>For years Chrysler has been the low man of the Detroit three, soon it will just be the Detroit two. I haven’t been a fan of Chrysler, but I must admit that I did enjoy my time in a Dodge Avenger two weeks ago. A friend of mine and I were chosen to present at a teaching conference in Kalamazoo, MI. To my surprise I received an Avenger for my rental and enjoyed all 1000 miles of the weekend. Of course why not drive: $400 per tix plane ride($850total after tax), $250 for rental car and gas. Duh!
But now that the domestic car market is in a pseudo panic, I wont be buying American for awhile. Think about it this way, all the 2010 that are being sold were made by workers who don’t know if or when they will be laid off. Ask yourself this, Do you do your best work when you think you are goin to be fired?
It turns out that Chrysler might be just small enough to fail.
In the end, the Obama administration decided to back General Motors — at least for 60 days — but to effectively wash its hands of the much-smaller Chrysler after only 30 days. Barring a last-minute rescue by Italian automaker Fiat, U.S. taxpayers won’t put up another penny to back the company.
For all the times President Barack Obama’s been told he must prop up companies that are “too big to fail” — think Citigroup and AIG — he’s finally found one that he’s decided he can let go, if he has to.
White House sources said Chrysler isn’t viable as a stand-alone company, and without Fiat or more tax dollars, might go into some kind of “structured” bankruptcy. But auto industry analysts say a bankrupt car company isn’t much of a company at all — simply because shoppers don’t want to buy cars from a bankrupt company.
It’s not a step Obama would take lightly, for sure. But politically, it seems a step he’s seriously contemplating in the face of “bailout fatigue” in the heartland — but also Chrysler’s own specific situation.
The ailing automaker, home to such storied American brands as Dodge and Jeep, just isn’t “systemically important” enough — in the new vernacular of bailout-era Washington — to warrant extraordinary measures to save, the administration declared. The hard numbers are these: Chrysler, in 2008 employed 58,000 people. But General Motors employed many more: 252,000.
“They are, of course, much smaller,” explained a senior administration official Sunday night.
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If Chrysler should fade, Obama also could argue that the company brought it on itself.
White House sources bashed Chrysler’s plan for recovery, saying that it contained overly optimistic and flat-out unrealistic economic assumptions.
Not only that, these sources said in no uncertain terms, its cars aren’t very good either.
In a conference call with reporters, a senior administration official cited several awards recently presented to General Motors cars, but could think of no industry recognition for Chrysler vehicles. “Chrysler has no cars that are recommended by Consumer Reports,” the official said.
Still, such a move could cause massive pain in Detroit and the Rust Belt states where Obama succeeded in 2008 — hitting hard at those blue-collar families he struggled to win over in the first place. He’s worried enough about the economic displacement to appoint a recovery director for that region alone.
And Obama was careful to give General Motors — a far more iconic American company anyway — a clear escape hatch to survivability in his plans announced Sunday night.
In fact, it’s telling that Obama is not even bothering to fire Chrysler CEO Robert Nardelli, who has been at the company since 2007. That could be a sign that no one at the White House thinks Chrysler will be around long enough for it to matter. General Motors CEO Rick Wagoner, by contrast, was asked to step down, and he will be replaced by the company’s president, Frederick Henderson. The administration official said Wagoner’s departure was orchestrated to give General Motors a “start with a clean sheet of paper.” But Chrysler’s not getting the same chance.
One other factor that likely weighed on the Chrysler decision — though no administration officials said so explicitly — is that Chrysler is owned by the secretive private equity firm Cerberus Capital Management. That firm, which is headed by former Bush administration Treasury Secretary John Snow, is presumably sitting on billions of dollars in cash, yet has declined in recent months to provide additional financing to its own portfolio company. That means either that Cerberus is much poorer than most investors assume, or that it has concluded on its own that Chrysler is a lost cause.
If the big money guys in New York weren’t going to put money into Chrysler — when they own the company — it would be an enormously difficult political sale to convince the American taxpayers that Chrysler was a good investment. Obama, it seems, decided that was a fight he didn’t want to take on at all.