Chrysler buyer caps painful year

[rickaren]

Chrysler buyer caps painful year

Last August, private-equity firm bought carmaker, and nothing has gone right since

August 10, 2008

After running Chrysler for a year, Cerberus Capital Management must be wondering if its namesake, the three-headed dog that guards the gates of hell, is protecting it from the underworld or leading it into the flames.

Since the private-equity firm bought 80.1 percent of Detroit-based Chrysler from the former DaimlerChrysler one year ago this week, little has gone right.

Gasoline spiked above $4 per gallon, driving people away from the trucks and sport utility vehicles that dominate Chrysler's lineup. Consumers were spooked by a weak economy; the U.S. housing market went belly-up; and credit markets tightened, limiting Chrysler's ability to borrow. U.S. auto sales are down 11 percent this year and aren't expected to improve soon.

"Their timing is horrendous," said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan. "They couldn't have picked a worse time to get into the automobile business domestically."

The troubles are mounting. Chrysler's sales are down 23 percent so far this year, the worst drop of any major automaker, and it has stopped offering leases through its financial arm because of falling truck and SUV values.

At the same time, Chrysler Financial renewed only $24 billion of its $30 billion in credit lines, which will hurt Chrysler's ability to provide loans to buyers and dealers. Fitch Ratings has downgraded Chrysler further into junk territory, saying it expects the company's finances to fall to the minimum levels required to fund its operations as early as next year.

Complete Article Link:
Chrysler buyer caps painful year | IndyStar.com | The Indianapolis Star