Chrysler's Cash Claim: A Cruel Con?

by Robert Farago

November 4th, 2009 7:15 PM

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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4 of 23 comments

KixStart on Nov 05, 2009

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?

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Rnc on Nov 05, 2009

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.

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Buick61 on Nov 05, 2009

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?

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Greenb1ood on Nov 05, 2009
@ 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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