Finance and Economic

Chrysler is on the verge of a Motor City miracle: a make-over in bankruptcy that will bring in new management under Italy’s Fiat SpA and its highly touted small car technology.

Rescued from liquidation with $8.6 billion of emergency U.S. government loans and bankruptcy financing, Chrysler has been given a new lease on life.

But what’s next?

The new Chrysler will be up against formidable and entrenched competitors in the small vehicle market like Honda Motor Co.

It will also struggle with the aftermath of freezing product development to conserve cash, analysts said.

But in what could be its biggest challenge, the No. 3 U.S. automaker has to break free of a reliance on aggressive discounting and a reputation for poor quality.

In the short term, analysts said Chrysler will have to find a way to hang on until early 2011, when Fiat is expected to debut the first of its smaller cars in the U.S. market.

“The big challenge is not getting through this bankruptcy,” IHS Global Insight analyst Aaron Bragman said. “The big challenge is what do they do between the end of this bankruptcy and the arrival of the Fiat vehicles?”

“There is still at least 18 months they have to try to survive in a down market with largely the same showroom and really no extra cash to get them through it,” Bragman said bad credit payday loan.

Industry analyst and consultant Maryann Keller said that estimates of the investments required for the new Chrysler after bankruptcy have been way too low.

“They have to be rebuilt, and we don’t even know if Chrysler can be rebuilt,” Keller said. “There hasn’t been any development work done in the last 12 months.”

Chrysler, bought by Cerberus Capital Management from Germany’s Daimler AG in August 2007, filed for bankruptcy protection on April 30 under the direction of the Obama administration’s auto task force.

Based in Auburn Hills, Michigan, Chrysler was seeking bankruptcy court approval on Wednesday for an assets sale, putting it ahead of an aggressive government schedule.

Chrysler has achieved more to cut costs in a shorter time than most analysts thought possible, including wiping out plants and jobs along with dealerships. Chrysler is due to cut nearly 800 dealerships, or 25 percent of its network, by early June.

It has used the bankruptcy process to eliminate $6.9 billion in debt and to halve a $4.5 billion payment that was due to a union trust fund by making it part of a note and part equity that could be sold later. 

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