Chrysler says no basis to bankruptcy rumor

DETROIT (Reuters) - A spokesman for Chrysler LLC said on Thursday that market rumors of a bankruptcy filing by the privately held automaker were "without merit," saying the company had ample liquidity.

"The rumor is without merit," Chrysler spokesman Dave Elshoff said. "There is no basis for the rumor."

The concern about Chrysler's liquidity position and the rumor of a Chapter 11 filing drove down prices for the automaker's loans on Thursday, according to Reuters LPC.

Fitch Ratings on Wednesday cut ratings for both Chrysler, now controlled by Cerberus Capital Management LP and its larger rival General Motors Corp, citing the industrywide downturn in sales.

A spokesman for Cerberus also said there was no truth to the market rumor of a bankruptcy filing.

Liquidity concerns for U.S. automakers have been rising as evidence grows the downturn in sales that began earlier this year accelerated in June in the face of record gas prices and a consumer defection from trucks and SUVs.

Earlier this week, Chrysler drew down a $2 billion credit line from Cerberus and Daimler AG, the German car maker that sold off a roughly 80 percent stake in Chrysler to Cerberus last year.

Under the terms of that sale, Chrysler had until August to draw on the credit line, which included $1.5 billion from Daimler. The credit line pays interest fixed at 7 percentage points above the London interbank rate, Daimler has said.

Chrysler, which lost $1.6 billion in 2007, has said it ended the year with $9 billion in cash. Its U.S. sales are down 23 percent so far this year.

The concern about Chrysler's liquidity corresponded with an event for employees at the automakers Auburn Hills, Michigan headquarters intended to honor former chairman Lee Iacocca, who is credited with steering the No. 3 U.S. automaker from bankruptcy in the early 1980s.

Chrysler marketing chief Deborah Meyer said market concerns were making it harder for all of the automakers.

"Right now in the auto industry, we are seeing a lot of changes. There are a lot of issues in the economy all over and so everyone is wondering not just about Chrysler, but about the auto industry and all aspects," Meyer told Reuters.

Meyer said senior executives were urging Chrysler employees to focus on customers and their feedback as concerns deepen around the sector.

"The whole company is trying to focus on the customers and what their needs are," she said on the sidelines of an event to showcase Chrysler's 2009 line-up. "If we can stay focused on that with all this rolling around, then we will be okay."

(Reporting by Kevin Krolicki and David Bailey, editing by John Wallace and Andre Grenon)