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Chrysler More Expendable than GM
As the economy continues to sour, the automakers continue to run up huge losses. Declining automotive unemployment is unavoidable in the near term, so I'd like to argue that we will get the most bang for our buck by propping up General Motors and letting Chrysler go. There are three basic reasons: size, quality, and impact on the stock market.
Size: GM employs 252,000 worldwide. Chrysler employs 58,000 worldwide and, sad to say, more jobs than that will be lost in the U.S. industry alone. Chrysler's employees deserves bailouts, but Chrysler itself is no longer too big to fail. If Fiat wants to pick up some of the pieces, that would be just fine.
Quality: Consumer Reports just came out with its annual Auto Issue, showing just how bad Chrysler is. For CR to recommend a car, it must perform reasonably well in tests and have at least average reliability. Not a single one of Chrysler's 22 models is recommended. General Motors is not much better, as only 17% of its vehicles are recommended by Consumer Reports. However, the two companies' overall report card scores are farther apart than you'd expect on the basis of the percentage recommended. Chrysler, at 48, is far behind GM's 57, compared with top-rated Honda's 78.
Stock market: Because Chrysler is privately held, its bankruptcy would not affect anyone's mutual funds or retirement savings (though it would obviously affect its own employees' retirement). The owners, Cerebrus, can afford to lose the money. GM, of course, is a very widely held company, so if it can return to health it will help a lot of people beyond the company.
Bottom line: Neither pre-Daimler Chrysler, Daimler-Benz, nor Cerebrus has been able to return Chrysler to profitability, so it's time to pull the plug. There's no point in an unsalvageable company taking sales away from companies that aren't dead yet.
Size: GM employs 252,000 worldwide. Chrysler employs 58,000 worldwide and, sad to say, more jobs than that will be lost in the U.S. industry alone. Chrysler's employees deserves bailouts, but Chrysler itself is no longer too big to fail. If Fiat wants to pick up some of the pieces, that would be just fine.
Quality: Consumer Reports just came out with its annual Auto Issue, showing just how bad Chrysler is. For CR to recommend a car, it must perform reasonably well in tests and have at least average reliability. Not a single one of Chrysler's 22 models is recommended. General Motors is not much better, as only 17% of its vehicles are recommended by Consumer Reports. However, the two companies' overall report card scores are farther apart than you'd expect on the basis of the percentage recommended. Chrysler, at 48, is far behind GM's 57, compared with top-rated Honda's 78.
Stock market: Because Chrysler is privately held, its bankruptcy would not affect anyone's mutual funds or retirement savings (though it would obviously affect its own employees' retirement). The owners, Cerebrus, can afford to lose the money. GM, of course, is a very widely held company, so if it can return to health it will help a lot of people beyond the company.
Bottom line: Neither pre-Daimler Chrysler, Daimler-Benz, nor Cerebrus has been able to return Chrysler to profitability, so it's time to pull the plug. There's no point in an unsalvageable company taking sales away from companies that aren't dead yet.
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LOL !! The only difference between Chrysler an GM is that Chrysler actually makes cars with style and cars that have a soul! Chrysler is the only American car company left on the planet with over 90% of their sales, employees, and suppliers here in the USA !! I don't see GM on wards 10 best engines in the world list, like Chryslers HEMI, I don't think GM invented a brand new segment like Chryslers minivans....? Let's give credit where credit is due...........Chrysler is the BEST American car company hands down!!!!!!!!!!!!
March 8, 2009 6:00 AM | Reply | Permalink
Just what I figured as I was reading this essay: It looks like an opportunity for all TPM motorheads to weigh in on the "MOPAR vs. bowtie" debate.
Should we let Chrysler fail and prop up GM? I'm not sure about that approach to the problem for a number of reasons.
But I do know that Wards blew it on the 10 best engines list. After all, what's more bulletproof than the GM 3.6 litre V6?
March 8, 2009 8:17 AM | Reply | Permalink
Don't put down on the Ford Truck around a ranch. Hanging offense.
March 8, 2009 1:13 PM | Reply | Permalink
I drive a 2002 Silverado myself... and absolutely love it! :O)
March 8, 2009 1:20 PM | Reply | Permalink
SleepinJeezus. What was your first car and how much did you pay for it? Mine was a 55 Chevy. Paid $75.
March 8, 2009 2:24 PM | Reply | Permalink
I can't resist this one.
Among other vehicles come and gone, I've owned a 1988 Dodge Caravan from 1992 until today. Virtually everything superficial on it is in deteriorated condition - except that it starts, runs, and continues to reliably do everything I ask of it as a (now) extra 'knockaround' vehicle for odd-jobs, fishing, etc. For pure, functional, versatile, spacious 'handiness', the mini-van is in a class by itself.
When we finally got a new vehicle for my wife in 2004, we bought a new 2005 Caravan after looking at various other mostly 'SUV'-type options (some we could barely figure-out how to enter or to exit). No reason to regret it so far.
Don't get me wrong, I've owned other makes and types, and generally have been OK with them ( I use a very good 2000 Mercury Mystique for commuting). But when push comes to shove on a NEW car, all-purpose choice, we will probably do again what we did in 2004.
March 8, 2009 8:51 AM | Reply | Permalink
from a global perspective, i.e. outside of the USA, the GM home brands have near zero visibility except for Buick in China and Chevrolet in a few markets where they are really Daewoos or rebranded Opels. Many of GM's global employees are in Europe, Australia, South America or Asia...all of Chrysler's are in the USA. Chrysler's Jeep probably has a much greater following outside the USA than any GM brand. All three Chrysler brands are on offer in Europe whereas only Cadillac and only partially Chevrolet are here, and only with the HHR and the Corvette (which is marketed as purely Corvette). The rest of the Chevrolets here are from Korea...The big three ( recently joined by the Japanese) have been pushing huge SUV's and trucks in the USA for decades, even though more than 50% of the people buying them don't really need them but were made to believe through marketing hype that they did...just like the US love affair with three layered soft toilet roll...pleeeze... The manufacturers were in it for a quick buck...but where did all the profits get invested? I have no solutions or recommendations, but for the sake of the working man, I wish both companies to survive.
March 8, 2009 9:13 AM | Reply | Permalink
I can't imagine a world without chevy trucks in it if treated right they last forever. Also the reason we should bailout GM instead of chrysler is simple to me anyway GM is a publicly held company that needs help while chrysler is privately held and the people holding it should spend there money not ours. In all honesty I don't think we should help either one of them until the people at the top are replaced. They ran the company down get someone who can bring them back
March 8, 2009 11:45 AM | Reply | Permalink
The government should hang tough on Chrysler and not let Cerberus off the hook. Cerberus can either rescue it, sell it, or fold it up. The viable parts are really just Jeep and Dodge trucks.
However, letting Chrysler find its own way doesn't remove enough excess capacity.
You also need to have GM go through bankruptcy so that half of GM's brands, factories, suppliers, and dealerships can be closed. Bankruptcy is a must for closing brands and dealerships without paying a huge ransom because of state franchise laws.
Then the remaining Chevrolet/Cadillac and Ford/Lincoln-Mercury domestic auto businesses are about right-sized.
Saab is already bankrupt and on its way to independence or merger with an Asian manufacturer.
Opel looks like it is headed the same way, but there are problems since GM has pledged all Opel's patents, factories and real estate to the US government. So the US and Germany have to work that out.
March 8, 2009 11:47 AM | Reply | Permalink
You have got to be kidding! Chrysler beat both GM and Ford in the Canada market last month making it the #1 automaker in Canada! Not to mention it's losses are less than both the other two for the first quarter so far. GM has been mismanaged for decades and is now showing the wear and tear of bad policy and bad management. Chrysler hasn't had a chance to catch it's breath, being overtaken by hostile German forces then stripped of it's rainy day funds and flipped to Cerberus. GM can not be saved. It is too big and too far gone. I think we should give one more loan to both companies and then see who survives the year. It's not a matter of which we should bailout, it's a matter of who can make it in the long haul, and no matter how much money we throw at GM it cannot make it with current management in place. Now...if the company was turned over to the workers it might stand a chance. The Fiat/Chrysler merger could make the best American cars we have ever seen. This merger will also create thousands of new "American" jobs. I would love to be able to go down to my local Dodge dealer and buy an American made, rebadged Fiat 500, have you seen the EPA and performance numbers on those bad boys!
March 8, 2009 3:06 PM | Reply | Permalink
The Canadian market is 1/10 the size of the US market, so results there are less representative of sales performance than sales in the U.S. market.
Cerebrus is a private equity firm, so it should have known what it was getting when it bought Chrysler, including any asset stripping by Daimler Benz. I don't think it should get any loans, as no one but its employees are depending on it. Its employees should be taken care of.
GM is certainly going to downsize, but as I've said in earlier posts, the auto industry as a whole would benefit more from single payer than from any other type of universal health coverage, because it would no longer have to pay UAW contracted health benefits. I agree with you that its management needs to go.
Lastly, we need the Employee Free Choice Act to make it easier to organize all the non-union auto plants, which have been killing off the Big Three due to younger/cheaper to insure employees and no retirees. If any foreign automaker asks for government help, unionization should be a necessary condition for any aid.
March 8, 2009 4:25 PM | Reply | Permalink
It was the first time EVER that Chrysler beat GM in Canada. That could damn well be a blip, and you know it. GM gets kicked in the shins constantly for its fuel economy ignorance, but it is Chrysler that has been the true buffoons there. "Hey, lets put a fucking HEMI in every fucking car we make and stop with this charade of fuel economy, whoopee!" Not to mention, Dodge trucks are the worst on the market (at least from the perspective of anyone who actually needs a truck) and are blown out of the water in terms of quality by the GM, Ford, and even Toyota and Nissan (I'm sure the pickup-truck mafia will be along shortly to beat me for that one). Chrysler has little to offer right now. Far less than GM in any case. (That said, GM needs to severely reign in their brands- in addition to Pontiac, I feel that Buick should go too- they could easily cover the land yacht market in Chevy or Cadillac)
March 8, 2009 5:11 PM | Reply | Permalink
So we would go from the big three to the big four:
Chevrolet, GMC, Buick, and Cadillac.
Not exactly a model of efficiency.
March 8, 2009 8:08 PM | Reply | Permalink