Chrysler’s logo should have been a bottle of lithium, rather than the Pentastar. It suffered from severe bipolar disorder all its life, and, sadly, died from it at its own hands. Like many suicidal bipolars (e.g., Van Gogh, Hemingway, Virgina Woolf), Chrysler’s many crashes and acts of self-mutilation were punctuated by fantastic highs of brilliant engineering, design and creativity. Chrysler has taken us on quite the roller coaster ride. And now it’s over. As we stumble out of our (Hemi-powered) coaster car, we’re left with an intense mixture of relief, thrill, and sadness.

Chrysler’s beginning was an unparalleled flash of genius and overnight success. Walter P. Chrysler had a fairy-tale career in the early automobile business, earning $10 million ($130 million today) in just three years while turning Buick into GM’s early powerhouse. Then, while running Maxwell, he launched the Chrysler line in 1924 with that just-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 manufacturers. The subsequent successful launches of the low-price Plymouth, the 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 radically advanced but unusual-looking Airflow. Its wholesale rejection by the buying public taught Chrysler (and Detroit) a painful lesson: avoid extreme innovation.

Chrysler recuperated and made enormous profits during the WWII era. But the development of the all-new 1949 models was haunted by Chrysler’s still-lingering Airflow insecurities. Whereas GM and Ford confidently introduced longer and lower models designed to thrill exuberant post-was buyers, Chrysler president P. T. Keller insisted on tall, boxy cars.

In 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, and 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 exuberant designer Virgil Exner was hired to inject vitality and fresh style. The 1955s were an improvement, but the radical 1957s were destined to be the great leap forward (“suddenly it’s 1960!”). But in the rush to revolutionize, the products were not fully developed, and suffered from atrocious build quality.

The flashy ’57s sold, but word got out and buyers punished Chrysler unmercifully. 1958 sales plunged by no less than 41% for Plymouth. And despite a reputation for engineering excellence, 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 one of the most staggeringly idiotic acts of executive self-mutilation. In 1960, Chrysler president William Newberg overheard a rumor at a cocktail party that Chevrolet was working on a dramatically smaller 1962 model (it was: the compact Chevy II).

In a colossal blunder, he assumed this referred to the full-sized Chevrolets. Newberg killed development of the full size 1962 Plymouths and Dodges and initiated a crash program for substantially downsized replacements. When the ugly, truncated ’62s were first shown to dealers, an uproar ensued, and twenty dealers cancelled their franchises on the spot. Plymouth crashed to ninth place, while GM’s market share rose to an all-time peak of 52%.

Chrysler barely survived the fiasco but went on to enjoy a relatively long spell of good health from the mid-60s through 1974, in part thanks to its successful performance image. But with a portfolio of heavy RWD cars and lacking the foresight, will (and capital) to retool extensively, Chrysler was flattened by the one-two punch of the energy crises. By 1979, it was back on the critical list, saved from bankruptcy only by the life-support of a government loan-guarantee act.

This financed the compact K-car; Chrysler squeaked by and regained health, once again. Endless K-car variants carried the day. When the 1990 recession brought on another depression, Iaccoca was shown the door.

In the mid-nineties, Chrysler was on its ultimate manic high. Low overhead costs from its near-bankruptcy, some deft model development, the purchase of Jeep, and sheer luck (the boom of the truck and SUV markets) generated huge profits and a 23% market share in 1997 (bigger than GM’s recently). But at the very height of health and success, the suicidal urges return.

In 1998, CEO Robert Eaton had Chrysler engage in ritual corporate seppuku by selling itself to Daimler (while walking away with over $200 million himself). And despite all of Dr. Z’s ministrations, the patient never really regained lasting health. Was there arsenic in the Daimler medicine?

There’s a market for corpses, and Cerberus bit with all three heads at once. And choked.

Well, the fat lady done sung. Only it was a thin president who ended TTAC’s Chrysler Suicide Watch. Lucky for us (if no one else), the Prez also promised to keep the dead automaker alive, through a fresh injection of federal funds. Obama didn’t specify the price tag for this zombification, but the bidding starts with the familiar “b” word, and octo-mom would recognize the number. As you know, Obama justified his ongoing intervention in Chrysler’s journey to liquidation by pimping the un-dead (now dead) American automaker to Italy’s own automotive English patient. So it’s time to get on with the business of tearing the Fiat “merger” idea to shreds. In this unenviable (but gainful) task, I’m aided by Jennifer Clark of the Dow Jones News Service. Jenny’s Chrysler-on-the-block piece arrives under the odd title “Chrysler Chapter 11 Filing May Aid Fiat Turnaround.” Go figure.

Miss Clark’s analysis begins with some Detroit News-like cheerleading from a hand-picked optimist. “A Chrysler bankruptcy filing could be a wonderful opportunity for Fiat,” said Jerry Reisman, a bankruptcy lawyer at Reisman, Peirez & Reisman, who predicts a speedy procedure. “All of Chrysler’s debt will be dealt with in court, so Fiat will know exactly what it’s buying. It will be a new Chrysler.”

It’s a shame Reisman wasn’t my divorce lawyer. Or, conversely, it’s a blessing. The Chrysler C11 case will involve hundreds of Chrysler creditors. Thousands of Chrysler dealers. Dozens of Chrysler debt holders. And they’ll all be represented by Reisman’s colleagues AND hamstrung by a building full of megalomaniacal bureaucrats. Reisman’s faith that a bankruptcy judge will sort this Fiat-finagled farrago in short order is almost as delusional as Chrysler’s initial hopes for the Sebring.

And the clock is ticking. “How will the company keep going for 18 or 24 months until the new product is brought to market?” asked Mark Fulthorpe, director of European vehicle forecast at CSM Worldwide. “They can’t rely on the U.S. government.” Silly me; I thought that was the whole point. But point taken. Even if Chrysler’s new boss opts for a short-term “solution” to the automaker’s glaring lack of commercially appealing products—say, by slapping a Chrysler badge on an imported Fiat—the federalization process required is neither cheap nor fast.

If, heaven forfend, the Presidential Task on Automobiles (PTFOA) bullies the National Highway Traffic Safety Administration (NHTSA) to relax its rules on product safety, Chrysler would still be SOL (shit out of luck). The move would open the way for Ford to bring over its Euro-models, which would slaughter Fiat’s models in the market.

Or not. There is no proof that anyone’s European models would do well in the US and plenty of indication that the exact opposite is true (Merkur much?) Otherwise, plan B (or plan A as it’s called) calls for retooling American factories to build Fiats. Huh? Why not just improve current Chrysler models? If American automakers should have learned one thing from this debacle, it’s that the constant pursuit of the next big thing puts an automaker on a hiding to nowhere.

And then there are the cultural problems. Let’s assume that the PTFOA is calling the shots at post-C11 Chrysler (only because it is). So now they have to ming with Fiat. And Chrysler’s new CEO (to be named later). And the United Auto Workers. Let’s also assume they can all work together in perfect harmony. Quickly, efficiently and, above all, profitably. And while we’re at it, let’s assume that someone makes a non-fat, low-calorie ice cream that tastes better than Häagen-Dazs ice cream for, I dunno, half the price. Yum.

Funny thing about Häagen-Dazs: it’s a made-up name created by two Polish immigrants in the Bronx. But the branding is killer. As is Chrysler’s, only in the literal sense of the word. Even with Barack Obama personally guaranteeing Chrysler’s warranties, the automaker’s Chapter 11 is the kiss of death. On a corpse, if we’re going down the icky route.

I know: I recommended a ChryCo C11 at the start of the old series. Well, as any S.E. Hinton fan will tell you, that was then, this is now. Now that Detroit has used up all its goodwill by sucking up seemingly endless (’cause they are) subsidies, the stench of bankruptcy is overpowering. If buyers avoided Chrysler like the plague before, they will now avoid the Auburn Hills zombie like Ebola. Which, coincidentally, ends with a vowel, Italian style.

Counterpoint! ”Carlos Ghosn proves it can be done: Ghosn is chief executive of France’s Renault SA and alliance partner Nissan Motor Co. of Japan.” Yes and no. Ghosn brought Nissan back to life, but he didn’t do it by selling rebadged (or retooled) Renaults in the US market. He did it the hard way, through evolution, over time. And Nissan still got slammed by the economic meltdown.

Nope. Chrysler is an evolutionary dead end, a walking zombie waiting for the marketplace to blow its head off. And TTAC will be there.

Auburn Hills, Mich., Apr 30, 2009  -  Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a vibrant new company. It will allow Chrysler and Fiat to fully optimize their respective manufacturing footprints and the global supplier base, while providing each with access to additional markets. Fiat powertrains and components will also be produced at Chrysler manufacturing sites.

“This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages,” said Bob Nardelli, Chairman and CEO of Chrysler. “It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles. Benefits to the new company include access to exciting products that complement our current portfolio, technology cooperation and stronger global distribution.”

Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Over the past several months, these discussions have evolved and expanded. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfillment of a broader strategic alliance.

“We want to personally assure everyone that the new company will produce and support quality vehicles under the Jeep®, Dodge and Chrysler brands as well as parts under the Mopar® brand. Chrysler employees will become employees of the new company. Chrysler dealerships remain open for business serving our customers. All vehicle warranties will be honored without interruption and consumers can continue to purchase our vehicles with complete confidence,” explained Nardelli.

Despite substantial progress on many fronts, Chrysler was not able to obtain the necessary concessions from all of its lenders, which would have avoided the need for a bankruptcy proceeding. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.

“Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat,” said Nardelli. “My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. “

Chrysler also will file a motion under Section 363 of the Bankruptcy Code requesting the swift approval by the Court of the agreement with Fiat and the sale of Chrysler’s principal assets to the new company. The benefit of this type of filing is speed. It should allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability.

Nardelli, who has been leading Chrysler since August 2007, also announced to Chrysler LLC’s Board of Management and the U.S. Treasury his plan to leave the company following the emergence of the new company from Chapter 11 and the completion of the alliance with Fiat. He will return to Cerberus Capital Management LP as an advisor. “Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” said Nardelli. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”

During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of “business as usual.” The company will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers.

“To create this vibrant new company, we are using this structured bankruptcy to rapidly implement tough but necessary changes, including: the agreed upon wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers,” said Nardelli.

Chrysler’s Mexican, Canadian and other international operations are not part of any bankruptcy filing.

As part of the restructuring and with the backing of the U.S. Treasury, we have reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.

When the transaction is completed, the Voluntary Employee Beneficiary Association (VEBA) will own 55 percent of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 percent stake. Fiat will initially hold a 20 percent ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15 percent in three increments as it meets the following criteria: 5 percent for bringing a 40 mpg vehicle platform to Chrysler to be produced in the U.S.; 5 percent for providing a fuel-efficient engine family to be produced in the U.S. for use in Chrysler vehicles; and 5 percent for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles. Fiat cannot become a majority owner until after all U.S. government loans have been completely repaid.

As a part of the restructuring, most manufacturing operations will be temporarily idled effective Monday, May 4, 2009. Normal production schedules will resume when the transaction is completed, which is anticipated within 30 to 60 days.

“We want to recognize the Administration, the U.S. Treasury, President’s Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move this new company forward,” Nardelli said. “It is also important to acknowledge Cerberus and Daimler, which provided the foundation for the alliance as well as Chrysler’s many other stakeholders including the UAW and CAW leadership, employees, dealers and suppliers. Without their deep sacrifices, unstinting loyalty and enduring belief in Chrysler, the alliance would not have been possible. We look forward to our new partnership with Fiat. To be sure, there will be many changes as we move forward to implement our plans. But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company.”

Barack Obama is set to address the nation tomorrow, announcing Chrysler’s death and rebirth. The president will frame the government’s intervention in familiar terms: hope and change. Only in the reverse order: change and hope. Obama will say that the federal government is helping Chrysler transform into a viable American automaker. This we (yes we) are doing because President Obama has hope for the future of the American automaker and, not-so-incidentally, American automaking. Chrysler, the United Auto Workers (UAW) and Fiat will now build the kind of economical, environmentally friendly vehicles America needs. Unfortunately, Obama’s “plan” is the exact opposite of what it pretends to be.

Chrysler Bailout III represents the protection and perpetuation of the status quo, not genuine change. How could anyone think otherwise, now that The Presidential Task Force on Automobiles (PTFOA) has engineered a deal that gives the United Auto Workers a majority stake in the reconstituted Chrysler? If there’s any one group in the auto industry that has resisted change, that’s opposed root and branch reform, it’s the UAW.

Since the union’s inception, they’ve labored under an ever-expanding set of terms and conditions, that’s now thicker than “Gone with the Wind” and “War and Peace” combined. As you might imagine, none of these endlessly negotiated strictures, mandates, grievance procedures, benefits, entitlements, etc., were designed to engender manufacturing flexibility. They were designed to protect workers from change.

The UAW’s onerous contracts have bolstered a stultified corporate culture that’s both unable and unwilling to foster innovation. You want to change the way I do my job? Take it up with the union. And good luck with that.

Sure, Chrysler’s management bears ultimate responsibility for allowing their union workers to [help] frustrate the company’s overall competitiveness. And no, the UAW didn’t decide what Chrysler cars, trucks, SUVs and minivans to build, how to build them, what parts to use or how to put them together. But no matter who’s to blame for Chrysler’s execrable products, the union is in the business of protecting the union—not finding ways to build better automobiles.

Not to put too fine a point on it, anyone who truly believes that increasing the UAW’s stake in Chrysler will transform union members from legendary foot-draggers to world class sprinters, passing the four-wheeled baton to a freshly energized (Italian?) management structure with speed and grace, is nuts. As in delusional.

Which is a perfect description of President Obama’s “plan” for Chrysler.

Not to coin a phrase, Obama and his PTFOA have failed to hope but verify. It’s one thing to imagine a reborn Chrysler making fuel-efficient Fiats that can sell at enough of a profit to keep UAW members employed and pay off the new company’s $10 billion (and counting) debt to taxpayers. It’s another to think it can actually be done.

Chrysler’s turnaround “plan” involves more variables than a five day weather forecast, from mastering manufacturing logistics in a company decimated by layoffs, to somehow overcoming consumer resistance to TWO damaged brands.

Perhaps that’s why private investors wouldn’t touch Chrysler with a ten-foot spreadsheet. And now, where financial angels fear to tread, the federal government rushes in. To save jobs.  Union jobs.

As I’ve stated previously, the American public doesn’t know credit default swaps from Shinola (another company that went the way of the buggy whip). But they understand that new Chrysler is a union gig. Well, if they didn’t before, they will now, what with the UAW’s 55 percent share of the post C11 company. The question then becomes how much sympathy does the average American—rather than, say, the average Democratic operative—have for the “plight” of the unionized working man?

The answer: some. But not enough. Not enough to go out and buy a new new Chrysler product just because it wears the union label. Especially not now, at a time when the average new car buyer isn’t buying a new car. When they can’t afford to risk their hard-earned money on a vehicle that may or may not be reliable. From a dealer that may or may not be in business next year. And then there are the people who will not even consider buying a Chrysler product because of the bailout.

There’s your bottom line. At the end of the day, after the feds “invest” tens of billions of tax dollars in Cerberus and Daimler’s cast-off, the automaker will live or die based on whether or not American consumers will buy the company’s vehicles in sufficient quantity at a price that allows Chrysler to take in more than they spend. As our Best and Brightest will tell you, without genuine change in corporate culture, without a realistic plan, the odds of that happening are somewhere between none and none.

And so the president will eventually learn—as Chrysler’s previous owners have—that commercial realities can only be postponed not denied.

GMAC is a bank. It used to be a lender to both the car and mortgage industries. And not a particularly good one. Or, maybe, too good. Or just right if you were a sub-prime borrower looking for quick cash. GM owned all of GMAC, which was a cash cow. Right until it wasn’t. Just before the now-infamous sub-prime meltdown, GM was trying to cover-up its cash burn. So CEO Rick Wagoner sold a controlling share in GMAC to Cerberus, the same people who bought Chrysler. Flash forward to the waning hours of 2008. GMAC was about to fall into bankruptcy, dragging down Cerberus, Chrysler, GM and that funny-looking guy who used to be your landlord. So Uncle Sam stepped in—and how. The Fed relaxed its banking rules so that GMAC could become a bank, and, thus, hoover-up $6 billion worth of bailout bucks. After that, there’s some stuff about ending leasing, not lending money to car buyers, driving Chrysler and GM dealerships into C11, lending money to car buyers, etc. Up to speed? OK. So here’s the New Deal . . .

To facilitate its plans to turn Chrysler into a union co-op, the Presidential Task Force on Automobiles (PTFOA) wants to unload Chrysler Financial on someone. But who in their right mind would take ownership of Chrysler Financial NOW, when the automaker it supports is about to be turned into a union co-op (see: above) and married (con fucile) to an ailing Italian automaker? In the middle of a contracting new car market? That’s abandoning Chrysler in droves.

Actually, it’s worse than that.

Chrysler Financial is running out of money and has had to rely on $1.5 billion in loans from the federal government. The company also has a line of credit from several major banks, but the interest rate is so high that it cannot use the money profitably.

Furthermore, if Chrysler files for bankruptcy, a prospect that many officials say is highly likely this week, the banks can pull their lines of credit from Chrysler Financial.

Bottom line: no one wants this turkey, obviously. Except anyone who wants Chrysler to survive as a going concern, in one form or another. (Don’t look at me.) Make no mistake: if Chrysler Financial flames out, it will take the automaker down with it. Well, unless Uncle Sam comes to the rescue again.

Chrysler Financial afloat still remains critical to the company’s future, some industry and government officials said. A collapse of the financing arm could take down many dealers, which rely on short-term loans to buy the cars that sit on their lots. Chrysler sales could also grind to a halt as consumers struggle to get car loans. In the present environment, it would be difficult for dealers and customers to get financing from banks.

Luckily, the PTFOA has an idea. A wonderful, awful idea! Sell Chrysler Financial to GMAC. Hey, that was Cerberus’ plan all along, right? Combine GMAC with Chrysler Financial and strip and flip the rest? So, let’s do it! I said, let’s do it. And don’t worry: we got money. Or, more specifically, you got money. Which we gave you.

As Mr. Marley used to sing, four o’clock, roadblock. Now that GMAC is a bank, it falls under the purview of the Federal Deposit Insurance Corporation (FDIC), whose sworn task is to keep banks from doing really stupid things like . . . spending money it doesn’t have buying Chrysler FInancial (again ALSO owned by Cerberus). And the Fed, so forgiving and understanding back in late ’08, aren’t playing ball on this one.

Treasury officials have not yet obtained the agreement of the Federal Deposit Insurance Corp. and the Federal Reserve, sources said. The FDIC, created to backstop the banking industry, is balking out of concern that its resources would be drained in support of an auto manufacturer. And the Fed, which regulates banks, would need to grant a waiver from a long-standing rule that separates banking and commerce.

House of cards anyone? Or should I simply say, let the political arm twisting begin! I mean, continue. And I’m glad that PTFOA head Steve Rattner is a former investment banker, ’cause this one sounds like a real bitch to sew together.

Closing a merger between GMAC and Chrysler Financial would require an infusion of new bailout money from the Treasury. The company also needs access to an FDIC program that allows companies to borrow money at lower interest rates, sources said. And administration officials want the Fed to relax a rule that would restrict the amount of loans that the enlarged GMAC could make to Chrysler’s customers and dealers because both firms are owned in part by the same company, Cerberus Capital Management.

Not to be too much of a downer here, but this clusterfuck illustrates the fact that no matter how this shakes out, Detroit’s federal bailout is doomed to an extremely expensive failure. On our dime. Sigh. Chapter 7 would have been such a clean resolution . . . .

Chrysler bondholders have officially rejected the Presidential Task Force on Automobiles’ (PTFOA) “offer” to exchange 85 percent of their secured debt ($6.9B) for a stake in a reconstituted ChyrCo. The Wall Street Journal reports the bondholders’ counteroffer: the lenders would cut Chrysler’s first-lien debt by $2.4 billion, in exchange for a 40 percent equity stake and a Chrysler board seat. Oh, and they want Fiat to put up a billion dollars. Which Fiat won’t do because . . . it doesn’t have it. The bondholders’ position sounds about right. Remember: this is secured debt. If/when Chrysler is sold off in pieces, the bondholders would recoup about 65 cents on a dollar. Settling for anything less would be against their financial interest. But not their political interest. Not only has the US Treasury rejected the bondholder’s proposal, they’ve cast aspersions on the banks’ patriotism. No, really.

“It is neither in the interest of Chrysler’s senior lenders nor the country for them to advance a proposal that would yield them an unjustified return as Chrysler, its employees and other stakeholders are working tirelessly to help this company restructure,” the Treasury said in a statement.

With just eight days left before ChyrCo’s latest restructuring deadline, this one’s getting seriously ugly. We hear rumors that Chrysler CEO Bob Nardelli is going to resign this week. And there’s plenty of talk from Motown politicians pressuring Chrysler bondholders to suck it up—or face the consequences.

Late Wednesday, Michigan Gov. Jennifer Granholm blasted the banks’ counteroffer, urging them to “do the right thing.”

“They need to collapse their debt as the Obama administration has asked to ensure the viability of the company, which is critical for the families, employees, retirees, dealers, suppliers and others who rely on it,” Granhom said. “To do otherwise is not only disappointing, it is unconscionable at best.”

U.S. Rep. Gary Peters, whose district is home to Chrysler’s Auburn Hills headquarters, called the banks’ offer “an affront to taxpayers” and Chrysler employees and retirees.

“These debt holders were offered fair market value for their debt and the banks have responded by asking for a windfall,” Peters said in a statement.

Windfall? As in undeserved profits? How long before someone trots out ye olde Jewish banking conspiracy? Like I said, real ugly.

Back to the Fiat deal, upon which President Obama so publicly staked Chrysler’s future. The bondholders’ billion dollar “put up or shut up” salvo against the Italians is really just a clever way of saying no freakin’ way.

The lenders also questioned the logic of having Chrysler pair up with Fiat. The Italian company, they said, would bring “negative synergies for the first 3 years” and would enter the alliance with “limited downside for a deal of this size.” Moreover, they said it could result in a “wealth transfer from the U.S. taxpayer to a foreign company of potentially $10 billion or more.”

I spit on you spitting on me for spitting on my country. Or something like that. And wouldn’t you just know it: the PTFOA is, as predicted here, happy to walk away from the $4 billion US taxpayers have already shoveled down the ChryCo rathole. And THEN toss them EVEN MORE money.

The counteroffer also came about a week after the government presented Chrysler lenders with more than 60 pages of financial assumptions for a combined, restructured Chrysler. The government projects that Fiat-Chrysler wouldn’t be able to start making payments on its debt until 2012, said several people familiar with the report.

The government also assumes that the $4 billion it lent Chrysler largely will be wiped out, as will a combined $2 billion Chrysler owes Cerberus Capital Management LP and Daimler AG, Chrysler’s last two owners. The government would then put in an additional $6 billion to fund the operations of Fiat-Chrysler.

Not to mention the $3 billion Uncle Sam would fork over to the United Auto Workers health care fund—cause that would be churlish. More on the unions in another post. Meanwhile, the WSJ saves the story’s most fascinating aspect for the end. It seems that ChyrCo bondholders’ are at war with each other, in a David and Goliath kinda way.

In the red corner: the nestling-in-the-pocket-of-the-feds crew: J.P. Morgan, Citigroup, Goldman Sachs Group Inc. and Morgan Stanley. In the green corner: a bunch of “little guys”: Elliott Management, Stairway Capital Management, OppenheimerFunds, Perella Weinberg Partners and three dozen of so relatively small lenders. Seems . . .

Not everyone was on the same page. The big bank view was “hey guys, the offer back can’t be outrageous. This is the government,” said one of these people. “There were others, smaller lenders, who wanted to be a lot more aggressive.”

In the end, the big banks “came closer to the smaller lender view,” said another person familiar with the talks.

What was that about a nation at war with itself? Anyway, C7 or boondoggle billions. We shall see.

C’mon. This whole Fiat and Chrysler hook-up is a joke, right? I mean, what could possibly motivate an Italian car company that got its ass kicked seven ways to Sunday in the US market for peddling sorry-ass rust buckets and [almost] providing some of the worst dealer service in the history of four-wheeled transportation to re-enter the fray under the Chrysler banner? That’s like Kodak teaming-up with Polaroid to make high end digital cameras for the Japanese. Like Cambridge’s instant photo folk, ChryCo’s business model is so busted all they’ve got left is an iconic brand name (Jeep). And there are still plenty of Americans who know that Fiat stands for “Fix It Again Tony.” So what’s it all about Alfetta?

Explanatory theories are floating through the autoblogosphere. The Fiat – Chrysler plan is an Italian head-fake. They’re having a peek at what they can buy when pennies from C11 heaven start to fall. Or Fiat’s “rescue” plan is a cunning ploy to use U.S. taxpayer money to fund Fiat’s American aspirations. After all, they got $2b from GM for not merging with GM. With inflation, that’s got to be worth at least $8b in today’s freshly-printed dollars. And then there’s a far more likely motivation for all this Mopar madness: ego.

The US car industry is a “yeah, too quiet” kinda place these days. The Presidential Task Force on Automobiles (PTFOA) has done the cappo si tutti cappo thing at GM: silencing Car Czar Bob Lutz and cashing ex-CEO Rick Wagoner’s bankruptcy-proof pension check. Wagoner’s clone, an overpaid caretaker who goes by the name of Fritz Henderson, has all the charisma of four-day old cod fish.

Ford CEO Alan Mulally is the same again, only fresher and more swordfish-like (if you know what I mean). And having learned that discretion is the better part of a $240m severance package, Chrysler CEO Bob Nardelli has sent out a memo saying, “Him! Let him run the company! Or them!”

In short, the American automotive industry doesn’t have a single charismatic spokesman at this, its hour of need. Which no doubt suits PTFOA chairman Steve “Chooch” Rattner. But it doesn’t alter an immutable fact: the auto industry is an ego-driven business.

Remember when we were discussing the strategy of Kirk “The Lion of Las Vegas” Kerkorian (ready to chill with Walt Disney), as his major domo (arrigato) Jerry York joined GM’s board and told them to sell something, anything, before the lights went out? Or the going, going, Ghosn GM – Renault merger?

That was then, and this is now. Now we have Sergio Marchionne. The Italian auto exec’s stolen the spotlight. He’s busy holding court—I mean chairing meetings. Issuing pronouncements. Making ultimatums. Flying hither and yon in Fiat’s private jets (yes, they still have them). Scheming. Dreaming. Coveting ChryCo’s CEOship. And putting on a show for Fiat’s shareholders.

To wit, the Wall Street Journal reports that “Italian carmaker Fiat SpA (F.MI) shares surged over 10% in Milan Friday, as investors expect a deal between the Torino-based company and Chrysler to be finalized by the end of April.”

How a ChryCo hook-up will help Fiat’s CEO achieve his profit target ($1.3b for 2009) in this moribund market is anybody’s guess. But the limelight does wonders for Marchionne’s rep in his native Italy, insulating him from the sales disaster waiting for Fiat’s politically-fixed sales incentives to expire.

Lest we forget, Sergio is, like Wagoner and Henderson, an accountant by training. Who started his career as a tax specialist. In other words, Marchionne’s a man whose craves attention not to say adulation. Which motivates the Canadian – Italian to rush in where any sensible corporation fears to tread. No, really.

“Canada was a mixture of pain and pleasure for the Italian teenager,” Canada’s Globe and Mail reported in a Marchionne profile. ‘Trying to get friendly with girls with whom you cannot communicate was a problem,’ he said.”

Surely this isn’t all about appearances, is it? Don’t call Sergio Shirley.

“The [Fiat] board room has a frescoed ceiling that would not look out of place in the Vatican Museum,” the Globe reports in a more recent article. “Coffee is served in fine china on a silver tray. The employees make sure the place is well stocked with Murattis.”

And so, here we aren’t. Chrysler’s private equity owners tried to dump the failed American automaker on China’s Chery (Hornet much?). Cerberus then tried to off-load their automotive non-fortunes onto Nissan (Hornet that, Titan this). And now they’re trying to palm off the whole schmeer on Fiat. Well, the U.S. government really. With the help of an egomaniacal Italian who either knows better and doesn’t care, or should.

Of course, you could say that the same thing about all parties concerned with this, Chrysler’s final fling, before it slinks off into that long goodnight.

A TTAC reader writes: “Did you read the Wards AutoWorld article about how full Chrysler’s product pipeline is?  So inaccurate. I had to throw away the magazine because of it.  As a former product planner for Chrysler up until April of last year (on the Jeep WK (Grand Cherokee)), I can tell you the state of the business that I knew.

There was plenty of pinching on the interiors of the cars. We called it the “thousand dollar challenge;” which included reducing the amount of leather in the car seats (think lower back and where your butt is, but not the back of your thighs; all else vinyl). At the same time, unrealistic volumes were driving business decisions, with calculations for how JNAP [Jefferson North Assembly Plant] will be filled on three shifts for WK, endless management reviews and preparation for management reviews—leading up to a canceled product (CT, WC).

Chrysler tried to make product lines profitable by figuring out how to maximize profit by take rates and bundling. Eliminating an engine on the vehicle ultimately makes sense for reduction of complexity, but from a business case perspective, it is almost always negative (upcharge on the optional motor).

Now working in a different industry altogether, I get a sense of just how management-focused Chrysler had become. That is something the Germans can take credit for. There’s much more structure in the product development process, with the resultant inability to make a decision and endless preparation for meetings.

The “dream team” that Cerberus built was not. Specifically, the two Toyota execs were remedial. Jim Press was well liked internally, but Debra Meyer was not overly bright. She spoke and presented well, but she didn’t know cars.

I hear now that if you discuss the understaffing of ENVI relative to their proposed task you face retribution. I’ve also heard that the Jeep Patriot concept car/electric vehicle was nothing more than an interior (with cool cluster), Viper style wheels, and some other minor stuff. Nothing electric about it. Good PR tho.

They actually lost almost 35-40% of their staff in the Nov 26 buyout of white collars, not including the additional 10% they retired early (totaling then almost 50%). Of my product planning department, exactly none were left.

Brand Management and Product Planning have since been merged, an event that took until January to announce. They lost a month because they didn’t know who was going to be left, they didn’t tell people before they made a decision what was to be their future etc.

Look what happened to Mopar guys. They were mostly contract guys working for a 93 grade band supervisor. They outsourced all of the jobs to suppliers and transferred some of the contract guys over there.

XXXXXX XXXXXXX  was one of the suppliers (plastic injection stuff among others). They told their guys that they were not able to work them the full 40 hours a week due to financial limitations (payments from Chrysler?) and that they’d get one day off a week (in addition to the 10% pay cut). THEN they said you need to work five days a week and simply book those comp days for the future (where you’ll never get to use them).

They really don’t have any idea of how to approach their business. They are building a WK (2- row only), a WD (3-row Dodge), an LX that the dealers council said needs to look more different than the existing model (the one that they showed in the filing to the government to get more dollars was the revamped one, the one before was even more vanilla but not much different), and no other product that I am aware of.

I heard (was not directly involved) that the D-segment quotes from Nissan were within single digit dollars of their projected internal costs to do it inside. With only 100 people on that platform working previously, they were definitely going outside. Now virtually all of those people are gone (retired or bought out).  Normally 600–700 are required on a platform.

Internally, a platform’s profitability depends on how much overhead is assigned to it. The WK  was over-assigned overhead, to the point where it was always negative. Usually it was based on sales + an arbitrary amount decided by management. The WK was always under water with the fully accounted system we used (DCAV). But I think it was an attempt to make the platform stretch for profitability (hence the unrealistic volumes).”

According to Automotive News, Chrysler plans to sell up to seven Fiat/Alfa Romeo-designed models in America. Under this scheme, Chrysler dealers would flog the Fiat 500, Alfa MiTo, and Alfa 147 replacement. There’ll also be up to four Fiat-based cars in the A, B, C, and D segments. Some American car fans are thrilled at the idea of inexpensive, fuel efficient, fun-to-drive Italian cars — even if the machines in question end up as Dodges built in Mexico to Italian blueprints. But that’s exactly what it is: an idea. And a bad one at that.

The Chrysler – Fiat deal is a lot less than meets the eye. Most importantly, Fiat isn’t putting a dime on the table. All the costs of converting any given Fiat/Alfa to a Chyrsler and/or Dodge product would be borne — again, in theory– by Chrysler. Given Chrysler’s cash position (i.e. none), given the complexity and expense of creating even ONE car for the U.S. market, given the cultural and corporate communications hurdles involved, Chrysler’s promise to deliver the fruits of this alliance in two years is as optimistic as their electric car “program.”

But let’s say Chrysler and Fiat could wave a magic wand and place these American-Italian cars into Chrysler/Dodge showrooms tomorrow. Would they sell?

The U.S. economy is in a deep recession. By many accounts, it’s going to be worse still. Any sort of recovery is at least 12 months away. With the rest of the world in a similar position, gas prices are likely to stay low. And that means sales of small cars and fuel misers will continue to sink– relative to a sinking market. If you look at the sales of Honda’s well-established Fit for example, it’s not a pretty picture.

Even if California’s new fuel economy standards suddenly arrived in the same fantastic manner to force consumers into smaller cars, the poster child for this new alliance– the Fiat 500– would be a modest flag-bearer at best.

Sure, the 500 could become a relatively inexpensive version of the iconic MINI. But to help Chrysler out of its deep hole, the 500 would have to sell over 100k units per year, at a significant profit.

Lest we forget the U.S. market is choked with new cars. Prices are down and going lower. Ford’s upcoming, less-expensive Fiesta faces an uphill battle for sales, and Ford doesn’t face the same problems of collaboration. And that’s without considering the long, slow process of resurrecting Chrysler’s brand. With a Fiat no less.

Even if Chrysler gets around to finishing design work on these new cars, what happens after the enthusiasm/sales from Italiaphiles and car fans dries up? I repeat: Italian cars have a terrible reputation for quality and reliability in the U.S., regardless of the present-day reality. Fiats may last for 250k miles in Brazil, but it won’t matter to American consumers that can only hear “Fix It Again Tony.”

It also is worth noting that even in Europe, Fiat and Alfa Romeo residual values are among the worst on the market. While the 500 and Panda have been solid, the bulk of Fiat’s cars’ resale values are absolutely atrocious. Poor residual cars in Chrysler dealers? Not exactly a new news story. But neither is it a road to redemption.

The worst part of all this: Chrysler expects the American taxpayer to pay for this so-called strategy. Since the moment Chrysler felt the need to hit-up the U.S. taxpayer for $7b, the company’s owners have refused to invest any additional money into the failed enterprise. So we can assume they’ll give this brilliant plan, this awesome alliance, a similar amount of financial backing. If it’s not good enough for them, it’s good enough for you? Fool me once…

The news coming out of New Orleans today: Chrysler promised dealers it’ll still be around in April. The only way that’s “good” news is if the presumption among Chrysler dealers is that the company actually has less than three months to live. Is Chrysler-on-federal-IV-fluids going to be around to produce Fiat-designed cars that, well, haven’t yet been designed? I’m thinking no.

The Chrysler – Fiat deal only makes sense on a superficial, 24-hour-news level of analysis. Chrysler is in bad shape, Fiat has been touted (prematurely) as a European success story. Chrysler has no small cars, Fiat does. Fuel economy regulations are set to increase, and President Obama has just scared the heck out of car manufacturers by, ironically, applying a States’ Rights approach to future fuel and emissions policies.

From a product standpoint, media pundits can be forgiven for thinking that the pieces fit together. Unfortunately, they don’t. Since so many of these collaborative automotive projects end before or when the first product hits the showroom floor, it’s unlikely to matter.

[TTAC's reviews of the Fiat Panda 4x4, Alfa 147 and Fiat Grande Punto]

Adolph Hitler said The Big Lie was effective because most people “would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation.” In this case, the lie is the idea that Chrysler is a viable automaker.

The fact that the company is utterly bankrupt without any chance of recovery is, obviously, besides the point. As long as there is hope that Chrysler has a future, the general public and their fear-mongering elected representatives will cling to the fiction that Chrysler can– indeed should– continue to exist.

To perpetuate that myth, to protect its federal lifeline, Chrysler must generate plausible possibility. Hence the stream of “news” coming out of Auburn Hills in recent weeks. Canada’s Magna Corporation may purchase Chrysler’s minivan plant. Nissan may produce a small car for Chrysler, and rebadge Dodge Ram pick-up trucks as Titans. A Chinese carmaker may buy unwanted (not to say unused) tooling for the soon-to-dead PT Cruiser. And now… Fiat buys into Chrysler.

In reality, Magna may want Chrysler’s Windsor minivan plant, but the company isn’t stupid enough to pay anything for it. Not when they can pick it up for pennies on the dollar after ChryCo’s collapse. In reality, Nissan is in deep trouble; it’s not going to build anything for Chrysler without [non-existent] cash on the nail. It’s also in no position to remount an attack on a market segment that’s both crowded and cratered (just ask Toyota).

In reality, China doesn’t need the PT Cruiser. And in reality, the Fiat deal has nothing to offer. Without any cash investment by the Italian automaker, without a single production-ready Italian vehicle on the horizon to lure Americans into empty, abandoned Chrysler showrooms, this non-deal does nothing whatsoever to ensure Chrysler’s long term viability.

The underlying causation for this non-news is simple enough. Lipstick. Pig. Apply.

On February 17, Chrysler will present their term paper to Congress: “How I Spent Uncle Sam’s $4b” (a.k.a. “The Three Headed Dog Ate my Automaker”). Chrysler’s representatives will attempt to prove that the company can [now] be restructured and resurrected to live a long, happy life. See? Things are happening! We’re building for the future!

Of course, Chrysler’s “business plan” was, is and will be complete BS.

CEO Bob Nardelli knew Chrysler was doomed to the dole back in December, back when he told Congress his employer could turnaround Chrysler’s fortunes with “just” $7b worth of federal loans. As is the way of such things, that was then. This is now. By mid-February, Boot ‘em Bob’s boys will unveil phase II of their grand plan for Chrysler’s renaissance: get out of the manufacturing business.

The new plan is the same as the original plan: keep the brands and distribution network. Sell vehicles made by others rebadged as Chryslers. Limited capital and engineering required.

Meanwhile and in any case, Chrysler needs the same lifeblood as any other going enterprise: cash. Badge engineering and branding be damned; new car sales aren’t going to provide Chrysler with the funds it needs to sustain its operations and pay for its ongoing liabilities. Not now. Not later. Most likely, never. Asset sales won’t do the job, either. And Fiat’s sure as Hell not providing operational liquidity.

Blow away the smoke, pack away the mirrors, allow owner Cerberus to insulate themselves from accountability for their actions, and it’s clear that Chrysler has one source– and one source only– of cash: the U.S. taxpayer.

As any good politician knows, to fool some of the people all of the time, you need to change your story frequently. In other words, The Big Lie must be sustained by a steady diet of big ideas.

When it comes to Chrysler’s ongoing call on the public purse, the biggest of these is the Chrysler – GM merger. The concept: forget Chrysler and GM. We need to save American manufacturing! This American Leyland strategy is a stupendously bad plan which would make The General like Citibank: a company too big to fail with operating divisions that can never be properly integrated.

Which is exactly why it’ll happen.

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.

Let’s start with what we know. Cerberus never intended to run Chrysler as an automaker. As Ken Elias pointed-out in his GM Death Watch, right from the git-go, the automaker’s most recent owners have starved Chrysler of all the investment necessary to run Chrysler as a going concern. In that sense, they lied to union workers, white collar employees, suppliers, dealers and customers. And the media bought their lies like a teenager purchasing a pack of condom with a knowing cock tease by his side. Hey baby, are you into EVs?

Now that Cerberus has been unmasked by the rest of the media (TTAC called the finance company’s play a strip and flip even before the sale was complete), we also know that Cerberus wants the Hell out of Chrysler, and soon. When Chrysler CEO Bob Nardelli famously pronounced that his employer was “operationally bankrupt,” he wasn’t kidding. The automaker’s truck business is dead, their car business is deader and the finance part of the program is the deaderer (apologies to Andrew). There is no there, there; and the red ink won’t stop spurting until Chrysler bleeds out.

So, assuming Cerberus hates carmaking and wants out now, what to do, what to do? There are three likely scenarios.

First, sell it to a sucker. I break with Mr. Elias’ view that GM will “absorb” Chrysler to ensure a prime position at the federal bailout trough. As PCH101 points out, GM is already too big to fail. In terms of public perception, the idea that GM is “healthy enough” to buy Chrysler (a dumbing-down of the concept, but there you go) would undermine its claims against the public purse. So who else? Renault? No. A Chinese automaker? Nope. In this market, no one. So fuhgeddaboutit.

Second option: Cerberus toughs it out. It keeps Chrysler until the industry shakes out and picks-up, and then sells it to whoever is left for whatever it can get. At this point, Chrysler would need federal “assistance” to stay in the game. The fact that ChryCo offered the media some cod-electric vehicles– pitching for part of the existing $25b federal loan program– shows that the company is ready, able and willing to steal borrow money from Uncle Sam.

I also disagree with Ken’s contention that the feds couldn’t loan bailout billions to Chrysler because it’s a private equity firm. If AIG execs can receive federal “intervention,” spend $1m on company pedicures and not be strung-up from a light pole, why should the fact that a guy who skis in Gstaad owns Chrysler make any difference to bailout boosters? As twisted as it sounds, a Chrysler bailout also sounds fair. If we give a loan to GM, why NOT Chrysler? Chrysler’s got history. “We made the feds a PROFIT the last time ‘round. And, lest we forget, Cerberus has plenty of good friends down in D.C.

If, however, Cerberus needs or wants a right now solution to their problems, bankruptcy is it. Or Chapter 7. Either way, option three is the fastest, cleanest and, possibly, cheapest option.

I know: I predicted a ChryCo C11 for late July. But unlike GM’s point-of-view, bankruptcy protection is ALWAYS on the table for Cerberus. Cerberus bought a controlling stake in Houston-based mortgage lender in 1998. Aegis ceased operations in August 2007. When Mervyn’s department-store chain (part-owned by Cerberus) hit the skids this summer, Cerberus pulled the plug and filed for C11. This very day, Mervyn’s filed for Chapter 7.

So which option is Cerberus pursuing? I reckon it’s all three at the same time. The big news here: Reuters reports that Cerberus is negotiating with Daimler to buy back the German automaker’s share of the American company. ALL of these exit strategies depend on Cerberus owning 100 percent of Chrysler.

No matter how you look at it, Chrysler is attempting to kill itself. Of course, there are some big winners in all this: JPMorgan and Citigroup (representing Cerberus) and Morgan Stanley and Evercore Partners (representing GM). The fees involved in keeping Cerberus’ options open must be astro-friggin’-nomical (and the meter’s already running). Another winner: the transplants. Chrysler’s slow bleed lets them gradually increase their share of the American without anyone noticing. How sad is that?

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 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. 

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?

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. 

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

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.

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.

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.

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.

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.

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.

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]

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.