By on May 17, 2011

Does that headline seem ripped from the pages of TTAC’s 2008-2009 headlines, or what? But really, who’s shocked? Chrysler spent early 2009 trying to convince the government that it was worth a (second) taxpayer-funded second chance, and now that it’s looking for a private-sector bailout in order to escape the terms of its publicly-funded bailout, Chrysler’s still got some ‘splaining to do. The DetN reports:

Chrysler Group LLC does not intend to speed up plans for new cars despite media reports that investors see a high degree of risk in an automaker that has been so dependent on truck sales…

“Nothing has changed from the five-year plan,” [Chrysler Group VP of Design and Dodge boss Ralph Gilles] said.

New small and midsize cars for Chrysler, engineered by Fiat, “are coming strong and heavy,” Gilles told reporters following a speech. “There is no need to speed up.”

Now, nobody would suggest that Chrysler should mess with its product timing simply to please some bankers. If it’s even remotely possible to hurry new products to launch without cutting serious corners, Chrysler should/would be doing it anyway (ask Sergio). Still, Gilles’ “nothing has changed” sound bite isn’t exactly true.

Less than a month ago, it was reported that the Chrysler brand would not be getting new Compact or Subcompact vehicles… a fairly clear break from the Five Year Plan. At the time the move was justified  as a way to prevent overlap with the Fiat 500 and forthcoming Dodge C-Segment sedan, but that’s only a problem if you don’t spend any money differentiating your products. Fiat sells the Lancia Ypsilon next to the Fiat 500 in Europe… with gas prices going up and CAFE looming, why not try a similar strategy stateside? Perhaps Wall Street would have more confidence in Chrysler’s ability to fix its sub-standard fuel economy if it hadn’t just cut small cars out of an entire brand.

But, then, Chrysler doesn’t need to push for better loan terms. Not when the bond market is hopping. The WSJ reports that Chrysler has flip-flopped its bond-loan mix, and is now seeking only $2.5b in loans and $3.5b in bonds. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott explains that

The relative resizing of the bond and loan issue is very instructive about the two markets. The corporate bond market remains wide open for issuance while the loan market is a little more cautious to lend. Banks cost of capital and, therefore, a loan’s cost have been on the rise and that’s because loan purchasing tends to be done by investment committees whereas bond buying is more decentralized

On the other hand, you have to wonder if the bond market has paid much attention to Chrysler’s recent past, specifically the experiences of its erstwhile bondholders in bankruptcy. It really wasn’t all that long ago (although our “legal team” advises me to clarify that Old Chrysler is in no way the same company as “Chrysler Group LLC). Either way, more bonds equals more interest… around eight percent, according to the WSJ. The FT adds that Chrysler has bumped its loan interest rate to 475 basis points over three-month Libor (from 400-425).

Meanwhile, help may be coming from another corner… the government. Reuters reports that Energy Secretary Steven Chu confirmed that Chrysler’s ATVM “Retooling Loan” request is still pending the refinance deal. Chu said he was “hopeful” that Chrysler would qualify for the loans, which require proof of “viability,” but that a decision before the re-fi would be premature. Chrysler’s $3.5b ATVM loan application has been pending since before the bailout, and CEO Sergio Marchionne says it will be used to improve truck fleet efficiency. And luckily those loans are the kind of low-interest loans that only the government can provide.

 

 

Get the latest TTAC e-Newsletter!

15 Comments on “Chrysler: No Product Changes For Loans...”


  • avatar
    segfault

    Is it too soon for the Second Bankruptcy Watch? Can we start a dead pool?

    • 0 avatar
      SVX pearlie

      Deathwatch: Chrysler should have already started.

      • 0 avatar
        segfault

        When Chrysler (and later, GM) declare bankruptcy for the second time, will our profligate government bail them out again? (And who will bail out our government?)

        It could be five years from now or fifteen or fifty years from now when it happens, but neither company has the management in place to allow them to practice “smart decline.” It’s already known that their market share has declined for decades and will likely continue to decline, but their present leadership has their head in the sand on this point and is basing current and future spending on the fallacy of maintaining or increasing market share in the short and long term.

    • 0 avatar
      highdesertcat

      We should hope that Chrysler can secure money from sources other than the US Treasury, and maybe we, the people, can get back some of that bail out money. But it is unlikely that Fiatsler can make a comeback, and no lender is going to chance a default. Sergio has it right! Gamble with other peoples’ money, never your own. And true to that he has not put any Fiat money into Chrysler, and never will.

      GM? I don’t think they will make it either. I think that by 2015 the US auto industry landscape will have changed beyond recognition. What will be left will be some conglomeration of partnerships and joint ventures, like GM and various Chinese auto makers all trying to gain access to the US market under GM’s nameplates; Fiatsler, of course, with their Fiat-branded Chrysler products; and an odd assortment of Ford/Toyota ventures with Toyota being the majority owner of Ford, where most of their products are Hecho en Mexico.

      You may laugh now, but a lot of people were also laughing at the forecast demise and bankruptcy of GM and Chrysler. Nevertheless, it happened.

  • avatar
    Byron Hurd

    Chrysler is (barely) living proof that Wall Street investors don’t know fuck-all about running a car company.

    I was a little surprised when they announced that the C-segment Chrysler car was axed, but it makes sense if they’re trying to reposition the brand more upscale than Dodge again. It makes sense if you think about it, especially considering what they’ve done with the 300.

  • avatar
    charly

    Fiat sells the Fiat Panda next to the Fiat 500. That it also sells a Lancia is true but not really important outside Italy.

  • avatar
    Beerboy12

    What Americans want is a truck that can carry 8 people and tow a house, what they need is a small, well engineered hatch back with 3 peddles for gas mileage and performance. Fiat offers exactly that type of product. Why don’t Chrysler put some Fiats on their show room floors and get busy selling cars. All this fussing about money, branding and so on is just hopeless.

    • 0 avatar

      Fiatsler simply are not that smart toomuch effort being put into reviving junk like the 300 so that its still totally outclassed on real roads testers found the diesel can easily keep up with the hemi bas its got no torque low down, Why bother?waste of resources, slap a few Fiats on the showroom floor and see what sells better bet than the crap that broke them in the first place

  • avatar
    highrpm

    This ridiculous plan is not even remotely funny, especially considering that my tax dollars are propping up this dud of a company.

    No small car in the works for several years, with $4 gas?
    The only midsize car they offer is a reworked Sebring?

    Sure, Chrysler makes some nice trucks and minivans. And I know that the execs don’t pump their own gas. But I think that they at least drive past a gas station every once in a while don’t they?

    If I was trying to run a company into the ground on purpose, my product plan would look exactly like Sergio’s plan that you’ve shown.

  • avatar
    Rod Panhard

    The manufacturer and their dealers will be able to sell product to their core of customers … the employees, retirees and extended families and friends of said folks. They’ll buy whatever rolls out of the factory. But competing for customers during $4 gasoline? They’re gonna need help with that.

    The 500 will sell well until it’s no longer fashionable and market demand has been met. The rest of the Fiat line, if Chrysler lasts long enough, will be a different story.

  • avatar
    Zackman

    Hmmm…Chrysler already has “possibly the world’s best vehicle?” in the Dodge Journey. What else do they have to have?

    By the way, I see more 200′s every day around here on my commute, and I don’t believe they’re all rentals either, so something’s happening. Is it too little, too late though?

    Unfortunately, I can visualize an automotive world, in the U.S. at least, minus Chrysler, Saab, Mitsubishi and Lincoln.

  • avatar
    jpcavanaugh

    I don’t really see any news here. First, we are a few months from the 2012 model year in which we will see the new C segment Dodge. No C segment Chrysler? Big deal. With all Mopar brands being offered in the same showroom, does there really need to be a Chrysler smaller than the Sebring when you have Dodge and Fiat models right there anyhow.

    So, back to the refusal to rush. Everyone agrees that Chrysler has had quality problems. If Chrysler were to go into a panicked rush to speed the small car intros, now THAT would scare me. I like the management of this company. They had to start from scratch on small cars, as there was absolutely nothing worth salvaging from the Daimler era. So in sum, the company is doing the best they can with what they have. If the recent products are a guide, the new C segment car will be appealing and will vastly outsell the Caliber.

  • avatar
    jaje

    I think Chrysler got lucky riding GM’s bankruptcy coattails. If GM wasn’t in so bad a shape I doubt the Gov’t would have bailed out Chrysler. Circumstantially Chrysler was only allowed bankruptcy when Fiat bought into the company with guarantees to buy enough shares to take a controlling interest at a future date (pay off the US gov’t shareholders).

    The market is too saturated / mature for perennially struggling automakers. It’s time to let the free market do what it does best (close down defunct brands and let automakers who do not have the strength fold and go out of business). In the next couple of years we’ll see the Chinese enter the US market so this will be interesting.

  • avatar
    abgwin

    Too many people confusing Chrysler Group with Chrysler brand. Chrysler BRAND without a B segment (C is still under review) doesn’t mean Chrysler GROUP without a B segment. There’s both a Dodge and Jeep B segment in the pipe.

    Do you people think that an automaker can snap their fingers and a totally new product magically appears? Even bringing the 500 to the US required a totally new platform underneath to meet not only NA crash standards but also to make a competitive car. Ask GM how dumping an Astra on the Saturn lots worked out.

    The Dodge-branded CUSW (i.e. C-Evo for North America) drops late this year or early next. That’s soon enough. If they were to rush any more, cut any corners, this site would be harping at that too.

    Go drive a Sebring, then drive a 200. Drive a new Grand Cherokee. Hell, drive a 500. Then you can have an opinion.

  • avatar
    mjz

    Chrysler 100: upscale C-segment sedan (Lancia Delta).
    Chrysler Chianti: upscale B-sement hatch (Lancia Ypsilon).
    With gas likely to reamain around $4 per gallon, they would be foolish not to have these products.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India