Chrysler will likely be broken up if it doesn’t merge with another automaker or get government funding help.
Without new funding or a wrenching restructuring, executives have raised concern about the automaker’s ability to finance its operations from existing cash beyond the first half of 2009, “people with knowledge of the situation” told Reuters.
They added that Chrysler had had to pay out over US$100m a month to support strained suppliers on top of $200m in sales support to dealers in August and September as it suspended vehicle lease financing.
The cash pile of $11.7bn Chrylser said it had at the end of June has declined substantially due to deteriorating performance, including a 35% slide in October sales and increasing cash incentives, the sources told the news agency.
Neither the automaker nor parent Cerberus Capital Management would comment to Reuters, as is usual.
The report added that sources had said that, after the Bush administration rejected a request for some $10bn to support a merger with GM, Chrysler refocused, along with its Detroit-based rivals, on obtaining a broader federal rescue package, that included suppliers, to save jobs and preserve retiree benefits.
Sources also told Reuters Chrysler has been considering a more drastic set of backup plans that could include selling off key business lines – including prized brand Jeep – and may also outsource its finance and human resources. The automaker has also talked about more alliances, including one in Russia.
It also is moving to split up its replacement parts business by brand so that its Chrysler, Jeep and Dodge operations could be completely separate (and thus easier to sell individually), a source briefed on that plan told the news agency.
Analysts noted that Cerberus ownership of Chrysler poses a political problem as a federal rescue could be criticised as a bail-out for a secretive Wall Street firm known for its political contacts – its is chaired by former Bush administration treasury secretary John Snow and its board includes Dan Quayle, vice president to former president George H W Bush.
Chrysler is hoping to sell its Viper sports car line this year but that is likely to bring in $80m or less, a source told Reuters.