The Auto Writer

Just who (or what) will control Chrysler in the next few months is an open question.

General Motors is still interested in purchasing America’s #3 automaker, but the Bush administration has said no to allowing special Treasury Department assistance which could possibly pave the way for a take over (the UAW must agree too — a huge obstacle in light of tens of thousands of jobs being lost). Likely, President Bush decided to punt on the issue, letting the president-elect handle the problem or perhaps putting the onus on the lame duck Congress which is expected to reconvene shortly after the election.

As far as its negotiations with Nissan (and/or Renault), Chrysler has broken off talks with the Japanese automaker in order to concentrate on hooking up with General Motors, extended federal assistance offered or not.

Getting A Piece of the Loan Money

Both Chrysler and General Motors are assured of some federal help in the form of the $25 billion lending package approved by Congress and signed by the president in October. That agreement allows U.S. automakers (and suppliers) access to government money at rates much lower than what banks have to offer.

Initially, the feds said that the funds wouldn’t be made available until early next year as a team of experts sort through the aid package and figure out how to dispense the monies. However, the Bush administration has indicated that those monies may be made available sooner in order to expedite a General Motors-Chrysler solution.

The Aftermath

With Chrysler’s owner Cerberus Capital Management, L.P. bent on selling the automaker to GM, the following scenario and aftermath could play out:

• GM and Cerberus come to an agreement where GM purchases Chrysler while Cerberus purchases a significant chunk of GM’s remaining share of GMAC. Currently, GM owns 49% of GMAC while Cerberus owns 51%. If Cerberus can get their share up to 75%, then by law GMAC is eligible to be converted into a bank holding company allowing GMAC to apply for its portion of the $700 billion federal bail out package.

• Tens of thousands of autoworker, supplier, and dealer jobs are eliminated as GM shuts down much of Chrysler. Whether GM keeps the Dodge and Chrysler brands alive long enough to settle dealer closings or not, these two brands won’t be around in their present form for much longer.

• Jeep gets a new lease on life, replacing HUMMER which will either have been sold off or closed down as GM absorbs Chrysler LLC. Expect the Wrangler and Liberty models to soldier on with a new vehicle developed to replace the current Grand Cherokee and Commander. The Patriot and Compass would be axed as GM also dumps a sibling vehicle, the Dodge Caliber.

• Dodge could be converted into a trucks-only brand with the Dodge Ram the centerpiece of that operation. The company might Include the Grand Caravan minivan and perhaps the Dakota to round out the brand.

• Chrysler goes away completely with maybe the 300 and Charger getting a new lease on life under other GM brands.  The Viper, if not sold to a third party, could be retained while the Dodge Challenger is one for the history books. Every other Chrysler, Dodge, or Jeep model that isn’t considered a fit would be retired or phased out.

GM, Chrysler Going Forward

Once the election has passed, expect the GM-Chrysler picture to sharpen as the president-elect announces his intentions regarding the auto industry. More government rope extended to the automakers will either help to rescue or hang the industry, a move that may not become apparent until 2010 when the industry rebound is expected to kick in.