In Defense of . . . The Chrysler and GM Bailout

Rich Truesdell
by Rich Truesdell

Over the last year, as this unparalleled automotive sales depression has picked up steam, I have observed unprecedented vitriol directed at both Chrysler and General Motors. Here on TTAC; on Autoblog, Jalopnik, CarDomain, et al.; and in the mainstream press, the companies receiving federal aid have been criticized. I just couldn’t understand it. It’s as if the only vehicles these companies ever built were the Jeep Compass and Pontiac Aztek. Critics seem to have completely forgotten all the great cars both companies are building right now and have built over the years. At the same time, they’ve overlooked Chrysler and GM’s importance to their employees, suppliers and countless communities from coast-to-coast. “Stakeholders” who have a direct impact on as many as one-in-ten domestic jobs.

Then came the contentious debate about bailing out Chrysler and General Motors which culminated in President Obama’s address on March 30. Obama gave Chrysler thirty days fix its balance sheet and close its alliance with Fiat—or face liquidation. GM was given an additional thirty days to restructure itself or face bankruptcy. While Chrysler came within days of escaping bankruptcy, a few of its dissident bondholders balked and Chrysler was thrown into a Chapter 11 filing that many pundits felt it would it would ultimately result in liquidation. While many observers rooted for it to failure, Chrysler has emerged from bankruptcy with unprecedented speed. Congratulations.

Back in early November, in what seems like a lifetime ago, the talk in the automotive world was of a possible “merger” between GM and Chrysler. I thought that this was a bad idea and would quickly lead to the dismantling of the Auburn Hills automaker and the loss of at least 30,000 US jobs. I came out and said that there was a far better partner for Chrysler who needed small car technology that they couldn’t afford to develop on their own. That partner was Fiat, which had the obvious and complementary need to sell vehicles in the United States in its quest to become a truly global automaker.

On January 20, Chrysler announced it was in serious partnership talks with Fiat to merge their operations; a move that would help both cope with and survive in the deepening worldwide automotive sales depression. This sales implosion was not only was impacting weak regional automakers but successful global ones like BMW, Honda, and even Toyota. All were seeing sales volumes declining by 40% or more as the virus was spreading around the globe.

Then, as now, I believed that an alliance with Fiat was Chrysler’s best and probably last hope for survival and was pleased to see yesterday’s deal between Chrysler and Fiat concluded. I truly believe that it will have a positive impact on both companies and will give us, as car enthusiasts, additional choices. After all, what can possibly be bad about Alfa Romeos returning to our shores?

Meanwhile, it should be said that other nations have taken extraordinary steps to protect their home-based industries. Why shouldn’t we do the same, especially since we have provided completely open access to our market allowing them to build their export industries? For example, I have absolutely nothing against Hyundai and Kia. But what’s fair about the fact that South Korean manufacturers can sell more than 600,000 vehicles a year here in the United States, yet our manufacturers sell fewer than 10,000 units annually south of the 38th parallel?

Last year, when driving to cover the Los Angeles Auto Show, I was forced to take a detour off the freeway. I stopped at a Starbucks in the Asian enclave of Alhambra off I-10 to get my e-mail. As I pulled into the parking lot, I noticed something strange: there wasn’t a single American brand car in the lot. While there were a few BMWs and Mercedes, every single car in the lot was of Asian origin. I walked into the Starbucks thinking to myself that Asian buyers, consciously or unconsciously, appear to buy homogeneously, supporting their nation’s car builders. Why don’t Americans? It’s because our market is so open that we can. In retrospect, maybe this explains why the American public—and our politicians—gives our own companies such a cold shoulder.

I hope the restructuring of General Motors is ultimately successful. The fact that some are calling for a boycott of “Government Motors” strikes me as absurd. Collectively, we as Americans will soon own 60 percent of New GM. Why would we not buy vehicles from a company we own?

[Read more of Rich Truesdell’s work at automotivetraveler.com]

Rich Truesdell
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  • Jimmy2x Jimmy2x on Jun 12, 2009
    If the president of the United States starts a war without provocation that directly expands the public debt by $2.7 trillion, and which gets 10s of thousands of human beings killed, all the while financially benefiting his biggest backers and the world he comes from while the rest of humanity takes it on the chin, which then leads to the brink of the total collapse of the global financial system, the natural wingnut response to this is to find some random left-wing whacko like Ward Churchill saying something mean and then comment, “See? Both sides are bad!” No - that's your trick. Bush was not being discussed here, but so far as I am concerned he should be prosecuted for murder - see Bugliosi, Vincent. That said, ever heard of Vietnam? I did, up close and personal - 57,000 American deaths thru another lie. That one happened to be Democratic. And there we go, another dash of false equivalency, more lying, and some gratuitous personal insults. What would a healthy exchange with an outmatched wingnut be without the predictable ending? I am actually very funny, it’s just that the humor seems to elude those with lesser intellects. And you have the nerve to accuse me of gratuitous insults? All I've ever said is that crackpot partisans exist on both sides of the aisle. From that, you have quickly deduced that I am a right-wing nut because I take issue with you. At his point, I bow to your superior intellect and give up.
  • Probert Probert on Jun 16, 2009

    to the tin hats: 1) It's not "the " government - it's "your" government. If you really believe in "freedom" absorb this and figure out when this concept of government apart from the people became common thought. 2)If you want to see how congress makes decisions follow the money. 3) If you want to judge who's pulling a fast one start with anyone who waves the flag and cries "freedom" at any opportunity. HINT: watch the hand that's not waving the flag. 4) use google - do some simple research to back up your ideas. Separate facts from opinion and from those facts derive an opinion. 5)Here's a good question: why are unions and health care bad for the US and good for every other industrial state on the planet earth? Wait - use google - ask a foreign tourist in your town - think - follow the money. 5) Try to treat the next guy well - and tip your waitress.

  • Mike Some Evs are hitting their 3 year lease residual values in 6 months.
  • Tassos Jong-iL I am just here for the beer! (did I say it right?)
  • El scotto Tim, to be tactful I think a great many of us would like a transcript of TTAC's podcast. 90 minutes is just too long for most of us to listen. -evil El Scotto kicking in- The blog at best provides amusement, 90 minutes is just too much. Way too much.
  • TooManyCars VoGhost; I was referring more to the Canadian context, but the same graft is occurring in the US of A and Europe. Political affiliation appears to be irrelevant.
  • The Oracle Going to see a lot of corporations migrating out of Delaware as the state of incorporation. Musk sets trends, he doesn’t follow them.
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