouth Reliant, Dodge Aires, 400 and 600; Chrysler LeBaron, Town and Country and Executive; and on and on and on. By the time the K stopped being special, Chrysler had produced nearly 40 variants.

It worked. With lowered overheads, interchangeable parts and Iacocca’s salesmanship, Chrysler was soon back in black. 

After paying back Uncle Sam, Chrysler’s accumulating cash cache began to take its toll, allowing the automaker to slip back into kicking back. Even worse, the money burned a hole in Lido’s pocket. A suicidal spending spree ensued.

Like other successful CEOs, Iaccoca coveted a Gulfstream jet. Unfortunately, he liked it so much he bought the company. In an ill-advised aping of GM’s purchase of Hughes and EDS, Chrysler decided to diversify. In 1987, Chrysler bought the floundering American Motors Corporation (AMC). Lido correctly saw AMC’s Jeep brand as the crown jewel. During the ensuing SUV boom, Jeep made Iaccoca into a genius.

The 1990 recession caught Chrysler flat-footed (once again). The company shot its cash wad on acquisitions instead of investing in competitive new cars and building a rainy day fund. Gulfstream was quickly jettisoned. Newly-installed President “Maximum Bob” Lutz refocused the company’s energies on new product development. Lido finally relented to the board’s increasingly adamant urgings to retire.

In the nineties, Chrysler experienced its final manic high. Having slashed the costs of new car development through the use of integrated development teams to 2.8 percent of revenue (GM: eight percent), a slew of new cars spewed forth: the Viper (’92), LH full sized sedans (’93), New Yorker/LHS (’94), compact Neon (’94), Ram pickups (’94), mid size Cirrus/Stratus (’95) and all-new mini-vans (’96).

By 1997, the new product barrage pushed Chrysler’s market share to 23 percent (shockingly close to GM’s current market share). Chrysler was hailed as the model for the American automobile industry's incipient revival.

Affable, mild-mannered Chrysler Chairman Robert Eaton saw towering clouds on the horizon. In a 1997 speech, Eaton described a “perfect storm” involving global over-production. Eaton’s cowardly solution: sell Chrysler to Daimler and walk away with nearly $100m in his pocket.

In all likelihood, Eaton knew that Chrysler’s manic success was built on a weak foundation. In [what’s become] classic American style, Chrysler's flood of hastily-spun new products was far from perfect. In an echo of Chrysler’s 1957 fiasco, quality problems were rife. Rubber-band transmissions, blown Neon head gaskets, ever-cheapening interiors and a general prioritization of flash over substance were the all-too prevalent ingredients of the “New, New Chrysler”. The “model for the revitalization of the US car industry” was not a robust formula with which to take on the Asians.

Rather than disappoint investors (and spoil his own stock options) by plowing profits and dividends into improving product quality, Eaton made it someone else's problem. If Daimler had done its homework and checked the corporation’s medical records, they would have known that Chrysler crashes like clockwork every six to ten years. In fact, the acquisition by Daimler only accentuated Chrysler’s all-too-soon next crash, because of the clash of cultures and Eaton’s increasingly disengaged leadership (seller’s remorse?).

Daimler paid $38b just before the inevitable collapse, and sent Dr. Z to minister to the sickly patient. But the German executive administered the usual prescription of happy pills: slash costs, cheapen the goods and rush out some new product (Chrysler 300). The result was a classic dead cat bounce: a $1.7b dollar profit in 2005, followed by an endless sea of red ink.

The perfect storm that Eaton had tried to detour gathered strength. Instead of addressing Chrysler’s underlying pathology, the shot-gun wedding only exacerbated the disease. In every category, Chrysler was attacked by competitors, and its products were inevitably found wanting. No wonder Daimler practically paid Cerberus to take the ailing automaker off its hands.

Chrysler has had nine major crashes. “Doc” Nardelli is desperately trying to find a pulse, hoping there’s a tenth life left in the once proud company. But it’s looking more and more like he’s got a corpse on his hands. At least it came with a signed organ donor card.

Suicidal tendencies can be pathological, inevitably recurring. Chrysler’s current self-destructive phase, as chronicled by TTAC, is hardly its first. From its very beginnings, the patient has suffered from symptoms of bi-polar syndrome. Chrysler’s biography is a nothing less than a roller coaster ride of giddy highs punctuated by disastrous crashes and self mutilation.

Chrysler’s birth and euphoric immediate success is unparalleled in automotive history. Walter P. Chrysler had a brilliant career in the early automobile business, turning several ailing manufacturers into successes. By 1919, he’d earned $10m ($130m in today’s money) from three year’s work transforming Buick into GM’s early powerhouse.

In 1924, whilst running Maxwell, Chrysler launched his eponymous line. The cars sported a perfect blend of advanced engineering and style. It was a home run that catapulted Chrysler to number four out of a crowded field of 49 domestic manufacturers. The subsequent launches of low-price Plymouth and upper-mid priced DeSoto, and the purchase of mid-priced Dodge, firmly established Chrysler as a charter member of the Big Three.

Chrysler’s first crisis came in 1934, with the failure of the advanced Airflow. The model adopted the latest aerodynamic principles. The company also repositioned the engine and body further forward on the frame (foreshadowing “cab-forward”), delivering major advances in comfort, quietness and handling. While similarly avant-garde vehicles found favor in Europe, the Airflow’s startlingly blunt “waterfall” front end styling was too radical for America’s more conservative taste.

The American car buyer's wholesale rejection of the Airflow taught Chrysler (and GM and Ford) a painful lasting lesson: avoid the risks of extreme innovation. The fiasco helped shape Detroit’s enduring elevation of popular style over genuine innovation.

Chrysler revived, and made enormous profits during the WWII era. But the development of the critical all-new 1949 models was haunted by Chrysler’s lingering Airflow insecurities. Whereas GM and Ford confidently introduced longer and lower models designed to knock the socks off of exuberant post-was buyers, Chrysler President P. T. Keller insisted on tall, boxy and boring cars– specifically designed so that a man’s fedora wouldn’t be knocked off upon entering.

In that post-war buyer’s frenzy, Keller’s stolid tanks sold well enough– initially. By the early fifties, Americans were in the mood for more: horsepower, automatics, power steering and brakes, style and flash. Unlike Chevy and Ford, Plymouth offered none of those; the market punished it unmercifully. In 1954, Plymouth was kicked out of its long-established number three spot by Buick, and dropped to number five behind Pontiac. The mood pendulum had swung too far; it was due for an (over) correction.

Chrysler hired designer Virgil Exner to inject vitality into the company’s products. The 1955’s were an improvement. The radical 1957’s were set to be the great leap forward (“suddenly it’s 1960!”). But in the rush to revolutionize, the dramatically finned ‘57’s suffered from atrocious build quality. Water and dust leaks were notorious.  Upholstery split. Springs came up through seats. And the cars started rusting on the dealer lots.

The flashy new product sold, but word spread quickly. Plymouth’s 1958 sales plunged by no less than 41 percent. Despite a rep for engineering prowess, Chrysler would have to dodge a reputation for spotty build quality from then on, deserved or not.

Chrysler nursed itself to health once more, only to be deeply wounded by a staggeringly idiotic act of self-mutilation.

In 1960, Chrysler president William Newberg heard a rumor at a cocktail party that Chevrolet was working on a dramatically smaller 1962 model (the compact Chevy II). In a colossal blunder, Newburg assumed this downsizing rumor referred to ALL the full-sized Chevrolets. Newberg immediately killed development of Chrysler’s best-selling full-size 1962 Plymouths and Dodges, and initiated a crash program for substantially smaller replacements.

In what some historians consider a calculated act of revenge for this folly, chief stylist Exner responded by creating bizarrely-styled 1962 Dodges and Plymouths. When these ugly, truncated cars were first shown to dealers at a convention, they created an uproar. Twenty dealers cancelled their franchises on the spot. Plymouth crashed to ninth place, while GM picked up the pieces, swelling its market share to an all-time peak of 52 percent.

Newberg was shown the door. Chrysler hastily restyled the ‘63’s, and went on to enjoy a relatively long spell of good health. From the mid-sixties through 1974 the company thrived, in part thanks to its successful performance image. But with a portfolio [literally] heavy with large rear wheel-drive cars, lacking the foresight, will (and capital) to invest in new efficient compacts, Chrysler was flattened by the one-two punch of the energy crises.

By 1979, the Pentastar was back on the critical list, saved from bankruptcy by taxpayer funded life-support in the form of a $1.5 billion bail-out package of government guaranteed loans.

"Are we bankrupt? Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." Another milestone: Chrysler CEO Bob Nardelli used the “b word’ in public. What’s more, Boot ‘em Bob told the Wall Street Journal (WSJ) that he’s on a leash so short he can feel the hot breath of his Cerberusian owners tickling his neck hairs. Why’s that then? Because all Hell's about to break loose.

More specifically, Chrysler is about to follow GM and Ford’s lead and break loose anything that isn’t nailed down and sell it. This forthcoming “Staving Off Bankruptcy” sale should come as no surprise; this fall, Nardelli announced his intention to flog bits of the biz just after Christmas. His “operationally bankrupt” shocker is PR hyperbole, preparing Chrysler's camp followers for the divestiture to follow. 

Saying that, Nardelli's “backs up against the wall” spin is a double bluff; or, if you prefer, the truth. Chrysler really is “operationally bankrupt.” Have a look at their new product plans. What product plans? Well, exactly.

While $10b is a lot of money for you and me, that’s the amount of cash GM needs just to keep the lights on. Ten billion bucks ain't enough money for Chrysler to make the long-term investment in the new product designs and technology it needs to compete for the American car buyer’s customer AND keep the company going. Period.

So what? That was never the plan. Chrysler’s new owners didn't have any intentions of investing their hard-earned money in the bottomless pit known as a product-lead turnaround. Whether or not Cerberus planned to keep the Chrysler dealer network as a kind of K-Mart store front for outsourced products, Cerberus' purchase was all about stripping and flipping. 

That’s why the smartest guys in the room installed Nardelli, who’s about as much of a car guy as I am a numismatist. The Home Depot despot was charged with cutting costs and stabilizing the company until such time as it could be sold; which was to be sooner, rather than later.

Unfortunately, the private equity boys knew sweet FA about cars. They failed to realize that Chrysler’s German owners had left behind a mortally wounded automaker. Perhaps the incoming execs were dazzled by the new minivan and upcoming Ram, or the company’s total turnover. But they didn't understand that carmaking is a consumer-driven– not cost driven– business; an enterprise whose survival depends entirely on brand strength and an endless stream of class-leading products.

Cerberus never imagined that Chrysler would get this bad this fast– because they didn’t know cars. Nor did they clock the fact that the overall U.S. new car market was headed dramatically south. Cuts or no cuts, bad intelligence and bad timing have destroyed any possibility of stabilization in Auburn Hills.

Needless to say, none of this does anything more than accelerate Cerberus’ original time lines. Nardelli will continue to wield his axe even as he begins the inevitable process of dissolution. To that end, the Chrysler CEO told the WSJ that “the company will move very aggressively to dispose of about $1b in land, old plants and other assets, even if it has to sell them below book value.” 

Don’t be fooled by the implications of that list. The only thing Chrysler has to sell that’s worth a damn are its MOPAR parts operation, its production facilities and the Jeep name. The “book value” of these “assets” is a Hell of a lot less now than it was when Cerberus bought them, and falling. Given the dizzying pace of vehicle production technology, unless the Chinese, Indians or Canadians (Magna) want to buy Chrysler’s U.S. production facilities, they're worthless.

Where does that leave Chrysler? Nowhere. Ten billion dollars isn’t enough to do anything more than pretty-up their current products’ dreadful interiors ("260 line item improvements") and help the automaker hold on for another year or so– albeit cutting every step of the way in the face of diminishing market share. Meanwhile and in any case, Chrysler will either sell itself to someone “below book value,” or its private equity masters will throw in the towel and file for Chapter 11.

If we had any doubts before, Nardelli’s "operational bankruptcy" remark leaves no doubt that Cerberus is prepared to cauterize its Chrysler wound and use Chapter 11 to amputate the automaker from its portfolio. Cerberus will hive off Chrysler Financial, take their tax write-off and call it a day. And consign one of America's greatest automakers to the scrap heap of history.

How in the world did the United Auto Workers (UAW) boss Ron Gettelfinger think he could get his Chrysler members to ratify their proposed contract without providing job guarantees? Did he seriously believe a $3k signing bonus would convince his otherwise carrot-less union brothers and sisters to surrender their right to graduate into cushy “non core” jobs? Or was Gettelfinger blindsided by his own ego; figuring he could yell “roll over” and “play dead” at 45k well-paid autoworkers and make it so? Either way, the question must be asked: what the Hell is going on?

First, the latest point in our connect-the-dots sequence: a so-called “secret handshake” deal between the UAW and Chrysler. Reuters reports that UAW VP General Holiefield told Local leaders he made an unannounced pact with Chrysler to keep certain U.S. plants open if members ratify the new contract. Assuming Chrysler workers will believe Holiefield– a stretch given the rancor surrounding the po-faced contract– it’s a clever play. But is it true? 

If Chrysler owner Cerberus offered their UAW members job guarantees, surely BOTH sides would want them in writing to ensure the new contract’s ratification. There are two possible reasons why the union would hide assurances of job security. Either the UAW knows that this alleged job security is highly selective (i.e. they realize that Chrysler’s about to shut plenty o’ plants) and therefore divisive, or there wasn’t any “secret” deal. It’s just a desperate UAW officer blowing smoke up his members’ collective asses.

No matter how you look at it, the UAW leadership has rolled onto its back doggie style, their members aren’t buying the new deal and the union brass are growing increasingly desperate. To wit: not only did the International approve the contract by voice vote, but they aren’t reporting ANY member voting totals. The Locals are playing fast and loose with the numbers as well. The Detroit News says that three quarters of their yes/no stats arrive as percentages, rather than precise numbers.

Could the UAW cheat their way to ratification? Sure. And if the subterfuge is discovered, there will be Hell to pay– within the UAW, relative to Chrysler and, lest we forget, over at Ford. And what will happen if the rank and file reject the contract? The key to this conundrum, indeed, the explanation for this incipient chaos, lies within the UAW’s six-hour strike with Chrysler. 

It’s critical to note that the Chrysler strikette represented a split within the union, rather than a united push for more concessions. After the UAW walked out, they did not return to the bargaining table; they simply signaled Chrysler that they were ready to sign. Lead negotiator Bill Parker’s immediate and public opposition to the deal is proof positive that the UAW was of two minds. And the bit that said this is as good as it’s ever gonna get won.

Think of it this way: Union boss Ron Gettelfinger understands that Chrysler is a company staring down the barrel of Chapter 11. He also knows Cerberus stands ready, willing and able to let its 45k union employees go on strike– and break it. He must have figured it’s better to capitulate now and make it look like tough negotiation, rather than face Cerberus’ nuclear winter. And he may have been emboldened by his success at GM.  

But there’s one thing Gettelfinger didn’t/doesn’t understand: his members’ ignorance and militancy.

The average Chrysler worker doesn't believe that his or her employer is about to go under. They don't appreciate the fact that Chrysler’s lack of a foreign sales safety net makes it especially vulnerable. They don't understand that one of the world’s richest private equity firms will hang the company out to dry in a New York minute if they think it’s an irredeemable money pit. All they know is that someone’s getting screwed and it’s us. As usual.

Gettelfinger’s mob forgot to sell union members on the idea that Cerberus holds all the cards. Saying that, how could they? Big Ron couldn’t risk calling a “real” strike to get his members in line– because they would have lost. And he couldn’t tell the truth about his position, because he would have been considered weak, and the members might not have bought it anyway. But the truth is neither Gettelfinger nor his members can avoid the truth. 

If Chrysler workers are allowed to reject the contract, the UAW goes back to the bargaining table. Chances are nothing much will change. The leadership will re-present virtually the same contract and hope the members have “got it out of their system” and approve the deal (a la National Steel in the early ‘90’s). If Gettelfinger’s regime can’t withstand the fallout and/or gets caught cheating, the new leadership will call a strike. And lose.

[Interview with Greg Shotwell of the Soldiers of Solidarity below]

Kids love to play connect the dots. When the dots are numbered sequentially (with a few outlining details thrown in to keep 'em focused), it's easy to do. When the numbers are missing, it's hard to see anything more than random points on a page. And so it is with Chrysler, an American automaker that's generated enough bloggable news during the last six months to keep Google News-alerted surfers away from their designated job for hours at a time. Even though only Chrysler's new owners know their real game plan, there's been enough new "dots" to form a recognizable pattern. What it reveals is a company on the cusp of a major revolution.

The first dot: DaimlerChrysler dumping selling Chrysler. Several companies showed interest in buying Chrysler early on, but most industry analysts expected Canada's Magna Corporation to be a shoo-in. Magna had the balls; Chairman and founder Frank Stronach is the personification of unbridled ambition. Magna had Chrysler-specific auto building experience; they held the contract to assemble Chryslers and Jeeps in Europe and run the paint shop at the Jeep Wrangler plant in Toledo, Ohio. And Magna had the money.

But before the Chrysler deal went down, the automaker announced it was moving production of Euro-spec Chryslers from the Magna-Steyr plant in Austria to Chrysler's plant in Brampton, Ontario. Magna wasn't happy. The Canadian Autoworkers Union (CAW) loved it. Dot two.

Third dot: the private equity firm Cerberus came from nowhere to grab the golden ring. It was the union's turn to be displeased. United Auto Workers (UAW) president Ron Gettelfinger and CAW president Buzz Hargrove both suspected that Cerberus was about to "strip and flip" their meal ticket. They saw storm clouds gathering over Auburn Hills.

And yet, after just one meeting with the three-headed dog's masters, both union leaders did a complete 180. Gettelfinger said the sale of Chrysler to the private equity fund was in the "best interests of our members." Hargrove, who had said he was "pissed off" over the sale, suddenly decided "Chrysler is better off under Cerberus ownership than they would be under Daimler." Dot four.

Fifth dot: after taking over Chrysler, Cerberus revamped the company's upper management. Union-friendly CEO Tom Lasorda suddenly found himself shuffled aside to a vice president's position. Former Home Depot CEO Robert Nardelli took over as Chrysler CEO. Toyota's Jim Press moved in as co-vice president, to run sales and marketing. Both came from companies known for their decidedly anti-union stance, yet the UAW and CAW were both uncharacteristically quiet about their selection. 

Then came dot six: negotiating a new UAW contract. In return for ponying-up a bunch of billions for a health care VEBA superfund, the UAW's leadership agreed on a contract radically different from the GM deal. The Chrysler agreement doesn't include job guarantees or commitments not to close or sell plants. If the UAW's members ratify this agreement, it leaves Cerberus free and clear to shut down whatever plants they choose, whenever they choose. OR… sell those plants to someone else.

Last month, Magna surprised everyone. The fiercely anti-union company suddenly opened its plants to the CAW, inviting them to organize their employees. Owner Frank Stronach said the company "would embrace the union" under the "framework of fairness."  He claimed an epiphany: Magna and unions need to work together to save North American auto industry jobs and create new employment. Dot seven.

Dot eight: Chrysler has announced it's [finally] ready to trim models across all three brands. The executions could mean a Chrysler plant now building several variations of one model for three divisions would build one model for one division. Although the divisions might share some components (e.g. engines or transmissions), the new regime will tie a specific production facility to a specific brand.

Connect the dots. As we predicted when Cerberus assumed control of Chrysler, the money men are getting ready to sell part or all of Chrysler to Magna, or, at the least, outsource production to them. This they can do because Chrysler’s unions have been well and truly appeased, paid off in billions and granted access to Magna’s expanding worldwide empire. This they will do because they’re a private equity firm that has always preferred right-now cash cows to long-term plays. 

Magna is also on board because, well, it’s what Frank wanted then, it’s what Frank wants now and Frank’s got the cash to do the deal. Ah, but is this a picture of resurgent automaker? Nope. It’s an abstract image; one that allows both artist and onlookers to see what they want to see. One thing’s for sure: it's still very much a work in progress.

It’s true. The United Auto Workers (UAW) six hour strike against Chrysler was nothing more than a bit of empty posturing, some meaningless moaning and a quick and unsatisfying climax. Oh I’m sure the union bosses are basking in the warm afterglow of successful pattern bargaining; safe in the knowledge that Chrysler will render unto Caesar the same plunderiffic health care deal as GM, as they look fordward to their next payout. And Chrysler’s new masters must also be happy with the deal. (Ipso facto.) But anyone who’d hoped that someone in Detroit would have the balls to finally shaft the UAW has been left high and dry.

Truth be told, I was one of those observers who assumed that a switch from public stockholder to private equity ownership would help Chrysler grow a serious set of stones. With no one to answer to but their free-spending wives, ex-wives and children, with pockets deeper than an Icelandic ice core, Cerberus' directors could do what The Big 2.8’s erstwhile guardians had never done (if the thought even occurred to them): walk. Hey Ron! You want job guarantees and a bazillion dollar health care VEBA? See you in China. Anyone want to buy Jeep?

That said, my belief in Cerberus’ ability to upset the union applecart disappeared long before the UAW negotiations began. A few weeks after Chrysler’s overlords installed former Home Depot CEO Bob Nardelli into the top slot, I suspected Cerberus couldn’t get wood. There was only one good reason to hire the Prowler-owning auto industry virgin, a man whose largest contribution to his previous employer was self-checkout terminals (for which he paid himself $210m). To cull the deadwood and strip Chrysler like the Grinch looting Cindy Lou Who’s house.

This he didn’t do. If anything, Nardelli’s added complexity to the system. First, he failed to fire Chrysler Prez Tom LaSorda; the exec that helped the Germans run the ailing American automaker into the ground. Next, Nardelli appointed his office manager as his new turnaround titan. Then he hired Toyota’s Jim Press as Chrysler's car czar; a self-professed "servant leader” whose consensus management style poses no threat to Chrysler’s dysfunctional bureaucracy. These are not the actions of a revolutionary intent on a destroying a busted business model.

I know: it’s hard to believe that Cerberus would allow Chrysler’s new management team to adopt the same “steady as she goes” strategy that’s helped GM shed huge chunks of market share and drop billions over the last 17 years, and led Ford to mortgage everything up to and including their logo. With bankruptcy’s long shadow hanging over Detroit, how could anyone with even the gentlest grasp on recent history assume that tweaking overheads, products, sales and marketing is a recipe for success?

And yet, where’s the game changer? 

The weird thing is that Chrysler seems to know what it should be doing to reinvent itself. They made a head fake in the direction of cleaning their dealers’ clocks, looking to trim a bloated dealer network Chrysler can’t afford. And then they backed off. They talked about killing overlapping, brand-defiling models and refocusing their product line. And then added more complexity: a new hybrid-building hothouse. AND we're still waiting for the Pacifica, Durango, Aspen, et. al. to die. Chrysler hinted that a GM-style union health care VEBA superfund wasn’t for them. And then they agreed to it.

Perhaps the UAW agreement is simply Cerberus’ attempt to buy some time. Let’s get the best union deal we can, keep the dealers’ doors open and the factories humming a while, and THEN we’ll blindside them. THEN we’ll close factories, kill models, import Chinese products, cut deals with other automakers to retail their products, sell off brands, face the dealers in court, etc. It’s a heartening thought for those who see Chrysler’s re-invention as the key to its survival, but the facts don’t fit the theory.

Cerberus’ is famous for implementing a “100 day” plan on their new acquisitions. The 100 days have come and gone; if they were going to kick out the jams, the jams would be kicked. Aside from adding new management, the carmaker Cerberus owns today looks strikingly similar to the carmaker Cerberus purchased on May 14– new union contract and all. 

In fact, the day before the UAW strikelet, Chrysler announced they were cutting 415 full-time white collar jobs from their Auburn Hills HQ, and saying sayonara to 1000 temps. The bloodletting was part of LaSorda’s pre-Cerberus turnaround plan, which dictated that the automaker shed 11k hourly and 2k salaried jobs over three years. So the “old” turnaround plan was/is still chugging away behind the scenes, even as Cerberus headed into and out of UAW negotiations. That ain’t good.

It’s time to face facts: Chrysler’s new boss is the same as the old boss. Same game plan. Same results. The UAW non-strike strike proves that the real indecencies are yet to come.

Since Cerberus removed Chrysler from German control, the crisis corporation’s modus operandi appears to remain unchanged. Other than some relatively minor dealer antagonism (since smoothed over), there’s been none of the slash-and-burn stylings formerly attributed to ex-Home Depot CEO Bob Nardelli and his new, private equity employers. Perhaps a companywide excrement – fan collision awaits the conclusion of United Auto Workers negotiations. Meanwhile, Chrysler better start getting its you-know-what together on the product front, ‘cause the cupboard is almost completely bare.  

In the last year or so, Chrysler has rolled out over a half-dozen new models. Only one can legitimately be called a “hit”: the Wrangler Unlimited. Yes but– much of the buzz surrounding the vehicle can be attributed to low supply. We’ll have to wait for the initial rush to end before we'll know if the Jeep model has "legs:'" sufficient staying power to match increased production and become a corporate cash cow. 

Elsewhere, the bloom is off the 300 and its derivatives. Sales are down 15 percent year-to-date. The good news: Chrysler has the relatively affordable, large-and-in-charge American sedan market to themselves for a while longer. And the “niche” is generating a cool quarter million sales per year. The bad news: the previous regime pushed 300 production well past consumer demand, and then dumped 44 percent of total production into fleet sales. Owners are heading for a major hit at trade in time– which will do neither 300 sales nor the brand any favors. 

At the same time, the company’s REAL profit centers are rotting on the vine and taking it on the chin. The Dodge Durango and Chrysler Aspen (a TTAC Ten Worst Automobiles Today (TWAT) winner) are both down by double digits. And again, Chrysler sent its “extra” units to bulk buyers. Some 33 percent of Durangos and 31.2 percent of Aspens sailed with the fleets.

Ye Olde Ram pickup is also in dire straits. The Ram was always going to have problems keeping up with the refreshed Chevrolet Silverado and “newer than thou” Ford F-150. With the slump in the building trades and Toyota jumping in and playing price war games with their Tundra, the Ram is on a hiding to nowhere.

Chrysler’s “new” introductions are also lost in [dealer lot] space. Though let down by poor reliability, the designs that fueled Chrysler’s pre-merger renaissance were daring and innovative (e.g. the cab-forward line and the Neon). They kept their competition awake nights and wrote the tickets for more than a few former Chrysler hands (one of whom has been chasing the magic at GM ever since). 

After the 300, Chrysler’s new models landed with a gigantic thud. Jeep Commander excepted, they weren’t “bad” designs; just incredibly bland. The much-anticipated Sebring hit the market and went straight to rentals. Even the nicest of the buff books could find little nice to say. The Caliber was an interesting idea that can only dream of the old Neon’s volumes. And the lack of a model priced beneath the Caliber is crippling.

The Pacifica has been cut and reprieved several times. At the moment, as Chrysler supposedly considers paring down its offerings, there isn't even an update on the drawing board. As Chrysler’s only entry in the hot large-CUV market, the Pacifica should be capturing some of the more profitable parts of the SUV refugee and people-hauler business. The Pacific wasn’t quite good enough when it was new. It’s less so now.     

Other than their new minivan, Chrysler has one– count it one– more new vehicle on the near horizon. The new retro-styled Challenger has been getting good ink, but it’s diving into a shrinking pool (Mustang sales are tanking) and competing directly with Chevy’s new Camaro.

At least Chrysler doesn’t share GM’s and Ford’s worries about trying to eke out a profit from imported Europe-designed models. Chrysler don’t have any. One of the main “reasons” behind the now-abandoned DCX merger: Chrysler had no overseas presence. Their European subsidiaries were dogs, and got sold off during Iacocca’s reign. Chrysler Europe isn’t a great drain, but it sure isn’t going to be the company's savior.     

Worse, Chrysler’s old “partner/contract designer” Mitsubishi has been twisting in the wind for the last decade. Historically, designing and selling parts/designs to other manufacturers has been Mitsubishi’s path to success (such as they’ve had). Surveying Mitsi's equally aged line of lackluster models indicates that a last-second hook-up with Chrysler won’t help either of them.

Whatever the new regime has planned for Chrysler, it looks like DCX shot their wad before handing over the keys. The new minivan better be “number one with a bullet," 'cause it’s the only one Chrysler's got chambered. Meanwhile, the lack of bold decisions on the new/refreshed product front may indicate management indecisiveness, a secret plan to tie-up with foreign automakers or an equally covert op aimed at stripping and flipping the core business (loans). Or, perhaps, all three.