Nerves are frazzled in Stuttgart over the troubles facing Chrysler. Let's not forget that Daimler still has a skin in the Chrysler game, and while everyone natters and frets about whether or not Fiat will prove to be the Savior Of Auburn Hills, execs are also thinking about the worst-case scenario in the halls of Daimler.

According to the Detroit Bureau, Bodo Uebber, Daimler's Chrysler guy, reported recently that concerned shareholders are rightfully nervous, as Daimler could be stuck with a $1 billion liability if Chrysler ist kaput. Unfunded pensions and potential claims from suppliers could result in very bad things for Daimler. Cerberus and the German automaker are also duking it out over whether Chrysler's health was honestly disclosed at the time of the deal, tying up any developments with the remaining 19.9 percent of Chrysler that Daimler still owns. Both Uebber and Dieter Zetsche, Daimler's CEO, are actively trying to unload the company's stake in Chrysler to Cerberus, but predictably, that conversation isn't going anywhere at the moment.

[Source: The Detroit Bureau | Image: Bill Pugliano/Getty]

Despite the fact that Chrysler shares are no longer sold on the stock market, rumors regarding the company's financial standing continue to haunt the number three domestic auto manufacturer in America. Last week, rumors regarding the negative cash flow were so rampant, a company spokesperson went out of his way to deny that the automaker was headed towards bankruptcy. Now, despite constant assurance from Chrysler that it's hitting all of its internal goals, the lack of announced future product and credit warnings from major firms such as Merrill Lynch and Fitch Ratings are causing some industry insiders to predict major changes from the automaker. Some analysts even believe that Cerberus is looking to offload or break up the company, allegations that Chrysler vehemently denies.

Because the automaker is privately held, the world will just need to sit back and wait to see how Cerberus' so-called "buy, fix and hold" strategy will work out. Despite what took place back in the '70s, Chrysler shouldn't get its hopes up for much federal assistance. It goes without saying, though, that Chrysler is going to need some major revamped products if it plans to make it in the tough U.S. market much longer.

[Source: The Detroit Free Press]

UPDATE: Chrysler just released the following statement: "Cerberus has not reduced or made any changes to its equity stakes in GMAC or Chrysler since the closing of either transaction. Cerberus continues to have voting control over both investments. It is common knowledge, and has been widely reported, that Cerberus made these investments side-by-side with its co-investors at the time of closing. As a general rule, Cerberus does not commit more than 5% of the capital of any of its funds to any single investment."

The Detroit Free Press is reporting via the Financial Times that Cerberus Capital Management has sold more than 50% of its stake in Chrysler LLC and GMAC LLC to a group of around 90 investors. The Freep reports that the investment firm earned up to $1 billion for selling parts of its stake in both companies. Cerberus bought a controlling stake in GM's financial unit back in April of 2006 for $14 billion and bought up Chrysler from Daimler in May of 2007 for $7.4 billion.

Automotive News actually got in touch with a senior Chrysler official today, however, who said bluntly, "Cerberus has not sold any equity in Chrysler." What may be causing the confusion is that when Cerberus bought up 80.1% of Chrysler, it had already aligned itself with co-investors. These 90 investors may have been involved in the transaction from the beginning and own a stake in Cerberus' stake of Chrysler and GMAC. The $1 billion, meanwhile, would then be what Cerberus earned in fees for bringing on the additional investors.

There's clearly a lot of confusion this morning surrounding the Financial Times report and not until Cerberus speaks will we be able to ascertain the nugget of truth amidst all the conjecture.

[Source: The Detroit Free Press, Automotive News]

When the Chrysler 300 dropped on an unsuspecting public in 2004, it was all crisp edges and upright stance, with a bulldog face to help drive home the message of urgent thrust delivered by a reborn Hemi V8. Chrysler's got a refreshing in the pipeline for the 300, and that's giving designers fits. It's akin to sophomore album syndrome – when the original is a huge hit, how, exactly, do you follow it up? Chrysler designers are invoking the Porsche philosophy used to update its 911 through the generations as a roadmap for the 300's body changes, so don't expect anything too dramatic on the outside.

Inside, however, will be where the real action occurs. While not the worst interior Chrysler puts out, it's certainly got room for improvement. Cerberus chairman Steven Feinburg is reportedly passionate about improving the quality of Chrysler's offerings, and the lower quality materials we have today are being jettisoned in favor of more competitive finery. Whether that means competitive with what's out there right now, or as good as what everyone else will have by the time the new 300 hits the market, we don't know. Equipment levels, too, are an area where Chrysler wants to improve. Look for more technology and features that are better executed in the new 300, which the design staff has hopefully not managed to whack with an ugly stick in the name of "continued distinctiveness," or some other marketing double-speak for "we couldn't do better, so we did weird."

[Source: Wards Auto]

Looks like Cerberus is getting the Chrysler band back together. Automotive News reports (sub. required) that the latest former Chrysler exec to come back is Tom Gale. You probably remember Gale as the force behind Chrysler's design revival in the 90s. Motor Trend recently called Gale "The man who helped Motown find its Mojo," which is hard to argue with when Gale is credited with bringing to life the Viper, Prowler, PT Cruiser and 300M.

This should be big news for anyone doubting the buyout by Cerberus. Gale is no bean counter brought in to cut the company to the bone. Gale is one of us. He's a car guy and hot rodder who started at Chrysler in 1968 as an engineer then moved into design. This is a very good sign for the new Chrysler and points to the possibility of amazing products in its future.

In fact, in Motor Trend's article (which is definitely worth a read, btw), Gale has a seemingly prescient quote.

"When you get the opportunity to be head of design, you should always try to get your company to the point where you're being proactive and the others have to react to what you're doing. That gets you design leadership. It's not something you can just proclaim; it's something you have to earn."

Welcome back, Tom. We can't wait to see what's up your sleeve.

[Sources: Automotive News, Motor Trend]

It was only hours ago we reported that Cerberus looked more likely than Magna to buy Chrysler. Now The Detroit News is reporting the firm may have already been chosen as the preferred buyer and an announcement could come as early as Monday. Reuters and The Wall Street Journal say negotiations are still ongoing.

The WSJ says the deal would set up an entirely new company to take responsibility of Chrysler's massive pension and health care liabilities. The paper also says Cerberus would also make a "substantial payment" to Daimler. WSJ also says former Chrysler chief operating officer and Cerberus adviser Wolfgang Bernhard would not return to Chrysler in an executive position, but could have a board seat. Also, Daimler may keep a minority stake in Chrysler.

Whether or not Chrysler going to a private equity firm is a good thing makes for seriously interesting discussion fodder. Automotive News (subscription required) points out that breaking Chrysler free of its health care and pension baggage could make for a much more lithe car company capable of achieving great things. But the UAW is already upset with Cerberus possibly pulling out of a deal to help Delphi out of bankruptcy. Which means the union workers are not exactly gonna be celebrating a Cerberus buy.

Bloomberg's story has David Cole, chairman of the Center for Automotive Research, saying a private equity buyer would be "the worst nightmare" for the UAW.

So, what do AB readers think? Can cost cutters cure Chrysler? Or might management by Magna have mattered more? Tune in tomorrow for the next exciting installment.

[Sources: Automotive News, The Detroit News, The Wall Street Journal, Bloomberg, Reuters]

Less than a week ago, we brought you a report saying Magna is the only serious bidder for Chrysler and that Cerberus was brought in to make it look like more parties were interested in buying. According to the Associated Press, if the plan was to throw reporters off the scent, it worked. The Detroit News and the Wall Street Journal both reported that private equity firm Cerberus is the front-running contender to take Chrysler away from the Germans.

The papers list Magna as an also-ran along with GM and Kirk Kerkorian.

So, if you were the German owner of a partially-restored, vintage American car company, who would you rather sell to? Your Russian-backed, Canadian parts supplier that has years of automotive experience or a U.S. equity firm with years of, um, private equity experience?

[Source: AP via Breitbart.com]