Chrysler operationally bankrupt

[Sled]

source: http://money.cnn.com/2007/12/21/news...ion=2007122107

credit crunch deepens - report
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See all CNNMoney.com RSS FEEDS (close) December 21 2007: 7:26 AM EST


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.

[Rambit]

Nope! Wrong again. READ post #3 - Good News - Bad News. It's an unfounded rumour and Nardelli is pissed. Don't believe everything you read in the press.

Bernie

[rickgonz]

The timing of the story is very suspect - at year's end.

[srtc]

not good ..what could ths mean

[Northern Rider]

In the strict sense of the word, Chrysler is still losing money, if you call that operational bankruptcy . . .

But then, so are GM and Ford.

The difference with Chrysler is that they have a large amount of operational capital behind them from Cerberus. They should be fine for 2 or 3 more years yet.

[kevenj]

Originally Posted by Northern Rider

In the strict sense of the word, Chrysler is still losing money, if you call that operational bankruptcy . . .

Losing money for a period of time is not bankruptcy........ Having more debt than assets IS. Since cerberus (and therefore Chrysler) are privately held companies we don't know whether this is the case right now.......

[Rambit]

Also Cerberus entered into this arrangement knowing full well they'd lose money in the short term. Nardelli commented on that as well.

Bernie