Chrysler: bankruptcy speculation has no merit

Chrysler LLC again sought to reassure dealers on Wednesday that reports of its financial distress are unfounded.

"Speculation has surfaced recently in media coverage of analyst reports suggesting Chrysler might have liquidity issues down the road if the U.S. market does not pick up," the company said in a July 9 letter signed by Jim Press, Chrysler co-president, and Steven Landry, executive vice president of North American sales.

"Chrysler has communicated to the media that the suggestion of a possible bankruptcy situation is without merit."

Press and Landry's note quoted a presentation made to the national dealer council June 27 by Lenard Tessler, managing director of Cerberus Capital Management LP. At that presentation Tessler told dealers that a $2 billion loan drawn down by Chrysler from Daimler AG and Cerberus Capital Management LP was something agreed to in the original transaction when Cerberus bought 80.1 percent of Chrysler from Daimler last August.

The loan "was not something that was a result of Chrysler having any need for incremental cash based on financial performance of the business," Tessler said in his presentation. "The company has exceeded all of its financial targets it set for itself from the day we closed the transaction on Aug. 3. The truth behind the $2 billion is that it was a contractual obligation we had to the company and we were simply meeting our obligation as it came due, and it is reflective of our confidence in the ability of the company to weather the storm and move forward."

Press and Landry noted that Chrysler recently adjusted production levels, announcing its St. Louis South minivan plant will shut down indefinitely and production at its St. Louis North truck plant will go from two shifts to one.

The company will focus on higher-mileage models for the rest of the year, the note said.

The note implored dealers to "hang in there and fight for every sale during this period."

Chrysler has been hammered by soaring gasoline prices, which have crippled sales of the pickups, minivans and SUVs that make up more than 65 percent of its sales. Chrysler LLC's car and truck sales plunged 35.9 percent in June compared with last June.

Porsche set to move closer to VW takeover

Porsche will be one step closer to acquiring majority control of Volkswagen on September 2, when its deal to buy 4.9 percent of that company's ordinary shares takes effect.

The VW takeover "will be executed piece by piece," Porsche CEO Wendelin Wiedeking said during an event in the Black Forest on Wednesday evening.

A spokesman for Porsche said the deal closes on that day in early September.

The purchase of another 4.9 percent of VW common shares was necessary before Porsche could proceed with gaining regulatory approval from the European Commission, which required further proof a takeover was indeed intended.

Once Porsche has received the green light from various antitrust authorities, it plans to raise its voting stake in Volkswagen to over 50 percent.