By on May 2, 2009

More documents were filed in the Chrysler bankruptcy case. TTAC ace commentator and bankruptcy briefer, Toxicroach, gives us the 411 on the latest C11 maneuvers:

“Only four events today as of 5 p.m., only one of value. Either I misread prior docket entries or the 5/1/09 hearing was just to set a date for the real hearing, but the hearing on the emergency motions (first day motions is what they have been calling them) will be 5/4/09 at 10 a.m. I imagine it will be a zoo in Courtroom 523 this Monday. Still no bankruptcy ‘fast track’ 363 motion.

“It’s the weekend and it looks like the court is not active, so it looks like the earliest possible date for the transfer for assets is now 5/25/09.  If they file the 363 motion on Monday and get the hearing set, it would fall on 5/24, except that is a Sunday. So 5/25 is the absolute earliest to get the sale done.

“Addendum to the 5/1/09 Report. There were two items of note filed late on 5/1/09: Application for employment from Capstone to the be financial analysts for Chrysler (download pdf here). The free arrangement is on page 36 (can’t cut and paste this one). They get paid (handsomely) hourly, and they get $8M if they can successfully restructure Chrysler (with the Treasury in your pocket, is there any doubt?), and a $1M bonus for each billion dollars of financing they ‘acquire’ for Chrysler. Once again, we already know who is financing NewCo and for roughly what . . . but I digress. They’re also asking for a $2M dollar retainer.

“The other item is a statement by Bradley Robins (CEO of Greenhill, another financial advisor to Chrysler), basically saying that other than this deal, Chrysler is utterly boned and this is the only option to save 50,000 jobs. Read it all, it’s pretty interesting (download pdf here).

“Apparently, the ‘master transaction agreement’ was still in draft form as of 4/29/09, so the deal is still being negotiated. Key points: 1) Chrysler would run out of our of money by the end of the month; 2) they don’t have any unencumbered assets with which to raise money; 3) nobody but Fiat will touch them with a ten foot pole; 4) the market really, really sucks; and 5) the government won’t give them any more money unless they do it this way.”

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57 Comments on “Today’s Chrysler Court Action: The Sharks Feed...”


  • avatar
    bluecon

    It is a payoff to the UAW. Chrysler is not viable and who is going to buy a small Fiat instead of a Honda?

    Like I have said before this is the canary in the coal mine for the US and Canada. The economic system is broken and they are giving it methadone. Nobody is curing the patient since the cure of tightening the belt would be painful and our society thinks they should be coddled.

    This is just delaying the inevitable.

    Unfortunate but a case of no free lunch.

    Does anybody think this American Leyland will be successful?

  • avatar
    davey49

    “Chrysler is not viable and who is going to buy a small Fiat instead of a Honda?”

    Anyone who would ask this would not buy a Chrysler if they were viable and profitable so why ask this?
    Are you suggesting that everyone should buy Hondas?
    I think the “American Leyland” ship has sailed with regard to Chrysler, and the answer is yes. I think Chrysler will come out of this better than either Ford or GM. They will be a smaller company with less dealers selling less products. Easier to respond to market changes too.

  • avatar
    Dr. No

    Chrysler Redux has a chance. Certainly not if you read all the negativity here.

    Consider: UAW’s ownership does NOT mean control. UAW gets to pick ONE Board Member. Yes, that’s right…ONE.

    FIAT and Uncle Sam get to pick SIX, with others picking more that effectively further dilutes UAW influence. Am I missing something here? I’m ready for a mea culpa if someone can point this out.

    Dodge builds the best trucks on the planet. Period. And a surgical BK does not change that. I’m no apologist for unions, and I don’t like them owning 55% of Chrysler. But Chrysler MAY be able to resize and reinvent itself. And I think it’s worth giving Chrysler a chance.

  • avatar
    SpeedRacerrrrr

    Dodge builds the best trucks on the planet. Period.

    There are a lot of Ford owners out there who might disagree with you on that…

    The question still is: can they make money on the reduced volume they’ll see?

  • avatar
    paris-dakar

    Consider: UAW’s ownership does NOT mean control. UAW gets to pick ONE Board Member. Yes, that’s right…ONE.

    FIAT and Uncle Sam get to pick SIX, with others picking more that effectively further dilutes UAW influence.

    Right. And Obama will make certain that the 6 Board Members the Feds name will push the UAW to make the changes necessary for the ‘new’ Chrysler to succeed.

  • avatar
    Dr. No

    Dodge builds the best trucks on the planet. Period.

    There are a lot of Ford owners out there who might disagree with you on that…

    Well, there are plenty of current reviews to back me up on that.

  • avatar
    Nicholas Weaver

    Dr No: Dodge builds the WRONG trucks…

    You can argue about Ram vs F150, but the design of the Ram was skewed towards the luxury image truck, while the F150 towards the work truck.

    When the writing on the wall was clear about the gas prices hitting, Ford realized that “trucks will be trucks” is the future, rather than the “trucks for the yuppies”, and did last minute changes in product design and product mix, to refocus away from the suburban yuppie-truck.

    Dodge did not.

  • avatar
    SpeedRacerrrrr

    @ Nicholas Weaver

    Not just the F150. Ford pretty much owns the work truck market in the US, with all their cab/chassis combinations built on the platform concept allowing economies of scale and … wait for it! … PROFITABILITY!

    I think it will be difficult for Chrysler to make money on their trucks going forward unless a) the price of gasoline remains consistently low again, or b) people are willing to pay a lot more for Dodge Rams than they have been in the past.

    What do you all think?

  • avatar
    AuricTech

    If they file the 363 motion on Monday and get the hearing set, it would fall on 5/24, except that is a Sunday. So 5/25 is the absolute earliest to get the sale done.

    I would expect the Memorial Day Federal holiday would push this back to 26 May 2009.

  • avatar
    lutonmoore

    Dr. No :
    May 2nd, 2009 at 8:18 pm Dodge builds the best trucks on the planet. Period. There are a lot of Ford owners out there who might disagree with you on that…

    Well, there are plenty of current reviews to back me up on that.

    Well, there there are plenty of truck buyers that won’t back you up. Think there’s going to be a run on Dodge trucks now?

  • avatar
    Stu Sidoti

    FWIW the Ram and the F150 achieve pretty similar fuel economy, depending of course upon how you option your truck of choice…You can order either truck to get 20MPG highway which is pretty good for a V-8 that can tow and haul quite a lot. For the purposes of a quickie comparison, neither the Honda Element, the Hyundai Sante Fe, Acura RDX and many other ‘smallish’ SUVs exceeds 24MPG highway. 20MPG with a V-8 and huge towing capacity ain’t bad…nice work Dodge and Ford.

    http://www.pickuptrucks.com/html/news/miscnews/epa/fuel-economy/epa-publishes-fuel-economy-for-2009-f150-and-ram-1500.html

  • avatar
    ajla

    @Nicolas Weaver:
    Ford realized that “trucks will be trucks” is the future, rather than the “trucks for the yuppies”, and did last minute changes in product design and product mix, to refocus away from the suburban yuppie-truck.

    Ford still makes the “Lariat”, “King Ranch”, and “Platinum” levels for the F-series. Plus the SVT Raptor is on the way. So it isn’t like Ford abandoned the “suburban yuppie-truck” market.

  • avatar
    Slare

    Hey, you guys remember the time someone said Dodge builds the best trucks on the planet?

    Seriously, did that really happen?

  • avatar
    lw

    Should be interesting to see if anyone other than Fiat bids in the auction.

    It’s not in anyone’s best interest for Chrysler to stay offline for any additional time, but yet we’ve already seen days wasted at the BEGINNING of the process.

    Like watching a hapless NFL team calling time outs on the first offensive series to discuss the right play calls.

    Amateur night if you ask me…

  • avatar
    cardeveloper

    lw :
    Should be interesting to see if anyone other than Fiat bids in the auction.

    The plan appeared to be, just turn the company over to Fiat, which btw has a poor quality reputation… actually makes Chry look good. BK, now turns this into a fire sale, and while Chry is not worth much, the parts are worth far more then the whole. Fiat never intended to put any money into the arrangement.

  • avatar
    MikeInCanada

    “Dodge builds the best trucks on the planet…”

    “a lot of Ford owners out there who might disagree with you on that…”

    ‘My neighbor has a picture on his Chevy pickup of Calvin urinating on Ford pickup while it has forcible tailpipe sex with a Dodge…’

    Pleeeze….stop now.

    The big picture issue is not who makes ‘the best’ pickup – whatever that is (it’s a diesel Toyota Hilux BTW). What is actually important is making money on each and every truck you sell.

    That’s the bottom line – everything else is just marketing noise….

  • avatar
    lw

    @cardeveloper

    Agreed. If I wanted to buy any parts of Chrysler (certainly buying the whole thing outside of BK would just be insane, it would be easy to force the scenario.

    Say I buy a few million of their debt and hold out, or I provide a CDS to an existing debt owner that makes them whole. This forces the BK since Obama decided not to keep writing open ended checks.

    Then I would craft a bid for what I want in the BK… Imagine this judge getting multiple offers with variations.

    Bidder A offers $X for parts B, C, D….
    Bidder B offers $Y for parts E, C, F….
    and so on….

    And every day that goes by the specter of liquidation gets closer.

    This judge better have the wisdom of Solomon and the speed of Superman.

  • avatar
    toxicroach

    You are right Auric. I am horrible with holidays.

    The more I think about it, the more I think this is all political theater. There is no intent that Chrysler live; only that it appear that the Democrats were appropriately attentive and gave CPR long past the point where it might have been useful.

    Obama realizes Chrysler is dead (or he is stupid). He can’t admit its dead without pissing off all the UAW workers and De Lorenzos of the world. So he throws a few billion that way (and what is a few bill these days), blames the bondholders, and convinces the UAW he tried, and well, if it didn’t work out, what more could he do? Vote Democrat in 08!

    I wonder at if the UAW is going to fracture between the workers who are living off the dole and the Ford workers who are trying to stay off the dole. At the very least, the longer Chryco exists to hoover up dregs of the market, the more severe the concessions over at the gainfully employed portion of the domestic auto industry will be.

  • avatar
    lw

    I’m in a tin foil hat mood tonight…

    How much would it cost to force a Chrysler Liquidation?

    $5M? $10M? Buy some debt and force Ch. 11.. Pay some lawyers a few million to dream up slick ways to delay the entire the trial until it’s worthless, liquidate Chrysler and repeat with GM….

    Sure sounds cheaper and easier than hijacking airplanes or deploying a biological weapon.

  • avatar
    John Horner

    If you look at the plant closure list it is hard to keep making the “payoff the UAW” argument with a straight face. I don’t give the Fiat/Chrysler deal high odds of success, but it just might work out. Fiat had the brains to get a divorce from GM a few years ago and showed great skill in turning around the Chase-New Holland agricultural equipment company.

  • avatar
    toxicroach

    Yeah John, all these plants are going to close and yet… nobody is getting laid off.

    Qua?

    Whatever is happening, it reeks. Of something. And what precisely is the POINT of saving Chrysler if they are closing almost everything?

    And I don’t find the payoff to the UAW incompatible with everyone getting fired. The average UAW worker thought GM and Chrysler were hamming up their financial difficulties in anticipation of the next round of contract negotiations. They are the kind of people who think the de Lorenzo is too critical of Detroit. They are… special. It’s entirely possible they will think this is a payoff, even when it becomes obvious to the unblinkered that it was counterfeit geld.

  • avatar
    bluecon

    Obama realizes Chrysler is dead (or he is stupid).
    Good question.

  • avatar
    Dynamic88

    And I don’t find the payoff to the UAW incompatible with everyone getting fired. The average UAW worker thought GM and Chrysler were hamming up their financial difficulties in anticipation of the next round of contract negotiations. They are the kind of people who think the de Lorenzo is too critical of Detroit. They are… special. It’s entirely possible they will think this is a payoff, even when it becomes obvious to the unblinkered that it was counterfeit geld.

    When I served in the MI National Guard, a lot of the guys I served with were UAW workers. They don’t think they’re special. They know their products are inferior. They aren’t stupid. They know their pay is high in relation to what they do.

    Frankly, 55% UAW ownership is one of the best things that could happen to a D3 automaker. These guys have an interest in the long-term success of the company. They want to make comptitive vehicles, and have jobs that last 30 years and retire. They also know they’ll never find another job that pays as well. They’ll take a haircut if they have to.

    The UAW was not the D3’s biggest problem before Carmageddon, and it will not be Chrysler/GM’s biggest problem after restructuring. All 3 Detroit automakers need to be able to sell cars at a higher price -e.g. with out laying several thousand dollars on the hood. To do that, they’ll need to make better cars. Under the proposed resturcturing, ownership of 55% of the company and electing one member of the BOD, still doesn’t give the union the power to decide what to build, or the power to design new cars. Chrysler is going to have to work on design and engineering, quality control, work with their parts suppliers to improve quality, etc. etc. etc.
    IOW, Chrysler is going to have to start acting like Toyota and Honda. Chrysler is decades behind.

    I give the Fiatsco a 50/50 chance of success. The doubts I have are about management. I doubt American corporate managers are able to correctly identify the major hurdles they need to overcome. I doubt they can shift their focus from short term to long term. I doubt they can successfully apply the Toyota production system – in fact, I doubt they can even understand the Toyota production system. Chrysler is where it is because of management. If it fails, yet again, it will be because of management, yet again.

  • avatar
    Luther

    “Whatever is happening, it reeks. Of something.”

    Obama is starting to realize that he committed an impeachable offense by stealing property that did not belong to him… The secured lenders are going to scream until Obama pays them off…with taxpayer money, of course.

  • avatar
    Dr. No

    I give the Fiatsco a 50/50 chance of success

    That’s a fair assessment, I think. And although UAW seats only one Board Member initially, does UAW’s 55% ownership eventually overcome Uncle Sam’s initial selection of four Board Members (not 3 as originally mentioned)? What future role does Uncle Sam play, assuming the future plays out?

    I would like to see Chrysler succeed.

  • avatar
    John Horner

    In a liquidation the secured lenders would have gotten almost nothing and the unsecured lenders absolutely nothing. Given today’s market, what cash value do you really think there is in Chrysler’s pile of steaming assets? Have you been to any Detroit area distressed real estate auctions lately?

  • avatar
    Pch101

    And although UAW seats only one Board Member initially, does UAW’s 55% ownership eventually overcome Uncle Sam’s initial selection of four Board Members (not 3 as originally mentioned)?

    The union goal is to turn its ownership into cash. That can’t happen unless the company is turned around, because that stock won’t be initially worth anything. If things go well for them, they’ll be able to sell that stock and capitalize the VEBA with the proceeds. They’re placing an all-or-nothing bet on management that this is going to work.

    The government is maintaining seats so that it can police the new management so that it increases the odds of getting our money back. The main threat in a situation like this is that Fiat makes bad decisions, or just strips and flips what is left, so board control is critical until the loans are repaid.

    Fiat will be receiving stock as it passes milestones. The theory would be that Fiat is motivated to perform, and will be able to make a killing from a turnaround that is enough to repay the taxpayers, get the VEBA funded and make Fiat’s managers very rich.

    There is nothing sinister about a structure like this. I personally dislike what may turn out to be an adequate lack of investment being made by Fiat, but this sort of agreement is commonplace in the private sector. The government didn’t create any precedents here, and really borrowed the concepts straight out of standard business practices.

  • avatar
    SpeedRacerrrrr

    @ Dynamic88

    That’s a very good appraisal of the situation.

    I’m wondering, as I watch all the froth being generated both within the industry and without, how easy it will be to even come to a consensus about what a “better car” is?

    So much shouting and banging on the table about plug-in this or green tech that, about improving mileage or reducing carbon, about making “better quality”. But the actual fact of making a car is full of compromises set in the process of the detail design, engineering, testing, quality control, supplier quality, logistics, distribution and marketing. These compromises and details need to be well managed, something the Detroit manufacturers have not done well over the last several decades. Right now I think a LOT of people who know nothing about any of this are in powerful positions to make some very poor decisions. This includes a president who apparently thinks the US invented the automobile.

    Maybe Fiat will be able to force some clarity to the management of Chrysler, that’s the only hope I have for them. If that happens, they may actually be in better shape than GM is after all this is over. Having worked for GM in the past, it’s hard for me to imagine the company coming out of this with a creative, unified and coherent management team who understands the above and has the power to manage it through. At least as long as the government stays involved.

  • avatar
    SpeedRacerrrrr

    I personally dislike what may turn out to be an adequate lack of investment being made by Fiat

    Fiat isn’t putting any money in because they’re short of cash, and what cash they can get is being put toward the attempt at Opel. Opel represents access to real technology and talent, while Chrysler represents “only” a turn-key access to the US market. Fiat is spreading itself thin in a desperate attempt to leverage itself into automotive’s “top 5” companies, thereby gaining a chance to be one of the last standing.

    Sounds familiar eh? (Daimler/Chrysler)

  • avatar
    paris-dakar

    I personally dislike what may turn out to be an adequate lack of investment being made by Fiat

    Invest in what? Probably 2/3 of Chrysler could be closed immediately and never reopened again and everyone would be better off in the long run.

    About all I can think of that is worth keeping open in the long-term are Toluca, Satillo, Toledo Jeep (with the Supplier Park), Windsor Minivan, Bramelea Assembly and one Engine Plant each for I4, V6 and V8. Maybe a few odd stamping plants.

    The rest is totally unnecessary in todays 12 million SAAR market.

  • avatar
    jkross22

    “I’m wondering, as I watch all the froth being generated both within the industry and without, how easy it will be to even come to a consensus about what a “better car” is?”

    A better car is what the consumer says it is, as they’ll be buying more of the “better cars” than the alternatives.

    Ask Hyundai… they have experience with making said cars. Just look at sales to tell you what cars are “better”.

    Hint: Generous warranty, aggressive pricing vis a vis competing products, dramatically improved cars.

  • avatar
    Dynamic88

    So much shouting and banging on the table about plug-in this or green tech that, about improving mileage or reducing carbon, about making “better quality”. But the actual fact of making a car is full of compromises set in the process of the detail design, engineering, testing, quality control, supplier quality, logistics, distribution and marketing. These compromises and details need to be well managed, something the Detroit manufacturers have not done well over the last several decades. Right now I think a LOT of people who know nothing about any of this are in powerful positions to make some very poor decisions. This includes a president who apparently thinks the US invented the automobile.

    I agree, the process is complicated and Detroit hasn’t been very good at it.

    I tend not to worry about the politicians. They talk – a lot – and they use whatever buzzwords are in vogue. I think they’re more interested in talking than in actually mandating that everything has an extension cord.

    My worry is that even if the execs running the company benchmark something as pedestrian as the Corolla, they won’t follow through as needed. The gap, real or perceived, has to be closed, otherwise Chrysler (and GM) have to bribe customers to take the cars home. I’m not saying they can close the gap soon (if ever) but the time to start was 30 years ago, so there is no time left to waste.

    I wish I had some first hand experience with Fiat’s current line-up. That might give us some idea of what to expect – assuming Chrysler lasts long enough to get the Fiats federalized. I wonder if the UAW will be assembling knock-down kits, or what?

  • avatar
    Pch101

    The rest is totally unnecessary in todays 12 million SAAR market.

    I frankly find that assumptions based upon such low numbers to be over the top.

    There’s no reason to believe that the sales dip of 2008 is a permanent, irreversible condition. Every deep US recession has had a similar vehicles sales cycle — a sharp drop in sales, followed by a recovery within 1-2 years from the trough. If history repeats, the market should stabilize through this year, and stabilize by 2011. Still plenty of potential market share to get companies excited about doing business in the US.

    Meanwhile, Fiat is in the same bind as are the other car companies of its size; it needs to grow, shrink into a niche player or die. It has opted for growth. That’s what Chrysler represents to them; the main risk is that they don’t have enough cash on the line to necessarily be motivated enough. At its worst, Cerberus, the Sequel.

  • avatar
    SpeedRacerrrrr

    @ jkross22

    “A better car is what the consumer says it is”

    “they’ll be buying more of the “better cars” than the alternatives”

    “Just look at sales to tell you what cars are “better”.”

    These are all lagging indicators. As an engineer or manager having to make important decisions on product/process specifications for a car that won’t see the street until 3 or 4 years from now, I can’t afford to wait until I see what the people will be buying then.

    Of course, we want to satisfy the customer as our primary goal, but we need to use leading indicators, a sense of what is technically possible, and a good dose of risk management to do it. The lagging indicators will bear us out if we do that well.

    “dramatically improved cars”

    Good sentiment, but way too vague.

  • avatar
    SpeedRacerrrrr

    @ Dynamic88

    “I tend not to worry about the politicians. They talk – a lot – and they use whatever buzzwords are in vogue.”

    I hope you’re right. Having lived through periods in our history when politicians did more than talk (anybody remember the ESV programs of the 70’s? Or the 55-mph speed limit nonsense? Or even now with the modern day CAFE regulations) I fear the long-term consequences of their ignorance.

    “My worry is that even if the execs running the company benchmark something as pedestrian as the Corolla, they won’t follow through as needed. ”

    Indeed. Here is the heart of the matter.

    And why won’t they follow through? The car business has such a broad scope. Technologies as diverse as textiles and plastics on the one hand to electronics and iron casting on the other, value-streams encompassing 1000’s of steps and tens of 1000’s of people, using tooling as small as a simple vice or as large as a 7000 ton hydroforming press, all working for different bosses in different companies, with suppliers spread all over the globe, needing billions of dollars in investment… All this is beyond the experience of a lot of people. But it doesn’t stop someone who has managed to be very successful in some limited sphere (think Elon Musk) from thinking he knows better. Such people can cause a lot of damage.

  • avatar
    cnyguy

    @ Dr. No
    Dodge builds the best trucks on the planet. Period.

    You can quote all the magazine reviews you want, but in the real world where your truck is a work tool, Dodge comes up way short. Businesses cannot make money when the truck is in the shop for a second engine or a third transmission (seen it). Even Chrysler recognized the fact it couldn’t build a decent van and simply started relabeling Diamler Sprinters. At work, we use (to the limit) a mix of Fords and Chevys and as a Ford guy, it pains me to say the Chevy pickup with the Duramax/Allison combo is the best truck out there. Period.

  • avatar
    fincar1

    “lw :
    May 2nd, 2009 at 10:02 pm

    Should be interesting to see if anyone other than Fiat bids in the auction.

    It’s not in anyone’s best interest for Chrysler to stay offline for any additional time, but yet we’ve already seen days wasted at the BEGINNING of the process.

    Like watching a hapless NFL team calling time outs on the first offensive series to discuss the right play calls.

    Amateur night if you ask me…”

    Yeah, I agree. The rest of 0bama’s administration so far has been pretty much earn-while-you-learn time, and the less input he has into the process, and the more that standard industry norms re bankruptcy workouts operate, the better (or the less worse) off we’ll be.

  • avatar
    Dynamic88

    These are all lagging indicators. As an engineer or manager having to make important decisions on product and process specifications for a car that won’t see the street until 3 or 4 years from now, I can’t afford to wait until I see what the people will be buying then.

    But you do know what classes of cars will exist – all of them that exist now. All you’ll miss out on is a new type of vehicle (think minivan in the early ’80s) You don’t know what the market mix will be -lot’s of trucks and few econoboxes, or vice versa, but you know you’ll be making trucks and econoboxes, and mid sized cars and so on. If Chrysler can benchmark and meet the standard of the previous generation Civic, and the previous generation Accord, and so on, they’d be way ahead of where they are now.

    And why won’t they follow through? The car business has such a broad scope. Technologies as diverse as textiles and plastics on the one hand to electronics and iron casting on the other, value-streams incompassing 1000’s of steps and tens of 1000’s of people, using tooling as small as a simple vice or as large as a 7000 ton hydroforming press, all working for different bosses in different companies, with suppliers spread all over the globe, needing billions of dollars in investment… All this is beyond the experience of a lot of people. But it doesn’t stop someone who has managed to be very successful in some limited sphere (think Elon Musk) from thinking he knows better. Such people can cause a lot of damage.

    Sure, it’s highly complex. But Toyota handles it, as does Honda, as do others.

  • avatar
    SpeedRacerrrrr

    If Chrysler can benchmark and meet the standard of the previous generation Civic, and the previous generation Accord, and so on, they’d be way ahead of where they are now.

    Sure, and this is probably the safest way for them, while they work on improving the business’s organizational and financial aspects.

    But it will also mean that they won’t be able to ask a premium price for the product, so profits will lag. In fact you could make a case that this is in fact what Chrysler did after their last flirt with bankruptcy.

    I think the time has passed when you can just muddle through in this way. The marketplace is too competitive now.

    “Sure, it’s highly complex. But Toyota handles it, as does Honda, as do others.”

    Of course. But for some reason(s), the Detroit companies have avoided consistent success for decades. I worry that we may not address the reasons, even at this late date.

    I love this business, so I’m not so eager to write these companies off as so many seem to be. But we have to solve the real problems now. This time there will not be a serendipitous event (SUV anyone?) that we can use to mask the real issues.

  • avatar
    mtr2car1

    Dr. No :
    May 3rd, 2009 at 9:25 am

    I can appreciate your thoughtfullness in wanting to see this work out for Chrysler – but Why do the taxpayers need to fund a Private Company’s efforts to give one more “college try”???

    They did the best with what they had and the level of customer response is what it is. The Market has spoken.

    I agree with Toxicroach – Something else is behind this process. Let’s say it does go thru, what will Chrysler look like in 6 months? Same products that customers are cool about today – how about in a year? Is there really THAT much low hanging “cost” fruit for them to fix today and survive until the Fiat product arrives in 18 months? Every other maker on the planet didn’t think so.

  • avatar
    Pch101

    Let’s say it does go thru, what will Chrysler look like in 6 months? Same products that customers are cool about today – how about in a year? Is there really THAT much low hanging “cost” fruit for them to fix today and survive until the Fiat product arrives in 18 months?

    From the look of things, the federal government will loan the interim working capital through the DIP financing.

    Although not explicitly in the deal terms, I would also not be surprised to see some of the VEBA stock end up being sold to an additional JV partner, such as Nissan or VW. Not that this has to happen, but the deal could be modified to allow for this if everybody wants it.

    The issue isn’t with cost savings, so much as it is about creating future revenue. In the interim, they’ll probably just sell existing inventories and producing enough new stuff to keep what’s left of the dealership network alive.

  • avatar
    toxicroach

    I was too harsh. I shouldn’t have implied that UAW workers were stupid. I went overboard there. My apologies.

  • avatar
    Dynamic88

    Of course. But for some reason(s), the Detroit companies have avoided consistent success for decades. I worry that we may not address the reasons, even at this late date.

    I agree with you.

  • avatar
    RogerB34

    Dems are between a rock and hard place. Payoff of the UAW, marginalizing the automobile, carbon tax, global warming crusade, reliance on cutting edge energy sources, creation (or saving) 5,000,000 jobs, free health care, “living” wage, limit trade, immense private and public debt. Failure both GM and Chrysler certain. Going to take many more one hour Obama sermons.

  • avatar
    SpeedRacerrrrr

    @ pch101

    I would also not be surprised to see some of the VEBA stock end up being sold to an additional JV partner, such as Nissan or VW.

    Wow, really? Have you ever tried working with, especially, VW? I can’t imagine any of these companies taking anything less than a controlling stake in this mess…

    … unless of course you’re talking about liquidation.

  • avatar
    Pch101

    I can’t imagine any of these companies taking anything less than a controlling stake in this mess

    VW is currently buying minivans from Chrysler, and Nissan may want the truck line. Whether that leaves room for bringing them in as partners is something that we’ll have to see.

    In any case, it’s in the best interests of the union to get somebody to buy the stock. The VEBA is undercapitalized and will need money if it is going to do what it’s supposed to do.

    The story that you’re not reading in the mainstream media is that the UAW rolled the dice with the VEBA and probably lost. They have members who paid their dues for benefits that they may not collect. Between shrinking in numbers and imploding under the weight of potential future litigation, their future may be pretty dim.

  • avatar
    SpeedRacerrrrr

    “Payoff of the UAW, marginalizing the automobile, carbon tax, global warming crusade, reliance on cutting edge energy sources, creation (or saving) 5,000,000 jobs, free health care, “living” wage, limit trade, immense private and public debt. Failure both GM and Chrysler certain.”

    Whew!

    “Going to take many more one hour Obama sermons.”

    That’s okay… He’s got a gift.

  • avatar
    tony7914

    “toxicroach :
    May 2nd, 2009 at 11:48 pm

    Yeah John, all these plants are going to close and yet… nobody is getting laid off.

    Qua?”

    Out of curiosity where do they intend to send those folks? Are they counting on them taking the latest buy out offer or what?

  • avatar
    SpeedRacerrrrr

    “VW is currently buying minivans from Chrysler, and Nissan may want the truck line.

    These are one-time tactical deals. In the case of the VW deal it was done by middle management taking advantage of a distracted executive team to do a minor deal that probably wouldn’t (shouldn’t?) have happened any other way.

    How would anything other than a long-term interest (like a majority equity interest) lead to one of the other majors taking a stake in the Chrysler VEBA?

  • avatar
    mtr2car1

    From the look of things, the federal government will loan the interim working capital through the DIP financing.

    So, how long do they keep handing out Billion dollar checks? When does anyone really think that revenues turn positive?

    Based on what they have to sell in the near term (6-12 months) they need to “cost” their way to break even so we don’t keep adding to their payback amount. Then in 18-24 months, we get Fiats and Better product than we have today to sustain them going forward.

    That kinda sounds like what Chrysler, Fiat and the Govt hopes to happen – but is it realistic??

  • avatar
    Pch101

    How would anything other than a long-term interest (like a majority equity interest) lead to one of the other majors taking a stake in the Chrysler VEBA?

    If that scenario was to transpire, the buyer wouldn’t be taking a stake in the VEBA, per se, but acquiring shares that would be liquidated by the VEBA, reducing the VEBA’s percentage of ownership in exchange for cash.

    The whole point of the VEBA shares is to be able to sell them at some point — they need the money. Either FIAT needs to create value for the company, which eventually shows up in the stock value, or else the VEBA has to find someone else to buy it. If the shares can be reclassed (which they could subject to negotiation) to give more authority, voting rights, etc. to the acquiring party, that would make it possible for a JV partner to enter the deal without diluting Fiat’s position.

    The ideas here are to raise cash for the VEBA and to preserve Fiat’s percentage of ownership until the stock really becomes worth something. Presumably, Fiat would want to retain as much ownership as possible until the time to sell is right.

    That kinda sounds like what Chrysler, Fiat and the Govt hopes to happen – but is it realistic??

    That would depend upon the burn rate and the ability to generate revenue and/or capital.

  • avatar

    Fiat will be receiving stock as it passes milestones.

    There should also be milestones that trigger sale of government shares. There has to be some end strategy. So far I haven’t heard of one. The Iacocca era Chrysler loan guarantees and Savings & Loan restructuring both had built in ways to get the government out of private business.

  • avatar

    A better car is what the consumer says it is, as they’ll be buying more of the “better cars” than the alternatives.

    Ask Hyundai… they have experience with making said cars. Just look at sales to tell you what cars are “better”.

    I believe Hyundai’s model is ballpark quality at a significant price break, not making better cars. Hyundai makes its cars just good enough for consumers to consider them a fair value.

  • avatar

    Businesses cannot make money when the truck is in the shop for a second engine or a third transmission (seen it).

    Businesses generally buy from whichever manufacturer has the most recently updated truck. That’s about 6% of the truck market and was Toyota’s initial focus with the full size Tundra. Other than that, it’s hard to get a Ford or Chevy truck guy into another brand. Dodge was an also ran until they came out with the new Ram in ’93 I think it was. For most of the 90s I think that Chrysler had about 10-12% of the pickup market, with Ford & GM evenly splitting the rest.

  • avatar
    rcguy

    Here’s an idea, maybe if the arrogant, intitalist, greed, from the top down in this company wasn’t there, they wouldn’t need help to survive.

  • avatar
    npbheights

    It is amazing that this company lasted through the 1950’s. For every one thing right they did, they did nine things wrong. Bunch of chuckleheads peddling third rate products from day one. Truly Amazing

  • avatar
    windswords

    ajla:

    “@Nicolas Weaver:
    Ford realized that “trucks will be trucks” is the future, rather than the “trucks for the yuppies”, and did last minute changes in product design and product mix, to refocus away from the suburban yuppie-truck.

    Ford still makes the “Lariat”, “King Ranch”, and “Platinum” levels for the F-series. Plus the SVT Raptor is on the way. So it isn’t like Ford abandoned the “suburban yuppie-truck” market.”

    And Dodge makes a “real” work truck. The heavy duty Ram 2500 – 5500. If you look them up you will see they compare favoribly with the Ford F250 – 550. The light duty Ram 1500 can tow 8000 lbs. without breaking a sweat but still has a nicer ride when it’s not working. Remember a lot of guys that use their light duties for work use it for persanal transportation as well. They are not big companies but small businesses and they don’t have enough money to buy a truck for work and a truck for pleasure. The Ram plays in both worlds better the F150. Better ride, more storage.

    Slare:

    “Hey, you guys remember the time someone said Dodge builds the best trucks on the planet?

    Seriously, did that really happen?”

    It also happened in 1994.

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