Whither Chrysler?

By Brendan Moore

10.25.2008

What is happening with Chrysler now? Are they going to end up with GM after everything is said and done? Will they go with Renault-Nissan’s partnership offer? Will the company be snapped up by a dark horse buyer/partner? Or, will they end up with no one?

Well, the last option is probably not going to occur – Chrysler LLC (owned by Cerberus) is very weak in a very weak market sector in a very weak economy, and furthermore, it has almost zero prospects in terms of new product to suit the current and short-term. Jim Press did his best a few days ago to make people believe that Chrysler staying independent was still an option, but it isn’t. The attempt to talk up the possibility of future independence for Chrysler was a valiant one, but ultimately a transparent one. No one really believes that Chrysler can stand on its own anymore.

Chrysler is cutting production like crazy and announced another 5000 job cuts yesterday, so it looks as if Chrysler is preparing itself for new ownership by becoming as lean (and therefore as attractive an acquisition) as possible.

What about that deal with GM?

Well, GM still can’t get the money to do the deal, some members of the GM board are not happy about the desired deal, and now, Ceberus is making noises along the lines of wanting substantial changes to the leadership at GM as part of the terms of the acquisition, and since they would retain a stake, they would have the ability to keep being a thorn in the side of GM if those changes didn’t take effect. The changes in leadership Cerberus wants are as yet undefined, but one can only hope that they don’t have Bob Nardelli in mind for Rick Wagoner’s job.

Renault-Nissan?

They want 20% of Chrysler but don’t want to buy the partnership stake with cash; they only want to do a stock swap because, of course, they don’t have the cash. Just like almost everyone else in the world. Cerberus isn’t too interested in such a deal, for various reasons, one of which is the fact that if Renault-Nissan takes only 20%, then Cerberus still has a problem called Chrysler, and they want that problem to go away.

What are the chances of a dark horse riding in unexpectedly and purchasing Chrysler?

I would say they’re not as good a couple of weeks ago, but the possibility still exists. The global economy is tanking and the auto market is going to be in meltdown next year, so it’s not exactly a promising market scenario for any potential buyer of a struggling auto maker.

But something has got to happen. Chrysler’s already cloudy future has gotten even more doubtful lately and although the smart money is still on GM getting Chrysler, it could easily go another way. I look for some resolution by the end of the year.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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2 Comments

  1. I taught of a strange idea, doubtful if it might work. Here it is

    -Renault-Nissan take 20% of Chrysler while GM short of cash gets the remaining 80% and in exchange of letting Renault-Nissan having 20%, GM will allow Renault-Nissan having some parts (around 20% could be less or it could be a little more) of GM.

    But as I mentionned, it have some very slim chances to happen unless a miracle happens.

  2. I do not support the GM-Chrysler merger!All this will do is to close Chrysler!
    I think Chryler just needs a new owner, a deal like Harley Davidson did in the eighties! Some leadership that are passion about cars, not a Wall Street investment firm!

    I cannot believe all the doomsayers that think Chryler is finished, there is just as much room for them as BMW,Saab,Kia etc! This not the time to close Chrysler just because they got caught in a bad economic cycle! If everyone had this fatalistic attitude no one would surrive!
    As Lee Iaacoca” said where are all the great leaders gone?

    If Chrysler has to downsize, let them do it, not GM!

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