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Chrysler's sorry state revealed

Old 05-11-2009, 06:32 PM
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Default Chrysler's sorry state revealed

I think that means that the 2010 Dodge Challenger will be delayed.

Bankruptcy court filings reveal how complicated the auto business is - and just how much trouble Chrysler is in.

By Alex Taylor III, senior editor
Last Updated: May 11, 2009: 6:10 PM ET
NEW YORK (Fortune) -- Among the thousands of pages of documents filed in connection with Chrysler's Chapter 11 bankruptcy are affidavits from Chrysler executives that open up a window on the auto business previously closed to outsiders in this intensely competitive business.

They reveal an almost unimaginable complexity in the design, manufacturing, and distribution of new cars.
But what's more revealing is that the affidavits expose Chrysler's inability to successfully compete and the dangers facing the company in a prolonged bankruptcy.
Consider:
  • Chrysler pays its suppliers 45 days after delivery. So if it suspends production - as it has now - for more than 45 days, the suppliers would have to resume manufacturing without their regular source of revenue. According to Scott Garberding, Chrysler's chief procurement officer, this imbalance of expenditures and revenues would be "catastrophic" to these marginally profitable companies.
  • As long as Chrysler remains in bankruptcy, it will suspend development of new models. But it can't simply restart development months from now and expect to pick up where it left off because, in the words of Frank Ewasyshyn, a top engineer, "we lose some of the learning and expertise" about the new model. In the affidavit, he figures that work done after a restart will take one-and-a-half times longer than work done before.
  • The longer Chrysler suspends production, the more it will cost to start back up, according to Ewasyshyn. The fluids that flow through the lines and equipment are perishable and must continue to flow, even when cars aren't being built. Paint is a particular problem. "Paint should be removed and stored after 21 days at a cost of $2 million," he said. "After 69 days, paint would need to be replaced at a cost of $15 million."
  • Chrysler can't start making 2010 models until it finishes building the 2009 models presently sitting on the assembly line. So the longer Chrysler is shut down, the later its 2010 models will be to reach showrooms.
  • Chrysler vehicles are such slugs on the market that 20% to 25% of the wholesale cost goes to dealer incentives, according to Peter Grady, director of dealer operations. Yet not only were there 286,687 2009 models - more than three months supply - sitting on dealer lots at the time of the filing but there were 36,370 2008 models left. In other words, they had been sitting around unsold for more than a year.
  • Dealers depend on cash flow to support their operations, but as Chrysler neared its financing deadline, the checks stopped coming. A West Palm Beach dealer named James Arrigo reported that Chrysler owed him $639,000 in consumer rebates, $426,000 in warranty and parts receivables, $13,000 in new vehicle receivables - in total $1.7 million. The dealer reduced his monthly expenses from $2.1 million to under $1.3 million in an effort to stay afloat.
Chrysler's dire condition explains why vice-chairman Tom LaSorda has been so busy trying to sell the company - and why he has been so unsuccessful. LaSorda revealed in his affidavit that he had spent two-and-a-half years trying to find a partner for Chrysler. He approached most of the world's top auto companies: GM (GM, Fortune 500), Volkswagen, Toyota (TM), Honda (HMC), Nissan, and Hyundai - as well as India's Tata Motors, Russia's GAZ, parts maker Magna, and a number of Chinese companies.

"No party except Fiat emerged as a viable and winning alliance partner for us," LaSorda reported. After reading the affidavits, you begin to understand why.

You also begin to understand why the chances of Chrysler emerging from bankruptcy in any shape that resembles intact looks increasingly unlikely.
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Old 05-12-2009, 06:20 AM
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Yeah Bankruptcy is such a GOOD idea for Chrysler and GM, these idiots that said that dont have a clue and no idea what they are talking about and obviously never ran a business.......and for the other noodle who crying about the extra 1000. CFC rebate money that got taken away sayig the dealer should give it to him, i wonder if youd give it to people when Chrysler owes you a half-a-million in un-paid rebate money, would give more out knowing you werent going to get paid ?
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Old 05-12-2009, 07:39 AM
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I saw part of a story at work the other day (someone else was working on it and I read over their shoulder) that said basically that even with Fiat, the only parts of Chrysler that would remain would be the truck production and the minivan production. According to what I saw, it flat-out said ALL of Chrysler's car production would disappear and be replaced with Fiat's cars. Unfortunately, the story apparently got killed for something else before it made it into the paper and I wasn't able to find it later on to post it here. I don't even know what wire service it was on.
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Old 05-12-2009, 12:34 PM
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I hope they keep the Challenger. (Duh!)
If they drop the pricing to make it more in line with the Camaro, they'll sell all they can build. (I'm sorry to keep on harping on this same old point, but Chrysler and the dealerships both seem to think they're made out of gold.)
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Old 05-12-2009, 01:04 PM
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Sounds like the bottomline is:
There's a very real possiblity that we will not see a 2010 Challenger (or anymore 2009's for that matter). So if any of you really want a "new" Challenger, and have been holding off...you may have to go with what ever the dealers have in stock....
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Old 05-12-2009, 02:43 PM
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Originally Posted by Raydar View Post
I hope they keep the Challenger. (Duh!)
If they drop the pricing to make it more in line with the Camaro, they'll sell all they can build. (I'm sorry to keep on harping on this same old point, but Chrysler and the dealerships both seem to think they're made out of gold.)
The Challenger carries an MSRP in line with the Camaro.

The Challenger R/T's base price is actually a few dollars less than Camaro.

The problem is that to get a Challenger, dealers had to sell a certain amount of other cars. Chrysler's production line was limited to produce only 1 Challenger to however many LX sedans.

That kept supply down, and therefore dealer asking prices up.
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Old 05-12-2009, 03:15 PM
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I did without a new Challenger for 30 plus years. I promised myself if they ever built a real Challenger again I'd buy one. Well I did and so happy with the results. As far as if they will build more... lets wait... lets see. If you own one don't be worried about parts and such in the future. My 70 Challenger has been out of production for 39 years and guess what? I can get almost any part I need from several dealers. And this is why the aftermarket small buisnesses are so important to us. Big bussiness too. So I will wait and see how it all pans out. I for one hope they continue to build Challengers and rear wheel drive sedans on the Chrysler platforms... they are the best looking and they have a HEMI. What more could you ask for?
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Old 05-12-2009, 06:56 PM
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Originally Posted by lear4406 View Post
...If you own one don't be worried about parts and such in the future...
This is one of my major concerns.
Sure, the underpinnings are very similar to the Charger and 300, but our body panels are unique.
Unless someone like Certi-Fit starts making repops.

But I suppose that we shall see.
I'll just continue to drive and enjoy mine.
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