By on November 4, 2009

Send me the bill . . . later.

Sergio Marchionne stunned the mainstream media—literally—with his revelation that Chrysler has improved its post-C11 cash position from $4 billion to $5.7 billion. “’Some of you have been surmising we’re burning through cash,’ he said in brief remarks opening the company’s presentation of its five-year plan. ‘This is not true.’” Uh, yes, it is. Can you say “accounts payable?” When Chrysler entered into bankruptcy, it stopped production.  Remember the Chrysler Cash for Clunkers product drought? Like that. Since then, Chrysler’s been taking in [meager amounts of] cash without paying out anything much, as production more or less stopped during the interregnum. And now that production has resumed? Chrysler’s about to pay those 90-day payables. Look for Fiatsler’s cash pile to erode like a California beach during an El Niño storm.

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23 Comments on “Chrysler’s Cash Claim: A Cruel Con?...”


  • avatar
    Jerry Sutherland

    So it’s first and 10 on their own half yard line.

  • avatar
    Ron

    More like first and 99 1/2.

  • avatar
    panzerfaust

    Its amazing how much money you can save when you’re not paying your bills.

  • avatar
    FreedMike

    Last month’s anti-Chrysler whine:

    “They’re burning through money and won’t tell us anything about their product plans.”

    Now that they’ve given us the product plans, and have stockpiled another $1.7 billion dollars, here’s the new whine:

    “They haven’t paid their bills yet.” Clearly, whoever says that is privy to those bills, right?

    Right?

    Welcome to Schadenfreude, chapter 7904590876…and counting.

  • avatar
    eamiller

    Wow, Chrysler uses 60-days? I thought the industry standard was 90-days.

  • avatar

    eamiller

    My bad. I meant to put 90-days, I swear.

  • avatar
    KixStart

    FreedMike, CommanderFish,

    If you’ve got an alternate explanation for this cash increase of $1.7 billion, I’d admire to hear it.

  • avatar
    TexN

    KixStart,
    +1. This argument reminds of when a major league baseball player hits a homerun on opening day and then someone will invariably say, “He’s on pace to hit 162 homeruns this year!” If Chrysler has a long term plan to grow their cash position while their sales plummet, I’d love to hear it.
    Tex

  • avatar
    johnthacker

    Yep, when the news doesn’t coincide with what you want to hear, just deny it outright.

    Do you also use this when people doubt the existence of Santa Claus, despite the clear news reports from NORAD tracking him?

  • avatar
    Logans_Run

    Actually typical Italian terms are more in the 180 to 210 day range. Used to be the CFO of a medical devise company that sold to Italy. You had to call every day to collect that quickly. Otherwise, who knows?

  • avatar
    rocket88

    I sold alot of stuff to Fiat Car plants. terms were effectively 180 days. In Detroit, historically it was 30 days. But in times of trouble, your invoices would get lost, phones wouldnt be answered and the like, and things in effect stretched to 90 days say.

  • avatar
    jacksonbart

    Where is Lee Iacocca when you need him? .. Oh that’s right he is in Florida still realing from his failed motorized bike venture and now really pissed that his pension and executive retirement package is in the toilet. Well then lets hope Fiat can build a Chrysler better than their WWII tanks.

  • avatar
    parbuster

    Robert- interesting analogy of their cash claim…. makes sense. BTW do you think that Ford had a positive cash flow for the same reasons? GM?

  • avatar
    bigbadbill

    I had a FIAT Mirafiori (I think that’s what it was called) in the late 1970’s. It was an interesting, canary yellow POS. After all my problems, FIAT soon left the USA. In an instant, the FIATs all disappeared….into the junkyards (or pushed off cliffs) I presume.

  • avatar
    Rod Panhard

    If Mr. Marchionne had said how they’d stockpiled some cash, then it would be a different story. Instead, all he said was that they had more cash.

    If I don’t pay the mortgage for a month, it looks like I have more cash in my bank account, too!

  • avatar
    Daanii2

    Never, ever trust any figures from an accountant unless they are audited statements in a filing with the Securities and Exchange Commission. And if you’re smart, not even then. In the business world, there are liars, damned liars, and accountants.

  • avatar
    Stu Sidoti

    Chrysler did indeed save themselves a lot of cash by shutting down nearly all production for several months but conversely, over the last 3-5 months they have been paying their bills just fine-trust me, these things I know and in case you didn’t know, they’re in the middle of a massive hiring spree in R&D, Program Management, Testing, etc.

  • avatar
    majorfrn

    Um, it’s 2009. This is not “Fix It Again Tony” FIAT. Revenue was +/- $88 Billion (+/- $2B profit) in 2008. They have 200,000 employees. In ag equipment they are second only to Deere. In heavy construction third to CAT and Komatsu. They’re the 6th biggest carmaker in the world. I think they can handle Chrysler just fine.

    Chrysler and us tax payers are damned lucky FIAT wanted back in to the US market when they saw an opportunity. The alternatives stunk.

    And seriously, the crew who were running Chrysler and GM were pathetic compared to Marchionne (OK, or anybody). The dude is taking no prisoners, and obviously is serious about winning.

  • avatar
    PeteMoran

    Is there a statement of earnings or a balance sheet, or cash flow report for Q3 from Chrysler?

    @ majorfrn

    Somehow I don’t believe FIAT will use agricultural or industrial equipment revenues to prop up zombie Chrysler, especially as they’re separate reporting entities.

    You might as well say, Ferrari profits (or lack of…) will keep Sebrings on the road for everyone.

    Marchionne is clearly a vast improvement, but is the task too great.

  • avatar
    KixStart

    FreedMike,

    Let’s look at this another way… Cash up on crashing revenues is quite a surprise. Marchionne would know that, so why didn’t hee explain it?

  • avatar
    rnc

    I don’t think that is the case with Ford, they didn’t go into bankruptcy, they never had a shutdown – They actually paid down $2 billion in debt early in the last quarter. So add the $2 billion increase in cash ($500 million from stock offering) + the $2 billion debt payment and you don’t get those kinds of numbers by pushing out payables.

  • avatar
    Buick61

    Sources? Facts? Figures?

    How in the world do you know what bills Chrysler is not paying?

    I’m pretty sure if Chrysler owed BILLIONS of dollars, there’d be many many news stories about suppliers, dealers, everyone saying that “We bailed them out and they won’t pay us here taxpayers what they owe us.”

    Seriously, you think they added $1,700,000,000.00 by simply playing the “check is in the mail” game?

  • avatar
    greenb1ood

    @ Buick61:
    Funny you should mention the “check is in the mail game”.

    Chrysler’s Annual Purchasing budget is $28,000,000,000 which equates to $2,300,000,000 per month or $71,232,877 per day.

    Therefore, stretching / withholding payments for only 23.87 – call it 24 – days saves $1,700,000,000.

    As someone who has been on both ends of automotive payment terms, I can say with no reservations that a 25-30 day delay in payment is nothing out of the ordinary.

    Combine this with the savings of shut downs earlier in the year, and even a 15 day stretch can show an inflated bank account.

    Mr. Farago’s assessment of Chrysler’s financial shenanigans makes perfect sense whether it’s actually happening or not.

    The difference is that he has mathematics and industry precedence on his side, while the ardent Chrysler supporters only have blind faith.

    Sergio knows that the automotive journalists care more about HP numbers than cash flow numbers, so he can make such statements without too much pressure to explain himself.

    It’s nice to defend your preferred OEM, but Chrysler supporters are bringing a toothpick to a gun fight on this one.

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