Critics suggest reeling Chrysler is a lost cause

updated 9:15 a.m. ET Jan. 9, 2009

DETROIT - Even by the standards of battered automakers, Chrysler is in dire shape. Its sales in December were down a stunning 53 percent, far worse than Ford or General Motors, and analysts say it probably won’t survive the year as an independent company — despite $4 billion in government loans and the possibility of more.

Things were so bad last year that a single Toyota model, the Camry/Solara midsize car, outsold the entire fleet of Chrysler LLC’s passenger cars.

“Basically they’re done,” said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight in Troy, Mich. “There is no real possibility of turning this thing around as an independent company in my opinion.”

Chrysler spokeswoman Shawn Morgan said she could not provide an immediate comment after requests Tuesday and Wednesday.

U.S. sales of Chrysler, Dodge and Jeep brand vehicles fell 30 percent last year, the worst decline of any major automaker. It lost more market share than any of its peers, down to 11 percent. Analysts say most of Chrysler’s products, especially its cars, don’t look, feel or drive as well as the competition’s.

Chrysler plans to introduce an electric car in 2010, but until then, there are few promising models to boost sales. Many analysts predict that by 2010, Chrysler will be acquired by another automaker or sold in pieces by its majority owner, New York private equity firm Cerberus Capital Management.

Chrysler’s chief financial officer has said the company needs $7 billion every 45 days to pay parts suppliers, and analysts question whether the company’s meager sales are generating enough cash to make those payments.

Analysts also say an acquisition by General Motors Corp. is still possible. The two companies discussed it late last year before GM backed away to focus on its own cash issues.

Nissan Motor Co. could be interested in buying Chrysler’s truck business. Chrysler is already signed up to make pickup trucks for the Japanese company.

Jonathan Macey, a Yale University law professor who has been critical of U.S. automakers’ management, said Chrysler’s sales numbers are “further evidence of an unviable entity.”

When automakers went to Washington late last year, their aim was to get enough money to become viable again. They wound up with only enough help from the Bush administration to get them through March, when Barack Obama will be in office and might provide more aid.

Macey said giving the carmakers any money is burning cash.

“I’m a big fan of not throwing good money after bad,” he said. “The idea that you would enter into a financing relationship like this without any parameters is more evidence of the complete insanity of all this.”

A Treasury Department spokeswoman noted that the agreement for the government’s automaker loans required that the administration designate someone to keep analyzing the companies’ finances and viability.

Macey, author of a book on corporate governance, said it’s too late for Chrysler and GM to solve their problems, including high labor costs and union work rules that hinder competitiveness.

To get the loans, GM and Chrysler had to agree to negotiate concessions from creditors and the United Auto Workers union, but the specifics have yet to be worked out. The government can call in the loans March 31.

Chrysler CEO Robert Nardelli, in a presentation to the Senate Banking Committee last month, said the company could stay alive in the long term with reasonable concessions, a $7 billion bridge loan and $6 billion more out of the $25 billion Congress allocated to develop new fuel-efficient technology.

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