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It's official - Cerberus buys Chrysler
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Comments
Except of course the Legacy costs.
Say if they can off load these costs to the union for say $25 Billion then they own it free and clear with no stockholders. Any money they make by selling off parts is theirs to keep. Ditto any future profits Chrysler makes.
Nothing Chrysler makes even interested us in the slightest when we bought our 2007 SEL AWD Fusion in December 2006. I just don't see where having new "owners," particularly an investment group, is going to have a positive impact.
"There's one thing everyone agrees on: Daimler screwed Chrysler royally. To understand how the desperation sale to Cerberus Capital Management could possibly happen to one of America's iconic car companies, you have to look at the history. Chrysler's merger with Daimler-Benz nine years ago was a disaster from the start. At the time, Chrysler was making a lot of money—something like $1 billion every quarter. The minivan was a cash cow. The Jeep Grand Cherokee and Dodge Ram pickup were selling like crazy. There were 4,000 profitable dealers, a brand-new $1.5 billion research center, and $12 billion in cash. Chrysler was the lowest-cost producer and the most profitable car company in the world, with sales of 2.5 million cars and light trucks. But it took Daimler less than a decade to drive Chrysler off a cliff."
Since 2001 Chyslers direction has been to generate cash and profits only from it's two core products, minivans and trucks. ( Did M-B need all the cash that Chrysler could provide in order to turn itself around? ). Now that M-B is back on good footing there's no need for the Chrysler cash cow...and oh btw we need $32 Billion to fund our Health and Legacy costs.
"Well what if we sold the empty shell that was Chrysler and only had to come up with $18 Billion to fund the H & L costs?"
Essentially, Daimler is paying Cerberus to take Chrysler off its money-bleeding hands. Cerberus will pay 5 billion to those Chrysler auto operations it will control. Daimler still covers Chrysler's losses before the deal closes, estimated to be around another 700 million bucks.
As CNN Money asks: So what's in it for Daimler?
This: they forgo any futher liability for future healthcare costs. As you know, Daimler also ditched the money-losing SMART enterprise recently.
Not sure where the other 2.7 billion mentioned in the deal is going. Probably from Cerberus directly to Chrysler, maybe that part it won't control. Not sure about this yet.
- $5 billion to Chrysler Corporation LLC, the automaker
- $1.05 billion to Chrysler Financial LLC, the auto financier
- $1.35 billion to Daimler, who then returns $2 billion to Chrysler Corporation for a Daimler net outlay of $650 million
As a Dodge owner for the last 11 years, I admit to having a rooting interest in Chrysler's success. As they will exist on October 1 (when they should complete the transaction), Chrysler will be the leanest of the Detroit 3. No bloated overseas luxury marques (Saab, Volvo, Land Rover), no duplicate brands (GMC vs Chevy truck), no experiments (Saturn), no dying brands (Buick, Mercury), and most important, no debt.
They have a shot if Cerberus lets the car guys do their thing.
kcram - Pickups Host
I do think that the Sebring needs a make over ASAP. The sedan is simply a disaster. The convertible looks ok, but the interior needs a drastic makeover.
Chrysler needs to focus a lot of their work on improving fuel economy. As gas prices rise, consumers are going to be more sensitive towards fuel economy numbers, and Chrysler (and the rest of Detroit) is rather lacking in this area.
Now a breakdown on what each brand needs to accomplish to become successful again:
Chrysler
Sebring needs a redesign, and ASAP. I know it just got one, but it's horrible.
PT Cruiser replacement needs to be fast tracked, and I believe that it is on the way for 2009.
I think the decision has been made to ax the Pacifica.
Aspen needs to be axed. It was a creative way to use excess plant capacity at the Durango plant, but the large SUV market is shrinking daily and the Durango can handle any extra sales that the Aspen may have picked up.
the Minivans (Dodge and Chrysler) are fine.
The 300 is beginning to age, and a RWD redesign better be in the works. The formula worked the first time around, and they shouldn't mess with success.
The budget for interiors needs to be increased.
Dodge
The Avenger just hit the market, and it looks much better than the Sebring. It's too early to decide on this...
Nitro needs to be axed. Once again, creative use of excess capacity, and an excellent stop gap product, but I'm seeing quite a few Nitros in rental fleets, which is not a good sign.
Caliber needs to make A/C and Power Windows standard. Few people skip those features these days...
Charger/Magnum need to be reskinned; ala 300. And it better be RWD. Dropping the Magnum may not hurt, but it may not help, as it is a distinctive product that sells slowly.
Grand Caravan is fine.
Durango should either be given a light redesign or be scrapped. Leave the full size SUV market to GM, Ford, and Toyota to duke it out. (not enough potential sales to justify development costs)
Ram needs a redesign. The new Tundra and GM products are far superior.
Dakota could probably hold on for a few more years.
Sprinter will probably be axed, as it was a Daimler product from the get-go.
Jeep
Ax the Compass. It's not a Jeep and never will be.
The Patriot looks nice, save for the interior. Redesign it.
The Liberty's redesign desperately needs the 4.0L from the Nitro. If the Nitro is axed, the two won't overlap.
The Wrangler is fine.
The Grand Cherokee could use a redesign.
All Jeeps should offer diesels as an option.
I have bought a new Lancer GTS '08 from Mitsubishi and love it so I'm not in the marketplace, but the new Hornet looks rather cool to me.
Dodge, keep the price around $15,000-$17,000 if you can and you'll sell a lot more of 'em.
2021 Kia Soul LX 6-speed stick
I haven't heard much about it (either that or I haven't done much research into it) But as I recall it was a 2 seater roadster, correct? If so, then if Dodge can do it for $17-$22K , undercutting the Solstice on price, then they could steal quite a few sales. (and increase showroom traffic)
Chrysler
Sebring needs a redesign, and ASAP. I know it just got one, but it's horrible. I agree. But then again the Sebring sedan has never been a nicely designed car....I don't know why Chrysler can't get it right.
PT Cruiser replacement needs to be fast tracked, and I believe that it is on the way for 2009. God the PT should have been replaced a couple years now.
I think the decision has been made to ax the Pacifica. I haven't heard that.
Aspen needs to be axed. It was a creative way to use excess plant capacity at the Durango plant, but the large SUV market is shrinking daily and the Durango can handle any extra sales that the Aspen may have picked up. I think the Aspen was built for the loyal Chrysler fans that were probably bugging the dealers.
the Minivans (Dodge and Chrysler) are fine. Yes they are doing excellent.
The 300 is beginning to age, and a RWD redesign better be in the works. The formula worked the first time around, and they shouldn't mess with success. I agree
The budget for interiors needs to be increased.
Dodge
The Avenger just hit the market, and it looks much better than the Sebring. It's too early to decide on this... It looks a lot better than the Sebring that's for sure.
Nitro needs to be axed. Once again, creative use of excess capacity, and an excellent stop gap product, but I'm seeing quite a few Nitros in rental fleets, which is not a good sign. I agree
Caliber needs to make A/C and Power Windows standard. Few people skip those features these days... A/c and Power Windows not standard?...how wierd is that!
Charger/Magnum need to be reskinned; ala 300. And it better be RWD. Dropping the Magnum may not hurt, but it may not help, as it is a distinctive product that sells slowly. I think their designs have held better that the 300 but could use a tweak here and there.
Grand Caravan is fine.
Durango should either be given a light redesign or be scrapped. Leave the full size SUV market to GM, Ford, and Toyota to duke it out. (not enough potential sales to justify development costs) I though they already did a light redesign.
Ram needs a redesign. The new Tundra and GM products are far superior. I dunno I still prefer the Ram.
Dakota could probably hold on for a few more years. Didn't they do a redesign for 2008
Sprinter will probably be axed, as it was a Daimler product from the get-go. Thank god I hated that thing!
Jeep
Ax the Compass. It's not a Jeep and never will be.I never understood why Jeep thought they needed this vehicle.
The Patriot looks nice, save for the interior. Redesign it. I agree
The Liberty's redesign desperately needs the 4.0L from the Nitro. If the Nitro is axed, the two won't overlap. How could the redesign it without the 4.0L again what is Jeep thinking!
The Wrangler is fine.
The Grand Cherokee could use a redesign. True this last tweak just didn't do it. It looks the same.
All Jeeps should offer diesels as an option. I think they are waiting until next year for a bio diesel to be developed, so they can market it in all states.
My question since Chrysler is out of the fold will they still share with Dodge?
Has the SmartForSomebody craze died down sufficiently so that we can fully concentrate on real cars again? Not nearly enough protection in those accidents-waiting-to happen rigs, IMO. I'd buy an Obvio! 828/2 before I'd even test drive a SmartForSomebody.
2021 Kia Soul LX 6-speed stick
Chrysler probably has to share with Dodge, as the costs of developing three unique sets of platforms is just too cost prohibitive.
I doubt Daimler wants to touch anything related to Chrysler given the state of their "marriage"
I believe I read something about the Dodge crossover also spawning a Chrysler variant that would replace the Pacifica for 2009. I don't know where I heard this though...
You also have the UAW negotiations this summer which is always interesting.
If they're smart, the UAW should play ball with the new Chrysler. Both entities will benefit greatly if they can develop cars and trucks consumers want faster than the competition. Chrysler can now have that "go for it" attitude they had in the early 90s that produced the Ram, Viper, the LH sedans, and the "cloud cars" that made all the cash that attracted Daimler in the first place.
We won't see the results of the new "attitude" before 2010, but Chrysler could be the only US automaker poised to take on Toyota and Honda by then. GM and Ford are too bloated and inefficient - they're not in position to slim down enough.
kcram - Pickups Host
My biggest fear in the whole thing is going after the quick buck by selling the pieces off. I like to think that this deal is structured to discourage that.
Whether that's true is another story...
But now that Chrysler is private they'll be able to move faster, since they don't have to answer to a large group of shareholders.
I hope they get a 35 MPG car out on the market ASAP. The most fuel efficient car they have would either be the PT Cruiser or Caliber, both at 32 MPG highway which isn't enough for a compact car, even if it is a wagon/crossover/SUV type thingy.
Buick GNX --
'88 Fiero (finally got the car right)
'89 Turbo Trans Am
94-96 Impala SS
LS-1 powered Camaro/Firebird
'93 Cadillac Allante with Northstar engine
By a STRANGE CO-INCIDENCE, that list represents the *only* 1980s GM cars worth anything today in the collectible car market.
So there's hope for Chrysler AND Ford if GM continues its historical patterns. Struggle with a product, make a good car out of it after 3-4 years, and then discontinue it, and produce another imperfect car to perfect over time and discontinue.
It's perverse, but it could be a silver lining.
MrShiftright
Visiting Host
I remember trying to talk my dad into a '93 Cadillac Allante with Northstar engine. He leased a DeVille. Go figure.
So they got to the same place of mediocrity as AMC, Ford an d Chrysler in the 1980s, but it just look longer and cost more :P
MrShiftright
Visiting Host
I have a friend who many years ago owned a Pacer. Oh, what a pile of junk.
Showing that people don't learn, he and his then wife went and bought a Renault Alliance! Their logic? The Renault dealer was the closest one to where the Pacer died!
These days he's got a Camry but only because his dad left it to him in the will. Can't imagine what he'd buy these days. They don't make anything near as bad as a Pacer or an Alliance anymore.
They had the prototype all finished and never put it into production.
Part deux: Those many years ago, Chrysler imported Simca autos from France. My father rescued a pair of them from a wrecking yard and kept them running as a hobby to replace insipid television of an evening. I spent a summer session herding one of those to and from a college campus. Aaaaah! The memories of Chrysler past... My Renaults did not share the Chrysler import pedigree. I suspect I'd do something similar, again, if Chrysler would!
And the new Dodge Hornet will no doubt only produce about 29-31 mpg on the highway with the 6-speed manual tranny because it will be too heavy to propel it any more economically.
2021 Kia Soul LX 6-speed stick
It's okay, though. GM would have put some wheezy pushrod in it and sent it out to fight against DOHC turbo MR2s and Probes.
Now there's a heritage I appreciate.
Get'em while they are sleepers!!
:P
anyway, i for one am sad to see the breakup. It is only in the last half a decade or so that chrysler was actually producing cars I would consider owning (and do own one, the pacifica). Before that, I only liked the trucks. I still REALLY want a Charger or Magnum. But if they have to resort to putting their unreliable 4-speed autos in it, I'm not interested!
I also got my sister to buy a Caliber. I find it an impressive little vehicle and may even consider an SRT for myself. Is this car still going to happen? I don't think there is a daimler connection there, so maybe.
So that's at least 4 car-based vehicles in their lineup that I found competitive for my dollars. I'd hate to see that all change again so soon.
'11 GMC Sierra 1500; '08 Charger R/T Daytona; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '08 Maser QP; '11 Mini Cooper S
2021 Kia Soul LX 6-speed stick
2021 Kia Soul LX 6-speed stick
They're not. Talk about screwing up a great idea. They LOOK great.
That flies mostly against the Chrysler pricing movement overall so maybe they envision the new Challenger as their new world order Prowler or something. That, although not really making much sense, might start to explain the pricing hike. Making it to be a baby-boomers prize along the lines of a Corvette or Viper.
2021 Kia Soul LX 6-speed stick
Maybe, maybe not, but these decisions have more to do with business than politics.
'11 GMC Sierra 1500; '08 Charger R/T Daytona; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '08 Maser QP; '11 Mini Cooper S
Chrysler was worth 35 billion when Daimler took over. Cerberus bought 80% of the company for 7.4 billion, which makes Chrysler worth 9.25 billion now. And, most of the 7.4 billion went back into the company, not into Daimler's pockets. Cerberus has historically gotten a 22% return on investment, which means they need to sell their share for 9 billion (worth=11.25 billion), a 1.6 billion dollar profit.
To do this, they're probably going to do some untraditional things, which would make sense since the 'traditional' things got the domestics in trouble in the first place.
With the UAW talks coming up in September, I think we're in for some fireworks. Steve Miller/Delphi set the direction, and Chrysler will probably follow that. Getting labor costs in line with reality is probably worth 1.6 billion per year.
If I bought a house for $400,000 but it was appraised at $450,000, what's it worth? The answer is probably none of the above.
Most people will say that something is worth only what someone is willing to pay, but that's not necessarily written in stone. It commonly applies, but not when you are talking about something that has value in its parts. Let me use GE as an example. Analysts say it has more value in totalling its parts than its current stock price would indicate. So if you bought 100% of GE's stock, you'd own the company for less than it is actually worth.
'11 GMC Sierra 1500; '08 Charger R/T Daytona; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '08 Maser QP; '11 Mini Cooper S
2021 Kia Soul LX 6-speed stick