Old look to the new Chrysler

Old look to the new Chrysler

formatting link
The new Chrysler, sprung from bankruptcy Wednesday, is not the old Chrysler.

Or is it?

It's leaner, smaller and lighter by 789 dealers. It's got a new CEO, Sergio Marchionne, a promoted deputy CEO, Jim Press, and the makings of a new board. It'll have four divisions, none of which are familiar names to the folks in Turin, Italy, now players in the global auto industry's latest grand experiment.

But Chrysler is under foreign management -- again. It still is beholden, if indirectly, to the priorities of the United Auto Workers, whose health care trust owns 55percent of Chrysler Group LLC. And its future will be guided by the disembodied hand of the federal government joining with the Italians of Fiat SpA, a curious combination that gives new meaning to the clich? "strange bedfellows." Decision a relief

No question, the U.S. Supreme Court's decision not to hear key issues in the bankruptcy case -- an appeal pushed by three Indiana pension funds

-- is a collective relief to the thousands of Chrysler employees and Chrysler communities desperate for the company to get one more chance with Fiat, however draconian, to avoid liquidation.

No question, either, that Team Obama delivered a speedy tour through bankruptcy that the experts (and more than a few seasoned CEOs) didn't think possible. The trial run suggests bankrupt General Motors Corp. will emerge, too, as a "New GM" by Labor Day.

But at a terrible cost, witness the Chrysler casualties. Nearly 790 dealerships were forced to relinquish their franchises Tuesday, the same day the Supremes backed President Barack Obama's auto task force. Thousands more jobs will disappear, more plants will be closed and shutdowns of others will be lengthened, stressing the supply base and state and local tax revenue. Chrysler unwanted

It's scant comfort to say the obvious, that this had to happen, that this sacrificing of some to save the rest was the only option this side of complete shutdown. But it was. No one else in -- or interested in -- the global auto space wanted Chrysler. Not the Germans or the French. Not the Japanese or the Koreans. Not the Russians, the Chinese or the Indians.

And certainly not the private equity sharpies on Wall Street, who watched Cerberus Capital Management LP's play to return Chrysler to American hands blow up in its proverbial face. The bankruptcy was a good, ol' fashioned thrashing for the firm named for the mythical three-headed dog guarding the gates to hell.

So Auburn Hills, home to the battered and bruised, dissed and decimated Chrysler, gets an Italian boss. In that, there's a faint symmetry to the nine years under German control -- a European and his vaunted "technology" will ride to the rescue of the folks who revived Jeep and build the best minivan on the planet.

Let's hope the similarities end there, for the humbled Chrysler emerging from bankruptcy was impoverished by nearly a decade of control by Germans who refused to engineer the economies of scale that make global auto companies work. Or fail, because high-end European luxury cars could not be allowed to be tarnished by association with tawdry American metal. Ja!

But how will Marchionne & Co. ride to Chrysler's rescue, beyond saving Detroit's smallest automaker this week from an all-but-certain downward spiral that would be devastating to Oakland County, southeastern Michigan and pockets of Indiana, Ohio and other states that haven't killed manufacturing?

Fiat isn't putting any cash into the deal because we, the American taxpayers, are under terms of the deal with the feds. Fiat's capacity to assume more debt is limited. And Fiat vehicles, focused on small and subcompact cars with small displacement engines, are not expected to appear in U.S. showrooms for at least 18 months.

That's a long time when, as Chrysler's representatives have been reporting recently, the company has been losing $100 million a day. At that rate, the American-Italian axis would pretty much consume the $6 billion in exit financing wired Wednesday to Chrysler from the U.S. Treasury. Big job ahead

Amid near-depression industry sales numbers, the taint of a 40-day bankruptcy and a truck-heavy lineup with a reputation for dodgy quality, that won't be an easy trend to reverse. Even for a savvy Italian workout guy credited with pulling Fiat itself back from the brink a few years ago, partly by whacking away at what he perceived to be surplus layers of upper management, it's a challenge enorme.

And more. Chrysler's bankruptcy cram-down, muscled by Obama's auto task force, likely will reverberate across the investor class and capital markets for years to come. Here, secured lenders are unsecured, and unsecured debtors like the United Auto Workers are secured to receive special treatment.

Even as Chrysler emerged from Chapter 11 and tied up with Fiat, the administration chose the same day to announce plans to monitor the executive compensation of firms -- including Detroit's automakers and major banks -- that have received (or been forced to take) federal dollars under various bailout schemes.

Just asking, but in a global market for executive talent, isn't an administration whose interests and those of the taxpayers would be best served by seeing the best and brightest running these struggling firms merely succumbing to populist ranting and telling the talent to go elsewhere?

Of course. Welcome back, Chrysler. You've been missed.

Reply to
Jim Higgins
Loading thread data ...

FIASCO - Fiat/Chrysco

Reply to
News

For sure.

Reply to
Jim Higgins

MotorsForum website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.