TCC: Cerberus Spins Nardelli’s Bankruptcy Talk

[VenSeattle]

Cerberus Spins Nardelli’s Bankruptcy Talk
Turning around Chrysler could be biggest challenge.
by Joseph Szczesny (2007-12-24)

Link to original story on TCC

Cerberus Capital Management LLC had to discard one of its principal operating principles Friday as it scrambled to repair the damage done by some loose talk by chief executive Robert Nardelli.

The private equity fund, which acquired Chrysler from Daimler only last summer, had to issue a rare public statement, re-emphasizing its confidence in Chrysler LLC's future after Robert Nardelli indicated he believed the automaker was "operationally" bankrupt.

"We remain extremely enthusiastic about our investment in Chrysler. 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," Mark Neporent, Cerberus chief operating officer, said in a statement.

Generally Cerberus prefers to avoid being drawn into any kind of public discussion about its so-called portfolio. Reviving Chrysler, however, is the most complicated project on which Cerberus has embarked in its short history.

"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. We are confident that Bob, Jim and Tom are taking the right steps to bring Chrysler to profitability. Our mutual resolve to restore Chrysler to its leadership position as an iconic brand is unwavering," Neporent statement's added.

Cerberus doesn't have to issue any kind of financial reports, making it difficult to gauge Chrysler's financial position. Nevertheless, Chrysler is now expected to lose something like $1.6 billion in 2007 and will probably lose money again in 2008, according to information seeping out of the company.

The hasty show of support from Cerberus also suggests Chrysler is already missing the services of Jason Vines, the former vice president of communications who resigned in mid-December.

Nardelli, in an interview with The Wall Street Journal, confirmed that he had told a group of employees recently, while Chrysler wasn't "technically" bankrupt," it was "operationally" bankrupt.

"Someone asked me, 'Are we bankrupt?" Nardelli said in the transcript. "Technically, no. Operationally, yes. The only thing that keeps us from gong into bankruptcy is the $10 billion investors entrusted with us," Nardelli said in the interview.

Talk of bankruptcy in a business as deeply interconnected as the automobile industry can have unfortunate consequences. Suppliers, dealers and consumers are wary of dealing with a bankrupt manufacturer. John Devine, General Motors' former chief financial officer, told reporters more than two years ago there is no precedent for an automaker filing for bankruptcy and surviving.

Cerberus doesn't have to disclose a lot of financial information publicly and after Vines' departure the role of public relations was systematically de-emphasized inside the company. Public relations functions will now be supervised by the executive in charge of human relations and the emphasis will be on product promotion.

The question remains, however, whether product promotion can work effectively without a distinctive and stable public image that can reassure an increasingly finicky public.

GM more or less tried it the Cerberus way back in the 1990s under Ron Zarrella. The effort failed miserably because GM could never seem to tell a consistent story, while critical parts of the message simply got lost.

Meanwhile one analyst, who asked not to be identified, suggested that Cerberus underestimated how difficult it might be to turn Chrysler around.
The situation has been complicated by the slowdown in industry sales that began this fall. Sales are not expected to improve until the second half of 2008 at the earliest, according a new report from IRN Inc. of Grand Rapids, Mich., released Friday.

Nardelli announced a series of sweeping cuts back in November but rumors of more layoffs have increased in recent weeks. Chrysler officials said this week no specific cuts are planned at this point.

In addition, reports are suggesting Renault/Nissan is now interested in bringing Chrysler into its global alliance. Cerberus apparently is interested enough to have held talks with executives from Renault/Nissan, according to some reports.

[Drew Dowdell]

suggested that Cerberus underestimated how difficult it might be to turn Chrysler around.

wow... ya think?

Chrysler has nothing compelling out or in the pipeline at this point. I fear they just handed the mini-van market to the Japanese. Their bread and butter sedans did a complete belly flop. They exited the economy sedan market.

Where is the NG 300/Charger? They came out in March of 2004 as a 2005 model.

Granted, none of this was under Cerebus's watch, but really, they need *some* cashflow to survive until redesigned models come out.

I really think Benz saw what they they did with the Sebring/Avenger, looked over at Ford and GM, and said "F*ck this, I'm outta here"

[regfootball]

wow... ya think?

Chrysler has nothing compelling out or in the pipeline at this point. I fear they just handed the mini-van market to the Japanese. Their bread and butter sedans did a complete belly flop. They exited the economy sedan market.

Where is the NG 300/Charger? They came out in March of 2004 as a 2005 model.

Granted, none of this was under Cerebus's watch, but really, they need *some* cashflow to survive until redesigned models come out.

I really think Benz saw what they they did with the Sebring/Avenger, looked over at Ford and GM, and said "F*ck this, I'm outta here"

the dodge journey would do well except for its dismal interior. the vans are ok product but do suffer from weaker base and mid level pushrod engines and dismally cheap interiors (except for top level T/C's) as well. They should have offered AWD and sharpened up the reflexes a bit for the buff books too.

It's painfully clear that Chrysler's biggest flop was betting the farm on RWD and Hemis and the nasty polarizing styling.....without any backup plan like a redone intrepid.

Intrepid and Stratus were HUGE in the market. In one fell swoop, the 300 turned chrylser into a bling company, and its lost appeal to the mainstream markets (i.e. women buyers). Avenger and Sebring turned out to be undersized and ugly and underwhelming and thus Chrysler is left with direct to enterprise business.

Even though Chrylser has some good efforts in some areas, they were starved of money to do enough projects to keep the whole lineup fresh.

Edited December 25, 2007 by regfootball

[Intrepidation]

the dodge journey would do well except for its dismal interior. the vans are ok product but do suffer from weaker base and mid level pushrod engines and dismally cheap interiors (except for top level T/C's) as well. They should have offered AWD and sharpened up the reflexes a bit for the buff books too.

It's painfully clear that Chrysler's biggest flop was betting the farm on RWD and Hemis and the nasty polarizing styling.....without any backup plan like a redone intrepid.

Intrepid and Stratus were HUGE in the market. In one fell swoop, the 300 turned chrylser into a bling company, and its lost appeal to the mainstream markets (i.e. women buyers). Avenger and Sebring turned out to be undersized and ugly and underwhelming and thus Chrysler is left with direct to enterprise business.

Even though Chrysler has some good efforts in some areas, they were starved of money to do enough projects to keep the whole lineup fresh.

From what I hear the Journey's interior materials are a vast improvement over offerings like the Avenger. Need I remind you Reg, just because you don't like it doesn't make it bad, especially if you're basing it just on looks.

Charger sells at least as well as the Intrepid did, and besides the Magnum, the LX cars have been successful. Redesigns last I heard were scheduled for `09 or `10. Once more, you may not like the styling but we all know how your "tastes" are anyone. Lots of people do like the styling.

Stratus wasn't exactly huge, in fact it wasn't really a serious contender after it was redesigned, but the Avenger and Sebring are flops that needs to be redesigned ASAP.

However, until we new products being caught testing I'm not exactly hopeful for the future. We've yet to hear or see anything new since Cerberus took over.

[regfootball]

if i recall, towards the end of the nineties, the stratus/cirrus and intrepid were both top 10 sellers in the US.

you could have said that about the stratus a couple years ago, if you meant 'top 10 enterprise purchases'

http://thehollywoodextra.blogspot.com/2007...ney-prices.html

I saw the Journey at the Auto Show, and it's not one of these cars that looks "better in the flesh".

I don't really see the point of getting this over anything else. The interior is better than the Caliber but that's not really a compliment.

It still looks like a rather cheap 80's interior.

sorry, but this is pretty indicative of the blanket of comments I have read on many sites across the internet. so, I am not alone in my journey interior bashing. seems fairly universal that they blew it on that one.

[haypops]

The Journey seems mediocre at best (even without the interior mistake). The car show season is upon us (Detroit, Chicago, New York) and Chrysler always puts its best foot forward at these events. Be patient.

[Hudson]

Charger sells at least as well as the Intrepid did, and besides the Magnum, the LX cars have been successful. Redesigns last I heard were scheduled for `09 or `10. Once more, you may not like the styling but we all know how your "tastes" are anyone. Lots of people do like the styling.

The "polarizing" styling coming out of Chrysler over the past 15 years has been THE differentiator in the marketplace. Why else would you buy a Chrysler product over anyone else? It's not just the 300/Charger...the Intrepid and Concorde and Ram Truck started this whole move. And I haven't seen many women turned off by the new 300 styling.

The Intrepid outsold the Charger slightly. But today, they're selling Magnums and Chargers in place of one body style Intrepid. The Charger (and 300 and, to a lesser extent, Magnum) was the way to go in a market that was showing more and more me-too yet high quality family sedans. By making the LX cars different, you reduce the direct competition and allow dealers to ask more money.

The Stratus/Sebring sold well and they obviously screwed up when the redesigned them. I'd rather buy a 6-year old Sebring than a brand new Avenger or Sebring. Styling and interior quality are the main reasons.

LY cars, replacing the LX cars, are (and have been) due out in the 2010/2011 model year time frame. They're not late...yet.

[VenSeattle]

We already know what Chrysler will be showing... they're hybrids:

http://www.ridelust.com/chrysler-steps-out...for-2008-naias/

Unless Chrysler has something else planned for show, 2008 will be very difficult year.

[VenSeattle]

LY cars, replacing the LX cars, are (and have been) due out in the 2010/2011 model year time frame. They're not late...yet.

I thought the LY cars were delayed until 2013 to coincide the first round of corporate-wide interior improvements announced for 2013?

[FUTURE_OF_GM]

The "polarizing" styling coming out of Chrysler over the past 15 years has been THE differentiator in the marketplace. Why else would you buy a Chrysler product over anyone else? It's not just the 300/Charger...the Intrepid and Concorde and Ram Truck started this whole move. And I haven't seen many women turned off by the new 300 styling.

The Intrepid outsold the Charger slightly. But today, they're selling Magnums and Chargers in place of one body style Intrepid. The Charger (and 300 and, to a lesser extent, Magnum) was the way to go in a market that was showing more and more me-too yet high quality family sedans. By making the LX cars different, you reduce the direct competition and allow dealers to ask more money.

The Stratus/Sebring sold well and they obviously screwed up when the redesigned them. I'd rather buy a 6-year old Sebring than a brand new Avenger or Sebring. Styling and interior quality are the main reasons.

LY cars, replacing the LX cars, are (and have been) due out in the 2010/2011 model year time frame. They're not late...yet.

[Chris_Doane]

I thought the LY cars were delayed until 2013 to coincide the first round of corporate-wide interior improvements announced for 2013?

Nope. They should be here Q3 of 2010 as a 2011MY. Assuming nothing goes wrong with the program. Which could be assuming a lot.

[regfootball]

cut the crap. the aero chrylsers were never POLARIZING. they were MAINSTREAM. the late 90's 300 aeroform design was stunning and yet not at all polarizing. it was very much in form with many of the other aero cars of the genre. the original intrepid enjoyed big mainstream success and the 98 redo merely expanded on it.

the magnum sure has been selling......to fleets. i love the magnum to a point but i NEVER see women driving any newer 300's, magnums, or chargers. They are the type of car and design most women avoid like the plague. and women buyers have driven the car market for like 20-25 years now.

wow, the pro chrysler spin in the last few posts makes me need to bring out the waders and wade through all the ....poo....that has been slung around.

When Gale and Lutz left, and Chrysler was handed over to the Germans, they began a massive design and execution free fall they could not recover from.

Edited December 27, 2007 by regfootball

[Duncan]

cut the crap. the aero chrylsers were never POLARIZING. they were MAINSTREAM. the late 90's 300 aeroform design was stunning and yet not at all polarizing. it was very much in form with many of the other aero cars of the genre. the original intrepid enjoyed big mainstream success and the 98 redo merely expanded on it.

the magnum sure has been selling......to fleets. i love the magnum to a point but i NEVER see women driving any newer 300's, magnums, or chargers. They are the type of car and design most women avoid like the plague. and women buyers have driven the car market for like 20-25 years now.

wow, the pro chrysler spin in the last few posts makes me need to bring out the waders and wade through all the ....poo....that has been slung around.

When Gale and Lutz left, and Chrysler was handed over to the Germans, they began a massive design and execution free fall they could not recover from.

Let's compare this...

...with this...

...and this...

...and finally this.

That would be the Intrepid, compared to the top-selling sedans of the same period. I'll let you make your own decisions there. I will simply say that of the three Intrepid competitors, the Taurus had previously been regarded as the holder of the "aero" styling crown. Compared to the Intrepid, it's like night and day in just seven short years. (As a side note, the original Lumina looks very dated today - the other designs seem to have worn slightly better over the years.)

Chrysler's problem at present is not solely rooted in styling (though the Sebring could make a strong case); it's more about mismanaged resources. The 300 and Charger/Magnum were home runs in many respects, with Chrysler's usual bold lines and a new emphasis on Hemi power to sweeten the deal. When the time came to follow up those dingers with a couple of solid base hits for the future, they chose to bunt instead. (I'll stop the baseball analogy now. )

Have we learned nothing from the Japanese? Obviously, I don't want Chrysler to build boring cars again, but it would have been nice if they'd simply stuck with the solid J platform they already had and refined it into something better than the previous version. Instead, they sold that tooling off to the Russians and went with a co-engineered design shared by Mitsubishi, and clothed in styling that was obviously intended for a larger set of cars. In addition, the engineering money spent on a new platform could have been better utilized on the long-awaited new V6 engine project.

Hopefully, Chrysler will last long enough for us to see better successors to these cars - as of right now, it doesn't look very good.

[CMG]

i love the magnum to a point but i NEVER see women driving any newer 300's, magnums, or chargers. They are the type of car and design most women avoid like the plague. and women buyers have driven the car market for like 20-25 years now.

Hahaha

Let's see....

MY WIFE DRIVES A MAGNUM R/T EVERY DAY. AND SHE LOVVVEEESSS IT!!!!!!!!!

(The capitals are for YELLING, so you can HEAR ME!)

hahahaha

Lots of women driving LX cars everywhere. We have several in our neighbourhood.

You're just blinded by brand hatred reg. You need to go into a 12 step program.....

:AH-HA_wink:

[CMG]

Unless Chrysler has something else planned for show, 2008 will be very difficult year.

All domestics can have that kind of lame comment directed at them IMO.

If GM thinks the new Malibu will turn around the tide against the imports I fear they have a big wake up call coming.

:AH-HA_wink: