Chrysler Falls 29%

Chrysler Falls 29%
http://www.thetruthaboutcars.com/chrysler-falls-29/

Not unexpectedly, Chrysler's results once again tumbled into terrible.
The ailing American automaker's sales fell 29 percent overall. Sadly,
the sales breakdown doesn't look much different than last month's. But
that should come as little surprise; absolutely nothing has changed.
Thanks to ChryCo's uninspiring and truck-heavy product mix, the sales
chart again lists a whole bunch of double digit percentage drops. The
minivans have switched places - T&C up a few thousand, GC down a few
hundred. Dodge's big hair van (the Journey) is selling slightly better
than the brand-new Challenger. The smallest cars are again
underperforming, with only the Jeep Patriot in positive territory, up a
paltry 4 percent. A gaggle of discontinued vehicles– Chrysler Crossfire
and Pacifica, and Dodge Magnum– are down in minus 80 percent territory.
The Durango, which has not been discontinued (yet), due for Lame Duck
Dual Mode hybridization, is also down 84 percent. Just 384 trucks left
the lot. Chrysler's Project D fuel-sipping mid-size sedan can't come
soon enough. Literally.

 

As the BIG chrysler products pile up on my local dealers lot.

IMO it's a good time to buy a big Chrysler, if you don't put on a pile
of miles.
Recent used models are selling for a song and the depreciation saved
more than makes up for the higher fuel costs.
Oil price is now dropping line a stone, now to $120.

 

Chrysler is now a private company.

Why does it feel compelled to report it's financial or sales situation?
It now has the luxury (such as it is) to keep it's cards close to it's
chest.

 

Cerebus makes it's money by buying companies that everyone else
has given up on, and making them profitable, then selling them. That
is what they are trying to do with Chrysler. If they succeed they will
want to get rid of Chrysler by either selling them to someone else,
or making them public and selling their stock. Either way, if they
cease the financial reporting, any future investors will likely believe
that Chrysler is a lot worse than they really are. Nobody is going
to buy stock in a company that does not have several quarters of
reported profits unless they are planning on taking the kind of risk that
Cerebus is currently taking.

Because it's not publically traded, Cerebus also doesen't have to
justify it's financial reports anymore to the general public so they really
don't care at this time if investors think that Chrysler is going to go out
of business. They care what the general public thinks. And since all
of the automakers are doing badly due to the recession, the shortage
of credit, and the fact that the general public mainly wants to buy cars
that save gas (ie: small econoboxes), the general public is a lot more
willing to accept that Chrysler is just going through the same rough
patch that the rest of the automakers are and will come out of it.

Ted

 

Chrysler is only one component of Cerebus.

If Chrysler is in bad financial shape, then it does not serve Cerebus in
any way to report the details. Investors in Cerebus only need to see
Cerebus's bottom line performance to make an investment decision. Is
Cerebus publically traded? Is Cerebus floating any new shares (public
or private) ?

What stock is Cerebus selling (or trying) to sell at the moment?

???

You just said above that Cerebus *would* care about what investors would
think if they *didn't* publish Chrysler's financial situation.

So I don't know what argument you're trying to make.

And keeping a lid on Chrysler's financial situation means that the only
*speculation* of Chrysler's financial health will be in some inside page
of the financial section of the newspaper or auto industry trade
publication where the general public won't see it.

But announcing that Chrysler has "fallen 29%" makes the Drudgereport and
the evening news.

So you tell me which option has more of a negative impact for Chrysler?

 

Cerebus is private and releases no financial info. But -- Daimler
owns 19.9% of Chrysler, so Chrysler's performance can be calculated
from Daimler's quarterly statements, but this lags one quarter
behind. That's where the stories are getting their info.

 

Presumably Chrysler is buying (some) parts directly from Daimler, or
building other daimler-designed or patented parts (and therefore paying
royalties or license fees to daimler).

No matter which way you cut it, Daimler is a critical supplier to
Chrysler for some parts.

All that is a way of saying that *maybe*, if you dig down deep enough in
Daimler's manditory public filings, you might (or will) find the amount
of direct revenue from parts sales or other payments from Chrysler.

Presumably, if Chrysler is operating in the red, then there will
probably be no dividends (none for Cerebus and none for Daimler). So if
Daimler is reporting zero dividends from Chrysler, that fact alone
doesn't indicate to what extent Chrysler is in the red.

As for how Daimler is reporting it's Chrysler investment on it's books,
that's a real crap shoot. Since the shares aren't publically traded,
there is no basis for valuation beyond what they were worth at the time
of the sale to Cerebus. No doubt that Daimler can use all sorts of
creative accounting techniques to revalue their Daimler shares as time
goes on, and a good part of that would have to take into account
currency fluctuations, but there isin't necessarily any connection
between the degree to which chrysler is in the red, and what Daimler
ends up putting on their books.

 

Cerebus does not intend to own Chrysler for the long term. They
bought Chrysler to turn it around and get it profitable then sell it
for a lot of money. Much like home-flippers buy a beat up old
home and spruce it up then sell it for profit. That is what Cerebus
does.

The investors in Cerebus already have their money stuck in Chrysler,
they can't pull it out. All of them bought into the idea of buying
Chrysler low and turning it around then selling it high. If they didn't
buy into this idea, they wouldn't be investing in Cerebus in the
first place.

In short, they spent their money and they are taking their chance.

That isn't how they work. They buy companies and keep their financials
intact, turn them around, then sell them as intact units. Or if they can't
turn them around they close them and the company's creditors then
are stuck out in the cold.

When they get Chrysler ready for sale then they will sell Chrysler
stock. They won't be selling Cerebus stock.

The investors that invest in turnarounds aren't your man-in-the-street
people who buy in, then when the stock has gone up for a quarter,
sell off. They know that what they are buying is already a disaster,
that's why they bought in to it. Telling them 6 months or a year later
that it's a disaster isn't telling them something that they don't already
know.

The investors that "follow" the stock market and read all of what the
pundits are saying by contrast are short-termers. They will dump a
stock if they think the company is going to go downhill.

The pundits are playing to the short termers.

Well, the real question here is how much does company stock impact whether
the general public buys a product or not. With auto sales, keep in mind
that the -vast- majority of auto so-called "buyers" are in reality nothing
more
than renters since they are so-called "buying" on lease.

Your average new car buyer walks into an auto dealership wanting a
certain set of features in a car and cannot afford to spend more than
$150 or $200 or $250 or whatever it is, a month. And in 3 years or
whenever the lease is up, they won't be able to afford the buyout,
they still will only be able to afford their whatever it is a month, so
they simply proceed to "trade-in" their vehicle and rent another
one. They don't give a crap if the car company is going to go out
of business in a year or so, as long as the car dealership is still
going to be around to do the warranty work. They figure that getting
parts and all that crap is the dealership's problem not theirs. And
if they get a new car on a 3 year lease, and a year into it the
automaker goes bankrupt, and a year after that the car breaks
and the dealership says we can't fix it since parts aren't available,
why then so what? That's grounds for terminating the lease, plus
a nice lawsuit, and in any case no sane dealership would ever tell
a customer that, they would just trade it in and stick them on yet
another new car lease.

It's only people like you, and me, who are out there scrounging
through everyone else's leftovers in the used car lots looking for
our grocery-getters who actually care about such things. Because,
unlike the new-car-renters-I-mean-leasers, we actually are putting
real money down, and actually owning the machine.

I would hazard a guess that one of the reasons that resale value
on off-lease Chryslers has gone way way down was not just that
they are gas hogs, but because of the uncertainty of whether
Chrysler will be around or not. But does that really hurt Chrysler?
Yes, for the short term - but frankly Chrysler wants to increase
volume of -new- product, and they like the rest of the automakers
are now focused on small cars, and they know that their future will
be made on whether they can rapidly get those small econoboxes
out into the market quickly, cheaply, and in volume. It won't be
made on whether they can create a farce of a marketing campaign
to try to get a few more percent sale price on 3 year old junk
that nobody wants anyway.

Ted

 

Incorrect. Chrysler IS releasing financial info publically, they
released cash and EBITDA numbers on August 1st. And you are
going to see more of it because it's pretty obvious that Daimler
AG has made some serious screwups and has lost a lot of money,
and is desperate to blame anything other than their own management
for their losses. Cerebus can't allow Daimler to pull this kind of
crap for reasons I've already cited.

Ted