Not unexpectedly, Chrysler's results once again tumbled into terrible. The ailing American automaker's sales fell 29 percent overall. Sadly, the sales breakdown doesn't look much different than last month's. But that should come as little surprise; absolutely nothing has changed. Thanks to ChryCo's uninspiring and truck-heavy product mix, the sales chart again lists a whole bunch of double digit percentage drops. The minivans have switched places - T&C up a few thousand, GC down a few hundred. Dodge's big hair van (the Journey) is selling slightly better than the brand-new Challenger. The smallest cars are again underperforming, with only the Jeep Patriot in positive territory, up a paltry 4 percent. A gaggle of discontinued vehicles? Chrysler Crossfire and Pacifica, and Dodge Magnum? are down in minus 80 percent territory. The Durango, which has not been discontinued (yet), due for Lame Duck Dual Mode hybridization, is also down 84 percent. Just 384 trucks left the lot. Chrysler's Project D fuel-sipping mid-size sedan can't come soon enough. Literally.
As the BIG chrysler products pile up on my local dealers lot.
IMO it's a good time to buy a big Chrysler, if you don't put on a pile of miles. Recent used models are selling for a song and the depreciation saved more than makes up for the higher fuel costs. Oil price is now dropping line a stone, now to $120.
Cerebus makes it's money by buying companies that everyone else has given up on, and making them profitable, then selling them. That is what they are trying to do with Chrysler. If they succeed they will want to get rid of Chrysler by either selling them to someone else, or making them public and selling their stock. Either way, if they cease the financial reporting, any future investors will likely believe that Chrysler is a lot worse than they really are. Nobody is going to buy stock in a company that does not have several quarters of reported profits unless they are planning on taking the kind of risk that Cerebus is currently taking.
Because it's not publically traded, Cerebus also doesen't have to justify it's financial reports anymore to the general public so they really don't care at this time if investors think that Chrysler is going to go out of business. They care what the general public thinks. And since all of the automakers are doing badly due to the recession, the shortage of credit, and the fact that the general public mainly wants to buy cars that save gas (ie: small econoboxes), the general public is a lot more willing to accept that Chrysler is just going through the same rough patch that the rest of the automakers are and will come out of it.
If Chrysler is in bad financial shape, then it does not serve Cerebus in any way to report the details. Investors in Cerebus only need to see Cerebus's bottom line performance to make an investment decision. Is Cerebus publically traded? Is Cerebus floating any new shares (public or private) ?
What stock is Cerebus selling (or trying) to sell at the moment?
???
You just said above that Cerebus *would* care about what investors would think if they *didn't* publish Chrysler's financial situation.
So I don't know what argument you're trying to make.
And keeping a lid on Chrysler's financial situation means that the only
*speculation* of Chrysler's financial health will be in some inside page of the financial section of the newspaper or auto industry trade publication where the general public won't see it.
But announcing that Chrysler has "fallen 29%" makes the Drudgereport and the evening news.
So you tell me which option has more of a negative impact for Chrysler?
Cerebus is private and releases no financial info. But -- Daimler owns 19.9% of Chrysler, so Chrysler's performance can be calculated from Daimler's quarterly statements, but this lags one quarter behind. That's where the stories are getting their info.
Presumably Chrysler is buying (some) parts directly from Daimler, or building other daimler-designed or patented parts (and therefore paying royalties or license fees to daimler).
No matter which way you cut it, Daimler is a critical supplier to Chrysler for some parts.
All that is a way of saying that *maybe*, if you dig down deep enough in Daimler's manditory public filings, you might (or will) find the amount of direct revenue from parts sales or other payments from Chrysler.
Presumably, if Chrysler is operating in the red, then there will probably be no dividends (none for Cerebus and none for Daimler). So if Daimler is reporting zero dividends from Chrysler, that fact alone doesn't indicate to what extent Chrysler is in the red.
As for how Daimler is reporting it's Chrysler investment on it's books, that's a real crap shoot. Since the shares aren't publically traded, there is no basis for valuation beyond what they were worth at the time of the sale to Cerebus. No doubt that Daimler can use all sorts of creative accounting techniques to revalue their Daimler shares as time goes on, and a good part of that would have to take into account currency fluctuations, but there isin't necessarily any connection between the degree to which chrysler is in the red, and what Daimler ends up putting on their books.
Cerebus does not intend to own Chrysler for the long term. They bought Chrysler to turn it around and get it profitable then sell it for a lot of money. Much like home-flippers buy a beat up old home and spruce it up then sell it for profit. That is what Cerebus does.
The investors in Cerebus already have their money stuck in Chrysler, they can't pull it out. All of them bought into the idea of buying Chrysler low and turning it around then selling it high. If they didn't buy into this idea, they wouldn't be investing in Cerebus in the first place.
In short, they spent their money and they are taking their chance.
That isn't how they work. They buy companies and keep their financials intact, turn them around, then sell them as intact units. Or if they can't turn them around they close them and the company's creditors then are stuck out in the cold.
When they get Chrysler ready for sale then they will sell Chrysler stock. They won't be selling Cerebus stock.
The investors that invest in turnarounds aren't your man-in-the-street people who buy in, then when the stock has gone up for a quarter, sell off. They know that what they are buying is already a disaster, that's why they bought in to it. Telling them 6 months or a year later that it's a disaster isn't telling them something that they don't already know.
The investors that "follow" the stock market and read all of what the pundits are saying by contrast are short-termers. They will dump a stock if they think the company is going to go downhill.
The pundits are playing to the short termers.
Well, the real question here is how much does company stock impact whether the general public buys a product or not. With auto sales, keep in mind that the -vast- majority of auto so-called "buyers" are in reality nothing more than renters since they are so-called "buying" on lease.
Your average new car buyer walks into an auto dealership wanting a certain set of features in a car and cannot afford to spend more than $150 or $200 or $250 or whatever it is, a month. And in 3 years or whenever the lease is up, they won't be able to afford the buyout, they still will only be able to afford their whatever it is a month, so they simply proceed to "trade-in" their vehicle and rent another one. They don't give a crap if the car company is going to go out of business in a year or so, as long as the car dealership is still going to be around to do the warranty work. They figure that getting parts and all that crap is the dealership's problem not theirs. And if they get a new car on a 3 year lease, and a year into it the automaker goes bankrupt, and a year after that the car breaks and the dealership says we can't fix it since parts aren't available, why then so what? That's grounds for terminating the lease, plus a nice lawsuit, and in any case no sane dealership would ever tell a customer that, they would just trade it in and stick them on yet another new car lease.
It's only people like you, and me, who are out there scrounging through everyone else's leftovers in the used car lots looking for our grocery-getters who actually care about such things. Because, unlike the new-car-renters-I-mean-leasers, we actually are putting real money down, and actually owning the machine.
I would hazard a guess that one of the reasons that resale value on off-lease Chryslers has gone way way down was not just that they are gas hogs, but because of the uncertainty of whether Chrysler will be around or not. But does that really hurt Chrysler? Yes, for the short term - but frankly Chrysler wants to increase volume of -new- product, and they like the rest of the automakers are now focused on small cars, and they know that their future will be made on whether they can rapidly get those small econoboxes out into the market quickly, cheaply, and in volume. It won't be made on whether they can create a farce of a marketing campaign to try to get a few more percent sale price on 3 year old junk that nobody wants anyway.
Incorrect. Chrysler IS releasing financial info publically, they released cash and EBITDA numbers on August 1st. And you are going to see more of it because it's pretty obvious that Daimler AG has made some serious screwups and has lost a lot of money, and is desperate to blame anything other than their own management for their losses. Cerebus can't allow Daimler to pull this kind of crap for reasons I've already cited.
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