Chrysler CEO admits to company being 'operationally bankrupt'

Chrysler Corp., owned by private equity firm Cerberus Capital, has said what many auto industry watchers have suspected for a while. It's "operationally bankrupt," according to Chrysler boss Robert Nardelli (who left Home Depot this year after compensation padding during HD's poor performance). Nardelli walked into a nightmare, which was fitting since he left one company in his messy wake and joined another that was already in progress. How fitting.

Anyway, Chrysler, who is selling assets and trying to reorganize into something recognizable as an auto manufacturer, is apparently running out of cash. When Nardelli was asked point-blank if Chrysler was bankrupt, he answered slyly with "Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." Thank goodness for Cerberus, eh?

Chrysler is trying to raise capital by selling land, older factories and other tangible assets (probably at a loss to book value), but with Cerberus now being exposed to the effects of the subprime mortage industry's implosion with its ownership of GMAC (bought from General Motors for $12 billion), it can't just prop up Chrysler without seeing the company shed itself of useless assets as quickly as possible. Would you buy a Chrysler vehicle with all this uncertainty? If customers start using that in their decision-making process, the world of hurt could get even worse.