Daimler: Chrysler Drops $772.5m in Q2
Not bad, you know, considering. Considering that Chrysler has pretty much stopped spending money on capital expenditure (small stuff like developing new cars). Even so, ChryCo was quick to launch its crack [smoking] damage control squad. “Chrysler issued a statement saying that the second-quarter loss is $660 million when taking into account the differences between international and U.S. accounting standards,” The International Herald Tribune reports. “The Auburn Hills-based company says Chrysler’s automotive operations lost $570 million, with the rest of the loss attributable to Chrysler Financial.” So, that’s alright then? Anyway, Chrysler is continuing to negotiate with Daimler to buy the German’s automaker’s remaining share in the Crisis Corportation. “On a conference call this morning, Daimler Chief Financial Officer Bobo Uebber said negotiations with Cerberus continue. Cerberus is seeking to buy all of Chrysler and is negotiating with General Motors Corp., the combined Nissan Motor Co. and Renault SA, and other companies for the sale of Chrysler.” Yup, that about covers it.
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Why would GM merge with Chrysler? There is absolutely no reason to want a single share of Chrysler... Ordinarily, chopping off the R&D expenses should lead to an improved income statement, at least for the short-term, until the products run out. So, if this is$-700 million is an "improved" income statement... well... as a business, Chrysler is toast and therefore not worth buying. However, it seems to me that, business results aside, certain companies are still attractive to purchasers (buyouts or just stockholders) for a couple of reasons but none of these apply to Chrysler: Cash flow generators - Chrysler is sooo not this. Companies with significant future value - With the destruction of their R&D budgets, Chrysler is not this. Valuable businesses in temporary distress - Again, not Chrysler. Buffet just bought an energy company for twenty-five cents on the dollar because of liquidity issues which Buffet can solve. Companies with valuable, underappreciated assets - I don't see how Chrysler could be melted down and sold for better than book. Who wants a car plant, even a modern one, when there's 16m/year capacity in the US and demand for 12m/year? The one thing Chrysler has with significant value is the Jeep brand and not only is GM is trying to exit the hard-core off-road business but we see that Toyota and Honda, for example, do very well without an off-road brand. The recent gas price shock has probably depressed any value the Jeep brand may have had. And I read Flint's remarks and I agree... there's no way that Cerberus is going to let Chrysler wander off with $11B in cash. [Wemmick] laid his hands upon my shoulders, and added in a solemn whisper: "Avail yourself of this evening to lay hold of his portable property. You don't know what may happen to him. Don't let anything happen to the portable property." - Charles Dickens, "Great Expectations"
Bobo?! Not exactly a name that inspires confidence.