Mel Karmazin, CEO of the new Sirius XM (SIRI) satellite radio company, gone public with his plan to fix the firm.

Shares in Sirius have traded around $.90 over the last several days. They are likely to drop further due to the spread of the credit crisis.

The most immediate problem Sirius faces is that the merged radio firms have long-term debt of more than $2 billion. Sirius would like to re-finance much of that on better terms. There has never been a worse time to do so.

According to The Wall Street Journal, Karmazin will offer potential customers listening packages less expensive than the current ones. That may bring in consumers who see the present monthly price of the service as being too high. Unfortunately, it gives today’s subscribers the chance to "downgrade" to lower packages with fewer channels to save money. Sirius may end up with more customers with the average revenue-per-client actually falling.

Satellite radio sales depend in large part on new car sales. Karmazin is facing another 18 months of more of that industry struggling through its worst period in decades. That partially blocks Sirius’s ability to add new customers.

The Achilles Heel of satellite radio is that it has been replaced by portable electronics devices like the Apple (AAPL) iPod and multimedia phones which work on 3G networks. Consumers only want so many gadgets for getting their entertainment.

Sirius may not ever trade above $1 again for any significant period of time.

Douglas A. McIntyre

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