Barack Obama is set to address the nation tomorrow, announcing Chrysler’s death and rebirth. The president will frame the government’s intervention in familiar terms: hope and change. Only in the reverse order: change and hope. Obama will say that the federal government is helping Chrysler transform into a viable American automaker. This we (yes we) are doing because President Obama has hope for the future of the American automaker and, not-so-incidentally, American automaking. Chrysler, the United Auto Workers (UAW) and Fiat will now build the kind of economical, environmentally friendly vehicles America needs. Unfortunately, Obama’s “plan” is the exact opposite of what it pretends to be.
Chrysler Bailout III represents the protection and perpetuation of the status quo, not genuine change. How could anyone think otherwise, now that The Presidential Task Force on Automobiles (PTFOA) has engineered a deal that gives the United Auto Workers a majority stake in the reconstituted Chrysler? If there’s any one group in the auto industry that has resisted change, that’s opposed root and branch reform, it’s the UAW.
Since the union’s inception, they’ve labored under an ever-expanding set of terms and conditions, that’s now thicker than “Gone with the Wind” and “War and Peace” combined. As you might imagine, none of these endlessly negotiated strictures, mandates, grievance procedures, benefits, entitlements, etc., were designed to engender manufacturing flexibility. They were designed to protect workers from change.
The UAW’s onerous contracts have bolstered a stultified corporate culture that’s both unable and unwilling to foster innovation. You want to change the way I do my job? Take it up with the union. And good luck with that.
Sure, Chrysler’s management bears ultimate responsibility for allowing their union workers to [help] frustrate the company’s overall competitiveness. And no, the UAW didn’t decide what Chrysler cars, trucks, SUVs and minivans to build, how to build them, what parts to use or how to put them together. But no matter who’s to blame for Chrysler’s execrable products, the union is in the business of protecting the union—not finding ways to build better automobiles.
Not to put too fine a point on it, anyone who truly believes that increasing the UAW’s stake in Chrysler will transform union members from legendary foot-draggers to world class sprinters, passing the four-wheeled baton to a freshly energized (Italian?) management structure with speed and grace, is nuts. As in delusional.
Which is a perfect description of President Obama’s “plan” for Chrysler.
Not to coin a phrase, Obama and his PTFOA have failed to hope but verify. It’s one thing to imagine a reborn Chrysler making fuel-efficient Fiats that can sell at enough of a profit to keep UAW members employed and pay off the new company’s $10 billion (and counting) debt to taxpayers. It’s another to think it can actually be done.
Chrysler’s turnaround “plan” involves more variables than a five day weather forecast, from mastering manufacturing logistics in a company decimated by layoffs, to somehow overcoming consumer resistance to TWO damaged brands.
Perhaps that’s why private investors wouldn’t touch Chrysler with a ten-foot spreadsheet. And now, where financial angels fear to tread, the federal government rushes in. To save jobs. Union jobs.
As I’ve stated previously, the American public doesn’t know credit default swaps from Shinola (another company that went the way of the buggy whip). But they understand that new Chrysler is a union gig. Well, if they didn’t before, they will now, what with the UAW’s 55 percent share of the post C11 company. The question then becomes how much sympathy does the average American—rather than, say, the average Democratic operative—have for the “plight” of the unionized working man?
The answer: some. But not enough. Not enough to go out and buy a new new Chrysler product just because it wears the union label. Especially not now, at a time when the average new car buyer isn’t buying a new car. When they can’t afford to risk their hard-earned money on a vehicle that may or may not be reliable. From a dealer that may or may not be in business next year. And then there are the people who will not even consider buying a Chrysler product because of the bailout.
There’s your bottom line. At the end of the day, after the feds “invest” tens of billions of tax dollars in Cerberus and Daimler’s cast-off, the automaker will live or die based on whether or not American consumers will buy the company’s vehicles in sufficient quantity at a price that allows Chrysler to take in more than they spend. As our Best and Brightest will tell you, without genuine change in corporate culture, without a realistic plan, the odds of that happening are somewhere between none and none.
And so the president will eventually learn—as Chrysler’s previous owners have—that commercial realities can only be postponed not denied.
And so the president will eventually learn—as Chrysler’s previous owners have—that commercial realities can only be postponed, not denied.
Good editorial, RF.
You just can’t borrow your way out of debt.
I didnt ever get to study any numbers for chrysler, and did not see how Fiat was really a savior, but, if union owns 55%, then we get to see if they will now argue against themselves when someone in mgt has a good idea to improve productivity. Mgt representing owners of course.
OK, so the UAW now owns 55% of the company. Great. Are they going to invest the 10s of billions of dollars to develop new and competitive products? The tens of billions to upgrade the ancient and obsolete factories? Is the plan just to hope people want to buy FIATs with DODGE/CHRYSLER/JEEP nameplates on them? Where would those be built? I don’t get it. I really don’t.
If the feds are unwilling to let Chrysler be liquidated, are they really any worse off than GM?
Would a lineup consisting of the Ram, Ram HD, Charger, Challenger, Grand Caravan, Wrangler, Wrangler Unlimited, Patriot, Grand Cherokee, Fiat 500, and Grande Punto really be that uncompetitive?
?
Hmmm,what happens the next time oil prices increase? The 500 and Punto aren’t enough. No hybrid or alternative fueled vehicles?
Whilst I don’t always agree with your views on the domestic car industry Robert, I have to say that this is a fair and equitable analysis of the situation.
The tie-up with Fiat is a smokescreen of epic proportions. It will have taken Ford, with proper investment, almost 3 years to bring the outstanding Fiesta to the US bearing in mind product changes, plant building, safety regualtions etc. etc. How on earth to Chrysler/Fiat expect to be able to bring a European vehicle to market any sooner when they do not have anything like the money required.
In addition, with the company in union control, the new small Fiats will have to be built in the US and many companies have already proved that this will not make a single dime in profit as a result.
The plan is fundamentally flawed, and I fail to understand how the combined brains behind the Task Force and the Obama backroom staff cannot see this for what it is.
I feel for the Chrysler team. They have been shafted from here to kingdom come by a succession of idiots. But I am sorry – enough is enough.
Let them die with some kind of dignity (Jeep and all – sorry Robert – that is a brand going South fast as well).
Time to move to the next chapter in Detoit’s history. One that sees Ford out front, a much smaller GM and no Chrysler.
Arivederci amici e bonne notte!
What are the Stages Of Denial again someone?? Acceptance hasn’t been reached…..still.
The problem is structural, who knew?
The mess won’t be fixed until GM/Chrysler are absorbed into Ford (as an example), or all three just fade away.
The mess won’t be fixed until GM/Chrysler are absorbed into Ford (as an example)
Even as an example, the thought of GM and Chrysler dragging down the one automaker in Detroit that’s got an exit plan (albeit one that may not work) is enough to make me shudder.
Yikes – please don’t let Ford anywhere near this mess! They are good to go! Don’t hold then back with this pile of steaming horse manure!.
Oooppss. Before anyone else gets too startled, I meant that Ford pick up the remnants that have any worth. Jeep, maybe some truck business, Cadillac. Volt, maybe some sites.
Or maybe none.
It meant it as an example of the sort of contraction that will be required to create an entity that can survive in what will be a MUCH leaner reborn auto industry than we ever had before. (Albeit with less choices, but hey…)
seanx37:
“The tens of billions to upgrade the ancient and obsolete factories?”
Sean,
While I agree with your sentiments, it’s untrue that Chrysler has obsolete factories. Chrysler has some of the most modern manufacturing plants anywhere. FIAT knows this. That’s one reason they want in.
Oooppss. Before anyone else gets too startled, I meant that Ford pick up the remnants that have any worth. Jeep, maybe some truck business, Cadillac. Volt, maybe some sites.
Ford getting Jeep could legitimately be a good thing. This is the brand I thought of when you mentioned Ford absorbing Chrysler.