Chrysler Says it Needs Bailout ASAP

Chrysler gets right down to brass tacks, in a business plan submitted to Congress, asking for a $7 billion loan by the end of this month.

Otherwise, Chrysler warns it could fall below the cash needed to pay an estimated $11.6 billion in expenses in the first quarter of 2009 — even after cutting 32,000 jobs, and closing plants representing about 1.2 million units of production, or about 30 percent of its former size.

“Today we are asking you to help us bridge a chasm created by an unprecedented financial meltdown, and in doing so, preserve a critical sector of the U.S. economy,” says Chrysler chairman and CEO Bob Nardelli, in remarks prepared for two Congressional hearings. Nardelli briefed Chrysler’s senior managers on the plan on Dec. 2 (pictured).

That’s a much more alarming message than the plan submitted earlier in the day by Ford President and CEO Alan Mulally. Ford asks for a “standby” letter of credit for up to $9 billion, but Ford says it doesn’t plan to use the money unless business conditions get even worse.

Like Ford, Chrysler plays up the fact that it is developing electric vehicles and more fuel-efficient cars. Also like Ford, Chrysler spells out the restructuring and downsizing it has already performed. Like Mulally, Nardelli also says he’s working for only $1 a year.

But overall, Nardelli paints a much blacker picture for Chrysler than Mulally does for Ford.

“With credit markets frozen, our customers – average working Americans – do not have access to competitive financing to purchase or lease vehicles,” Nardelli says.
“Our dealers do not have access to market competitive funding to place wholesale orders for new vehicles … resulting in the constriction of cash inflows to the Chrysler. Chrysler Financial is in need of immediate liquidity support,” he says.

Nardelli warns that if Chrysler is forced to declare bankruptcy, it will need even more debtor-in-possession financing than the $7 billion it is requesting, and that the U.S. government would be the only likely source. Failing that financing, the company says Chrysler would be forced to close for good.

If it gets the $7 billion bailout, Chrysler forecasts it can start repaying the money starting in 2012.