Chrysler LLC CEO Bob Nardelli learned the hard way recently that you never, ever use the term "bankruptcy" in any context whatsoever when in polite company. In a meeting with employees earlier this month, Nardelli was asked if the automaker was bankrupt, to which he replied, "Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." He later confirmed making the comment, adding that he meant to "convey a sense of urgency", i.e. light some fires under a few asses.
Nardelli's comment about the company being operationally bankrupt has taken on a life of its own in the last few days. We even witnessed mainstream media maven Brian Williams report about the quote on NBC Nightly News yesterday evening. This is the first PR faux paus to occur at Chrysler since the departure of ex-VP of Communications Jason Vines, so we weren't sure how the new PR team would respond. Last night they released a statement credited to Bob Nardelli that attempts to mitigate the media frenzy. Nardelli explains in detail how, despite what he told his troops a few weeks ago, Chrysler is doing well and Cerberus is pleased with its performance so far. Is he convincing? Judge for yourself after reading the statement in full after the jump.
[Source: Chrysler, Photo by Bill Pugliano/Getty]
PRESS RELEASE:
Chrysler Chairman and CEO Expresses Confidence in Chrysler's Operations, Products, Finances and Employees
* Long-term support from Cerberus Capital Management, L.P. and Daimler AG
Auburn Hills, Mich. - "There have been several recent media reports that have painted an inaccurate picture of Chrysler LLC's current financial position. Therefore, the management of Chrysler and our parent company, Cerberus Capital Management, L.P., felt it imperative to correct the record since such misinterpretations and misperceptions are misleading and could leave the wrong impression in the minds of investors and other interested parties.
First and foremost, it is important to note that Chrysler is not only meeting, but, in many cases, exceeding its financial targets heading into 2008.
Importantly, Chrysler has ample liquidity. We are fully funded with working capital to meet our present and future needs and objectives. We are doing what any other prudent company is doing during this challenging economic environment. We are trying to instill a sense of urgency throughout the workforce, putting our capital to work effectively and efficiently, streamlining inventory, improving current products and developing new and innovative vehicles. Our dealer body is quite pleased that our inventory of vehicles was down another 4 percent in November.
In a 13-hour meeting this week with the Cerberus board of directors, Cerberus praised and was highly complimentary of Chrysler's progress to date and unanimously approved our 2008 plan. We have a solid strategic direction to return the company to long-term profitability. We are on target and have the unwavering support of Cerberus, as well as our other key partner, Daimler AG.
Cerberus met with its investors last Thursday to share the progress that has been made and to convey to these investors that the company was meeting – and in many cases – exceeding – its targets. The report was well received.
Like many companies in today's uncertain economic environment, Chrysler is moving aggressively to improve its business. We recognized in advance the increasingly competitive vehicle market heading into 2008. With that, we have been moving aggressively to make our company leaner. The steps we are taking include previously announced volume-related reductions at several North American assembly and powertrain plants and the elimination of four products from our lineup, which is very customary in the auto industry.
However, we are very excited about the new products coming in 2008. These include the legendary Dodge Ram pickup truck, the Dodge Journey crossover, the relaunch of the historic Dodge Challenger – which has already generated 8,851 customer orders – and two, all-new, large hybrid SUVs, the Chrysler Aspen and the Dodge Durango, demonstrating our support for the environment and more fuel-efficient vehicles.
For our current vehicle line-up we have already approved more than 260 line item improvements to enhance our products – most for the 2008 calendar year.
The recently completed national labor agreement with the United Auto Workers – which includes the establishment of an independent retiree health care trust – provides a framework to improve the long-term competitiveness of the company.
Since August and the first day of the new company, the management team has been working to improve Chrysler's working capital, disposing of non-core (or non-earning) assets and reinvesting this cash into product development, new technology and new innovations for our customers."
The following related statement can be attributed to Mark Neporent, Chief Operating Officer and General Counsel of Cerberus Capital Management L.P.:
"We remain extremely enthusiastic about our investment in Chrysler. Our underwriting assumed, and fully planned, that Chrysler would incur losses in the near term. Under the leadership of Bob Nardelli, Tom LaSorda and Jim Press, Chrysler is already on track to exceed its multi-year restructuring and recovery plan on virtually all key metrics. We met with the management team this week and fully endorse their strategic direction and their plan to meet the challenges of the current environment. We are confident that Bob, Jim and Tom are taking the right steps to bring Chrysler to profitability. Our mutual resolve to restore Chrysler to its leadership position as an iconic brand is unwavering."
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Reader Comments (Page 1 of 3)
Vincenzo @ Dec 22nd 2007 11:19AM
So, when is he going to sell Chrysler to Chinese Chery, Indian Tata, or a Russian oligarch; and introduce rebadged $2500 cars?
LX builder @ Dec 22nd 2007 11:21AM
Maybe Chrysler is going to miss Jason Vines alittle more than they knew.
Avinash machado @ Dec 22nd 2007 11:23AM
Hope Carlos Ghosn steps in soon and rescues this company.
Stéphane Dumas @ Dec 22nd 2007 12:16PM
I'm glad to see I'm not the only one who think then Ghosn should steps in asap
Calvin @ Dec 22nd 2007 11:47AM
Nardelli was not missed much by Home Depot when he left, I know because I work there. But Jason Vines knows the car buisness and Nardelli doesn't at all.
RP @ Dec 22nd 2007 12:00PM
Come on -- The guy tells it like it is, and people freak out? Sheesh. Do they want to be lied to and sweet talked about how rosy things are? Then get laid off 6 months later?
I would rather have a straight talking leader than a politician any day.
Illis Billis @ Dec 23rd 2007 12:51PM
I attended a big plant announcement in Brampton in August. It consisted of plans for future investment, making the 1 millionth LX model, and confidence for the future of a 3 shift operation. 3 months later, the 3rd shift is announced to be gone in March. So you're wrong he does paint a rosy picture and then lay off people exactly 6 months later.
RP @ Dec 23rd 2007 3:39PM
Wow, yeah, that IS lame.
richardtoh @ Dec 22nd 2007 12:06PM
Could someone explain to all why Chrysler would hire a man who did not do a good job at Home Depot to run its operation?
Are they saying that talents are so lacking that they have to go for someone like him?
why not the LS2/LS7? @ Dec 22nd 2007 12:11PM
Capital will always be an issue at privately-owned Chrysler.
Nardelli has a tough road ahead of him.
Russell @ Dec 22nd 2007 2:02PM
"Cerberus is pleased with its performance so far"
I don't think Cerberus is pleased with loosing money, afterall they're in business of making money not the opposite. We'll see how patient Cerberus really is.
Bryan @ Dec 22nd 2007 12:21PM
When you release a vehicle like the Dodge Journey in December of 2008 as a new vehicle, I'd be throwing around the term Bankruptcy to.....
Craig @ Dec 22nd 2007 12:37PM
Um the Dodge Journey isn't going to be "released" until March. Probably the more relevant question is why would testosterone enhanced Dodge launch a crossover aimed towards women?
Bryan @ Dec 22nd 2007 12:45PM
Sorry, meant to say showoff the Dodge Journey.
oby @ Dec 22nd 2007 1:05PM
Nardelli's comment is the most accurate one to come out of any of the D3 in ages. He may have had to climb down from it but he was right in the first place. BTW, GM is in the same position with it operating in an extremely negative capitol environment especially now that the last of the family silver has been hocked! (Mid size trucks). Only thing is, there is no one in GM with the balls to admit it. Ford have have put everything up as security for a huge loan even the company logo.
Blake @ Dec 22nd 2007 3:12PM
?
mikea @ Dec 22nd 2007 1:15PM
So what's that supposed to mean? I think no matter what Chrysler does it won't be enough in some peoples eyes. I think for that segment of the market, the Journey is pretty nice. As a matter of fact it looks way better than some of the weird looking cov's that are coming from the imports. and I do mean, "WEIRD."
mikea @ Dec 22nd 2007 1:22PM
oby...your right. Things can and do get taken out of context. And it sure looks like they did. I mean Cerebus hasn't even been in control long enough. I'm confident good things are coming from Chrysler.
J @ Dec 22nd 2007 2:11PM
I was AT the meeting where Nardelli said that. I'm an Engineer, and I can say that everyone I work with ALREADY has a fire lit under their asses. We don't need another push . . . what we need is a morale boost. EVERYTHING is getting worse for us, and Nardelli & Co. Don't seem to have a clue how to make things better. Highlights of the meeting for me:
1. Nardelli making a lame joke with the implication of how much money he makes. Meanwhile thousands of his underlings are being laid off.
2. Nardelli saying how excited he is about our upcoming products. 90% of which are Hemi powered and weigh over 4000lbs. Uhh . . . way to adapt to a changing global market.
3. When asked about plans for emerging markets, the response was something like 'We realize emerging markets are important, and we are now thinking about what markets to enter and how to do it.' No kidding? NOW we're THINKING about it? Talk about being late to the table . . .
Ford and GM on on their way to a successfull turn-around. Their market share will never be what it was, but by downsizing and coming out with GOOD PRODUCTS (GM and Ford's latest products ARE actually good cars), they are at least stopping the hemorrhaging and ensuring their survival as the world changes faster than ever. I'm less optimistic about our situation.
J.Crew @ Dec 22nd 2007 4:17PM
Sorry to hear that as I agree with you 100%. Nardelli is useless. He is going to take what is left of Chrysler and rip it to shreds as he has no clue about the industry. The three headed dog is biting itself off more than it can chew. I don't see Cerberus sticking around longer than 2 years if they keep losing money. They almost had it figured out when they initally had Bernhard lined up. Now I see why he did not stick around with a useless boob like Nardelli coming in. Bernhard should have been put in the top spot. What a mess and I fear it is only going to get a lot worse before it gets better. Good luck going forward and thanks for the insightful post on what is really going on inside the new Chrysler.