Chrysler Rhetoric Gets Contradictory - and Desperate?
By Michelle Krebs March 25, 2009By Bill Visnic
AUBURN HILLS, Mich. -- In the weeks leading up to March 31, the day President Obama's auto industry task force gives some direction about whether the government will continue to invest billions to keep General Motors and Chrysler afloat, Chrysler executives have spoken in terms that seem to indicate a festering anxiety at the company's headquarters here.
In some cases, executives have issued threats. Some have deeply contradicted one another. Always-provocative CEO Bob Nardelli has contradicted himself.
And last Thursday, Chrysler Chief Financial Officer Ron Kolka violated the spirit of "we're all in this together" with probably the most inflammatory -- and reckless -- remark yet; Bloomberg News reported Kolka as saying Chrysler could be considered more deserving than GM of receiving continued government assistance.
"If you look at it on a pure-business basis, we are clearly more viable," Kolka told
Bloomberg.
He also said if Chrysler gets the next $5 billion in government loans it seeks, the company wouldn't need to ask for more.
Yet Kolka made news not a week earlier by revealing Chrysler would be hurting in July -- during the company's traditional summer shutdown for assembly plant changes when vehicles typically are not produced -- even if Chrysler received the $5 billion loan.
Kolka's warning of July troubles came after Chrysler President Jim Press' dedicated pressing of the flesh with the media to cement the notion Chrysler's February sales performance proved the company is recovering.
"Things aren't so bad," Press said in an interview with AutoObserver. "At 80,000 vehicles sold in February, we're doing OK. We're not paying dividends or bonuses but we're OK."
Contradictions, Tensions as March 31 Approaches
Meanwhile, CEO Nardelli had to backtrack last week after Nardelli said in a video posted on Chrysler's Firehouse blog that Fiat S.p.A. would take a 35 percent stake in Chrysler and assume 35 percent of Chrysler's debt, only if it receives additional federal funding.
Not so, Fiat countered. Indeed, the next day, both companies issued rapid-fire denials, first Fiat and then Chrysler, clarifying that Fiat would take a 35 percent stake but not assume 35 percent of Chrysler's debt. Although some analysts and other sources suggested such a misunderstanding could be considered a normal hazard of transcultural business proposals, the gaffe made Nardelli appear to be shooting from the hip and less than fully in control.
Prior to the mix-up about Fiat's freedom from Chrysler debt, Nardelli also hiked up the hype about the rewards of the Fiat alliance, saying Chrysler would have access to vehicle structures and technology with a value of $8 billion to 10 billion -- more than the gains Chrysler originally projected. And in its most recent viability-restructuring plan submitted to the U.S. Department of Treasury, the document listed the cashflow value of the synergies from the alliance at somewhat less -- and requiring some eight years to realize.
Fiat CEO Sergio Marchionne placed a value of just $3 billion to $4 billion on what Fiat says it will bring to the table.
More Mixed Messages
The company has continued to send mixed signals on other matters:
- Nardelli and Press both say they think Chrysler can become healthy enough to stand alone, yet typically in the same breath they detail how much stronger Chrysler would be if the next round of federal funding is a approved and lawmakers green-light the Fiat alliance. Chrysler posted a video on its blog headlined: "Why Fiat Works," outlining the advantage of partnering with the Italian automaker.
- Chrysler evidently has a kind of selective schizophrenia about the Fiat alliance. Not long after the Fiat proposal was announced, Press was taking pains to tell the media that despite the promise of the Fiat alliance, Chrysler also was talking to others.
"If it doesn't work out with Fiat, we still have had other conversations with other potential partners and alliances and those obviously can continue, so we have other alternatives," Press was quoted as saying by the Detroit News.
- The company got itself into a minor-league version of the bonus flap that spurred public anger in recent weeks. When it was discovered Chrysler could be paying executive bonuses, Nardelli quickly announced the company's top-tier executives would not accept any "new" bonuses. Afterward, however, the company seemed to be searching for loopholes to qualify Nardelli's statement, saying the givebacks didn't apply to certain bonuses dating to 2007.
- Although CFO Kolka issued assurances Chrysler's financial position was strong enough to see it through the end of this month with no additional loans, a statement form Nardelli last week suggested Chrysler is getting skittish about learning the outcome of its request for additional funding. Nardelli's comment had a certain aroma of brinksmanship that has permeated recent executive statements, while also raising the specter of bankruptcy.
Nardelli told CNBC: "Obviously we have a responsibility to make sure that if the answer (about Chrysler's requested $5 billion) is 'no,' which would be devastating, we have to have enough liquidity to make sure that if it is a bankruptcy we have an orderly wind down."
- The increasing use of the gun-to-the-head gambit even percolated to normally relaxed Chrysler president Tom LaSorda, who told the Canadian government the company would leave the country entirely if the Canadian Auto Workers union did not make new wage concessions and an ongoing tiff over taxes wasn't settled.
Chrysler makes its segment-defining Chrysler Town & Country and Dodge Grand Caravan minivan as well as the Chrysler 300 sedan in Canada; it has some 9,000 direct employees there. Chrysler and the CAW began negotiations just this week.
Photos by Chrysler
1 - The Chrysler Pentastar window at the automaker's Auburn Hills, Michigan, corporate headquarters.
2 - Chrysler CFO Ron Kolka.
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