Chrysler Has 30 Days

Posted by: David Kiley on March 30, 2009

White House officials will make it plain today that the only chance Chrysler LLCC has of remaining an independent company is if it knits together a formal alliance with Italian automaker Fiat S.p.a. in the next 30 days that meets with Obama Administration conditions for receiving an additional $6 billion in loans.

“The Chrysler plan is not likely to lead to viability on a stand-alone basis, and Chrysler must seek a partner to achieve the scale and other important attributes it needs to be successful in the global automotive industry.”

Even so, the White House is prepared to extend to Chrysler and Fiat the additional loans on top of the $4 billion it received in December and whatever money it pumps into the automaker over the next 30 days to keep it afloat if it can reach an agreement with Fiat that guarantees, among other things, that the two companies will commit to building a certain number of engines and vehicles in the U.S.

The task force was harsh in its assessment of Chrysler, singling out “the inferior quality of its existing portfolio and its heavy truck mix.” A senior administration official noted specifically that Chrysler failed to get even one of its products recommended this year by the influential Consumer Reports magazine. The task force also cited Chrysler’s limited scale; that it is chiefly a North American company and severely challenged to compete against rivals with far more viable global operations.

The company, said the task force, is also woefully behind its rivals, including GM and Ford, in planning multiple vehicles on common engineering architecture, and building vehicles in flexible factories that can turn out many different models. The task force also cited the company’s difficulty in meeting toughening federal fuel economy standards with a product portfolio so heavily tipped toward trucks and SUVs. The company has just four all-new products, apart from those contemplated with Fiat, planned between 2009 and 2014, the task force noted.

Chrysler officials on Saturday said they had failed to reach a new labor agreement with the Canadian Auto Workers, but did not respond to calls and e-mails Sunday night about the task force findings.

As part of the government’s deal with Chrysler, the automaker agreed to strike a debt refinancing agreement with the banks holding its paper. Banks mostly hold $6.8 billion of secured first-lien debt of the automaker, which is owned by private equity firm Cerberus Capital Management LLC. “That is entirely too much debt for a company the size of Chrysler and the banks holding it have been immovable in negotiating it down,” said a senior White House official.

Chrysler has also failed to strike a refinancing deal for the billions it owes the United Auto Workers Union and the union’s Voluntary Employee Benefit Association, which is a trust fund that pays worker health care costs.

“Chrysler has just been eeking along with no real viable plan to generate positive cashflow,” said the official, who described the automaker as “hollowed out.”

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Reader Comments

CanadaMark

March 30, 2009 2:55 PM

Finally someone in the US political system picks up a Consumer Reports mag and notices that basically all Chrysler vehicles are subpar (maybe not it's Dodge trucks but no one should be allowed to buy truck without a business that requires one), not a reliable, competitive product in the bunch. The various union members will now get the pink slip they deserve (as a group) and instead of concessions to bring them in line with reality, they can face unemployment with no benefits after a real group of owners buy the pieces.

Momintn

March 30, 2009 3:33 PM

While I'm a member of Consumer Reports, I certainly hope being recommended by them doesn't determine the viability of a company to receive government loans. The idea of the government deciding what cars a company can make just doesn't seem right to me. And they want a worldwide organization to have the power to decide if companies are viable or take them over. I don't think Americans are going to agree to losing our freedom to this overwhelming control by governments, especially not our own.

Conon394

March 30, 2009 5:00 PM

CanadaMark

Wow I guess you live in a nice metropolitan area somewhere but I don't. I have to haul my own garbage, recycling to a dump 30 miles away. A truck is also rather useful when I want to feed my horse, get fencing supplies etc...

CanadaMark

March 31, 2009 2:06 PM

Conon394;
if you need to "haul, feed, fence" those would be the good reasons for having a sub 20mpg truck, I would consider that to be the business of farming although how much of your mileage is actually made up of 'dump' runs or getting 'fencing'? On the other hand, I note that even here in rural Alberta 9 out of 10 trucks I see have one occupant and nothing in the back, plus they are heading to work in town. I believe people should be encouraged to purchase appropriate vehicles. Use a gas tax in the US to fund GM/Chrysler so that they can continue to make sub-standard, non-competitive vehicles & keep all the union workers employed making trucks to sell to 'anyone' who can afford $5 gas.

jimboy45

April 2, 2009 10:04 AM

CanadaMark- what other people choose to drive is none of your business, that's why its called a 'free market'. You drive what you want, and perhaps lead by example! Re; Consumer Reports - it has been proven time and again that they are biased against North American product, and have often recommended asian cars without even having tested them, so you should not rely on their judgement. Having owned many Detroit vehicles, I can say from personal experience that they have been reliable, comfortable and economical. Try using your own perceptions instead of relying on the (often) biased media.

CanadaMark

April 2, 2009 2:57 PM

JimBoy, your right of course, it's none of my business that others spew vast amounts of pollution into 'my' environment and waste fuel resulting in 'oil wars' and untold deaths. Using your theory they should build a free market nuclear plant in the middle of your residential neighborhood and tell you it's a free market enterprise. I am currently reading the new (Apr09) auto edition of CU, please point out the untested but recommended car. All perceptions are based on incoming information, I suppose again your correct if you only drive Chrysler vehicles your perception might be that you found them R,C,& E. However, if you were to actually compare them to comparable product you would come to the conclusion that they are sub-par.

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