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from an editorial in the Detroit News

Chrysler LLC isn't "technically" bankrupt, CEO Bob Nardelli told engineers in a recent town hall meeting, but "operationally" it is.

Here we go again -- another Chrysler thrill ride for its long-suffering employees and the rest of us who have an economic and psychic stake in the survival of Detroit's No. 3 automaker.

"I was trying to convey a tremendous sense of urgency now that we're a free-standing company," Nardelli told The Wall Street Journal, adding that the "only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with. I wanted to be transparent, candid about the condition of the company to set a sense of urgency."

My guess is that it worked, far more so than the subsequent official qualifications that Chrysler has "ample liquidity," that it is "exceeding financial targets heading into 2008," that it has the "unwavering support of Cerberus" Capital Management LP.

Chrysler hands hardened by an endless cycle of boom and bust, of German control and now the private equity ownership of Cerberus long ago learned to pay attention to what management does, not what it says. But mention the "B" word in this town, especially after the Delphi Corp. workout and all it wrought, and even the most clueless minds will get focused real quick.

The mother of all workouts

They should, but not just inside Chrysler. With its truck-heavy portfolio, mediocre product line, scant evidence of alternative powertrains and little global reach, am I the only one wanting to ask a simple question of the masters of the universe running Chryslerberus:

OK, smart guys, now what? Cerberus relieved former parent Daimler AG of a company that devours capital just as a) the U.S. car market was tanking because b) the housing market was imploding and c) gas prices were north of $3 a gallon.

Then a Democratic Congress and Republican White House delivered an "energy" bill that essentially a) equates Big Auto with Big Tobacco and b) requires reworking the product plan and c) demands massive investments in or more partnerships on engines and alternative technologies.

Welcome to the arena, gentlemen. If all of the scope of this slide was "assumed," as Cerberus COO Mark Neporent intimated in a statement, how come dumping assets to raise cash is Job 1 in Auburn Hills?

Cerberus rolls in the barrel

The back-channel buzz on Nardelli & Co. is that they have little patience for the old Chrysler -- circa Lutz & Eaton or Zetsche, Bernhard and LaSorda. They all had their chance to make Chrysler sustainably profitable, the thinking goes, and they all failed.

Now it's Cerberus's turn. More broadly, it's time for the private equity hotshots from New York to show the dullards in Detroit how to run a car company, to rationalize capacity, to shape a product line for its customers and the times, to join with foreign partners who can share product development and manufacturing costs.

Or not.

It ain't so easy, even for Nardelli, a former GE whiz kid, and a Toyota alum like Jim Press, who spent a storied career managing the growth and success of Toyota in the United States -- not the much more difficult job of doing the opposite.

Private equity guys haven't historically played atop the automaking space, in part because there are a lot more ways to make a lot more dough. Those who have and do -- in Detroit, France, Germany and Japan -- have been doing it all their careers, often in the same company.

With the exception of Ford Motor Co. CEO Alan Mulally, a 37-year product of Boeing Co., all of the major players at the world's top automakers are industry veterans. A snarky rejoinder would be, "Yeah, and look at how they performed," except that the list includes Toyota, Honda, BMW and Carlos Ghosn's Renault-Nissan -- hardly a laundry list of chronic money losers.

The book on a private equity shop like Cerberus is that its principals like tough workouts because the payoffs are bigger, which means one of two things: They chose wisely, or they made a huge mistake.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, [email protected] or http:/
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