Analyst: Chrysler in biggest danger of Detroit’s Big Three

By Dee-Ann Durbin

THE ASSOCIATED PRESS

The U.S. auto industry’s weakest player, Chrysler LLC, may have to file for bankruptcy or sell its storied Jeep and Dodge Ram brands as early as next year, while rivals General Motors Corp. and Ford Motor Co. are likely to get through the rough patch and turn a profit in 2010.

GM shares slid to a 54-year low last week after Merrill Lynch auto analyst John Murphy wrote in a note to investors that a GM bankruptcy “is not impossible if the market continues to deteriorate and significant incremental capital is not raised.”

But JPMorgan auto analyst Himanshu Patel said the situation at Chrysler LLC is far more perilous because it has limited assets to raise cash and is more heavily reliant on trucks and on the North American market.

Chrysler will burn through $4 billion this year and could be forced to file for bankruptcy protection or sell off parts of its business in the second half of 2009 if industry conditions don’t improve, he said.

Ford, which mortgaged its blue oval logo and other assets in 2006 to borrow up to $23.4 billion for its restructuring, can easily weather two years of a down market and swing to a profit in 2010, Patel said.

Aaron Bragman, an auto analyst with the consulting company Global Insight, said Wall Street’s views on the Detroit Three vary widely because of the uncertainty in the marketplace. The companies’ turnaround plans were based on the false assumptions that the economy would come back and gas prices would fall in the second half of this year.

Still, Bragman said bankruptcy is not a likely option for any U.S. automaker.

“The disruption to everything would be absolutely undesirable,” he said.

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Chrysler, GM troubles resonate in the Rock River Valley
Chrysler LLC has an assembly plant in Belvidere that employs more than 2,700 on two shifts. It is the largest manufacturing employer in Boone, Ogle and Winnebago counties. Workers there assemble the Dodge Caliber, Jeep Compass and Jeep Patriot. Last year, the company employed more than 3,600 in Belvidere. But it eliminated a shift in March because of money concerns.

General Motors has about 2,400 workers at its assembly plant in Janesville, where it assembles the Chevy Suburban and Tahoe and GMC Yukon. Several hundred workers will be laid off this month because of slow SUV sales and the company plans to close the plant in 2010.

— Alex Gary

 

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