Chrysler is not about to fail, analysts say

Analysts say fears are overblown.

TRAVERSE CITY, Mich. (AP) — Fears of Chrysler LLC’s imminent demise are overblown but the newly private automaker poses risks to the rest of the auto industry with its dramatic changes, a reputable industry analyst said Thursday.

Business partners — from parts makers to dealers — face special risks because of secrecy around Chrysler’s financial status and the expectation that it will ultimately be sold off to other automakers, Mark Warnsman, a Calyon Securities analyst, wrote in a note to investors Thursday.

“Even as the prospects for the U.S. auto industry will improve when the economy turns the corner, Chrysler may prove to be a drag on that recovery,” Warnsman wrote. “As a large, newly private concern Chrysler has and, in our view, will continue to present a challenge to the remainder of the industry as the industry adapts to the reality and potential for sharp changes in the competitive landscape driven by Chrysler’s actions.”

Cerberus Capital Management acquired majority control of Chrysler a year ago, making Chrysler the first privately held major U.S. automaker in more than 50 years. Dramatic changes have followed, as its U.S. sales have dropped more than 20 percent so far this year.

Chrysler has announced plans to cut 15,000 jobs on top of 13,000 cuts already planned, eliminated four models, took out 1.1 million units of capacity and stopped offering leases through Chrysler Financial. Chrysler has partnered with automakers, including Nissan Motor Co., to add to its lineup and is in talks with automakers in Italy, India, China and Russia about potential deals.

“Chrysler has embraced its status as a private entity as an enabler for a series of decisions that, at best, are unsettling to the rest of the industry. At worst, they could prove to be highly disruptive,” Warnsman wrote.

On Wednesday, Tom LaSorda, a Chrysler president and vice chairman, again stated that Chrysler’s majority owner Cerberus Capital Management is a long-term investor and that Chrysler is meeting all key financial metrics.

But the statements continue to be questioned. “Cerberus may be a long-term investor, but we see it exiting its Chrysler stake within five years of its initial acquisition,” Warnsman wrote. “We like a partnership-to-sell model as the primary means for Cerberus to realize value as it first finds partners for key parts of Chrysler’s business and then completes a sale of those parts over time.”