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Chrysler's End Game

Chrysler
CNBC.com
Chrysler

In the week since President Obama's Auto Task Force decided GM and Chrysler were not viable, much of the focus has been on the future of GM, who runs the company, and how the country can save its largest auto maker.

To read and watch the coverage, one would think Chrysler is already dead.

Somewhere Lee Iacocca is watching this and saying to himself, "That's it? There's no fight left for Chrysler?"

The truth is Chrysler may not be dead, but it's certainly running out of time. The Auto Task Force essentially said as much. Sure, the company has a little over three weeks to see if it can pull out a better deal with Fiat, but the odds of that happening are slim.

Yes, I know some of you will scream, "Wait! Why wouldn't Fiat want to step up right now and save Chrysler?"

I'll tell you why. It may be easier and cheaper to try and pick up pieces of Chrysler in Bankruptcy. Chrysler in Chapter 11, or Chapter 7 could allow Fiat, or any other auto maker, to pick and choose what elements of the auto maker they want while taking a pass on those "less than desirable" elements.

And that's not all.

If someone can present a credible plan to Chrysler's creditors in bankruptcy court, they could get a company that has cut it's legacy costs, shed the weakest dealers, and most importantly, is free from government control.

Make no mistake, Chrysler still has plenty of valuable assets that make it attractive. Sure, the public focuses on the Jeep brand, but the company's large car platform will also get a fair amount of attention. Minivans? Trucks? There is value in both, especially for a foreign auto maker looking to establish a foothold in North America. With more than 10% of the world's most lucrative market, Chrysler could be a very valuable addition for some auto maker.

Will that auto maker be Fiat? Maybe.

Sergio Marchionne has three weeks to finalize a deal, but it will take a lot more than committing to share technology and small car platforms. Washington has shown it won't give Fiat a pass just to unload Chrysler. If the deal's not there, the Auto Task Force will pull the plug on Chrysler's financial lifeline and let the folks in Auburn Hills, Michigan figure out their next step, most likely in bankruptcy court.

    • GM CEO: Bankruptcy Is Not Inevitable

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