Chrysler hired Bankruptcy Firm.....Interesting...

So this is the banking/death spiral that can occur.

If the auto companies file bankruptcy banks face up to $300 BILLION in write-downs on their balance sheets. Essentially, auto industry woes then pour back into the banking system, causing their balance sheets to erode further and re-endangering some banks. Does this completely diminish the benefit of the TARP program?

Everything I see and hope seems to indicate that there is political will t0 protect GM and Ford but I don't see any desire to bail out private equity funds that made a bad investment in Chrysler......



Dan Ross

Chrysler CEO says industry Ripe For Consolidation??

Chrysler's CEO says auto industry ripe for mergers

Chrysler's Nardelli says US sales slump creates environment for auto industry consolidation

Chrysler LLC Chief Executive Bob Nardelli said Thursday that a steep decline in U.S. auto sales has created an environment for industry consolidation, but he would not comment on reports that talks are accelerating for General Motors Corp. to acquire his company.

Cerberus bought its stake in Chrysler in 2007 from Daimler AG in a $7.4 billion deal. Cerberus and Daimler confirmed last month that they are in talks for the private equity firm to acquire Daimler's remaining 19.9 percent Chrysler stake.


http://biz.yahoo.com/ap/081016/gm_chrysler_merger_talks.html

Speaking on the CNBC cable channel, Nardelli said Chrysler has been open about looking for partners and creating alliances, but he would not address the GM discussions. However, he said the U.S. auto sales slump has set the stage for industry consolidation.

"It certainly creates an environment for consolidation where you can get synergies of productivity that will allow you to be more competitive, not only here in the U.S. market, but on a global basis," he said.

GM has discussed a merger or acquisition with Cerberus Capital Management LP, the New York private equity firm that owns 80.1 percent of Chrysler, a person familiar with the negotiations told The Associated Press last week.

My Take: Look, the private equity guys have gotten their tails kicked in the mortgage industry. They got in over their heads with Chrysler and I think they are trying to find a way to get out of this deal ASAP!

If you have read the papers over the last few years you would know that the private equity guys raised a TON of $$$ and chased ALOT of investment deals and have been BURNED by many of their investments. This one really has my eyebrows raised since GM has no $$$ to buy other companies as their existing business is hemorhaging $1 billion a month!. They are a DYING company themselves!

Owning an auto company as people talk about the next "great depression" seems pretty NUTS to me, let alone talking about one U.S. auto company running at 60%-70% capacity buying out another one. Consolidation will likely happen but due to BANKRUPTCY. Will the "greater fool" theory winout and GM buys Chrysler?

Dan Ross
http://www.BetterBizIdeas.com/

American Car Companies Look to Uncle Sam for $50 billion in loans

1) They don't build quality cars - I think they are building better ones now but that is the perception...like it or not

A new recall of 850k cars. So much for that I guess.....
http://www.reuters.com/article/hotStocksNews/idUSN2942792520080829

2) They haven't gotten the FOGGIEST CLUE how to brand a company. What does a GM or Ford Car stand for? Do you have any idea? Honda makes great engines, Toyota builds a great overall quality car that will last a long time, Nissan has power bang for the buck & some sexiness. Each of these companies also own a luxury brand like Acura, Lexus or Infiniti so their main brand only has so many luxury touches....

Anyway, here are some interesting articles.

Delphi's bankruptcy is going to cause big, big pension problems by the end of September. Expect GM to be in on that news.....

http://www.reuters.com/article/businessNews/idUSBNG11638920080829?feedType=nl&feedName=usbeforethebell&pageNumber=2&virtualBrandChannel=0

Then They are asking for tons more $$$ because they can only sell gas guzzling cars and failed to innovate or brand a car company.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7bD3A3D245-E2A2-4151-B5AD-D29C39880EEB%7d&siteid=yhoof2

I understand how important this industry is to the U.S. infrastructure, ability to have an industrial presence (in case of war)......but what I see are politicians/free enterprise/trade allowing cheaper cars into this country in DROVES. We shouldn't enable the destruction of an industry with one hand and then try and save them (without any hope) with the other hand. Just seems rational to me. The bottom line is that there are more health care costs in a GM car than STEEL costs! U.S. auto manufacturers, if they produce here, are at a competitive disdadvantage without some forms of tariffs. And then this starts the whole free enterprise/trade dilemna.....YIKES!

Dan Ross
http://www.BetterBizIdeas.com