Two days after General Motors got its first installment of cash from the Treasury Department, Chrysler also closed on its loan. On Friday, Chrysler received a transfer of $4 billion to help tide it over while management tries to find a way to right the ship. CEO Bob Nardelli acknowledged the complex arrangements that had to be made with privately owned Chrysler. It's not known at this point exactly what arrangements were made as far as collateral and what the government would get from Cerberus in the event of a default by Chrysler.
With Chrysler's cash dropping to $2.5 billion as we race to the end of the month, suppliers to the automaker have begun asking for immediate payment for delivered parts. When suppliers demand COD from struggling companies such as Chrysler LLC instead of extending payment terms, it wreaks havoc with the company's financial structure. Chief Financial Officer Ron Kolka and Vice Chairman Tom LaSorda told the Associated Press that the company is "fending them off." In order to work out a viable agreement, the company has scheduled meetings with the suppliers today.
Although $2.5 billion sounds like a nice chunk of change, it's the bare minimum the automaker needs to make payroll and pay suppliers (as of now, Chrysler pays $7 billion to suppliers every 45 days). With the failure of the bailout last night in the Senate, Chrysler is in dire straits – without an immediate cash infusion the company could run out of funds by the end of the month.
As you'd imagine, it's pretty tough to run a successful auto company if there's no viable product in the pipeline. Chrysler has seen its fair share of negative press for not announcing a clear strategy to rebuild the heart of its line-up, namely the Chrysler Sebring and the Dodge Avenger, and it's unclear how much life the aging 300C and Charger platform has in it. According to Chrysler's product development chief, Frank Klegon, though, there's nothing to worry about... assuming that the Feds pull through and "show them the money" they need for future development. If Detroit's number 3 automaker doesn't get the cash? Don't ask.
Klegon also says that Project D is still moving along, though no actual decisions have yet been made as to whether 1) a completely new platform is needed, 2) the old one will be modified or 3) another firm's mid-sizer will be cribbed for the next Chrysler Sebring and Dodge Avenger. Despite rumors of its apparent demise, Klegon reiterated that the Phoenix project to develop next-gen V6 engines is well into the testing phase. Chrysler needs to knock all of these plans out of the park in order to remain competitive.
General Motors and Cerberus reportedly want to act as quickly as possible if they are going to make a move on Chrysler. It seems that the two bargainers would like to come to a decision before the upcoming Presidential elections, as they believe they may get more promises from either candidate before the actual vote takes place. A potential problem exists though, as General Motors is finding it tough to come up with the cash needed to make a deal happen and banks aren't about the lend it to them. An alternative option that's being considered is getting government backing for the deal. Though it sounded hard to believe when we first heard the GM/Chrysler merger rumors, it truly appears that these talks are taking place at a very high level and the deal could indeed be on its way to. We'll just need to pay close attention in the next few weeks to the reactions from the Feds, the UAW and the thousands of workers that would inevitably be affected by the deal. Stay tuned.
Things were just starting to look up for Chrysler's upcoming powertrains. The Phoenix V6 will hopefully return competitiveness to the engine bays of Pentastar vehicles, and a dual-clutch automated manual transmission joint venture with Getrag was nearly off the ground before both companies started shoving lawyers at each other. A joint venture plant has been built in Indiana, but the deal fell apart over money for tooling. Chrysler's shot a lawsuit at Getrag, alleging that the transmission specialist hasn't ponied up for tooling and equipment to build the gearboxes. For its part, Getrag contends that it had backing from German banks provided that Chrysler put the $300 million needed into escrow, and is prepared to sue Chrysler to get reimbursed for its investment plus damages. If Getrag and Chrysler can't come to terms, it doesn't look good for the future of Chrysler's clever gearbox which would offer increased performance and fuel economy.
The latest rumors regarding Cerberus-owned Chrysler and its possible sale point to the breakup of Chrysler's assets, and in particular its brands. General Motors may be interested in bits and pieces of its cross-town rival, but perhaps not the entire automaker. Jeep is considered Chrysler's most valuable asset and was purchased by the automaker from Renault in the '80s, around the same time that AMC ceased to exist. A similar scenario may put Jeep back in the hands of Renault. This purchase could allow the French automaker an easier entry back into the U.S. market with dealerships and excess production capacity leftover from Chrysler. General Motors main interests are rumored to be the minivan line along with some production sites, including the plant in Mexico that assembles Dodge Ram trucks. In exchange for the pieces of Chrysler that GM is interested in, the automaker could fork over its remaining 49-percent stake in GMAC to Cerberus. It's clear that all companies involved are still in negotiations, and it's completely possible that nothing changes hands at all. Round 'n round we go...
Chrysler's Project D is in full swing, and the automaker has targeted an end-of-winter date for its decision on how to proceed. As a refresher, Chrysler has set up a team consisting of people from every facet of vehicle design and marketing with the goal of coming up with a suitable replacement for the Pentastar's mid-sized Sebring and Dodge Avenger, which we'll charitably describe as non-competitive. Possibilities for their replacements include creating a completely new vehicle architecture in-house or partnering up with another automaker that already has a well-designed sedan that Chrysler could use as a base for its next mid-sizer. Chrysler's not saying, but we've heard that discussions have taken place with Nissan/Renault, Fiat and, lest we forget, possibly even General Motors. According to the most recent reports, the automaker would actually prefer to partner-up on the project. In the mean time, we'd hope that Chrysler can perform a bit of mid-cycle magic on its Sebring and Avenger to make them just a wee bit more palatable.
Chrysler has managed to stay out of the doom and gloom news for a few weeks now, which goes to show that going private can have its benefits. But things couldn't stay quiet forever, and as if the company needed something else to deal with, it's now in row with German transmission supplier Getrag over a potentially failed joint venture. Chrysler uses Getrag double-clutch transmissions (DCT) in the Euro-version Dodge Journey (seen above), and is planning on adding the Euro Avenger and Sebring to the DCT lineup. Getrag signed an agreement with Chrysler to build a factory in the U.S. that would also supply Chrylser's American products with DCTs, and in return for Chrylser agreeing to get such transmissions only from Getrag, Getrag would get $300 million to finance and tool the factory. According to Getrag, it only intended to borrow the funds if said funds were guaranteed by the German government. According to the German government, it would only guarantee the $300 million loan if Chrysler put that same amount in an escrow account to guarantee repayment. According to Chrysler, it had no idea of such an arrangement, and Getrag never should have signed the agreement if it meant Chrysler needed to back Getrag's loan with its own cash. And that's how court cases are made. While the factory remains in limbo, Chrysler needs to find another supplier for DCTs for its American cars, and do it in a hurry.
Hopes for Renault's possible return to the American market were stymied when it became apparent that General Motors wasn't interested in a far-reaching partnership with the brand and its Nissan ally a few years ago. It seems that the French automaker is still very interested in re-entering the U.S. and would consider other possible partnerships. One particular option that popped up at the Paris Motor Show is a purchase of the Chrysler brand if Cerberus were interested in parting ways with it. Interestingly, Chrysler was the automaker that Renault pawned its last U.S. efforts off on. It wouldn't be an easy time to enter the U.S. market, as every automaker is currently posting lower-than-hoped-for sales figures, including Chrysler, which reported numbers down by nearly a third. Still, Chrysler has plenty of dealerships in the U.S. and Renault would love to have access to some of them. Plus, Chrysler is rumored to be in search of a new mid-sized sedan platform to build off, something that Renault would be more than capable of providing. Another more costly option would be for Renault to go it alone, producing three brand-new vehicles just for the U.S. We'll keep an eye on these rumors and report back if anything more substantial breaks.
A man who purchased Chrysler's uConnect in-car wi-fi recently gave his impressions... and he wasn't exactly impressed. His three main issues were: it's slow, there are no instructions for encryption, and you're limited to 1 GB for downloads. The Autonet site lists speeds as 600Kbps-800Kbps, and the reader didn't give any idea of the speeds, but he said the router had a hard time keeping an EVDO connection and would go to 1x. Autonet says the "connection is secured with WEP encryption, MAC address restriction or WAN port restricton," but according to the reader, it isn't shipped with any encryption in place and the manual doesn't tell you how to do it or even that you need to do it. As for the 1 GB cap, that's for the $29 plan. There's a $50 plan that gets you 5 GB, which would be the way to go if you really are going to have the kids on YouTube in the back seat. Of all he writes about, it seems the biggest gripe is the speed -- nothing like trying to watch a 30-second clip that takes eight minutes to download. That's not a minor drawback, but for the convenience of using any wi-fi equipped device, and not having to listen to that American Girl DVD again, it could be worth it.
