May 1, 2009

Chrysler couldn't Dodge bankruptcy

It's interesting that Obama was once again trying work both sides of the aisle, and in multiple ways. In the issue of a Chrysler bailout, Obama was looking for the car company to make drastic changes in order to avoid bankruptcy. That included concessions from the auto workers - one of his solid constituencies. He's trying to come across as the saviour of the common man but he's demanding they reduce their income to save the company. Not that that's a bad thing, but he's not championing them the way they he's claiming to when he brags about his tax cuts for Americans. He's pushing people into a lower tax bracket but taxing them less.

In a similar vein, he's pushing a green agenda including changes to the automotive industry - something that shouldn't be foisted on the car companies while they are in their possible death throes. He's throwing the drowning man a lead life preserver.

And in the third and most interesting instance of working both sides of the aisle is how he's treating the creditors of Chrysler. The financial institution bailouts on one hand, is subjecting creditors to stress tests. He's accused them of mismanagement and greed. Yet he's said that the institutions are necessary for America's financial health. In the case of Chrysler, they had to declare bankruptcy because the lenders would not bend on getting back such a low return on their lending - they were holding out for a smaller loss. The creditors weren't banks - they were steel companies, parts suppliers, and other manufacturers and suppliers related to automotive manufacturing. Are these companies being greedy or just trying to keep their own heads above water? The latter.

So why push them to bail out a failed company when it just moves the pain from one pile to another? Because it looks like the President is trying to help the little guy - auto workers. People probably assume the creditors are banks. Nobody likes the banks much right now. So he helps the UAW and earns some modest respect from those who opposed TARP (I doubt it). He's playing both sides of the aisle politically. Except the truth is that he's really only helping the most visible little guy. Who is going to clamor for a rescue of Flex-N-Gate Corporation? Nobody in significant numbers.
Chrysler couldn't hack it. Too bad. Dodge made some cool NASCAR cars. The company will emerge out the other end with Fiat ownership. The jobs will be there, but in a nostalgic way, a little piece of Americana will get dropped along the way. Let's hope GM fares a little better.

And on the plus side, perhaps this frees up resources that could be more efficiently used elsewhere in the economy. If you're feeling like this is too much of a travesty, I urge you to check out this.


  1. The "real" downfall of Chrysler started when Lee Iacocca replaced himself with Bob Eaton and not with Bob Lutz - mistake #1. Iacocca's hatred/fear of Lutz caused him to make that decision (ego-driven decision). Then Eaton sold Chrysler down the drain with his deal with Daimler. Eaton made a 100 million dollars on that deal - mistake #2.

    Daimler didn't want the Chrysler 300 to compete so close to the low end "C-class" so they went on a rampage to cut all costs (completely at the expense of quality) across the board - mistake #3.

    Daimler also on the day of them taking over Chrysler, shifted $9 BILLION dollars Chrysler had saved for future projects over to the Daimler side of the ledger.

    Humm, no money for future projects, cut quality to the bone, reduce manpower (design & engineering staffs) and we wonder why they have had so much trouble?

    How do I know this? I worked in engineering my whole career. Not being a high-paid VP, I could only watch - very sad indeed.

    Side note: I just took my Dodge Caravan to Florida and back to Michigan. Loaded down w/4 people and fulled with luggage, I averaged 25.4 mpg for the entire trip. And I'm not a slow driver!

    I only hope and pray they come back strong for the sake of their workers and the 10's of thousands of men and women who work in the supply base, tooling shops, plastic & steel industry's and all others who's livelihood depends on AMERICAN companies. Save America - buy American!

  2. David,

    That's some interesting insight, I'd like to hear more. You can reach me directly on Twitter; Dean_L.


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