Posted on 12/13/2008 11:25:17 AM PST by Lorianne
DETROIT -- Chrysler LLC's suppliers have begun asking for cash on delivery for auto parts, the Associated Press reported late Thursday, citing an interview with executives. Vice Chairman Tom LaSorda and Chief Financial Officer Ron Kolka said suppliers and other vendors have demanded COD, but the company is "fending them off," the AP said.
When suppliers demand COD from a troubled company such as Chrysler, it can cause chaos in the company's financial structure.
Chrysler's cash will drop to $2.5 billion by Dec. 31, company officials have said. That's the bare minimum the automaker needs to make payroll and pay suppliers, according to the report. Chrysler pays its suppliers $7 billion every 45 days, Kolka told the AP.
"January, first quarter is a big problem for us," Kolka said.
Chrysler's depleted cash situation underscores the financial crisis faced by the Detroit 3 as a federal government loan bailout failed late Thursday evening. Without an immediate infusion of cash, both Chrysler and General Motors have said they could run out of funds to operate their businesses by the end of the year.
Chrysler has scheduled a meeting Friday with its suppliers, but LaSorda told the Associated Press the company will not ask for concessions. Suppliers know that concessions, either price reductions or longer payment terms, are likely, and the company wants to work with them to reach the numbers, LaSorda and Kolka told the AP.
Kolka acknowledged "quite a few" Chrysler suppliers now are asking for cash.
"The biggest risk we have is our suppliers coming and saying 'I want to be paid on delivery,'" Kolka told the AP. "We can't do that. The math just doesn't work."
Chrysler and GM now must develop a plan to operate after Thursday night's events in Congress.
"Chrysler is obviously disappointed in what transpired in the Senate and will continue to pursue a workable solution to help ensure the future viability of the company," the company said in a statement released late Thursday.
Chrysler is owned 80.1 percent by private equity fund Cerberus Capital Management LP – and 19.9 percent by its previous controlling shareholder, Daimler AG of Germany.
Gosh I went to the market today to get some groceries, alas .. they wanted me to pay for it...I tried to get a hold of Barbie Boxer to see if she could write a hot check for me, but she was un available..
Parts suppliers will be in series trouble if they aren’t already.
“... suppliers have begun asking for cash on delivery...”
Same deal went down with Enron...
Seems to me Cerebus is the logical source for financing.
btw, isn't cerebus the three-headed monster that guides the gates of hell?
Ooops. guides = guards
The big three used to own most of their suppliers. The sold them off to get out from under the union contracts.
“... isn’t cerebus the three-headed monster that guides the gates of hell?”
Yup. A dog, if memory serves.
Chrysler and their vendors are not going to have the big problem. The big problem is going to be Michigan. This is all about salvaging the bankrupt and rudderlass incompetant state of Michigan.
“unfortunately it doesn’t look like Chrysler will make it that long”
Fear not, Bush and his socialist Gov, including the mobster Henry Paulson, will come to the rescue... at the expense of you, your kids and your grandkids.
They need to talk to Washington and have the Federal Reserve print more money to save the state of Michigan.
It's easy and doable.
All Michigan has to do is ask. ~
Cerebus is also the proud 50% owner of GMAC, which is also disappearing into it own black hole due to its previous rush into financing sub prime mortgages.
wooden shoe?
“... suppliers have begun asking for cash on delivery...”
I don’t know if this will work. I worked for a defense contractor many years ago. They made parts for a New York company called Wedtech. Anticipating Wedtech was failing due to government scandal, the owners put them on COD basis several months before they went bankrupt. The government came back to my employer and wanted them to give money back saying that they had received special treatment. They tried to punish my employer for running their business well.
Wait for PEBHO to take office. He will force them to take IOUs.
Thank yew, thank yew.
Without a bailout, I think Ford could make it. They’d have to go Chap. 11, but they could use it to dump the parasite UAW and move all their plants south.
GM & Chrysler are corpses. It’s just that they haven’t cooled to room temp yet and no one has notified the next of kin.
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