Chrysler CEO: We're 'operationally' bankrupt
Automaker scrambling to sell assets just months after private equity buyout as credit crunch deepens - report
NEW YORK (CNNMoney.com) -- Chrysler Corp., the troubled automaker bought by private equity just four months ago, is scrambling to sell assets amid indications of huge losses, as access to cash becomes increasingly scarce, according to a published report Friday.
"Someone asked me, 'Are we bankrupt?'" the Wall Street Journal quoted Chrysler boss Robert Nardelli telling employees at a meeting earlier this month. "Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with."
To raise money, Chrysler is looking to sell over $1 billion in land, old factories, and other holdings, even if it has to let those properties go for under book value, the Journal said.
In an interview with the Journal, Nardelli confirmed the comments and declined to give a financial forecast for 2008, saying only that Chrysler "will make a pretty significant improvement" over the $1.6 billion the company is set to lose this year. The Journal said Nardelli originally hoped to turn a profit in 2008.
The rush to raise capital comes amid constricting access to money as more banks and other lenders face heavy losses related to subprime mortgages.
Chrysler's owner, Cerberus Capital Management, is now facing serious subprime-related losses from GMAC Financial Services, which it bought from General Motors (GM, Fortune 500) for $12 billion, and is also trying to walk away from a now pricey deal to buy United Rentals Inc., (URI) the Journal said.
Cerberus bought Chrysler from German automaker Daimler in a deal that closed in August.
In the arrangement, Daimler (DAI) essentially paid Cerberus to take the automaker, which fell to No. 4 in U.S. sales behind Toyota Motor (TM) in 2006, in an effort to get out from under a $1.5 billion loss from last year, along with continued obligations to union members and retirees.