“NEW YORK (CNNMoney.com) — Chrysler Corp., the troubled automaker bought by private equity just four months ago, is scrambling to sell assets amid indications of huge losses, as access to cash becomes increasingly scarce, according to a published report Friday.
“Someone asked me, ‘Are we bankrupt?’” the Wall Street Journal quoted Chrysler boss Robert Nardelli telling employees at a meeting earlier this month. “Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with.”
To raise money, Chrysler is looking to sell over $1 billion in land, old factories, and other holdings, even if it has to let those properties go for under book value, the Journal said.
In an interview with the Journal, Nardelli confirmed the comments and declined to give a financial forecast for 2008, saying only that Chrysler “will make a pretty significant improvement” over the $1.6 billion the company is set to lose this year. The Journal said Nardelli originally hoped to turn a profit in 2008.
The rush to raise capital comes amid constricting access to money as more banks and other lenders face heavy losses related to subprime mortgages.
Chrysler’s owner, Cerberus Capital Management, is now facing serious subprime-related losses from GMAC Financial Services, which it bought from General Motors (GM, Fortune 500) for $12 billion, and is also trying to walk away from a now pricey deal to buy United Rentals Inc., (URI) the Journal said.
Cerberus bought Chrysler from German automaker Daimler in a deal that closed in August.
In the arrangement, Daimler (DAI) essentially paid Cerberus to take the automaker, which fell to No. 4 in U.S. sales behind Toyota Motor (TM) in 2006, in an effort to get out from under a $1.5 billion loss from last year, along with continued obligations to union members and retirees. “
How does this relate to chess? Master and fellow Princeton Alumnus and bazillionaire Stephen Feinberg (I wrote about him previously in conjunction with bridge-player Warren Spector’s spectacular Bear Stearns flame-out) is the puppetmaster of Cerberus. When his company bought Chrysler and appointed Nardelli (who failed horribly at Home Depot) the Wall Street community questioned these twin moves as evidence of Cerberus’s (temporary?) insanity. Perhaps it wasn’t Feinberg who orchestrated this deal – if so, subordinates’ heads are going to roll. If he did, it warrants a “??” in chess terms. Let’s review the recent ‘strategy’ – Cerberus seems to be eating its own multiple heads.
Synopsis of Cerberus’s Recent Blunders in Chess Terms
|Cerberus maneuver||Consequence||In chess terms, this is…|
|Buying Chrysler||Chrysler Operationally Bankrupt||Hanging queen|
|Appointing Nardelli of Home Depot disaster fame to run Chrysler||Nardelli runs Chrysler into bankruptcy||Overlooking bank rank mate|
|Acquiring GMAC||GMAC hit by subprime defaults||Moving queen to where the queen and king can be forked by a knight|