Edmunds CarPool

Issue #1. I hope the rosey scenario of better products plays out.
A wild card play could be some combination of Cerberus's 51% of GMAC and Chrysler.
 
Issue #2. I'm not a fan of Soap Opera Digest.
As Yogi Berra said, "Deja vu all over again"
 
Issue #3. I don't believe the Ford family is guilty of thinking short term. I believe they are guilty of making some really bad management decisions, such as putting incompetent family members in charge.
Regardless of the reasons, results have been losses not profits, too many poor products (my opinion), and no direction - which @#$% way is FORWARD.
 
Cerberus beware of Greeks bearing honey cakes.

I hope you are correct about the better product. But I think the key to that in the near future is Chrysler's engines.
 
Will they be able to keep the 3.0 CRD in the Grand Cherokee and possibly in the Wrangler?
 
Will they still benefit from the new Hybrid technology co-developed with GM, BMW and Mercedes?
 
I mean the new owners can have all the money in the world, but it takes time and patience to develop great cars. If short term profit is their aim, then long term product development may not be on the front burner.

Chrysler has a new four cylinder which is found in many of their recent products and shared with Hyundai and Mitsubishi. They also updated the SOHC V6 in the Pacifica to produce more power and torque. They are working on a new family of V6 engines to replace the 3.5L and 4L units but they wont be out for a couple of years.

Issue #1: Good for Chrysler, bad for American workers at Chrysler. It'll also end up being good for Ford and GM management, because now Cerebus can be the bad guy with the UAW.
 
Issue #2: You should never say never, but I'm saying it: Never happen. Ford is definitely a different animal than either GM or Chrysler, despite always being lumped together with them.

If American manufacturing companies were able to succeed they would succeed by now. This is going on since 80-s and they neither dead nor alive. I think big three will resist a little bit and then just give up to be eaten by Asian companies. Newcomers always are stronger, have less legacy, have more ideas, are more innovative and aggressive, and more optimistic.

Issue 1: I don't understand how it can be said that when a private equity buys Chrysler, all will become better because the equity is not focused on quarterly reports. So what? The equity is focused on PROFIT. They will do whatever they feel will make Chrysler profitable.
   
Could it be deciding to build alpha-Enthusiast vehicles such as the Tomahawk Motorcycle (Karl, you GOTTA want to rideTHAT !!) or the Viper Powered 300 or resurrecting the Viper Truck or building whatever race car in street clothes the alpha market wants and will pay for?
 
Or will Cerberus will decide to focus on other areas that make Chrysler profitable, such as focusing on the Caliber range, transferring production of that to China and slashing USA manufacturing?
 
This one will be fun to watch!

Most likely they will move production out of USA/Canada to Mexico for NA and China for Asia and Europe. I would do that to prevent UAW to dictate me how to run company. So if they strike - okay go ahead.
 
Then they probably should make development fixed budget in absolute value setting its priority higher than other expenditures. Actually thats what big three should do in first place – even if there is no or small profit – still fully invest into development borrowing money. They could not do that because were public. But if you are private company – you do not care.

Perhaps we are giving Chrysler too much hope.
 
Private Equities, especially the monster ones, are not interested in long term acquisitions. They make their money on the in and out phases. The decisions and processes needed to make a car company viable in the long term do not run parallel with the PE's desire maximize next quarter's return. In fact, I think the case can be made that the "new" Chrysler will be even MORE focussed on the short term than before. How can a hedge fund manager make 1.5 Billion in bonuses when he has to spend 2 B to develop a new 300C?
 
So... with these concerns in mind, my humble predictions are as follows:
 
1. Chrysler will be taken private in some shape or form. After all, you can't have an IPO until you go private. The casual/uninformed investor will be sold a bill of goods by Goldman Sachs, or whomever takes Chrysler public again. That's the "out phase" the Private Equity sharpshooters are looking for.
 
2. Jeep will be spun off and sold. It's worth a good deal of money and has a loyal consumer base. It's easy money for the pickings.
 
3. Sell off/merge Chrysler Financial. They will make a fortune doing this. Easily done, also.
 
4. Since PE's are not interested in actually running companies for the long term, break up/sell/liquidate the American Auto operations. Factories could be sold off to Toyota or Nissan. Auto workers could be given preferential hiring at the "new" factories. Final consolidation of the US Auto Industry can now begin. This would be an easy sell to the American public.
 
5. If I am a hedge fund (Private Equity), duplicate the above scenario with Ford, as soon as possible.
 
JMHO

The more I thought about it, the more I agree with Savetheland and Pflyer.
Rather than a combination of GMAC and Chrysler, it's more likely to be some combination of GMAC and Chrysler finance. At any rate I expect Chrysler finance to be spun off in some fashion, with Cerberus maintaining control.
Slash and sell for the rest. I don't think the new owners will be in the auto PRODUCTION business for very long.
 
Private Equity firms view of long term is equal to one product cycle for Auto companies. Chyrsler (the auto production piece) will declare bankruptcy, eliminating legacy costs, and curtailing UAW wages.
I expect we will be saying goodbye, again, to an American owned Chrysler in less than 5 years, unless the gov't steps in.
Would the US gov't allow a Chinese company to buy Chrysler auto? How does Chery Chrysler Motor Company sound?