Friday

Chrysler files for bankruptcy


Well what more needs to be said about this? There are scores of articles already about this subject so I won’t bore you with a rehash of what you probably already know. So I’ll just say this:

This is just going to be one of the biggest messes of all time.

ANYONE who thinks this will be over in 60 days is kidding themselves. As soon as the bankruptcy filing was done, suppliers stopped shipping parts, properly fearful of never getting a check for those items. That made Chrysler itself ground to a halt. Part of what is hoped will revive Chrysler is some kind of marriage with Italian auto giant Fiat.

But here’s the thing: Fiat is not exactly known for creating a product of quality to rival, say, a Toyota or Honda. What Chrysler hopes to gain is access to small car platforms and/or be able to sell Fiat’s through their dealerships.

There’s a million reasons why this doesn’t make sense – the least of which is the amount of time that it would take Chrysler to produce new products (small cars from Fiat) or get the Fiat’s certified to sell in this country. What happens in the meantime? How does Chrysler make money with the same tired portfolio that got them to this situation in the first place?

That’s just one gigantic issue facing the emergence from bankruptcy. This is one example of a problem that cannot be solved in two months. Heck, they’ve been trying for a third of a year to come up with SOME kind of solution to avoid this situation in the first place and couldn’t. The real question is, is Chrysler even worth saving? Let’s just be as honest as possible here – there are too many car companies in the world. Or is it better to carve up the only slightly decent parts (Ram trucks, Jeep, and the minivan line) and disburse the rest? In my opinion, Chrysler has had its chance to survive. Consumers voted with their wallets, and found Chrysler lacking.

As for the other repercussions throughout the economy, yeah well, we’re all going to feel it in one way or another.

Mark my words, this is not going to be quick (or surgical – the latest buzzword). It’s going to be painful, it’s going to be ugly, and I doubt we’ll see Chrysler ever again.

UPDATE 6/10/09 - called this one wrong! As of this writing, Chrysler is set to emerge from BK by selling their good assets to Fiat, and under the 60 days that was predicted. Like many things these days, this moved quicker than anyone could imagine.

1 comment:

Boz said...

I'm inclined to agree. As much as we don't want to see the worst happen - as much as we want to root for the underdog... a quick reality check will reveal the inevitable result. As soon as the carmakers started meeting with the US Government it was clear to me that the US auto industry was incapable of coping with, even surviving the economic downturn.

All 3 of the big 3 have consistently made poor (dare I say greedy) decisions for many years while they should have been thinking of the future. 'Let's see just how low we can go in quality.' 'Let's buffer the poor quality with 0% financing and long-term limited warranties though the average US consumer expects to throw his car away in two years.' 'Let's dump money into SUV development though gas prices are sure to spike next summer.'

Chrysler (and I predict GM in the near future) are simply high-profile examples of a mentality described by Newsweek (I think Robert Samuelson's essay) as "the affliction of affluence." Too many companies have rested on their laurels and multi-million dollar bonuses to much care about '5 years down the road.' Now that 5 years or so have passed, it is too late to catch up. The ground fell out so fast that major companies have found out the hard way that the laurels never existed in the first place.

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