Wednesday, June 10, 2009


Well, the deal is done. Most of Chrysler's operations have been sold to Fiat, and a good third or so of their dealers are no longer dealers. Most of their debt load is gone, and their pension obligations are too which reduces their labor costs. But that's not going to help Chrysler too much.

The portion sold to Fiat is going to take at least a year to pick up steam. Fiat isn't a well-known brand in the US, and the kind of sub-compact they make is smaller than the popular size here too. It's going to take them a year to get the factories re-tooled, ramp up production and start actually getting cars into showrooms, with no guarantee people'll buy them over more well-known brands. The portion that remains Chrysler is in even worse shape. It's line-up is still heavily skewed towards large trucks and vans and SUVs, exactly what's not selling well anymore. It's going to take them at least a year, maybe two, to get new designs more in line with consumer demand into production. And both of them will be competing with GM's new models, with Ford's existing line-up, and with Toyota, Mazda, Honda, Hyundai, Kia, Acura, Nissan et. al..

Normally I'd consider a bail-out of a company in this bad a shape as an all-around bad deal. But to be honest the point of the bail-out isn't to save Chrysler the company. It's to keep the majority of it's employees on the payroll, to keep the factories open and buying parts from suppliers, to generally stave off the complete dissolution of a major US auto manufacturer until the stock market isn't wavering and economy isn't ripe for any small push to send it tanking further.

I'd note that this is something the Republicans seem to be forgetting. The choice here isn't between good and bad choices. 8 years of Republican policies has left us with choosing between bad and horrible. It's like a tourniquet: it's a horrible idea, one of the worst things you can do as first aid, topped only by letting the patient bleed out. So when you can't stop the bleeding any other way you put the tourniquet on anyway, knowing you're likely costing the patient their leg but at least he'll be alive long enough to worry about that.

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