• Feb 19, 2008
Cerberus Capital Management shot off a nine-page letter to investors outlining ways that Chrysler could sink, while also pointing out that they believe Chrysler's on the track for success. Some of the possible failure scenarios include a nasty recession, an extreme slowdown in the car market, or a further credit downturn. Credit is already looking green around the gills, and the potential for a widespread domino effect that starts with an implosion of the teetering mortgage business would be catastrophic for Chrysler Financial and GMAC, of which Cerberus owns 51 percent. As easy mortgages and equity go, so goes willy-nilly new car purchasing, and we're probably already seeing the results of that adjustment. Cerberus believes that it can weather a mild credit downturn, and even a mild recession, just fine.
One way to attain success is to declare it, and changing the definition doesn't hurt, either. Cerberus optimistically declares that there's no need to be heroes to earn a good return on their investment. It sounds a little bit like they're saying it's okay to tread water. Stating that it's not necessary to build Chrysler up, even though that's the underlying hope, Cerberus thinks that just hanging in there should be good enough to earn a return. All of Chrysler's employees must feel great knowing that Bob Nardelli, Jim Press, and Tom LaSorda can essentially just keep the company coasting along until Cerberus sells Chrysler off so it can collect that mythical return. Chrysler's performance is so far outpacing expectations, and the company does have cash on hand. Those are actual, concrete good signs that Chrysler could yet emerge from its chrysalis.

[Source: Detroit News]


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  • 28 Comments
      • 6 Years Ago
      AZMike pretty much hit the nail right on the head with a comment I've made before as well, and forgot to include this time...

      Anyone who believes that Jim Press would have been STUPID enough to GIVE UP all he had achieved and a very likely lifetime of security with Toyota to jump over to a sinking ship is simply not seeing straight. It doesn't matter how much money was involved. Jim knows EXACTLY what he's doing, and so far, I'm liking alot of it. The new Dodge Ram by the way is an absolute HOME RUN.

      I fully expect the fast-tracked interior revamp for the rest of the line-up to be JUST as impressive and high quality.
      jw
      • 6 Years Ago
      terrible products with nothing new in the pipeline..management sucks..dealers are the lowest scums of the earth becouse they have to cram these pieces of crap up there customers a--...i see no way out except china/india...
        • 6 Years Ago
        @jw
        Re: Chrysler’s product portfolio, I wouldn’t count on the Challenger or Journey to right this listing ship.

        The Challenger’s value will be whatever halo effect it transfers onto the Dodge brand. In terms of sales, I wouldn’t expect a $30-50K, two-ton, 16 MPG 2+2 coupe to find a whole lot of takers. Mopar diehards will surely buy out the first year’s production run for over MSRP, but sales of such cars typically tank in the third or fourth year. The Camaro and revamped Mustang won’t help, as the muscle-car market will be spread far thinner than in recent years.

        The Journey, meanwhile, inherits every one of its Avenger progenitor’s weaknesses. A high-volume three-row cute-‘ute is a good addition to the brand in theory, but in execution, the hard and sharp plastic interior, pinched seats, stiff ride, wobbly handling, and generally cheap feel of the product leave little reason for buyers to stray from the compact-ute establishment.

        Of the existing Chrysler vehicles deserving criticism, I’d add the Caliber, Liberty, and definitely Nitro. Compared to their respective competitors, they really are standout worst-in-class products. Bear in mind, this is from someone who was really excited about Chrysler’s future a couple years back.
      • 6 Years Ago
      Cerberus is already stripping the brands.

      No more four wheel drive in the Dodge Nitro & Jeep Liberty (bye-bye center differential)
      and try to get a 5 speed automatic with the 3.5 V6 in the LX.

      A 2.4 I4 in the Dodge Journey and no 2.7 V6.
      Make the 2.7 & 62te the front wheel drive model
      use the 3.5 & 62te for the 'awd'

      As soon as the phoenix engines & double clutch transmission come out, Chrysler is on the auction block.

      Lifetime warranty, my eye.
      • 6 Years Ago
      Cerberus,

      I am not interested in buying any divisions in whole, but I can offer you $100 for the right to the letter "J" in "Jeep" brand. I also can give you $50 for the old "winged" logo.
      • 6 Years Ago

      I have said from the appointment of Nardinelli that it looks to be a strip and flip, as it is referenced. He didn't do anything good for Home Depot.

      But that letter is interesting - and telling.
      I've researched the company recently - they've been buying US / American "traditional" companies at an 'interesting' rate. Quite a few firearms makers and some other hard-core lines. They don't seem to be interested in major profits, they seem to be content to hold this companies.

      My initial reaction to the Cerberus / Chrysler deal was that a wealthy foreign investor wanted to have control of a US company to bring their products in. I haven't found any hard evidence of that, but that letter doesn't disprove it, either.

      Consider that Ford sold First Nationwide bank because it was only providing a 14% return-on-investment (may have been 12%, memory is fuzzy there). But their (Ford's) goal was to get 15% ROI. They didn't get it, so they sold it because the money would be better spent on other thinks (like buying Jaguar & Land Rover). My point is that most US companies are interested in PROFIT. Pure and simple. An above comment used the word greed - good point. But Cerebus doesn't seem to have greed and profit in the list of objectives. That leads to the question of what is their goal.
      • 6 Years Ago
      They need to try and increase fuel economy all around for all engines. Also other than the Avenger and Caliber(ew) Dodge needs to bring in a real cheap entry level car with some sporty value (yes you say Caliber SRT4) but i say bring a racing name or something. Maybe a cool little hatch back the old Dodge Daytona name or something to REALLY compete with the SI, GTI, SS and others in that category, not against the Evo and STI like many people are trying to do.

      Actually to be honest, all i really wanna see them is try and make a new Dodge Daytona =) heck, do they still have the right to make an AMC? give me a Javellin lol
        • 6 Years Ago
        Everything you've mentioned is a sports car. Dodge/Chrysler do not need to turn into Porsche.

        They need Corolla's & Accords & Fits.
      • 6 Years Ago
      Lee Iaccoca once said that in the auto biz...
      You have got to lead, follow or get out of the way!"

      Whenever Chryco was leading the way, they were winning. eg. Caravan, Town & Country, PT Cruiser, Charger, Magnum, Viper, Ram, Sprinter. You can add Challenger to that list here very shortly. Point is, there is a lot of unseen equity built up in the company that Chryslerbus is failing to capitalize on.

      Nardelli (I hate to admit) is doing a lot of things right.
      1. Buyout of all union employees.
      2. Merge all Chrysler-Jeep dealers with Dodge.
      3. Trim the manufacturing line to about 15 models.

      Is Cerberus out to strip and flip? I thought so too.

      However let me put it to you this way, Chrysler-Jeep-Dodge can be a major contender in the auto biz by this time next year, but only if it loses it's "loser attitude". Chryslerbus needs good leaders. Give me 90 days and I will turn this company around. No kidding!

      The guy who wrote the letter should be canned. Okay, I can work with him too.
      • 6 Years Ago
      I honestly couldn't, at first, believe what I was reading in the comments section.

      Then I remembered which blog I was reading, and breathed a sigh of relief, recalling that idiotic and doom-and-gloom logic is the norm amongst many of my peer posters.

      Cerberus is most likely not going to "strip and sell" Chrysler. Think about it, they've already enacted several enticing ideals, including the life-time warranty, and the plan to cut 30% or more of Chrysler's vehicle line-up.

      It's no secret that interior quality needs to improve, ten-fold, if Chrysler is to even begin to offer an appealing product... and the hope is that Ceberus can take a hit while that happens, which they seem more than willing to do. It's called a gamble, a high-risk situation, and it's what companies like Cerberus EXIST to handle: they invest in situations which seem risky, in the hopes they can turn the situation around with the right knowledge and intelligence, and in turn make a big buck.

      Chrysler is in fine hands, leave them be, and check back in a year or two when they make more progress. Lord knows they're on track to make more PURE PROGRESS than ANY automaker on the planet, and if you attempt to deny that, all you're doing is proving your lack of intelligence.
        • 6 Years Ago
        Purifoy, if that IS your real name:

        The statement to which you are reffering, "recalling that idiotic and doom-and-gloom logic is the norm amongst many of my peer posters," suggests that the normal flow of commentary carries that of a negative, unintelligent tone.

        Therefore, for you to take my statement and imply that I said something I really didn't, that "all" commentary followed that route, would be untrue.

        I'd appreciate it if you took your slanderous viewpoint to another person's posting.

        Thank you.
        • 6 Years Ago
        Matt:

        Just because some have expressed views or opinions which are different from yours doesn't mean that their any less intelligent.

        Go back and review your opening comments: "I honestly couldn't, at first, believe what I was reading in the comments section.

        Then I remembered which blog I was reading, and breathed a sigh of relief, recalling that idiotic and doom-and-gloom logic is the norm amongst many of my peer posters."

        And of course not wishing to leave any bases untouched, you closed with, "Chrysler is in fine hands, leave them be, and check back in a year or two when they make more progress. Lord knows they're on track to make more pure progess than any automaker on the planet, and if you attempt to deny that, all you're doing is proving your lack of intelligence."

        Some of your comments do carry some merit. Just like everyone else's here. But I have to ask the question: If you believe the people who entertain this blog are so idiotic or unintelligent, then why are YOU here?
      • 6 Years Ago
      Cerberus is a three-headed hound that guards the gates of hell, but it's a pretty dumb dog and easily fooled by a long-dead poet with a couple of handfuls of dirt. That says as much about Cerberus as one needs to know, really.
      • 6 Years Ago
      Jeez, does anyone seriously think Cerberus bought Chrysler for anything other than selling off it's assets?
      • 6 Years Ago
      This is a sad time to be a Chrysler fan. The 300 and Magnum had me all excited about a meaningful turnaround in 2004. Now their only hope is that a decent steward will pick up whatever's left after Cerberus jumps ship.
      • 6 Years Ago
      Strip and flip, whatever. The fact is that merging with Mercedes is what killed Chysler. All the merger and bank lawyers and executives of both companies made a fortune with a short sighted deal.

      Cerebus actually has incentive to keep it going whereas the former 3 star and 5 star executives didn't... all they needed to do is find some sucker to buy it and they did.

      Oh, don't think the unions didn't have a hand in making Chysler into the mess it currently is in... they did but I just think blaming the new owners for what happens is unfair.

      The product line SUCKS

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