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Chrysler – Should the American Taxpayer Pay

There’s always safety in numbers and this appears to be true for the big three automakers in the US. Each individual company has had its own problems over the years, but at the end of the day falling sales have resulted from designing and producing cars that people just don’t want to buy. Major restructuring is the only way these behemoths can possibly survive. The problem is they don’t have the cash to do it. Or do they?

Taking each company individually, Ford would appear to be in the strongest position. Still one of the market leaders in Europe, Ford seems to have realised the error of their ways. Now producing some of the most economical European cars with their Econetic range, Ford are at least moving in the right direction and the money they have asked for will only be taken up if the economy continues on its downward spiral.

General Motors differs from Ford. General Motors is in big trouble. It needs the money and it needs it NOW. It needs it to pay its workforce, it needs it to pay its suppliers. In short it needs it to survive. The only glimmer of hope on the horizon would appear to be the Volt, GM’s plug in hybrid slated to be launched in 2010 or 2011. However when you use 3.1 million dollars per minute 2011 looks a long way away. Does it deserve the bailout? Probably not, but it has nowhere else to go and as a result GM will no doubt continue to limp along as no political party will want it to fail on their watch.

So to the last and the smallest of the big three, Chrysler. The big difference with Chrysler is who owns them. In 2007 DaimlerChrysler sold an 80.1 percent stake in Chrysler to the New York based private equity firm, Cerberus. Their Chairman John Snow, a former U.S. treasury secretary said at the time “We think at this particular point in Chrysler’s history, there may be opportunities in the private world, the world of private investment, that create more room for growth and expansion”. Whoa, whoa, whoa. The private world? The world of private investment? What’s gone so badly wrong that in just over a year it’s been decided that the problems with the company your company acquired cannot be solved by the private sector?

Take a look at the Cerberus website and it states that the company holds controlling or significant minority interests in companies around the world that generate over 100 billion dollars in annual revenues. A large sum of money in anyone’s book. Delve further and you will see a list of diverse companies from banks to burger franchises, paper manufacturers to plane leasing companies, companies that no doubt continue to make a healthy profit for their parent company. Can’t they use their own money to save Chrysler and the jobs that Chrysler provides?

Cerberus paid 7.4 billion dollars for their stake in Chrysler. They obviously expected some return for their investment. Unfortunately, the global economic downturn and the fact that Chrysler have concentrated on gas guzzling, uneconomical, minivans, SUV’s and pickups mean that that return is further away than ever. But surely that’s THEIR problem and not the problem of the American taxpayer. It really does leave a sour taste in the mouth when a private equity firm goes begging for government dollars. And for what? To postpone the inevitable and save Cerberus a few billion bucks along the way. Cerberus bought it. Cerberus should sort it.

About the Author

Dave Foord is the content writer for a number of websites. If you are looking for a new car why not take a look at economical cars like the new Audi A3 1.9 TDIe.

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