Burying the Lede: AP Report On Chrysler Board Questions At Very End Whether US 'Allocation Will Be Enough'

July 6th, 2009 12:00 AM

Oh. So. Predictable -- Both what is happening, and how it is being "covered."

Chrysler is barely out of bankruptcy, and there is already concern as to whether the money Uncle Sam, (i.e., U.S. taxpayers) funneled into the company -- while in the process of ripping off and intimidating its secured creditors, capriciously terminating plants and dealers, and running roughshod over long-held notions of fiduciary duty -- will be enough.

Beyond that, how many people know that the magical technology its new owner Fiat, which put no money of its own into the deal, is "more than a year away" from making its way to Chrysler?

"Somehow," the Associated Press's Obamacized news prioritizers decided that the info nuggets contained in the previous two paragraphs should be relegated to the final paragraphs of an unbylined report (also saved at host) this afternoon. The report, including its headline ("Chrysler names remaining directors to new board"), appeared to be merely a droll recitation concerning certain Board members. Only readers getting to the last three of the report's eight paragraphs would have any idea that Chrysler's situation is already a cause for renewed concern about its viability.

Readers here can make what they will of the Board's make-up, but, as noted, the real beef in the AP story is in those final paragraphs (bolds are mine):

..... Chrysler emerged from bankruptcy protection after just 42 days, cleansed of much of its debt and labor costs. But with sales down 46 percent from the first half of last year - a year in which Chrysler lost $8 billion - the company faces a huge challenge to make money again under its new Italian owner.

Fiat, which has taken over running Chrysler, will provide badly needed small-car and small-displacement engine technology, but that's more than a year away.

Chrysler's poor June performance also casts doubt on whether the U.S. government's $7 billion allocation will be enough to get the automaker through the U.S. sales slump, which is projected to last into next year. The government has said it stress-tested the $7 billion figure and determined that it is all Chrysler will need to make it until Fiat products arrive and Marchionne can turn the company around.

At the tail-end of its effort to keep Chrysler's emergence from bankruptcy intact, government lawyers shrieked that the company was losing $100 million "every day its plants are closed," and that the courts had to set bothersome concerns like centuries of contract law and the U.S. Constitution aside because of the dire situation they had contrived. Assuming that the government's $100 mil/day claim was a cash burn rate that won't change, the company will go through its $7 billion "allocation" in less than 2-1/2 months. Even under a supposedly lower cost structure implying a smaller burn rate, it's hard to see how the company gets very far into next year -- let alone to the "well over a year from now" arrival of Fiat's supposed magic, when Marchionne finally starts "turn(ing) the company around" (though he is on the Board, will he just let it sit there and rot in the meantime?) -- while it sells over 60% fewer vehicles than it did just two years ago.

The Obama administration can talk about "stress tests" all it wants, but with an economy heading towards 10% or worse unemployment and a large portion of American consumers clearly shunning the bailed-out pair of Chrysler and General Motors, it looks more than a little likely that Chrysler will come begging for more taxpayer money in some form yet again, or yet again threaten to grind to a halt.

Oh. So. Predictable.

Exit question 1: Will a post-bankruptcy GM be Chrysler writ much larger?

Exit question 2: What are the chances taxpayers are going to get to see meaningful and timely financial statements from either of their new "investments"?

Smart-aleck question: How much more will Chrysler burn through every day once its plants reopen?

Cross-posted at BizzyBlog.com.