Chrysler Cashflow Crisis Confirmed

Frank Williams
by Frank Williams
chrysler cashflow crisis confirmed

Chrysler is no longer " asking" suppliers for a five percent cost cut across the board– they're just taking it. More ominously, they've changed their payment terms. We just received this information from a reader (independently confirmed) who wishes to keep his name and company confidential for obvious reasons:

On June 3 we received revised purchase orders (PO's) indicating Chrysler will now be taking five percent off all PO's and will take 60 days to pay instead of 45. The trouble is they are doing it to all existing orders, not just future orders. I was told by Chrysler purchasing they were trying to keep their cash flow together and there was nothing they could do about the PO changes. I think that might be all for Chrysler unfortunately. They also told me the new rules were going to include PO's shipped after June 1 even if they hadn't bothered to change the order.

If Chrysler's cash flow is so precarious that they have to shortchange suppliers and take longer to do it, it doesn't bode well for the company's short-term prospects. It looks like the only thing that will pull them out of this death spiral is a healthy infusion of cash from Cerberus' deep pockets; the private equity firm isn't known for throwing good money after bad. Look for Chrysler to file for C11 before the end of August, when the statute of limitations expires for suing Daimler for false conveyance.

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  • Mel23 Mel23 on Jun 09, 2008

    Are seats a component that can be sourced from far away? My impression is that they are not since they have to be color-coordinated with other parts of the interior, and possibly for other reasons. A substantial inventory of seats would occupy a LOT of space, but I suppose that could be pushed off to the supplier.

  • Mcloud1 Mcloud1 on Jun 09, 2008

    Well, I am agreeing that by the end of the summer, that will be it for Chrysler. I still can't believe that a company that was flush with cash and had a product portfolio of just about every car being class leading, is now only two months away from obliviation. Now, lets recall my prediction of Chrysler's fate: They will go out RCA style. Ford will buy the bankrupt, C11ed dyeing Chrysler from Cerberus, spin off Jeep, take in the useful parts and break up and sell the rest, with Chrysler and Dodge being sold to Chinese automakers as empty brands under which to sell their vehicles in the US.

  • Chadpothier Chadpothier on Jul 08, 2008

    This is completely ridiculous. Ever since Chrysler went private the media has been grasping at straws for stories to publish and jump on every tiny news they can get their hands on. I'm on the inside and can tell you Chrysler is exceeding their forcasted sales and are pushing for cost cuts because in todays automotive industry that is the reality; you don't survive by sitting back and waiting for the market to shift. Chrysler runs some of the most efficient plants in North America, aand are tied with Toyota for manufacturing efficiency.The Jeep plant in Toledo is the best performing plant in North America. To be efficient you need efficient suppliers, end of story. Eat or be eaten, and Chrysler is here to survive.

  • Blowfish Blowfish on Jul 08, 2008

    chadpothier Lets hope your info is totally reliable & correct. All of us are base on speculation. Even though we cannot see what u see, certain things can be predicted with educated guess. Some are unfound rumours that can never be true. We do all sincerely hope Chryslerbus can slowly turn around. First the product has to be dependable, reliable. No difference than why people will always go back to a not all impressive decored restaurant and skip a real freshly renovated rest? Is the food quality, they rather sit not as comfortable but good food than an expensive meal with not top quality food. Hope Chryslerbus can sell the real jucy steak but not the sizzle.