Could this be a reaction to Sarbanes/Oxley (SOX)regulations? Remember, the first CEO to sign a SOX certificate saying all was right with the company was…..
J.T. Battenberg, III of Delphi!!!! Now, the Feds want to send him to prison for life for violating said SOX regulations.

This, more than anything else, may drive Ford and GM to the arms of the Vulture Capitalists. Neither Billy Wagoner nor “Big Al” Mullaly would relish the idea of “20 years to life” because of an accounting error…..

If I were a Chrysler worker, I would not be feeling too comfy about my healthcare benefit. Article says pension is over-funded by $2B, but I would want to know on what basis (GAAP or economic basis?). And no indication from any of the sound-bites in this piece that any sort of health-care deal, wage or work-rule deal has been pre-arranged. Just assurance that headcount will not be cut. Of course, if only 70% of the existing workforce is willing to work for whatever deal Cerberus puts on the table, then Cerberus can claim that the headcount reduction was voluntary. I see zero evidence from this article that the UAW is happy about the Cerberus purchase of Chrysler.

They won’t be private for another 6 months. They have to play the union negotiations game and use the union’s steadfast stance against everything to partition up the company. They’ve got the money to get it through a bankruptcy and come out the other end as OverheadCam9000 is predicting.

GM, Ford, and Chrysler appear to be heading into some kind of limited consolidation. I can see 2.801 sharing powertrains and perhaps chassis where the sheetmetal, interior design, and suspension tuning will be unique corporate DNA. Ron and now Buzz are just too happy (at least not their usual grumpy selves) about this buyout so I think a 2.801 consolidation is in the works.

Look for the Jeep brand to be sold to Honda (who needs some off-road cred) for what Cerberus paid DCX; purchase price of $7.4b. That will happen within 12 months. Just the brand, not the factories. The factories will be closed, one way or another.

Next up, the Chrysler brand is sold to Chery Motors for, say, $5.0b. Cerberus has now broken even and the Chinese have their foot in the door.
Again, the U.S. factories will be closed, one way or another.

Finally, Dodge is dumped on Hyundai for $3.0b.
Hyundai? Yes, Hyundai! (Remember that tag line?) Made money. All done in 24 months.

Those moves should suck about 500k units of production out of NA, which is in the ballpark of excess capacity the industry gurus say we have.

I just don’t buy that argument. If GM (or any big 2.333) cared about quality, wouldn’t they improve the car and just charge a bit more? Do you really believe that a Cobalt LT costing $16,400 (instead of $14.9K) including $1500 of “improvements” would be competitive with a Civic or even an Elantra for that matter? I doubt it.

The hard truth is that GM can’t make quality cars. Throw all the money you want at them, but the fact remains that $100K still doesn’t get you a decent interior in the XLR-V.

The product is the problem. Period. Had union costs been the real issue, GM cars wouldn’t be selling because they were overpriced, not because of poor quality.

I don’t agree that Cerberus has necessarily made a deal with the UAW. I think it is enough for them to know they can negotiate from a position of strength.
“Healthcare is one of the largest issues facing Chrysler, which has $17.5bn in almost totally unfunded liabilities. The UAW last year gave Ford and General Motors concessions on healthcare, but not Chrysler. Chrysler calculates that just by receiving those concessions it could save $3.5bn.”

The union chiefs can’t do much now except welcome the deal. The negotiations come later.

Imagine if you could put another $1500 into each product you made. Do you think you could afford a nicer interior? Softer materials? 6 speed transmission? High product cost, only a part of which is labor, is the original reason GM and others had cheapened their interiors, extended powertrain dev times, etc.

Cutting the cost of health benefits of US retirees may be key to Cerebus’ plan. UAW retirees seem to have no idea how good they have it. My former employer provides health insurance through an agency that only seeks to break even. Coverage for a retiree and spouse who aren’t old enough for Medicare runs a thousand a month, 90% of that (plus deductibles and co-pays) paid by the former employee. There is no free lunch.

A big existing dealer network can be an asset if good product can be provided. If you live in Hays, Kansas you’re two hours from the nearest Hyundai dealer, but you have your choice of Detroit wares. Converting Chrysler into essentially a finance and distribution operation, with limited or no inhouse manufacturing, may be the route to viability. Excess capacity is the curse of the industry. Magna might supply minivans and Ram pickups. Maybe Chrysler could buy facelifted (non-pneumatic) Town Cars and have a salable New Yorker. Lightly restyled Sonatas could become Sebrings and attract more buyers. And then there’s China et al.

They didn’t say anything to him. DCX and Cerberus cozied up to Gettelfinger and ignored Hargrove and the CAW, and he got his feelings hurt. He met with Cerberus today and they soothed his ruffled feathers and now he says everything is sunshine, lollypops, and rainbows.

RF -

So what did Cerberus not say to CAW’s Hargrove to keep him so ticked off?

The union doesn’t want equity, it would put them in the unfamiliar position of having to ride their members to work harder and smarter, which will make them look like management. The union leadership only wants to get their money from their members and eventually fade into the sunset, leaving behind their hand picked successors.

Does anyone think that if Detroit lowered the cost of all their cars by $1500 that they STILL wouldn’t lose marketshare to the asian manufacturers? I think they still would, because the product needs to be better. And that problem has nothing to do with the union

I think it needs saying again: Cerberus wouldn't have bought Chrysler if the UAW situation hadn't been sorted out. So all this media talk about them facing tough times around contract time is B.S. This is a done deal.

The questions is, what did Cerberus give the UAW? Assuming that Magna gets Chrysler's manufacturing ops (hence the extra $1.7b from the Russians and other lined-up financing), how would Frank Stronach's mob placate the UAW?

When Magna's Chrysler bid was in the making, Frank talked about "parternship with the UAW" and "profit sharing" and the like. Is the UAW about to get equity? Or would simple job guarantees (at the UAW's current rate of pay and benefits) be enough?

So many people on this site argue that the major issue for the US auto companies is the union liabilities. yes, that is a problem, but I’d argue a bigger problem is an uncompetitive product. Quality, features, price. And union concessions will only fix part of that.

Lower the price of american cars by $1500 (or allow the automakers to make $1500 more per car, either way), and Toyota will still increase market share at their expense. The union is not the major problem, uncompetive product is….

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I will agree with this line of thinking once we see the timing at which Cerberus is required to inject its $6B of liquidity into Chrysler. If all the money is required to go in on the closing date, then I will lean toward what Deep Throat is outlining. If the money is primarily post-closing, then I see Cerberus using the threat of a filing or an actual filing to get what it needs from the UAW. Cerberus will get a DIP loan to fund negative cash flow during the BK period.

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I disagree here. The dealer network is just a retail channel for Chrysler to distribute its cars. If the cars can’t be built and sold to the dealers for a profit by Chrysler, then the dealer network is not worth anything to Chrysler, which does not own the dealerships or participate in whatever profits the dealerships might be able to make. The country is over-saturated with dealerships for all domesitic products. Once Cerberus does what it needs to do at the manufacturing cost level and plant capacity level, then it needs just enough dealer relationships to properly distribute its vehicle output. If Chrysler has products that are in demand by the buying public, Chrysler will have no problem signing up as many dealers as it needs.

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I agree with the goals that Cerberus likely has for Chrysler. Where Deep Throat and I differ is on whether the goals (plant closures, headcount reduction, retiree healthcare caps, work rule changes, wage cuts, etc.) can be achieved in a negotiated settlement or whether a strike and BK filing will be required for Cerberus to make the business work. If Delphi and the UAW can’t even work out a deal while Delphi (with Cerberus front and center in negotiations) is already in BK, why should we assume that Cerberus and the UAW will work out a new deal by September.

Let’s keep our eyes open for how and when that Cerberus capital injection goes into Chrysler.

“We would like to thank DaimlerChrysler for their good stewardship of this American icon over the last decade,” Snow, Cerberus’ chairman said.

http://www.freep.com/apps/pbcs.dll/article?AID=/20070514/BUSINESS01/70514009

This goes over much better with your (union) voters… and gives you time to work out the best deal with the new bosses without having to fight your ’supporters’ at the same time.

Now let’s see if he can avoid the strike that Cerberus AND his union members are spoiling for.

My bet is that he can’t.

I wounder if Ron G has been made a offer he couldn’t refuse