Chrysler LLC can't survive, expert says

Auto company should be allowed to wind down gracefully in a controlled process, asserts analyst.

Alisa Priddle / The Detroit News

DETROIT -- Chrysler LLC cannot survive intact, even with a government loan, an automotive analyst said Wednesday.

The road ahead for Detroit's automakers, which are losing ground in North America to foreign competitors, is grim, CSM Worldwide forecasters said, predicting that Detroit's Big Three automakers will become the "Detroit Two."

It would be best for everyone involved if Chrysler were allowed to gracefully wind down and go away in a controlled, staged process, Michael Robinet, CSM vice president of global vehicle forecasts, said at an Automotive Press Association event.

Assessing General Motors Corp., Ford Motor Co. and Chrysler on scale, efficiency, products and profitability, Chrysler "doesn't really have the scale, in most vehicle lines, required to survive in this market," Robinet said.

It wasn't all Chrysler's fault, said Craig Cather, CSM's chief executive. He laid the blame on Daimler AG, which owned the Auburn Hills automaker before Cerberus Capital Management LP bought a majority stake, in part because Daimler limited Chrysler's ability to expand internationally, he said.

A Cerberus spokesman would not comment on the study.

No one wants an immediate end to Chrysler, Robinet said. But its future doesn't look good.

Chrysler "is not the same organization it was 12 months ago and likely in six months it will be very different again," Cather said.

Chrysler said Wednesday that its focus was on securing federal aid.

"As this process evolves, many people will speculate on possible outcomes however, we will not comment on the speculation," the automaker said in a statement. "We are completely focused on securing a working capital bridge loan for Chrysler and will continue to work with Congress and the Administration .... to ensure the future viability of our company."

GM and Chrysler are seeking $14 billion in aid from the government to help get them through until the end of March, but even with that, Chrysler can't survive as a standalone , Robinet said.

There is "not a whole lot of vehicle development going on at Chrysler," he said. "It has slowed down substantially. They are just focused on core vehicles," adding that he wondered "how long can it continue as a caretaker company."

"We think only unique Chrysler platforms will survive," Robinet said, citing the Jeep Wrangler and minivans. There could be a buyer for Dodge Ram.

The forecasting officials didn't see bankruptcy as the answer, but that could be the eventual outcome. The result would be the same: dispersement of its assets, likely to more than one buyer. Cather said Congress' move to put Cerberus on the hook if Chrysler fails to live up to conditions of a loan could expedite the automaker's liquidation upon failure to find a buyer. "Cerberus has shown a desire not to invest anything further."

CSM's forecasts to 2014 factor in a phasing out of Chrysler's product lines and capacity in what Robinet described as "the movement from the D3 (Detroit Three) to D2 (Detroit Two).

This would help address capacity utilization which will fall to 50 percent for the Big Three in 2009. CSM forecasts annual vehicle sales at 11.5 million in the U.S. next year.

The fallout for suppliers from a further drop in the market will be dramatic, too. Of Chrysler's parts makers, 66 percent also supply GM, 54 percent supply Ford, 59 percent supply Asian automakers and 44 percent supply European carmakers, said Jim Gillette, CSM's director of financial services.

After the shakeout, the Detroit Two will see its prominence diminish. Foreign automakers will overtake Detroit's automakers in 2011, Robinet said, and offshore companies will build 54 percent of North American vehicles in 2013.