JPMorgan: Chrysler At Risk Of Bankruptcy

New York, NY (AHN) - A JPMorgan analyst warned that Chrysler is at risk of bankruptcy as it is hit by the triple force of high pump prices, an economic slowdown and an expected decline in sales of trucks. Other than to file for bankruptcy, the next viable option for the third largest vehicle maker in the U.S. would be to sell its Jeep and Dodge Ram brands by early 2009.

JPMorgan auto analyst Himanshut Patel said the two other U.S. carmakers, General Motor and Ford, would likely hurdle the challenges of the auto industry in 2008 and even manage to have a profit in 2010.

Patel's analysis contrasts with a note by Merrill Lynch auto analyst John Murphy, who wrote that GM may also face bankruptcy proceedings if the automobile market continues to plummet and it fails to raise a significant incremental capital.

Patel said Chrysler's position is riskier because it has lesser assets to raise money and relies heavily on the truck and U.S. markets for income, reflected in the 22 percent decrease in its sales from January to June this year.

Unless the car industry's conditions turn around by the second half of 2009, Chrysler would be forced to file for bankruptcy protection or unload some of its businesses, Patel forecast.

He said South Korean and Chinese car manufacturers were eying Chrysler's distribution network in the U.S.

At present Chrysler is talking with Great Wall Motor Company of China, which wants to expand its share in the global auto industry. It inked a tentative agreement with Great Wall to assess if the U.S. car maker would honor its preliminary deal with Chinese car firm to develop a long-term relationship.