Chrysler Refutes Reports Its Financial Situation Is Critical
The issue is critical because, as the Journal reported, several major banks are now finding it near impossible to sell the $10 billion in debt lent to Cerberus Capital Management to help it leverage acquisition of 80.1% of Chrysler LLC in August. Chrysler's solvency is critical to the debt's value, especially given the current credit environment resulting from failed sub-prime loans.
The Journal also reported that CEO Robert L. Nardelli told employees earlier this month that the company is "headed for a substantial loss this year and is scrambling to sell assets to raise cash ..."
Said the Journal, quoting Nardelli: "The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with."
Per the newspaper, the banks carrying the loans attempted in November to sell some of the debt at 97 cents on the dollar, to no avail.
Nardelli said the company will make improvements next year over the $1.6 billion it will lose this year, per the Journal.
The paper also reports that Peter Arnell--a New York marketing maven who was involved with the company's ill-fated Chrysler campaign four years ago that featured songstress Celine Dion--is tinkering with brand positioning for the company's Chrysler, Dodge and Jeep brands.
Nardelli, writing in Chrysler's blog, conceded the reports, but said they were inaccurate. He said Chrysler is "meeting and, in many cases, is exceeding its financial targets heading into 2008."
He says Chrysler has "ample liquidity" and is fully funded with working capital. He writes that the company is "trying to instill a sense of urgency throughout the workforce, putting our capital to work effectively and efficiently, streamlining inventory, improving current products ..."
He says Cerberus met with its investors last Thursday to say Chrysler was on track to meet targets.
New products next year include a redesigned Dodge Ram pickup truck, Dodge Journey crossover, Dodge Challenger (which Nardelli says has garnered 8,851 customer orders) and hybrid versions of the Chrysler Aspen and the Dodge Durango.
Mark Neporent, COO/general counsel of Cerberus Capital Management L.P., said in the same blog release: "Our underwriting assumed, and fully planned, that Chrysler would incur losses in the near term. Under the leadership of Bob Nardelli, Tom LaSorda and Jim Press, Chrysler is already on track to exceed its multi-year restructuring and recovery plan on virtually all key metrics. We met with the management team this week and fully endorse their strategic direction and their plan to meet the challenges of the current environment," said Neporent.