Industry observers say Chrysler not going to make it, bailout or no.
One of the hallmarks of good investing is what they call due diligence. In layman’s terms, it’s the research you do to determine whether the thing you’re thinking about putting money into – be it a house, a set of antique coins, or a wall street company – is actually worth that cash. In the case of a company, it’s also a matter of whether the firm is capable of generating sufficient return to justify the money you’re about to put into it. After all of the fallderall about “we’ve gotta bail the Detroit Big 3 out for the good of the economy” and after we start actually shoveling out the cash to them, we find that industry analysts doubt Chrysler can make it, bailout or no:
Even by the standards of battered automakers, Chrysler is in dire shape. Its sales in December were down a stunning 53 percent, far worse than Ford or General Motors, and analysts say it probably won’t survive the year as an independent company — despite $4 billion in government loans and the possibility of more.
Things were so bad last year that a single Toyota model, the Camry/Solara midsize car, outsold the entire fleet of Chrysler LLC’s passenger cars.
“Basically they’re done,” said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight in Troy, Mich. “There is no real possibility of turning this thing around as an independent company in my opinion.”
Swell. Again, I ask: what has changed in these auto makers’ business models that will make them any more viable with this cash that we’re giving them than before? They’ve already ploughed through billions more than even we taxpayers are now giving them. So what’s different now that means they won’t just burn our money, too?
Comments
Comment from The Bulletproof Monk
Time January 8, 2009 at 10:04
Found the following and found it to be spot-on and in need of sharing.
“GM is basically a healthcare provider that makes cars and trucks on the side.” –George Will
Comment from The Bulletproof Monk
Time January 8, 2009 at 09:55
Daimler set this ball up, and new owners Cerberos spiked it.
Daimler consistantly trimmed back programs like the incentive for Chrysler employees to get discounts on the products if they agreed to road test those products to work out kinks. As Daimler eliminated these employee “beta tests”, the very real product “kinks” ended up in real world customer’s laps. This only served to further damage the brand’s already lackluster reputation.
Secondly, the Jeep and truck divisions suffered under the rule of Daimler (the Chrysler was silent)because, frankly, Germans from Europe do not understand American consumers and attempted to build what they wanted, instead of what Americans needed. I can tell you squarely that the ONLY redeeming quality on a later model Dodge truck was the scrap metal it would yeild, and that Cummins Diesel IN IT.
Thirdly, Chryco had amassed a rainy day fund of some $12 BIL after the Lee Iacocca/”phoenix” act, and prior to the Daimler takeover. Daimler raided that, and then went in further. They insisted, as part of their negotiations, that Chrysler shave many programs like the one in my first paragraph, and then they pushed manufacturers of Chrysler components to the edge of operating costs. Dana (the premiere differential manufacturer) walked away rather than negotiate further. That’s why there are second rate American Axle Corp. units under the Dodge trucks to this day.
And in one last insult of a spend-happy tombraider, they took the $12BIL and bought 43% more of Mitsubishi Motor Corp., giving them controlling interest in a company that had,just three years before, failed to issue TSB (technical service bulletins)for known recall items because they didn’t want to spend the money fixing their own problems.
At the time Daimler spent $12 LARGE (BIL) for them, Mitsubishi was $16 LARGE in the hole.
If one looks at Daimler’s history, one can see that they had a history of buying up companies, sucking them dry, and the auctioning the shell of the corpse off on the market for whatever it’ll bring. “Google” Fokker Aircraft sometime.
Furthermore, everyone seems to still include Chrysler in the “Big Three” …when in fact, under Daimler’s run, they slid to #5 sometime back, coming in squarely behind Toyota and Honda.(and soon to slide again behind newcomer Hyundai…)