By on October 31, 2008

Chrysler is dead. Look for a Chapter 7 filing soon; that’s a liquidation plan, not reorganization. The judge will part-out and sell ChryCo’s few valuable assets to the highest bidders. There will be no “Hail Mary” pass to General Motors, no government rescue, no money from Cerberus to keep its corpse from the grave. Yes, the mythical three-headed dog of Hades does keep souls from escaping Hell, try as they might.

Despite GM’s desire for the $9b in cash supposedly on Chrysler’s books, the money comes with even bigger liabilities: health care, pensions, taxes, supplier obligations, the works. In fact, Chrysler is saddled with as much as $27b worth of claims. Those claimholders have no interest in letting Chrysler unwind in the hands of GM– which would keep all those claims unpaid. Better to just get it over with and pay it out now. The best idea for Chrysler is, was and will be immediate liquidation. Add the proceeds from the sale of Chryco’s assets to that cash pile and there might be as much as $20b+ to disburse.

The first ones to dine on the cash are Chrysler’s lenders, led by Goldman Sachs and JPMorganChase. They originally lent Cerberus about $10b or so to fund the acquisition from Daimler, with the hopes they could then sell the debt off to bigger schmucks. Well, they mostly failed at selling it, unloading only a portion, maybe about 40 percent (or so we’ve heard) at discount to some greater fools.

The banks are still stuck with the rest and they aren’t happy about it. If you were a sane banker in troubled financial times, would you transfer your repayment risk to General Motors, an equal if not even worse credit than Chrysler today? GM was counting on a government loan to GM to pay these lenders off– or at least guarantee their debt. Give Hank Paulson credit; he simply said “no way.” The Feds aren’t gonna take the heat for paying Wall Street off while jobs are lost.

So no, the bankers will never agree to a GM-Chryco Motors tie up. Better for them to take the priority position they get in liquidation today and take what they can. After all, Chrysler’s cash pile only gets smaller every day Chrysler continues to operate.

The second group that has a claim on Chrysler’s cash: vehicle owners. Yep, warranty claims out into the future. Remember, most recent vintage Chrysler vehicles (in service beginning in 8/07 and later) have powertrain for life warranties. The bankruptcy judge has to set aside funds to cover those claims. Say… $3b worth.

The third group: labor. The United Auto Workers (UAW) negotiated a contract that requires Chrysler to shovel $10b into a health care trust (a.k.a. VEBA) for retirees. Even the UAW wasn’t crazy enough let GM takeover Chrysler and absorb this liability when GM can’t even pay what it promised to the union. In any case, this is an unsecured claim. It’s doubtful the UAW could legally stop a sale to GM, but they can make life unpleasant for an automaker.  Heck if the workers are going to lose their jobs anyway, they might as well get what they can now for retirees.

And last: working capital claims for the balance. Unpaid vendors, employee wind downs, taxes, and the rest. Maybe another $4b or so. All told, $27 billion in claims against the cash plus whatever the Court can sell the rest of the assets for. Call it $10 to $15b. Best of all, assets sold out of bankruptcy come with no liability tail for the buyer, which make them much more attractive. No pension obligations, no warranty claims, no retiree health care. Clean and simple. And you don’t even have to take the UAW contract!

I reckon that there are four major components of Chrysler that will get sold. First, the Jeep brand. Although known worldwide, it really has only has one unique product (the Wrangler). But it’s cheap to build, generates a ton of profit per vehicle and will never go out of style. Yep, wrap that up. Maybe it’s worth $3b?

Second, the minivan biz. Already having consolidated assembly in one plant (Windsor), it’s easy to just supply other automakers like GM and VW. Hmm, do I hear Magna calling? So let’s say it’s worth $5b.

Third, RAM trucks hecho in Mexico. Nissan needs a truck and they’ve already agreed to buy their next Titan built in Chrysler’s Saltillo plant. Ok, so maybe it’s 100k units per year only. Might as well buy the plant and the rights to the truck. How much did it cost Toyota to develop the Tundra and build its now underutilized San Antonio truck plant? Let’s put a $2b price tag on this.

And fourth, Chrysler’s parts supply division. I don’t know how many Chryco rigs are on the road, but they’re going to need parts for a long time. Existing parts inventory that’s worth something plus profits from sales that will continue for years. So we’ll put a $1b price tag there.

So are you getting my drift now? There’s no GM-Chrysler deal ever. The government can’t stomach funding a deal where jobs are lost with taxpayer money. Better to shut Chrysler down in bankruptcy, and let Cerberus lick its wounds. Those jobs were going to be lost with or without GM in the picture.

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62 Comments on “Editorial: Chrysler Suicide Watch 41: R.I.P....”


  • avatar
    86er

    How will this affect the resale value of Chrysler products, old and not-so-old?

  • avatar

    86er:

    Not well.

  • avatar
    jaje

    What will happen to the German engineered Routan? Ya know where people are getting pregnant so they have a reason to buy one.

  • avatar
    Polishdon

    The only chance left is Renault-Nissan.

  • avatar
    jaje

    What will happen to the German engineered Routan? Ya know where people are getting pregnant so they have a reason to buy one.

  • avatar
    Polishdon

    I should add, that IF they could file for C11, then they might be better merger partner.

    However, what is the chance of that ?

  • avatar
    Austin Greene

    The fat lady has just sung.

  • avatar
    Austin Greene

    It wont be long before Carlos the Jackall will be dining on Chryco’s endtrails.

  • avatar
    autoemployeefornow

    You make opinion seem like fact. Oh yeah, it’s an editorial, I forgot. For those employees who aren’t going to have a job after your C7 “sale” I wish them luck.

  • avatar
    GermanGuy writing from Germany

    What are the implications for Daimler AG. They still own 19.9% of this “asset”, although valued at 0.

    Are they on the hook for 19.9% of the liabilities? Or for all the liabilities?

    Sorry for asking but my knowledge of the US legal system isn´t sufficient in this case.

  • avatar
    Point Given

    I think failed merger to chpt 7 is a big leap.

    It’s probably correct to say the company will be parted out though. GM takes Jeep and merge’s it with Hummer, maybe to resell at a higher price, maybe to manage yet another brand.

    Who knows who takes the mini vans. Ford or GM I suppose.

    Nissan takes the trucks and begins it’s much desired move into commercial vehicles, (it’s been a rumor at dealership level for some time that they were coming into the commercial van market).

    Speculation aside….I’d commit to saying is that something has to change at Chrysler and it’ll be sooner rather than later and it will be big. The status quo simply isn’t an option.

  • avatar
    Jerome10

    I agree Ram to Nissan will happen.

    I was under the impression Warren Truck was the primary Ram assembly plant. Is Satillo instead?

    And that also makes me ask what is Nissan going to do with Canton, MS? Take a Chrysler plant suddenly makes Canton not-necessary. Unless they’ll buy the RAM business, all the tooling, etc, and build it in Canton?

    And the other question is, if someone wants Wrangler, or RAM, or minivans, what about the engine plants, the stamping plants etc? Will these have to stay open? Or can you just buy the tooling without the property?

    I do think Grand Cherokee will live along with Wrangler.

  • avatar
    toxicroach

    Daimler won’t be on the hook for liabilities on the basis of their ownership of 20%. Now, there might be other contractual obligations that they took on or whatever, but the ownership alone won’t do it.

  • avatar
    jberger

    The only thing that made any sense in the GM merger rumor was the combined company would be easier to bail out politically. Literally, “too big to let fail”. Of course the reality is 1/2 of the combined company would have been closed down anyway. I wonder if they looked at the combination of supply chains and figured out they were too far apart to make it work.

    I’m just trying to figure out how the warranty claims would work in CH 7. Whoever bought the minivans could end up being the service and warranty provider for those claims, same with trucks and jeep. But why would they fund those obligations out of cash instead of just discounting the sale to account for the cost of claims? Cash is king with the credit markets so tight.

    I still don’t understand why Nissan wants the Ram truck to replace the Titan. Sure the design is new but I’m not at all sure it’s better than the Titan. What they should do is replace the Frontier with a new model, the market needs a great small pickup and the numbers would probably exceed the combination of Titan and Ram sales for the next 5 years.

  • avatar
    26theone

    What published facts are you using to support a Ch 7 filing “soon”?

  • avatar
    autonut

    1)Didn’t Cerberus secured remaining 20% of Chrysler from Benz?
    2) Elias, how do you get your financial information? Aside from estimates, which is anybody’s guess, Cerberus and Chrysler are private companies and don’t have SOX reporting or public fling requirements. I would imagine except comptroller, CFO, COO & CEO of those companies nobody really has a complete picture.

  • avatar
    menno

    Wasn’t it last week (60 days out from December 23, 2008) that the entire Chrysler workforce was given their 60 days notice “of lay-off” for (supposedly) 30 days following that?

    It’s rapidly becoming possible that it’s going to be kind of like the “30 days” that the Studebaker employees took off in South Bend on December 20, 1963, eh?

    Chrysler is likely to end in the same manner as MG-Rover in the UK.

    The only question remains; which Chinese (or Indian) automobile manufacturers are likely to snap it up for pennies on the dollar, after Chapter 7 liquidation?

  • avatar
    Kman

    That was a good, cogent analysis. Bye-bye Chrysler.

    I hope, for once, “market-economy” champions will let the downside of a market economy — losing companies going bust — take its course.

  • avatar
    Airhen

    Question, before Lee Iacocca came in, was Chrysler in any type of a similar condition as they are now?

    As far as Jeep, I would also put the Grand Cherokee in with the Wrangler as surviving.

    I also agree that bad companies (and their union) cannot be allowed to survive.

  • avatar
    Pch101

    Renault-Nissan and Magna would be the next logical stops, which is as it should be. Let’s hope that Chrysler ends up with one of them.

  • avatar
    Jimal

    Is there a timeframe on this? I am still waiting for GMAC to go belly up, as was foreshadowed in an earlier editorial. That predicted bankruptcy was to happen weeks ago. I’m not saying this won’t happen but you know what they say about predictions…

  • avatar
    menno

    Did you know that the Studebaker Corporation still “lives on” (though has been “borg-ified”).

    This from Wikipedia:

    After 1966, Studebaker continued to exist as a closed investment group… Subsequently, Studebaker was then merged with the Worthington Corporation to form Studebaker-Worthington. The Studebaker name disappeared from the American business scene in 1979, when McGraw-Edison acquired Studebaker-Worthington. McGraw-Edison was itself purchased in 1985 by Cooper Industries, which sold off its auto-parts divisions to Federal-Mogul some years later.

    Howzis for an off the wall idea? Federal-Mogul (which owns)

    AE engine products
    ANCO wipers
    Bentley-Harris protection products
    Champion spark plugs and wipers
    Fel-Pro gaskets
    Ferodo brake pads
    Glyco bearings
    Goetze piston rings
    Moog chassis products
    National wheel end components
    Nüral pistons
    Payen gaskets
    Precision drivetrain components
    Sealed Power engine products
    Wagner lighting and brake products

    – Could (Post Chapter 7) buy up the totally unwanted Avenger/Sebring and Journey design, rights and production plant for a SONG, plus a stamping plant, and buy engines from the Dundee Michigan engine plant maybe even buy 1/3 interest in the GEMA engine plant*, buy the Kenosha engine plant (2.7 and 3.5 V6’s) and offer low cost franchises to all 5-star Chrysler dealers for a song and re-introduce the:

    Studebaker Lark (reskinned/improved Sebring)sedan

    Studebaker Lark Regal (upscale version) sedan

    Studebaker Wagonaire (improved Journey) wagon

    and develop a 2 door variant for 2011 introduction (there’s that year again) as the

    Studebaker Gran Turismo Hawk with turbo-four

    * http://en.wikipedia.org/wiki/Global_Engine_Manufacturing_Alliance

    Also buy up the GEM electric car program. After all, Studebaker started out selling electric cars only – the FIRST time they went into the biz in 1903!

    I betcha Nissan would be willing to sell them small cars for sale through their network. The Studebaker Sparrow? And maybe even some full sized (ex-Ram) pickups – Studebaker Champ? Perhaps in exchange for some badge-engineered (ex-Journey) van/wagons.

    (tongue in cheek) (?)

    In any case, Federal-Mogul would be a great fit for Mopar (car parts for all of the dead Chrysler, Dodge, Jeep and Plymouth cars out in reality land still running around).

  • avatar
    John Horner

    Check out the resale value of Daewoos and Sterlings when they disappeared to see what might happen to Chrysler products.

    Vipers and Jeeps will do ok, but everything else will be in the bargain bin. If you own one, just enjoy it and drive it into the ground.

  • avatar
    Ken Elias

    jberger – Warranty claims do not transfer out of bankruptcy to the buyer of assets. But for business reasons – like getting existing owners to buy again – the buyer of assets may agree to take on certain warranty items – and adjusts the price paid for the asset accordingly. I doubt that would happen in this case as the Chrysler brands all disappear.

    Jimal – GMAC is effectively bankrupt. Check out what Moody’s said recently in their latest downgrade.

  • avatar
    gamper

    I guess my question is what is to stop GM from going back to Washington after the election to seek the Chrysler Merger? I refuse to believe that GM will simply turn their backs on such a terrible idea.

    I guess, that the liability is so high right now and profits so far out of reach, there really is no buyer willing to take it on.

    I too would like to know, aside from an educated guess, what are you basing this Chapter 7 prediction on???

  • avatar
    menno

    Correction (can’t edit) – maybe Federal-Mogul could also snag the ex-AMC Kenosha engine plant for the 2.7 engines used in the vehicles, and obviously, move Journey production to the Sterling Heights assembly plant alongside the sedans (Sterling Heights also is the site of a press plant).

    Ironically, Studebaker manufactured automobiles in Detroit from the 1910’s through the 1930’s.

    Naturally, to protect the rest of their biz, Fed-Mog would want to re-establish Studebaker Motors LLC as a separate entity.

    Maybe they could interest Daimler in buying 19.9% of it…. heh heh.

  • avatar
    Ken Elias

    gamper – The GM-Chrysler deal has never made any sense from the start. That has been covered extensively already on TTAC. The best thing for GM and Ford is for Chrysler to disappear. In reality though, some parts will remain as I’ve written.

    The point of the editorial suggests the timing to put Chrysler into Chapter 7 is today – as that would maximize cash left in the coffers at Chrysler for claimholders. I’ve heard that Chrysler is burning $400 million per month. So with no turnaround in sight, better to stop the madness now.

  • avatar
    NickR

    I am not sure the factory is worth that much. In a time of high demand, maybe. But I distinctly remember that when Chrysler bought AMC, the purchase price for the whole company was less than the construction cost of AMC’s new plant (the one where they currently build the 300, Charger etc).

    As for the warranty, good luck. I can see that working out the way some of my warranty work on other items has worked out. The warranty provider subcontracts the warranty management, maybe to a regional outfit. In turn, they have a specified list of shops that do the warranty work. Ultimately, you get directed to that shop. When you show up and say ‘This is under warranty’ you get a look of disbelief. Either the person behind the counter has no idea what you are talking about or they have dealt with the issue in the past and found out that it is a huge hassle and/or they aren’t adequately compensated.

    Buying a Chrysler now the only safe thing to do is go in assuming that the warranty is worthless.

  • avatar
    GS650G

    If any of this comes as a surprise to a Cry-sler employee then they have not been paying attention. I don’t think the divisions are worth what ken estimates, certainly not 5 billion for mini-van central since they are not going to win awards for quality or desirability. A C7 would offer the best outcome for the creditors and probably the UAW pension holders, provided the cash could be responsibly directed rather than inhaled in fees.

    Sad to see a once great automaker go down the tubes. But everyone who ever got F-ed by a bad transmission, or some other obvious engineering defect only to find they had to pony up out of pocket for repairs is getting dues right now. Add to that the shitty resale value on trade in with the dealership shaking their head as they load it onto an auction-bound car transport. The free market is brutal and Cryco has not succeeded where others have.

    Don’t count on the warranty. If a common problem emerges at some point down the road the warranty providers will work harder on denying the claim than on fixing your car. There is no, repeat no, incentive to make you happy with repairs. There is no repeat business to bank on. Just like insurance, they don’t make money paying claims.

  • avatar
    AG

    Actually, if I remember my Bankruptcy Law class properly, Uncle Sam is #1A in line if there are any back taxes owed, then secured creditors, then unsecured creditors, than equity owners.

  • avatar
    menno

    NickR said “Buying a Chrysler now the only safe thing to do is go in assuming that the warranty is worthless”

    Oh, so the Chrysler warrantee will be as good as the last GM warrantee I had on a 1997 Chevy, then…

  • avatar
    Pig_Iron

    Ken Elias: “Look for a Chapter 7 filing soon”

    What is the expected timeline?

  • avatar

    @Point Given while in the abstract it makes sense for GM to buy Jeep to merge with Hummer, let’s all agree that GM acquiring anything is folly at this time…

  • avatar
    guyincognito

    “They originally lent Cerberus about $10b or so to fund the acquisition from Daimler, with the hopes they could then sell the debt off to bigger schmucks.”

    Great line! And so true. This editorial nails it, but I also think your estimates of the value of Chysler’s assets are a little optimistic.

    Hopefully Cerberus takes the financial and PR bath they so deserve.

  • avatar
    Steve_S

    09 Challengers in 30 years might be worth some dough.

  • avatar
    Point Given

    jakemonO – Agreed. That said…it’s the most logical move for where Jeep could go and fit in with an established portfolio. And I think it will happen because GM’s been making poor decisions more often than not in the past decade…or two.

  • avatar
    Ken Elias

    My estimates of value are just that – estimates. But think about the alternative – the cost to develop a new vehicle are measured in the billions. A new factory – including land, tooling, robots, etc. – aren’t cheap either. Note that Chrysler’s Saltillo facilities include an engine plant and stamping facility in addition to the assembly plant. But I put its value lower than the minivan plant as the only customer for the plant would be its owner, Nissan.

  • avatar
    d996

    Even though it is Hallowen it seems a bit premature to declare Chrysler dead. There are still options available for Cerberus to try to work their way out of the mess. Although if Snow leaves then that would be a sure sign that their foray into autos would be over.

  • avatar
    hltguy

    What happens to the tens of thousands of unsold vehicles sitting on dealer’s lots or already built and not yet transported?

  • avatar

    Curious, If they are going to pull the plug via Chapter 7, why are they trying to cut salaried staff by 25% by end of year? Next week 100% (yep, all) staff will get an offer. Buzz says the amount will be between 70-75K, 6 months of benefits and a car voucher (oddly amusing parting gift). Second round will be less attractive (two car vouchers?) and the third round will be full on headshots!

    Why waste that kind of time unless they are positioning for a sale of some sort?

    VW, Nissan or a Korean maker.

  • avatar
    Pch101

    If they have a nice chunk of cash in the bank in excess of their debt, there isn’t much reason for Cerberus to file Chapter 7. They’d recoup more by selling the company.

    At the right price, somebody will want Chrysler. That price will likely be much less than what Cerberus would like it to be, but they have few options and everyone knows it.

    The same potential that made it appealing to Cerberus should make it appealing to someone else. The tough part is the credit crunch — Cerberus may have to help finance a part of the sale themselves in order to get it done, just as Daimler effectively for them.

  • avatar

    Oh shit, my aunt is buying a PT Cruiser that just came off of a lease, despite me warning her about Chrysler potentially going under. What now?

  • avatar
    DweezilSFV

    Wasn’t the potential to Cerberus to strip and flip Chrysler in the first place ?

    They weren’t getting into the car business because they were “car guys “….. like Lutz …..

    Do you really think they wanted to take the Sebring and Caliber to the “next level ” ?

    Someone may want Jeep. The other two only have sentimental value as brands.

  • avatar
    agent987

    Quote-“by Goldman Sachs and JPMorganChase. They originally lent Cerberus about $10b or so to fund the acquisition from Daimler, with the hopes they could then sell the debt off to bigger schmucks”

    Whats the chance this is where the government bails out Chrysler and takes an ownership in it? I’m sure Goldman’s and JP’s interest in Chrysler would be eligible for the government to buy under TARP. We know ex-goldman exec Paulson would love to take that problem off their hands. I’m sure the politicians could all get behind this too.

    Of course that means that the bigger schmucks are now the taxpayers, but that won’t be any different from the rest of the bailout

  • avatar
    Pch101

    Wasn’t the potential to Cerberus to strip and flip Chrysler in the first place ?

    No. Chrysler LLC’s pieces aren’t worth much of anything. There wasn’t anything to strip and flip when they acquired it. Breaking up the company without first building it up and making it better would have been a sure money loser.

    It’s fairly clear from Cerberus’ actions that their goal was to turn Chrysler into a distributor of cars made by others, while Chrysler would in turn build trucks and minivans that it would sell to others who wished to rebrand them for themselves.

    The logical play would have been to create relationships with these other auto companies that were deep enough that the eventual sale of Chrysler would create a bidding war among the existing JV partners, plus possibly some outsiders who wanted a foothold in the US market.

    It’s clear that Cerberus didn’t see this credit crunch coming. The current situation is difficult because it adds years to their exit strategy and it limits their ability to borrow money to pay for the buildup.

    They probably also planned on helping to pay for the growth of the new Chrysler by selling off the inventory that they inherited from Daimler. With sales dropping and prices falling, that can’t be going as well as planned, either.

    Since they don’t want to fill those money gaps by exposing themselves with more of their own or their investors’ money, they’d prefer to sell now while they have a chance to recoup something.

    They are going to take a bath on this one. This is surely not something that they projected or really wanted.

  • avatar
    Honda_Lover

    Airhen :
    October 31st, 2008 at 11:58 am

    Question, before Lee Iacocca came in, was Chrysler in any type of a similar condition as they are now?

    As far as Jeep, I would also put the Grand Cherokee in with the Wrangler as surviving.

    I also agree that bad companies (and their union) cannot be allowed to survive.

    Americans have decided to throw capitalism over the railing, because “it’s too harsh”. We don’t believe in loser having to pay the price anymore. Welcome to American socialism.

  • avatar
    obbop

    If the USA federal government took control of Chrysler is there a possibility we will see a new model on the road…. the Obamabile?

  • avatar
    Honda_Lover

    We’ll soon be getting Obamavilles(Hoovervilles?) and Obamabiles to drive between them using gas ration cards of course.

  • avatar
    DweezilSFV

    PCH101:Thanks.Seems like an odd plan to make work under even the best circumstances though.But I could see Chrysler assembly building other maker’s cars.

    I would take it the Rams for Nissan and MiniBus for VW are a part of that plan ?

    It didn’t seem like they got much of anything from Daimler in the first place. And it would seem that even that plan would have taken more capital and time to get the outfit strong enough to sell than they wanted.

    Seems like an awfully risky way to “invest” as the Big 2.8 were having problems long before Cerberus got in the game.

    Was there any product planning by Cerberus
    beyond 2010 or was Cerberus aiming to have been done with Chrysler and on to other things by then ?

    Oddly AMC was building cars for Chrysler there at Kenosha, both M Body and the Omnirizon at different points IIRC before the merger and after.

  • avatar
    Ptrott

    Cerberus has the money to turn Chrysler around and make it work. It is simple greed and a lack of concern for all the thousands of jobs lost. For over a year Cerberus has outright lied in respect to their intentions for rebuilding Chrysler. Cerberus should keep its word to the consumers that bought Chrysler products and the workers that have taken concessions and make this thing work.

  • avatar

    Ptrott :

    This dog won’t hunt. Too many dealers. Union contracts suck. Products blow. Corporate culture diseased. Massive liabilities. Anyone who’d be stupid enough to sink money into the Chrysler sinkhole will never see it again. Which is why Cerberus didn’t bother, and never planned to.

    Daimler– or the people who sold Chrysler to Daimler– gutted this fish. Cerberus merely carved it up. Or will do, ASAP.

  • avatar
    Ptrott

    robert farago:

    You have reinforced my point. Regardless of how Daimler “gutted this fish”, Cerberus knew what they were buying. IF Cerberus’ intententions were simply to “carve it up” then they have indeed lied to the buying public that spent good money on the products Chrysler was selling. Pure greed and a lack of ethics is at play here. I agree Daimler screwed this company, but, that is no excuse for how the customers and employees of Chrysler are being screwed over again.

  • avatar
    AuricTech

    Let’s assume for the moment that Mr. Elias has valued Chrysler’s Windsor minivan operations, their Mexican Ram pickup truck plant, Mopar and Jeep with reasonable accuracy. What is the value of Chrysler’s other facilities, especially their production plants?

    As a concrete example, let us ponder Chrysler’s twin plants in Fenton, MO (suburban St. Louis). The recently-shuttered south plant produced minivans, while the north plant is slated to run one shift building Dodge Ram pickup trucks. While the Fenton complex has been around for decades (30+ years, since I can’t remember it not being there), DaimlerChrysler spent about $500 million modernizing the complex since 2005. I’m not sure of the capacity, except that St. Louis South employed about 1500 workers for one shift, and the next-door North employs about 900 workers for one shift.

    All that being said, four questions occur to me:

    1. What is the value of this complex to another company? I assume that a recently-modernized plant, while having some tooling that is model-specific, has some tools (e.g., robot welders) that can be adapted to produce other vehicles.

    2. Which non-Chrysler auto companies would find this complex worth buying, assuming that UAW contracts weren’t part of the package?

    3. If no auto company wanted this plant, to what other kinds of manufacturing could this plant be converted without throwing away all the machinery?

    My fourth question may be beyond the scope of TTAC’s B&B, as it involves political issues, but here goes:

    4. How would money, in tax breaks and the like offered by Fenton, St. Louis County and the state of Missouri, affect both the value of this complex and the likelihood that some auto company would buy it?

  • avatar
    zerofoo

    Hopefully someone will continue to make parts for my 2004 Jeep Grand Cherokee Laredo. I love that thing, and I’ll keep it on the road as long as I can get parts for it.

    Either that, or I’m going to hire a Cuban mechanic to keep it running.

    -ted

  • avatar
    B.C.

    I hate to be the resident language Nazi, but I think you meant for Cerberus to “lick its wounds,” not “lick its chops.” Big difference.

  • avatar

    B.C.:

    Missed that one. Thanks. Text amedended.

  • avatar
    Dr. No

    Highly speculative article and a disservice to readers. What evidence is there for Chapter 7? Chapter 11 makes more sense, using a bankruptcy judge to lean-out the organization (and unprofitable dealers).

    Chapter 11 is difficult, however, because this isn’t the 1980s. Customers have more choices today than they did then, and it will be tough for them make their second largest purchase from a company in bankruptcy. Especially in this economy.

    I think a sale or merger with GM or Nissan is more likely. Cerberus wants OUT. We were all put on notice when Cerberus hired cut-and-run Nardelli over product guy Werner Bernhard in the beginning.

  • avatar
    menno

    Yes, Dr. No, that’s precisely why if Cerberus can’t arrange some kind of deal, they’ll Chapter 7 it. Chapter 11 is, for Chrysler , a waste of time and money. The can’t sell their wares now… never mind in Ch. 11.

    Now, things might have been different had Chrysler actually managed to “do an end run” around the competition with their last mid-sized car. Instead of a fumble.

    Imagine the value of the company if it had a
    GENUINELY 1st class Accord/Camry fighter – with similar reliability, capabilities, competitive styling, better than average fit and finish and materials, “next size” interior and trunk, good comfort levels, decent handling and decent styling. Oh yes – with competitive pricing – and MANUFACTURED in the United States. Oh yes, finally, with a first class, very long warrantee.

    I just described the Hyundai Sonata.

  • avatar
    ihatetrees

    AuricTech :
    As a concrete example, let us ponder Chrysler’s twin plants in Fenton, MO (suburban St. Louis)….

    1. What is the value of this complex to another company?
    $0.00 – There’s too much overcapacity in North America – even for a modern plant.

    2. Which non-Chrysler auto companies would find this complex worth buying, assuming that UAW contracts weren’t part of the package?
    Your question assumes a functional plant with non-UAW employees can actually be run in Fenton. I doubt that assumption. Feel free to speculate on possible legal and other production disruptions.

    3. If no auto company wanted this plant, to what other kinds of manufacturing could this plant be converted without throwing away all the machinery?
    Nothing. If the plant sold very cheap, it’d be best to flatbed the machinery to another location. Or, mothball the whole thing until government is willing to bribe youtax-incentives and grants make it viable to re-open.

  • avatar
    telrbm1

    hltguy :
    What happens to the tens of thousands of unsold vehicles sitting on dealer’s lots or already built and not yet transported?

    Let’s crush them. Crush them all. The overcapacity is so bad that my local dealer still has two new 2007 300s on the lot which remain unsold. Pathetic.

    Grind them all up and put them on boats headed for South Korea. They can come back to us as Aveo.

  • avatar
    Pat Holliday

    Only a faintly unrelated note, this story appeared in the UK national press over the weekend:

    Dodge dealers offering buy one get one free

    Seems pretty desperate.

  • avatar
    John_K

    But where will I get a vehicle that gets 11mpg off the assembly line?

    No more gas guzzling, Mexican made hemis! No more lousy transmissions that fall apart at 30K!

    What a cruel world!


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