By on May 7, 2009

Saving Chrysler is just stupid. There isn’t one shred of pure economic logic—never mind basic business sense—to rescue this company from liquidation. Yet, here we are watching tax dollars garnered from real earners (individuals and corporations) tossed into a swirling morass circling the drain of history. It’s time to speak up against this misbegotten adventure. And, well, here I am.

My argument against saving Chrysler springs from one basic business premise: risk taken should be compensated by adequate reward. It should be intuitively obvious that all the capital invested into Chrysler since Daimler’s acquisition back in 1998 and Cerberus in 2007 has never earned an adequate return. So why should we think that the US Government will be smarter than a successful German automaker or a wealthy private equity firm? Does it really make sense to pour (past and future) $12 billion or more of taxpayer dollars into the same hole?

Let’s review. Daimler acquired Chrysler for $36 billion or so and spent billions more trying to make a go of it. Sure, Chrysler had some profitable years in the interim. But by the end, Daimler recognized that there would be no future and effectively walked away from the mess. The decision matrix in Stuttgart came down to this: there would never be a return on the investment in Chrysler. It was an experiment in globalization gone seriously awry.

Despite public announcements to enhance and restore an American icon (hey, Steve Feinberg, you don’t look so good in that American Flag outfit), Cerberus had no intentions of making Chrysler into a real company. Rather, it would be a strip and flip operation by reducing expenses, fobbing off vehicle development to others (Nissan, Mercedes, and anyone else) and make money from financing customers’ wheels. We know how well this business strategy worked. Cerberus lost $7 billion of someone’s money (we still don’t know whose). All gone forever.

And now the American taxpayer has become the next sucker in the game of Chrysler. What is the ante at the table so far? Some $6 billion and going higher. And for what? To continue the fallacy that Chrysler in the last two decades has been a great American icon? Even President Obama can’t polish that pig.

The lawyers in bankruptcy court have argued about absolute priority, lenders tainted by TARP funds, and diminution of value without a quick sale. But it’s really irrelevant. The fact remains that any dollars plowed into Chrysler will never provide an adequate return.

Let’s review the government’s plan with Chrysler . . . With a quick asset sale, a modified UAW labor agreement, Italian management today, small cars tomorrow, and perfecto! We’ll enter into an automotive utopia of profits and cash flow. Will someone please dial 911 to the White House and clue the Administration into reality please?

There are NO good assets of Chrysler cobbled together in any fashion that can be considered as a going concern. Recall that Chrysler has had little retail success in the past several years with its product line. Fleet sales likely made up at least 40% of all sales. Guess what? The New Chrysler will have the same product line. Does the President really believe that American consumers will now wake up and buy Chrysler products all of a sudden? If so, he’s sadly mistaken.

Some will argue that the New Chrysler has a competitive labor agreement. Yea, so what? Labor makes up less than 10% of the total cost of running a car company. And GM and Ford get the same deal—which matches mostly what all the transplants already have. No real advantage there.

But the coup de grâce rests with faith in the Italians to do a better job running this mess. C’mon now! Fiat is and always has been a second-tier automotive player in Europe. Its product reputation hasn’t brought it accolades. And why would Americans even consider small cars from Italy being superior to Ford’s new Fiesta (a raging best seller in Europe) or cars from Honda or Toyota already here? And small cars just don’t make the same profits. Go ask the Japanese for the truth on that one.

The bottom line should be clear. Putting money to work in Chrysler, even reconstituted as a new company, makes no sense. Pitting the same product line, same weak brands and future Italian-mobiles against strong competitors in the USA today just doesn’t compute. Not for the capital invested. In fact, no venture capitalist would do this deal. No private equity players show any willingness to take this on the come. And not one other automobile manufacturer wants to buy the rotting corpse of Chrysler. Only the American government—an entity already proven incapable of running its own shop successfully—has stepped up to the plate.

This will not end well.

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75 Comments on “Editorial: Chrysler Zombie Watch 5: Saving Private Chrysler...”


  • avatar
    toxicroach

    Not to mention that it will continue to suck up precious market share that Ford and GM desperately need.

    If this were a lifeboat situation, Chrysler would have been BBQ a while ago.

  • avatar
    jkross22

    But Ken, it’s all about the JOBS!!! At all costs.

    To your point, this action is being taken by people who know nothing about the auto industry. A friend arrogantly told me he thought the government should just take over and require 35 mpg cars be produced. He’s a far left Democrat (of course) so I asked if that business model was so successful, why hasn’t Toyota or Honda done it.

    Silence.

  • avatar
    brettc

    Chrysler is dead. Their plants have ceased production. No one wants their vehicles. Even less people will want Fiatslers. It’s too bad Obama doesn’t understand the whole concept.

    Whoever has been updating Chrysler’s wikipedia entries is referring to their assembly plants in the past tense, which is kind of strange to read, but it’s at least accurate. If Obama thinks anything can make Chrysler profitable again, he should probably check in to rehab because he’s obviously on something.

  • avatar
    Ptrott

    I agree, however, I wouldnt describe what Daimler did to Chrysler as an “investment”. They cannibalized a profitable company with a competitive product line at the time of purchase and then left it for dead. Had Chrysler stayed an independent company, I believe this would be a completely different conversation.

  • avatar
    bluecon

    A payoff to the UAW.

    Of course like the editorial says this will further weaken GM and Ford. Once again the law of unintended consequences strikes.

    Obamanomics are going to turn out very bad for the USA.

  • avatar
    dwford

    What we need is for Chrysler to stop making cars altogether, and switch those factories to produce something else. TV’s? Batteries for other manufacturers? Clothes? We need to start manufacturing consumer goods in the US, so why not repurpose all these plants?

  • avatar
    jpcavanaugh

    This is not about saving Chrysler. It is about an outgoing administration lacking the courage to make a tough but necessary call during a financial panic, and about an incoming administration that owes (in large part) the UAW for its electoral victory and lacks the courage to get crosswise with that union.

    The above examples are again proof (as if we needed it) that it is the rare political orgaization that can make a tough and necessary but unpopular ruling. This situation is not going to get better.

  • avatar
    Casual Observer

    “Putting money to work in Chrysler, even reconstituted as a new company, makes no sense.

    It’s not about cars or profits. There are people in Obama’s cabinet who know full well that this is an idea dead-on-arrival, and that resurrecting Chrysler is an impossible task. That said, there’s only one logical explanation for what they are doing: money grab.

    This will amount to nothing more than a transfer of wealth from taxpayers to the UAW. A dead Chrysler means $0 for the UAW. The goverment has kept a zombie Chrysler alive long enough to transfer public money to the UAW in the form of 55% ownership.

    I don’t buy the “stupidity” argument. These people know exactly what they are doing.

  • avatar
    Airhen

    Well as I see it, the UAW is getting paid back for it’s support, the government is taking more control and ownership of the private sector like a revolution that would impress Chavez or Castro, and the cost of all this is going to be held of the heads of us taxpayers and the future generations. A crisis creates a great opportunity!

  • avatar
    Sammy B

    Great article! Spot on I must say.

    Question for the masses: Had McCain won, do you think the course of action would be much different?

    disclosure: Yes, I voted for Obama. No, I don’t think he’s God. I also don’t think he’s at all right about how all of this is being handled.

    Your thoughts?

  • avatar
    RickCanadian

    “Saving Chrysler is just stupid.”

    I think all this piece and all the comments (past and present) can be summarized in that simple sentence.

  • avatar
    MrDot

    In the end, the jobs are still lost and some Chinese firm gets all the equipment for pennies on the dollar.

  • avatar
    Kevin

    Obamanomics are going to turn out very bad for the USA.

    Please, the word is Obamunism.

  • avatar
    Verbal

    Ken Elias: Labor makes up less than 10% of the total cost of running a car company.

    This figure seems awfully low. Where did you get it? I would guess direct labor costs to be closer to 30%.

  • avatar
    NN

    My guess is that McCain would not bail out Chrysler. I do like Mr. Obama for some things, but what is happening right now is a huge crime being committed to the American taxpayer, and it is of Mr. Obama’s creation.

  • avatar
    menno

    Sammy asks “Question for the masses: Had McCain won, do you think the course of action would be much different?”

    Personally, sammy, I don’t think it’d be much if any difference, because looking at the “planks” of both McPain and the Obamanation, I saw little substantive difference.

    But I’ve been outside the realm of thinking within the box of two major parties since 1980, and I’m STILL looked down upon even here amongst friends and “foes” alike, as “wearing my tinfoil hat too tight” I think.

    On the other hand, I predicted financial problems from our deficit going from 1 trillion (in 1980) skyrocketing to something like 11 trillion now, and I think that is now coming home to haunt us all.

    I’ve also predicted that the Patriot Act would come back and bite us all on the ass, and events seem to have proven that right.

    I mentioned that it seemed that we’d hit global peak-oil around July 2008, give or take, and interestingly enough that was about when oil prices spiked (which partially led to an economic melt-down worldwide due to the rapid ramp-up of prices).

    I’ve predicted that the easy credit thing going on would lead to an eventual correction (well, duh, it happens every time if you look at history).

    So maybe I really don’t wear tinfat hats after all…. just sayin’

  • avatar
    Richard Chen

    @Verbal: Sergio Marchionne has said labor is 7%-8% of the total cost at Fiat.

    When he took over a few years back, he didn’t cut union benefits, stating that it wasn’t a big deal and went hacking away at everything else instead. I found it ironic that he asked for major concessions from the UAW/CAW just last month.

  • avatar
    psarhjinian

    Well as I see it, the UAW is getting paid back for it’s support, the government is taking more control and ownership of the private sector like a revolution that would impress Chavez or Castro

    Can we stop now, please? Or is there something I’m just not getting about what amounts to Randian Chicken Little-ism?

    I mean really, the alarmism is getting tiring. It’s becoming truly difficult to read this site because the signal-to-noise ratio is becoming a problem.

    I’ve been to Cuba several times, and the US is nowhere near it in terms of socialization. The US doesn’t even approach most of Europe or Canada, and Obama’s moves to the left—if you could call shovelling money at industry tycoons so that an Italian company started by a pal of Mussolini can pick it up for pennnies on the dollar “leftism”—barely registers. Please, for the sake of continued rational discussion, get over it.

    Personally, I would like to see government motors. Come talk to me when it actually looks like it’ll happen.

  • avatar
    Casual Observer

    Had McCain won, do you think the course of action would be much different?

    Good question. McCain seems to get enjoyment out of alienating conservatives. I do think he would be escorting Chrysler through the bankruptcy, but there would definitely be more adherence to the law – unlike the thuggery we’ve seen from the current administration.

  • avatar

    @Sammy B: McCain lost because of stupidity, arrogance, and thinking amorphous senatorial bullshit was a currency that could pass with voters.

    So, I imagine the situation would be just as bad under him; just in a different way.

  • avatar
    bill h.

    “Can we stop now, please? Or is there something I’m just not getting about what amounts to Randian Chicken Little-ism?”

    Whatever it is, I’m not getting it either, but then I haven’t been listening to Radio Paranoia.

    Maybe there’s something to be said for all the secession talk…meanwhile I’ll keep looking for some CAR discussion on another posting here.

  • avatar
    postman

    What we need is for Chrysler to stop making cars altogether, and switch those factories to produce something else. TV’s? Batteries for other manufacturers? Clothes? We need to start manufacturing consumer goods in the US, so why not repurpose all these plants?

    Excellent idea! These are the sort of ideas that people who don’t have a vested interest in the status quo come up with.

  • avatar
    geeber

    I posted this on another thread…

    Detroit – or at least Chrysler – may end up being the Obama Administration’s Iraq War.

  • avatar
    psarhjinian

    Detroit – or at least Chrysler – may end up being the Obama Administration’s Iraq War.

    I think it’s more likely it’ll be their S&L Crisis: ugly, compromised, full of theatre and not well understood, but probably necessary.

  • avatar
    tedward

    I think it has less to do with empowering the UAW with taxpayer funds than it does postponing the, “This will not end well” moment for a better day.

    Both administrations have “bailed out” firms and groups with political allegiance to the other party (and please, look not further than Bush and the first set of auto loans for an example). I’d accept an argument that the motivation is political cowardice rather than good government (not saying I’d agree with that though) but I can’t agree with a blase claim that this represents a giveaway to the unions. This is a hugely public issue (the loans to the car makers more so than even the financial industry given the respective levels of disclosure) and one that I doubt many politicians are willing to tangle with just to engineer kick backs to supporters.

    Besides, if they have enough capital to survive the shit times and they emerge with a few new products they might actually survive. Just saying.

  • avatar
    agenthex

    I mean really, the alarmism is getting tiring. It’s becoming truly difficult to read this site because the signal-to-noise ratio is becoming a problem.

    It’s becoming especially tiring because the proper explanations have been given as to why events are unfurling the way they are.

    The response seems to go along one of these routes:

    1. Dodge the rational arguments.
    2. Repeat the same line. A LOT. Tip: this only works with people who don’t do much of their own thinking.
    3. Get angry at the folks trying to help out their knowledge deficiency instead of the peeps misleading them.

    If I missed anything, please let me know.


    Detroit – or at least Chrysler – may end up being the Obama Administration’s Iraq War.

    Why do these people always assume everyone else is as incompetent or nefarious as they are?

  • avatar
    jkross22

    “I think it’s more likely it’ll be their S&L Crisis: ugly, compromised, full of theatre and not well understood, but probably necessary.”

    That’s more fitting for much of the financial bailout, not the auto bailout. If Chrysler and GM go away, we can still buy cars (even domestically produced cars).

    What’s the end game with Chrysler and GM?

  • avatar
    geeber

    agenthex: If I missed anything, please let me know.

    Yes, learn to follow those yourself.

    agenthex: Why do these people always assume everyone else is as incompetent or nefarious as they are?

    That’s because, unlike you, we not only live in the real world, and have a knowledge of how politicans think, but we also know a thing or two about the auto industry.

    If you think that hooking up Chrysler with a loser like Fiat is going to result in a viable company that can compete in a mature, brutally competitive market, you must have been very disappointed when the Easter Bunny didn’t show up a few Sundays ago.

    And if you think that President who has staked a fair amount of his administration’s early credibility on making this work will walk away when it is apparent that it can’t, you must have really just fallen off the turnip truck.

    And if you think that the Obama Administration has been any more open and honest than the Bush Administration, or has done a better job of living up to its campaign promises, you must have been in a coma for the past few months.

    And, for the record, I had nothing to do with the Iraq War, so I’m not one of “these people.”

  • avatar
    Dynamic88

    To your point, this action is being taken by people who know nothing about the auto industry.

    Not that I disagree, but this is always tossed out as if it’s something new. For the past 25 years Chrysler has been run by people who know nothing about the auto industry. Otherwise, we wouldn’t be talking about C11.

  • avatar
    geeber

    Dynamic88: For the past 25 years Chrysler has been run by people who know nothing about the auto industry. Otherwise, we wouldn’t be talking about C11.

    Iacocca knew a great deal about the auto industry.

    Unfortunately, it was the auto industry circa 1965…

  • avatar

    Not to mention that it will continue to suck up precious market share that Ford and GM desperately need.

    This is the point I can’t seem to get people to understand. There are too many car companies for this market. Chrysler needs euthanized, stat.

    John

  • avatar
    psarhjinian

    For the past 25 years Chrysler has been run by people who know nothing about the auto industry.

    I think the distinction is between people who know something about the automotive industry versus people who know how to run a successful business. Chrysler and GM needed more of the latter and less of the former.

    Of course, right now, Chrysler needs people who know how to get a company through bankruptcy and turnaround proceedings and into being a viable, sustainable entity. Somehow, I don’t see a Bob Lutz/Lee Iaccoca-style titan of automobilia as being that kind of person.

  • avatar
    tirving

    bluecon and casualobserver got it right. UAW payback. Michigan is still a swing state.

    “The fact remains that any dollars plowed into Chrysler will never provide an adequate return.”

    Correction: “The fact remains that any dollars plowed into Chrysler will never return.”

  • avatar
    Luther

    Fix It Again, Taxpayer.

    These gubmint psychopaths aren’t even good at putting lipstick on a pig…This is what happens when you have an Ivy League Humanities “education” combined with armies, jails, public school, television, and a counterfeit money racket.

    The free people in the free market voted NO!..Leave it alone to live or die! Quit stealing you Ivy League Scumbags!

  • avatar
    Morea

    psarhjinian : an Italian company started by a pal of Mussolini

    ???

    Fiat was founded in 1899 when Mussolini was 15 years old. Fiat founder Agnelli may have been a friend of Musollini in the 1930s but by that time Fiat was a generation old and Agnelli was no longer running the company.

    Now who is being hysterical?

  • avatar
    threeer

    I do have a slight bone of contention regarding the relative profits of small cars. Sure, when compared to badge-engineering forty (okay, so I’m exaggerating…slightly) variants of the same large SUV, a small car doesn’t make the same profit. However, please…do go to Japan and ask them how profitable they are when done correctly. Do you think that Toyota cries at the success of the Corolla? Mazda has been doing pretty well with the Mazda3 from what I can tell. Honda’s Civic tends to sell well. Well-engineered vehicles that attract a buying audience will do well. Period. Vehicles designed and built like the Sebring…not so much.

  • avatar
    agenthex

    Yes, learn to follow those yourself.

    Instead of hurling random insults, perhaps you can point to specific infractions, especially since you don’t exactly have great credibility.

    That’s because, unlike you, we not only live in the real world, and have a knowledge of how politicans think, but we also know a thing or two about the auto industry.

    If you think that hooking up Chrysler with a loser like Fiat is going to result in a viable company that can compete in a mature, brutally competitive market, you must have been very disappointed when the Easter Bunny didn’t show up a few Sundays ago.

    This is not controversial. In fact, let this be the specific example. Since I’ll be generous and assume you actually read the comments instead of just post the same rant in every one, you should have noticed that the discussion moved past that and should now be on trade-off involved in spending to maintain the employment level to battle a deflationary spiral.

    That you seem to be stuck in the past does not bode well for your claim to vast practical knowledge.


    And if you think that President who has staked a fair amount of his administration’s early credibility on making this work will walk away when it is apparent that it can’t,

    This is not something society can ever “walk away” from. The social liabilities are conserved, especially at the moment. Of course, I guess if you have a very shallow of econ, you can pretend that punting the problem will magically solve it.


    And, for the record, I had nothing to do with the Iraq War, so I’m not one of “these people.”

    You brought it up. And really, that post wasn’t specifically about you anyway.

  • avatar
    ihatetrees

    I agree that Chrysler should be liquidated. But, since the fix is in, what is New Chrysler going to be worth? Who is going to buy the stock?

    Is there any requirement for the UAW to maintain a certain percentage ownership in the New Chrysler? Or can they sell their shares anytime?

  • avatar

    Chrysler does not necessarily need to die, but it and Ford and GM need to shrink enough so that their production equals sales. They can’t just keep on using big rebates to sell vehicles in an oversaturated market.

    If Ford and GM are to be kept at their current size, Chrysler must be euthanized to make room. If we want all three to survive all three will have to shrink to market conditions.

  • avatar
    Pch101

    There are two differences here: Fiat is beginning its life with Chrysler with a fresh, new balance sheet (the Good Company), and the new CEO has experience with leading a successful turnaround. So there are some critical differences.

    Whether that results in success is another matter. I’d give it fairly low odds, if only because they are starting out so far behind. If it is going to work, Chrysler is going to have to be a much smaller company, and figure out how to squeeze as much margin as possible from what it sells.

    The government motivation was to prevent the immediate economic hit and uncertain possibility of a spiral — everyone knows what happened when FDR stopped his stimulus too soon, and we all should have noticed that the hit to the markets with Lehman and GM scared the hell out of Washington — as well as to avoid absorbing the pensions. I suspect it was also to avoid accusations from the right that the government was “picking favorites,” which seems to upset that wing.

    Over time, this has since also morphed into an effort to get our initial money back and to set a blueprint for the real whale, which is GM. That’s the real issue, and one that can’t be ignored.

  • avatar
    psarhjinian

    Fiat was founded in 1899 when Mussolini was 15 years old. Fiat founder Agnelli may have been a friend of Musollini in the 1930s but by that time Fiat was a generation old and Agnelli was no longer running the company.

    Valid point, and I was being theatrical. Consider the connotation retracted.

    Still, the core point was that facilitating the sale of Chrysler to FIAT hardly amounts to Castro-style socialism. I don’t think it constitutes socialism at all, frankly, and working that angle distracts from the core discussion**, which should be: Is is better to wind Chrysler down in a controlled fashion or let it explode quickly.

    ** (another worthwhile discussion might be “Why are we bailing out an privately-held entity that already has significant financial backing, instead of directing our efforts to the two domestic marques who are more legitimately strapped for cash?”)

  • avatar
    Robert Schwartz

    IT SHINES AND IT STINKS

    I can understand where Sergio is coming from. He isn’t putting any cash in. If he makes it work, fabulous. If he doesn’t he will at least get an opportunity to cut the rings off the corpse’s fingers.

    Another possibility. Sergio plays lets make a deal with Carlos, and some other foreign playas. Each gets something. Or Sergio is just trying to pump it up so he can sell FIAT’s auto business to the next sucker.

    I can understand where BO is coming from. It’s not his money and the UAW is a core supporter. Taking care of them is the Chicago Way.

    Now the UAW. Surely they can’t be betting that Sergio will make it work. That is so unlikely.

    My guess will be that Gettelfinger wasn’t kidding when he said that they do not want to be a long term investor. They will hold on long enough to pump and dump before Fiasler goes down for the last count.

    Now how they are going to do that is beyond my imagination. I don’t see an IPO for this mess in the near, or even not so near, future. Maybe some PE funds could take it off their hands, but I don’t think that would happen unless BO has some candy treats in his pocket to give them.

    Maybe the Gettelfinger hopes that the economy will have recovered enough by next year to allow animal spirits to take charge of the PE market, and he will find a sucker.

    Oh, that leaves the rest of us.

    The US government has already written off the first 8 G$, the next 4, 5, 6, … G$ they put in will never be repaid, nor will the US Government participate in UAW’s pump and dump. We are just burning this money.

    Deal with it.

  • avatar
    agenthex

    I can understand where BO is coming from. It’s not his money and the UAW is a core supporter. Taking care of them is the Chicago Way.

    OMG, collective governance taking care of citizens and general welfare of the nation. Must come as a shocker to conservatives.


    We are just burning this money.

    This fits in well with the mantra that if money isn’t going to the pockets of an elite and selective group, you might as well burn it.

  • avatar
    geeber

    agenthex: This is not controversial.

    Uh, yes it is, to people who actually understand the competitive nature of the auto industry in the United States, Fiat’s reputation in both America AND Europe, Chrysler’s reputation in America, and the difficulty of getting people to switch brands.

    If you believe that people are going to swap a Fit, Yaris or Fiesta for a Fiat-based car, or an Accord or Camry for Fiat-Chrysler sedan…well, if I were you, I wouldn’t make disparaging remarks about other posters’ credibility.

    At the very least, go to Borders or Barnes and Noble and pick up a copy of Top Gear or Car and read how well Fiats fare in reliability surveys.

    agenthex: In fact, let this be the specific example. Since I’ll be generous and assume you actually read the comments instead of just post the same rant in every one, you should have noticed that the discussion moved past that and should now be on trade-off involved in spending to maintain the employment level to battle a deflationary spiral.

    If the “discussion has moved past that,” someone needs to tell the site administrator, judging by the stories and editorials that are appearing on this site.

    The success of this plan hinges ENTIRELY on whether a combined Chrysler-Fiat is a viable company that can stand on its own.

    Unless, of course, you view Chrysler as a social-welfare organization that exists to provide jobs for people.

    Many of us have the radical idea that car companies are for-profit entities that exist to make money by providing products people want enough to buy with their own mmoney. The best way to meet this goal is to build and sell attractive, quality products that people willingly buy. Fiat and Chrysler don’t have the best track record in that regard.

    agenthex: This is not something society can ever “walk away” from.

    “Society” – meaning, taxpayers – has no obligation to make sure that every company stays in business, or that no one ever loses a job.

    People who are concerned about Chrysler closing or the associated job losses are free to visit their Chrysler-Dodge-Jeep dealer and buy a new vehicle at full sticker.

    Given the company’s sales figures over these past few years, we can venture a guess as to how strongly people want to support Chrysler.

    Society has already walked away from Chrysler.

    Society has enacted unemployment benefits, Medicare, Medicaid and the PBGC to help soften the blow. But society has no obligation to ensure that Chrysler and GM never close their doors, or never lay anyone off from his or her job.

    agenthex: The social liabilities are conserved, especially at the moment.

    The contract Chrysler employees had was with the company, not taxpayers. After a certain point, they are on their own. We have programs and laws to ease the transition for employees, but society has no obligation to ensure that companies never go out of business, or that no one ever loses a job.

    agenthex: Of course, I guess if you have a very shallow of econ, you can pretend that punting the problem will magically solve it.

    First, the argument was, “We can’t have Chrysler (and GM) file for bankruptcy when the financial sector is in trouble. We need to punt this down the road (beyond December 2008), and let them fail when the economy can absorb the blow.”

    I didn’t agree with it, but that IS a plausible argument.

    It lately sounds as though we ARE on the hook for more injections of government money, because we can never afford to let this company fail.

    Now, to prevent you from making the accusation that I am putting words in your mouth, please answer these questions so that I and others can get a better idea of where you stand on this issue:

    1. Do you believe that Chrysler’s partnership with Fiat will produce a viable company – i.e., one that can survive without any additional government aid?

    2. If this combined company does not prove to be viable, should the taxpayers be required to inject more money into it to keep it in business?

    3. If so, when does this end? How long should taxpayers be expected to keep putting money into Chrysler-Fiat?

    agenthex: You brought it up. And really, that post wasn’t specifically about you anyway.

    I brought it up as an example of what is often called a “quagmire.” The Chrysler and GM bailouts may prove that quagmires for presidents don’t always involve unpopular wars in foreign countries.

    It’s hard not to think that you are addressing me directly when you post this: Why do these people always assume everyone else is as incompetent or nefarious as they are?

  • avatar
    tedward

    I think the government financing will be a problem if these companies are continually propped up once credit markets are fully restored. Until that point though, it is arguably more responsible to preserve jobs and avoid stock panics in an environment where lending for business expansion or start ups is non-existent. That right there is when I will joing the Obama bashing and declare his interest to be purely political.

    I feel like 90% of the disagreements on this stem from people believing that the economy only exists to either distribute goods and services or to provide income. There is a middle ground and both of those extremes are ethically wrong and pragmatically unworkable (given our minimum expectations of social support and freedom of action).

  • avatar
    agenthex

    Unless, of course, you view Chrysler as a social-welfare organization that exists to provide jobs for people.

    Lol, you finally got the point by coincidence halfway through your rant.


    Society has enacted unemployment benefits, Medicare, Medicaid and the PBGC to help soften the blow. But society has no obligation to ensure that Chrysler and GM never close their doors, or never lay anyone off from his or her job.

    Under normal circumstances, probably not. I’m not sure what to do here, tho. Try to explain why again after I’ve already done it (and MANY others have done even more) or wait for you to hit upon it by luck through your ranting?


    1. Do you believe that Chrysler’s partnership with Fiat will produce a viable company – i.e., one that can survive without any additional government aid?

    2. If this combined company does not prove to be viable, should the taxpayers be required to inject more money into it to keep it in business?

    3. If so, when does this end? How long should taxpayers be expected to keep putting money into Chrysler-Fiat?

    1. Probably not.
    2. It’s not an unreasonable idea to do so until the economy recovers to a state where the unemployed can find replacement jobs
    3. or at least until a drastic hit to those numbers won’t cascade into larger issues

    If you haven’t noticed, the gov’s been doing some stress tests on the banking system, partly to measure the effects that tanking unemployment would have. That’s the kind of data needed to make an informed decision on these matters.

    I’m sure there’s also a political component, especially since GM (which Chrysler is bit of a test case for) is quite symbolic of US industry/manufacturing. But it’s ironic some people would accuse the gov of being superficial when they don’t understand the interconnected components that make for a successful country.


    I brought it up as an example of what is often called a “quagmire.”

    The iraq war has a lot of associated baggage that you probably don’t want to bring along if that’s your only point. In any case, what I’ve said on this can stand separately if it doesn’t relate to you.

  • avatar
    paris-dakar

    It will never cease to amaze me how some people can continue to defend this corrupt payoff to a politically connected Labor Union.

  • avatar
    kovachian

    Forget mergers, Fiat should just swallow Chrysler hole. The US would still have Ford and (maybe) GM, all the usual Japanese, German and various other European manufacturers, so why shouldn’t Fiat just displace Chrysler outright?

    You reading this Sergio? Call me bro, we’ll do lunch.

  • avatar
    amadorgmowner

    Obamanomics can’t be any worse than Bushonomics. Bushonomics are the reason we are in the mess we are in. Remember, it was Bush who started the bailouts of GM, GMAC and Chryslerberus. Do those who think that we should not have bailed out the car companies ( I oppose the auto bailouts – management hasn’t changed and the government is not good at managing anything) – also oppose any bailouts for the banks? Why the double standard? I have no sympathy for the car companies or Wall Street whose collective stupid decisions have ruined the economy. There is no such thing as a true free market. The taxpayers always get the shaft. We have to pay for the poor and the mistakes of the rich.

  • avatar

    I’ve been to Cuba several times, and the US is nowhere near it in terms of socialization.

    I prefer to vacation where my hard currency won’t help prop up a totalitarian regime that keeps Dr. Oscar Biscet in a gulag.

  • avatar
    danms6

    “I can understand where BO is coming from. It’s not his money and the UAW is a core supporter. Taking care of them is the Chicago Way.”

    OMG, collective governance taking care of citizens and general welfare of the nation. Must come as a shocker to conservatives.

    Please keep material like this flowing, I need a good laugh.

    I work in aerospace, the only major industry this country still excels at, and now my job may be in peril due to BO’s feel-good budget cuts today. There’s no big bad Democratic union to protect me, yet we still produce a profitable product that is assembled in the US and is exported to our allies.

    I’m speaking as a conservative raised in Chicago, and people like you must really have no idea how the Machine works.

  • avatar
    geeber

    agenthex: Lol, you finally got the point by coincidence halfway through your rant.

    You have an opinion of why this is necessary, nothing more, nothing less. It certainly doesn’t provide a reason for preserving Chrysler beyond the initial bailouts that is any more compelling than why we should just let it die.

    You just want to see a different set of winners and losers, based on your viewpoint.

    agenthex:

    1. Probably not.
    2. It’s not an unreasonable idea to do so until the economy recovers to a state where the unemployed can find replacement jobs
    3. or at least until a drastic hit to those numbers won’t cascade into larger issues

    Thank you.

    At least you are not advocating unending bailouts, although I would suspect that we differ as to when the economy can take a hit, and whether a collapse of Chrysler would be all that drastic.

    agenthex: I’m sure there’s also a political component, especially since GM (which Chrysler is bit of a test case for) is quite symbolic of US industry/manufacturing. But it’s ironic some people would accuse the gov of being superficial when they don’t understand the interconnected components that make for a successful country.

    The days when we needed Chrysler and GM to be “a successful country” are long gone.

    Even within the auto industry, companies have taken steps to ensure the viability of suppliers. Chrysler, certainly, is no longer necessary even for a successful domestic auto industry.

    If anything, propping up Chrysler is hindering Ford over the long run.

    agenthex: The iraq war has a lot of associated baggage that you probably don’t want to bring along if that’s your only point. In any case, what I’ve said on this can stand separately if it doesn’t relate to you.

    I have nothing invested in the Iraq War, so whatever is “brought along” is of no consequence to me or my example.

  • avatar
    agenthex

    It will never cease to amaze me how some people can continue to defend this corrupt payoff to a politically connected Labor Union.

    Given what so many people “think” without having the requisite data to inform their opinions, it should seem more obvious that the anti-union contingent is better connected and advertised in broad political terms.

  • avatar

    if you could call shovelling money at industry tycoons so that an Italian company started by a pal of Mussolini can pick it up for pennnies on the dollar “leftism”

    And, as Daniel Pipes has pointed out, Fascism is a heresy of the left. Mussolini started out as a socialist.

    You’re just following Stalin’s playbook on demonizing fascism as right wing, to protect socialism/communism from the taint of National Socialism.

  • avatar

    Pch101 :
    May 7th, 2009 at 3:34 pm

    There are two differences here: Fiat is beginning its life with Chrysler with a fresh, new balance sheet (the Good Company), and the new CEO has experience with leading a successful turnaround. So there are some critical differences. My party is in power in Washington and they came up with this plan.

    FIFY

  • avatar
    agenthex

    You just want to see a different set of winners and losers, for different reasons.

    If the econ tanks, very few will end up “winning”.

    It would seem in their many decades of operation, the d3 in general have intertwined their way into the lives of many, many people. Unwinding this is not a trivial nor quick operation.

    So this isn’t just about Chrysler specifically, tho in that case perhaps a few bil seemed cheap enough these days to give it a shot, even if it’s to make the inevitable mistakes that we can learn from for GM’s turn.

  • avatar
    agenthex

    yet we still produce a profitable product that is assembled in the US and is exported to our allies.

    The profitability of that product is protected by our money, and not just a little bit of political rhetoric and therefore necessity.

    It’s rather a weird bit of politics we have where everyone’ll take gov (collective) money but no one is grateful for whatever good it does them.

  • avatar
    Pch101

    My party is in power in Washington and they came up with this plan.

    Please, enough of the partisan dance. This plan was in the cards, anyway.

    The logical thing for the government to do was to find new custodians for these companies, so that the government wouldn’t have to operate them or leave the current idiots in place to continue to ruin them.

    I know that you are of a school of thought that would have simply handed cash to Rick Wagoner to do as he saw fit, but I think that most of us can see that as pure lunacy. That boob had already destroyed tens of billions of dollars in market cap and put the knife into the body. How much more was he supposed to break before you realize that he needed to go?

  • avatar
    JMII

    If a president is going to waste billions (trillions?!?) of our dollars at least this time the money is going into America workers hands and not into “rebuilding” cities we destroyed during an effort to “free” another country that (if you remember) we already beat the crap out of. Now much do Stealth fighters and smart bombs cost again?

    I think bailing out all these idiots is incredible stupid, but at least this time nobody will get killed on my dime.

  • avatar
    mtypex

    So, when will Renault close on the Saturn deal? I can’t wait for the Dodge Fiats and Saturn Renaults.

  • avatar
    ihatetrees

    It’ll be interesting to see who buys or is expected (as a ‘favor’) to buy New Chrysler shares.

    If they’re even traded publicly, that is.

    Threatjack notice, re: Private Ryan
    Any combat arms vets out there? Does it grind your gears to see those white, sniper-friendly, captain’s bars on Tom Hanks’ helmet? Arrrgggh! /rant.

  • avatar
    Robert Schwartz

    agenthex: “OMG, collective governance taking care of citizens and general welfare of the nation.”

    Paying off one’s political supporters is not taking care of the citizens nor is it attending to the general welfare. Paying to keep highly paid union members off unemployment is not taking care of citizens when the debt will be paid by the taxes of millions of people who are less well off.


    We are just burning this money.

    “This fits in well with the mantra that if money isn’t going to the pockets of an elite and selective group, you might as well burn it.”

    Rhetorical gibberish. The US Government has already written off as unrecoverable 8 G$ “loaned” to Chrysler. The rest of the money is highly unlikely to be repaid. This is as close to burning it as you can get without an incinerator.

  • avatar
    stevelovescars

    I think we’re missing the point of all of this. While I agree that Chrysler has little hope of survival (primarily because they have no new products coming for at least a few years and their current products, well, suck), the point of this bailout isn’t to save the company. I think the money pouring into Chrysler serves two functions:

    1- It distracts from the hundreds of billions of dollars being thrown to the banks in this country… many of whom have as little hope of survival as Chrysler and aren’t even asking for “loans,” but direct handounts. Not to mention that many of them are double and triple dipping into TARP funds with little oversight.

    2- This money will be spent in one way or another as thousands of people lose their jobs and require government help. Think of this as a subsidy for the survival of a few more parts suppliers (a sudden loss of whom could bring down Ford and whatever is potentially left of GM), the union who is tasked with finding a way to provide health benefits to thousands of current and retired employees when this is over, and a more gradual shedding of jobs so that people have time to search for something else rather than getting tossed on the streets en mass. I honestly don’t think anyone in Washington thinks Chrysler will be saved but rather that an orderly implosion will ultimately cost less to clean up than a hurricane strike.

  • avatar
    Robert Schwartz

    “The logical thing for the government to do was to find new custodians for these companies,”

    The real alternative is liquidation. It would be far better for everyone concerned, and far better for the health of the industry in coming years.

  • avatar
    FrankCanada

    Europe does not take America seriously, because we drive crappy un inspired Japanese cars. One thing Italy understands after 2000 years at the forfront of western civilization is- Those who rise fast fall fast. The Japanese have studied italy, (Machavelli) taken out old civilization emotions & created this puppet society of rehashing old European technology, playing it safe & selling it to Americans like its cutting edge. One thing Fiats have is heart, one thing the Japanese cars will never have. No matter if their built in America. Meet the new Chrysler, same as the old Chrysler (Pre War). Those who stop, are lost!

    P.S. In regards to Top Gear Magazine – Jeremy Clarkson – “Porshe Boxter feels like an Italian car, and if any manufacturer can accomplish this, thats the best compliment you can give.”

    P.S.S. – “Everytime I see an Alfa Romeo pass I tip my hat.” – Henry Ford

  • avatar
    psarhjinian

    You’re just following Stalin’s playbook on demonizing fascism as right wing, to protect socialism/communism from the taint of National Socialism.

    No, I’m not. Really. I’m trying to keep people from getting their collective knickers in a twist whilst keeping score for their pet ideological bent. I personally don’t give a damn about whose side of the Great Scorecard is benefitted by Augusto Pinochet, Josef Stalin, Alger Hiss or Walt-friggin-Disney.

    I’m a leftist, and by American standards a pretty serious one, and I do think it’s important for people to get a sense of perspective. Barack Obama is innocuous, or at least as innocuous as an American president probably can be, and no less a scion of extremism than H. George Bush or Gerald Ford. People who get all bent out of shape screaming about communism and the downfall of society dearly need to get a sense of perspective, just as much as people in my circles need to come to grip and stop yelling “Nazi!” whenever they can pause and breathe.

    I prefer to vacation where my hard currency won’t help prop up a totalitarian regime that keeps Dr. Oscar Biscet in a gulag.

    Please. It’s a nice country, and I’ve met a lot of nice people there. If I started avoiding going places based on historical karma, I’d probably be stuck vacationing in Iqaluit. Opening your horizons beyond “people I don’t hold with politically” can be interesting.

    Texas, for example, was like that for me.

    And besides, you get to see some cool cars. I rode around for days in mint Chevrolets from the 40s and 50s, Lada Nivas that somehow still ran and the occasional home-built special that looked like a sort of art-deco Frankstein’s Wheels, running on home-grown sugarcane ethanol and kept up by people who know their stuff. Cuba’s a vintage car nut’s paradise in that way. Pity you’ll miss out.

  • avatar
    agenthex

    Rhetorical gibberish. The US Government has already written off as unrecoverable 8 G$ “loaned” to Chrysler. The rest of the money is highly unlikely to be repaid. This is as close to burning it as you can get without an incinerator. ..blah blah blah

    I just addressed geeber on this, and I don’t intend to play this game of missing the point and repeating yourself.

    Please try again if you have something new to add.

  • avatar
    agenthex

    Paying to keep highly paid union members off unemployment is not taking care of citizens when the debt will be paid by the taxes of millions of people who are less well off.

    Since I’m feeling generous and I’m on a break, I’ll note the misconceptions in this:

    1. The measure of necessity in the result impact, and not the wealth of recipients. By your logic, the banks are least worthy of any bailout, despite being the most necessary.

    2. Anyone much poorer than they won’t be paying too much in taxes. I would consider this an attempt to misdirect from the fact that the actual wealthy may be more affected, but perhaps you just don’t know basic tax stats.

  • avatar
    Kurt.

    Just to keep the points clear here…

    Bush bailed out the banks. He punted to Obama to bail out the Auto Industry when Congress failed to do so.

    Obama is bailing out the Auto Industry.

    McCain would do the same. He’d have to.

    It’s not about saving the UAW or political payoff (though it is happening). It is simply about not dumping 35,000 people onto unemployment rolls – all at once. This summer, we’ll see the same with GM when 252,000 could get dumped. Even in a strong economy, we couldn’t afford that.

    If Chrysler goes the way of the dinosaur, suppliers might survive if GM and Ford could pick up the slack. They can’t. That’s up to another million people unemployed.

    None of this even considers the retirees. People who count on these companies for sustance because they invested their lives into them. The company goes under, the Gov gets stuck with them. And that means you and me.

    Now I don’t condone giving away our National resources (Chrysler/GM) to foriegn entities (FIAT) but someone has to take over and keep the lights on, even if it is only temporary. Sure, FIAT will close factories and move operations off shore but it will be one at a time. A few thousand getting layed off at a time is better 35,000 all at once.

  • avatar
    geeber

    agenthex: If the econ tanks, very few will end up “winning”.

    Chrysler being liquidated is not going to make the economy tank.

    The Big Three aren’t nearly as all-powerful as they were in the 1950s and 1960s…and keeping Chrysler around weakens one of them – Ford – that is making real progress in turning around its North American operations.

    FrankCanada: Europe does not take America seriously, because we drive crappy un inspired Japanese cars.

    Judging by the success of popularly priced European cars in American, U.S. car buyers don’t care how Europeans view their automotive preferences.

    FrankCanada: One thing Fiats have is heart, one thing the Japanese cars will never have.

    Fiat was on the verge of bankruptcy itself a few years ago, so that heart apparently didn’t do it much good. One way it righted the ship is by using the $4 billion GM had to fork over to avoid having to buy the whole company in a ridiculously structured cooperation agreement.

    Fiat may have heart, but it part of the reason it still exists is because GM didn’t have a brain…

    Incidentally, Hondas have heart, too. They also start every morning, and don’t spend more time at the dealers than on the road.

    When Europeans say things like, “Americans aren’t sophisticated enough to appreciate our cars, which is why we don’t sell cars there,” what they are really saying is, “We can’t build cars that meet American demands for quality and reliability, and we don’t want to spend the money for a strong dealer network and good parts availability, so we’ll take our marbles and go home and blame this on everyone else.”

    Amazingly enough, that sounds suspiciously like the attitude that Detroit has taken regarding smaller cars over the years…

    FrankCanada: P.S. In regards to Top Gear Magazine – Jeremy Clarkson – “Porshe Boxter feels like an Italian car, and if any manufacturer can accomplish this, thats the best compliment you can give.”

    Feeling like an Italian car won’t be enough to sell Chrysler-Fiats in numbers large enough to make the company viable.

    FrankCanada: P.S.S. – “Everytime I see an Alfa Romeo pass I tip my hat.” – Henry Ford

    Henry Ford I died in 1947…Alfas have changed considerably since then.

    Everytime I see a 1950s Cadillac I’m impressed…can’t say that about the ones built since about 1971 or so.

  • avatar
    Pch101

    Chrysler being liquidated is not going to make the economy tank.

    I suspect that a lot of the interest in Chrysler was ultimately associated with Cerberus’ then-ownership of GMAC, which the government does not want to fail, and with the credit default swaps for GMAC, which were heavily traded. The ripple effects of a failure were uncertain, and they’ve kept the ball up in the air in order to avoid seeing what may happen if it hits the ground. The fear of falling dominoes triggering a meltdown has been driving both presidents.

    I would agree that as time goes on, a Chrysler failure will become irrelevant. Once the economy recovers, a failure of Chrysler or GM become less important and probably unimportant, because there is enough growth elsewhere to negate them.

  • avatar
    geeber

    Pch101: The fear of falling dominoes triggering a meltdown has been driving both presidents.

    That was certainly a valid fear…I just don’t want Chrysler to become the bottomless pit for taxpayer money. Sooner or later, it will have to stand on its own, and based on what I’ve read about Fiats, and having seen them firsthand while in Europe, I can’t see Americans abandoning their Hondas, Nissans and Toyotas – or even their Fords – for Chrysler-Fiats.

    I guess we’ll all find out soon enough.

    As the Chinese say, “May you live in interesting times.”

    I can’t remember, though, whether that is supposed to be a blessing or a curse…

  • avatar
    Pch101

    I just don’t want Chrysler to become the bottomless pit for taxpayer money.

    I share your concern. My hope is that the government gets Fiat pregnant with this deal (figuratively), then leaves them with the baby if it needs to be fed. We should by trying to put Fiat in a position in which they have much to lose if they don’t contribute whatever cash that may be needed to keep things moving. Whether we’ll actually do that is another matter.

  • avatar
    50merc

    Geeber: “I can’t see Americans abandoning their Hondas, Nissans and Toyotas – or even their Fords – for Chrysler-Fiats.”

    Nor can I. Hooking Chrysler up to a fiscal heart/lung machine simply buys some time. If I worked for Chrysler I’d be desperately searching for another job. Hmm…come to think of it, maybe staying with Chrysler until the federally-subsidized post-employment benefits kick in is the right strategy. The feds might give jobless UAW members a reasonable facsimile of their old health coverage and pension amounts. A lot of people seem to be action the assumption that Washington should do more than what PBGC would provide.

  • avatar
    Patrickj

    @danms6
    As a part of the defense establishment, the largest socialistic organization in the history of the planet, you are obviously familiar with socialism.

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