DETROIT CEO Bob Nardelli and his management team are working on a short financial leash as they struggle to turn around ailing Chrysler LLC.
They're limited to the roughly $10 billion in cash they have on hand. The company can't borrow any more.
That $10 billion figure comes from a financial presentation Chrysler and its owner, Cerberus Capital Management LP, made to investors Nov. 7.
One indicator of Chrysler's tight spot: Cerberus' five major banks have failed twice to find investors to take $4 billion of loans off their books, even though the banks heavily discounted the loans.
The banks, which underwrote $10 billion in loans to Chrysler last summer, have been unable to syndicate all that debt to investors. The banks are JPMorgan Chase, Citigroup, Morgan Stanley, Bear Stearns and Goldman Sachs Group.
The failure to sell the loans has no direct effect on Chrysler operations, analysts say. But they say it shows a lack of confidence in Chrysler and Cerberus.
Nardelli told workers that Chrysler will lose $1.6 billion this year and announced a round of production cutbacks. He also has slashed four vehicles from the future lineup and laid off an additional 10,000 workers. This suggests he is running the company on a tight leash.
In its November presentation to lenders, Chrysler said it is performing ahead of its June 2007 earnings projections. Cerberus financed its purchase of Chrysler Automotive with two loans -- a $10 billion first-lien loan and a $2 billion delayed second-lien term loan. The loans are backed by Chryslers plants and property, accounts receivable, inventory and intellectual property.
The deal is similar to the one that CEO Alan Mulally engineered last year to finance Ford Motor Co.'s recovery.