by Calculated Risk on 11/02/2007 10:44:00 AM

From The Economist: Chrysler: That shrinking feeling

WHEN private equity and America’s ailing car industry meet there is only one likely outcome. On Thursday November 1st, just days after hourly workers narrowly ratified a new contract, Chrysler announced plans to drop four slow-selling models, slash overall production and trim perhaps some 12,000 hourly and salaried jobs. The job cuts amount to as much as 15% of the carmaker's total workforce.
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Whether the latest round of cuts is enough to stabilise Chrysler is uncertain. Not only is its market contracting but Chrysler has also failed to score any significant hits with its recent new products other than with a four-door version of the small Wrangler SUV. If anything the carmaker will have to eliminate even more products, if sales don’t pick up. That, in turn could lead to still more job cuts in the future. And so the cycle is set to continue.

Chrysler's future is clearly uncertain, but not mentioned in the article are the $10 Billion in pier loans (bridge loans that couldn't be sold) sitting on the balance sheets of Goldman Sachs, Bear Stearns, Morgan Stanley and Citigroup. If Chrysler defaults, the pain will be significant.