One of the key elements in a potential tie up between Chrysler LLC and General Motors Corp. is the desire of cash-burning GM to get its hands on Chrysler's cash reserves. GM is burning through $1 billion and could be threatened with running out of money next year as the credit crisis constricts its ability to borrow, but now Chrysler itself could be running out of money and may face a breakup as the American auto industry weathers the economic downturn.
Continue reading below
Controlled by private equity firm Cerberus Capital Management LP, Chrysler
doesn't publicly release its financials, but was sitting on $11 billion
in cash as of June 2008. However Reuters is reporting that the
automaker's
cash position may be depleted by high overhead and
plunging car sales. The news service said that Chrysler is paying over
$100 million a month to support strained suppliers on top of a total
$200 million support to sales through dealers in August and September
as it suspended vehicle lease financing, according to Reuter's sources.
Cerberus has become increasingly desperate to unload Chrysler,
primarily holding talks with GM and Nissan Motor Co. Ltd. about a deal that would
allow it to sell its 51% stake. The announcement of a $2.98 billion quarterly loss by Ford Motor Co.
will likely add to the Cerberus' difficulty in selling the company. All of Detroit's Big Three carmakers
have been lobbying Congress and the White House for more aid. However
the Bush administration said last week that its wouldn't support
government aid to bankroll a combination between GM and Chrysler.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reed met
with Ford's CEO Alan Mulally , as well as Chrysler's CEO
Bob Nardelli and GM chief Rick Wagoner, on Thursday in hopes of
wrangling $50 billion in federal aid.
- George White
See Reuters story
See Dealscape post on the effects of a Chrysler bankruptcy
