Ask The Best And Brightest: Are You Buying Fiat's "Old Carco" Kiss-Off?

When Chrysler celebrated its payback of “every penny that had been loaned less than two years ago” last week, I noted that CEO Sergio Marchionne’s triumphant line was technically correct, but hardly represented the whole truth of the story. I pointed to $1.5b in supplier aid that helped keep Chrysler afloat, as well $1.9b worth of the Bush Administration’s “bridge loan” to “Old Chrysler,” prior to its government-guided bankruptcy and sale to Fiat. Apparently my more-inclusive accounting of the price of Chrysler’s rescue (which was picked up elsewhere in the online media) caused Mr Gualberto Ranieri, Chrysler VP of Communication, to spend some part of his Memorial Day Weekend writing a response of sorts, outlining Chrysler Group LLC’s perspective on the situation. Hit the jump for Ranieri’s statement, and my brief answer to the headline’s question.

Ever take a really close look at fruit salad? It’s not necessary. Fruit salad is pretty self-explanatory. A collection of different fruits that makes up the whole salad. A cherry by itself, does not a salad make.

Well, unfortunately, we’ve seen some published, and posted, reports treating the entire $12.5 billion lent by the Federal government as the cherry and not the salad, and therefore questioning whether we had the right to mark our loan payback this past Tuesday.

It’s easy to be confused, so let’s pick apart the salad one fruit at a time.

Yes, the Federal government loaned a grand total of $12.5 billion to a former company known as Chrysler LLC, along with other entities including Chrysler Financial, GMAC and parts of the current Chrysler Group LLC. Those parts that did not go forward with the new company post-bankruptcy, and therefore were left behind for disposal, are under an entity commonly called Old Carco.

That’s your fruit salad.

Chrysler Group LLC is the cherry and stands alone. Chrysler Group LLC paid back its full obligation to the federal government—with interest.

Indeed, the U.S. Treasury lays it out soundly in its statement released on May 24. Of the $12.5 billion, “Chrysler has returned more than $10.6 billion of that amount to taxpayers through principal repayments, interests and cancelled commitments.”

“When Chrysler LLC (sic), the new company says, we paid back every penny we borrowed, that is 100 percent correct,” said Ron Bloom, special assistant to President Obama, in an interview with WJR, Detroit radio personality Paul W. Smith.

What the other elements of the “fruit salad” owe is completely separate and irrelevant to our company.

In the words of Chrysler Group LLC CEO, Sergio Marchionne speaking to Smith, “The funds that we’re talking about, this excess, are funds that Chrysler never saw. They funded things prior to bankruptcy, including operating losses that go back to 2008. I mean they were even given under the previous administration – they were not on President Obama’s watch, so I – these are things that this group doesn’t know.”

Chrysler’s triumphal payback ceremony was a fascinating blend of the political and business worlds, but Marchionne’s distinction between loans made by the Bush and Obama administrations is fairly irrelevant given the fact that Chrysler’s noble decision to pay back its loans with Wall Street money was possible only because of Bush’s precipitous bridge loan. The least Marchionne could have done would be to acknowledge that taxpayer sacrifice, along with the sacrifices of the liability awardees, bondholders and laid-off workers who also made the new Chrysler Group LLC possible. Crafting sentences to vaguely acknowledge “loans” while implying (and strongly messaging) that taxpaying consumers should understand Chrysler as having squared up “every penny” of “the loans made to us,” is to beg for a clarification of the actual costs of Chrysler’s rescue.

And since we’re in clarification mode and Chrysler Group LLC is in “distancing itself from Old Carco” mode, let’s follow Mr Marchionne’s logic one step further: perhaps it would be less confusing for all Americans if we properly emphasized the discontinuity of the bailout by no longer referring to Chrysler as a “Group LLC” but, rather, a division of Fiat S.p.A. After all, Fiat owns 46% of the company and will have majority control prior to any IPO. Because then, Americans curious to understand the truth about the cost of Chrysler’s “rescue” could simply calculate what it cost taxpayers to sell an American automaker to an Italian company, instead of having to try to understand how the disposal of Old Carco was somehow not a cost of Chrysler’s rescue. But somehow I think Ranieri and Marchionne don’t want quite that much emphasis on the newness of Chrysler Group LLC.

Ultimately, Americans were only concerned about the price of their metaphorical fruit salad… and now, Mr Ranieri is going to have them wondering about the ingredients.