The Obama Administration has evaluated business plans and decided the best course of action for two of the auto companies formerly known as the “Big Three!” America can breathe a sigh of relief. Chrysler can declare bankruptcy now and be taken over by Fiat. GM can have a few billion more (borrowed) tax dollars now and the economic wizards in Washington will decide a GM bankruptcy later. What an innovative solution!
Of course, we have to overlook the fact that the president has never run a business, let alone an automobile manufacturer, and none of his financial advisers has even remotely relevant experience -- one wonders who evaluated the business plans and what criteria were used.
Then, of course, we have to consider the decision to force Chrysler to merge with Fiat, instead of being split into potentially profitable businesses in Chapter 11 court. Chrysler’s demise was no surprise to anyone who has been paying attention to the auto industry since 1970, because they have consistently produced the wrong cars for the economic times. For instance, when gasoline was $4.00 per gallon last summer, Chrysler was advertising the availability of its “Hemi” across its model lineup and offered little or no competition in the high-mileage market segment. Also, Chrysler/Dodge/Jeep were perennially at the bottom of consumer reliability ratings. If ever there were a company that deserved to fold, Chrysler was near the top of that list.
Now, through the genius of DC bureaucracy, Chrysler, a company that was unable to read the market, is to be wedded with Fiat. Anyone over 40 may remember Fiat’s short but undistinguished attempt to compete in the American market. The 124 Sedan was small, unattractive, and not particularly efficient. Fiat finally withdrew the 124 from our shores and licensed Russia to build them under the name “Lada.” The Spyder roadster lasted a bit longer than the 124, but ultimately died because of Fiat’s poor quality and lack of maintenance support. So, we are looking a merging Chrysler, a company with no foresight and poor quality control, with Fiat, which has a documented record of being unable to produce a quality car for our market. Whether they end up making “Fislers” or “Chryats,” only a fool would buy one. And, by the way, if Fiat is making the decisions, will he cars really be American?
General Motors is another case, entirely. At one time nearly half of Americans drove a Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac, or GMC truck. But GM’s vision got lost in the management hierarchy, where profit per unit trumps market demand, quality control, and responsiveness to competition. Only Buick and Cadillac succeeded in going head-to-head with the Japanese and Korean competition. Oldsmobile folded, and Chevrolet and Pontiac loyalists found more attractive, more efficient, and better designed alternatives at their local Asian branded dealer. GM lost market share because its leadership forgot why they were in business. Now, GM management and design decisions will be made by people who do not possess a clue as to what that business may be. If you like the Post Office and AMTRAK, you’ll love the new GM!
If these two companies had been allowed to pursue normal Chapter 11 relief, it is likely that Toyota, Honda, Nissan, or Hyundai would have purchased the brands with profit potential. The rest would have been relegated to the history of Nash, Studebaker, DeSoto, and Packard -- good cars whose day is past. There is nobility in having once been great; there is nothing worth noting in living on in mediocrity.