US car maker Chrysler has announced it will soon be short of cash and will be unable to continue its business normally unless the government agrees to immediate bridge financing.
Chrysler could run out of cash without "immediate" help from the government and may fail to emerge successfully from bankruptcy protection, the automaker's chief told lawmakers Tuesday.
"Without immediate bridge financing support, Chrysler's liquidity could fall below the level necessary to sustain operations," said Chrysler chairman and chief executive Robert Nardelli.
Nardelli warned that a bankruptcy at any of the Big Three US automakers would have a "devastating" impact on the economy and would cost significantly more than the 25 billion dollars in government-backed loans that Chrysler, General Motors and Ford have requested.
"The overall amount and cost of financing the restructuring will be significantly higher in a Chapter 11 process than the working capital bridge we are requesting here today," Nardelli said in testimony prepared for delivery to Senate Banking, Housing and Urban Affairs Committee.
"And finally, we cannot be confident that we will able to successfully emerge from bankruptcy."
Chrysler's private equity owner, Cerberus Capital Management, is ready to enter into legally binding agreements to forgo any benefit from the government assistance provided, Nardelli said.
Chrysler has already done much to restructure its operations and plans to "emerge from the current downturn as a lean, agile company" and "welcomes the opportunity" to work with lawmakers on "a collaborative approach to restructuring" the industry.
"We are asking for assistance for one reason: to address the devastating automotive industry recession caused by our nations' financial meltdown, and the current lack of consumer credit, which has resulted in the critical lack of liquidity within our industry," he said.
"However, both our private equity owner and I believe that while the immediate bridge financing is critical, the long-term solution to the industry's problems and challenges requires industry consolidation and cost rationalization to eliminate excess industry capacity and redundant costs."
Date created : 2008-11-18