Fiat to pull Chrysler out of Bankruptcy

2006 Chrysler 300 Series Photo: CNN

2006 Chrysler 300 Series Photo: CNN

The collapse of car company Chrysler’s has been the topic of media discussion this week – the American company filing for a Chapter 11 bankruptcy on April 30th. The first car company to go under during the current economic recession has made international news, however I did find some interesting facts about the Chrysler history that makes one think the media could have predicted the downfall of the company.

The Sydney Morning Herald reported that President Barrack Obama had ordered Chrysler to conduct a quick bankruptcy, with an auction for the company’s assests hoping to be completed in 3 weeks. As a result of lenders refusing to reduce debts the company has no money to continue trading but instead of totally closing it’s doors an alliance will be formed with Italian car company Fiat over the following weeks.

The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The SMH said that no other buyers had showed any interest in the company. They also said that this was the fifth largest bankruptcy in American history! I think that’s quite a massive set back to the American economy. And I do think the move should have been more premeditated – Chrysler is a ‘luxury’ car brand with ridiculous prices and not much practicality to the average consumer so who can really afford to splurge on these kind of cars right now?  The US and Canadian Government are going to give the company a total of US $6 billion in taxpayers money to start the new alliance with Fiat. The SMH seems to consider this a positive move as it will keep some jobs for those who originally worked for Chrysler but if I was an American taxpayer I would be a little bit peeved. I would prefer my money to be going towards the education or health system as opposed to a car company.

CNN said that Chrysler was king of the hill only a few years ago with their 300 series, but a string of uninspired products destroyed their reputation.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but “one more step on the path to Chrysler’s revival.”

Obama really does have a positive outlook on everything doesn’t he!

I did find a really interesting article on Chrysler from 1983 from the Heritage Foundation and it reported that Chrysler nearly went bankrupt in 1987 but was bailed out by the American Government with $1.2 billion in loan guarantees. The article tries to reveal the myths surrounding the bail out – and raises one serious question about the American Government:

It shows that if the bailout is indeed the model for an American industrial policy the consequences could be disastrous

I agree with this article and think it is relevant to the situation today; does the the American Government need to take a closer look at industrial policy and business-government relationship? With the near bankruptcy in 1983 was the amount invested back then an absoloute waste? Why didn’t the media pick up on this issue sooner? We will have to wait and see how the formation of Fiat and Chrysler pans out…Stay tuned!

Published in: on May 4, 2009 at 10:19 am  Comments (1)  

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One CommentLeave a comment

  1. Hi, cool post. I have been wondering about this topic,so thanks for sharing. I’ll certainly be coming back to your site. Keep up great writing

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