Ask the Best and Brightest: GM and Chrysler: Gone Tomorrow?

Robert Farago
by Robert Farago

Chrysler, the U.S.-funded, Italian-run, formerly bankrupt American automaker is leaking its product plans, ahead of their official unveiling in November. Automotive News [sub] confirms that Sergio Marchionne’s minions have decided to spin off Ram trucks into a separate brand, removing the company’s most profitable product from underneath the Dodge umbrella. For once, AN (or at least its mysterious person of interest) understands the full implications. “The separation of the Ram truck brand will allow Fiat to make Dodge more of a performance car brand, the person said. But the move could also make it easier for Chrysler to spin off its truck business down the road if a continuing slump forced Fiat or U.S. officials to consider such a step.” Did you see that? “U.S. officials.” Pay some attention to the Presidential Task Force behind that curtain! In any case, Chrysler and GM are heading into a perfect storm: continued market share erosion, new product constipation and chaos and, sopra tutti, cash burn.

Never mind that GM IPO FUD, or the back door billions shoveled GM and Chrysler’s way via subsidies, low-cost loans, union health care bailouts, the PBGC Delphi dance and tax breaks. Both automakers’ only real hope of long-term survival is the same as it’s been since last spring: your taxes. What are the odds that Uncle Sam will re-up? Of course, timing is. Everything.

Questions, questions, questions. Does either carmaker have enough cash in the kitty to make it past the mid-term elections without a fresh federal infusion? And if the Democrats get their asses kicked, will the new, fiscally conservative Republicans bailout Motown again (not forgetting that it was George W. Bush who started this whole debacle)?

For those of you who say the Obama’s army never really intended to rescue either automaker, that they were simply subsidizing the companies to facilitate a soft landing, I say bullshit. Washington’s big swinging dicks, led by private equity money men with a similar anatomical affliction, honestly thought they could “fix” Detroit. Any other reading of the situation would be deeply cynical, and you know how I feel about that.

In any case, it’s only a matter of time before Chrysler, and then GM, are parted out. Without a new new new round of bailouts, look for the Big Two to go down by the end of next year. Your take?

Robert Farago
Robert Farago

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  • Geotpf Geotpf on Oct 02, 2009
    TJ : October 1st, 2009 at 10:21 am I aree and disagree with this assesment of Chrysler and GM. I think Chrysler is dead but GM will survive. I agree with this, with a slight modification: Chrysler must die if GM is to survive. If Chrysler goes away, enough of that demand will migrate to GM to keep it is business. Obama should have picked favorites and helped GM and killed Chrysler. In any case, I disagree with his assessment of what Obama wants to do. I'm sure Fargo is a Republican and automatically sees the worst in Obama; as a Democrat, I see the best. Obama realized that having both GM and Chrysler go out of business in the middle of a recession would be a disaster for the country at large. I seriously doubt a second go around of funds will be available, especially for Chrysler. We will just have to wait and see.
  • Teddyc73 As I asked earlier under another article, when did "segment" or "class" become "space"? Does using that term make one feel more sophisticated? If GM's products in other segments...I mean "space" is more profitable then sedans then why shouldn't they discontinue it.
  • Robert Absolutely!!! I hate SUV's , I like the better gas milage and better ride and better handling!! Can't take a SUV 55mph into a highway exit ramp! I can in my Malibu and there's more than enough room for 5 and trunk is plenty big enough for me!
  • Teddyc73 Since when did automakers or car companies become "OEM". Probably about the same time "segment" or "class" became "space". I wish there were more sedans. I would like an American sedan. However, as others have stated, if they don't sell in large enough quantities to be profitable the automakers...I mean, "OEMs" aren't going to build them. It's simple business.
  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.