Detroit, Mich. — As one would expect from a company with Washington as a major investor, Chrysler’s “viability plan” submitted this afternoon reads more like a political document than a business plan.
Chrysler is a company that hasn’t turned an annual profit since 2006 and is burning through a billion dollars in cash a month, yet its plan to return to profitability leads with a promise to introduce unprofitable “electric vehicles to help meet current federal fuel economy standards.” That is, vehicles that have yet to establish market demand and that will initially be sold at a substantial loss.
“On behalf of the men and women of our extended family, we thank the Administration and the Congress for the opportunity to continue the process of requesting federal loans,” says CEO Robert L. Nardelli in the third graph of Chrysler’s public announcement. “We fully understand the need to adapt to significantly reduced annual U.S. sales and to national concerns over energy security and climate change.”
Of course, the taxpayers that are footing the bill could care less about climate change (judged dead last among 20 issues in matters of importance by a recent Pew poll). They want to know when they’ll get their $9 billion back ($9 billion you say? Wasn’t our loan agreement $7 billion? Oh, yes, I forgot to mention that, due to a softer market than expected, Chrysler has asked for an additional $2 billion).
The taxpayer investor class has to slog through to Graph 10 to learn of the real meat of the plan: a full mix of new Chrysler sedans and SUVs like the Jeep Grand Cherokee, Dodge Charger, Dodge Durango, and Chrysler 300 (President Obama’s favorite car) that had better make lots of money to subsidize those electric vehicles.
And in order to comply with provisions insisted on by pesky, bottom line-minded, kill-joy Republicans like Sen. Robert Corker (R., Tenn.), the company promises that “the signed term sheets for the Labor Modifications and VEBA (health care trust fund) modifications fundamentally comply with the requirements set forth in the U.S. Treasury Loan and once realized would provide Chrysler with a work force cost structure that is competitive with the transplant automotive manufacturers.”
That won’t be easy, given the fact that the Detroit Three still have a union to negotiate with while the foreign transplants don’t.
Marty Manley, a former assistant labor secretary in the Clinton administration, who has been involved in steel industry bankruptcies, says the Detroit Three’s efforts to return to profitability are different “than the normal workout” given the “political visibility” of its Congressional loans.
“Restructuring” not “transformation” may be Congress’ first priority — that is, a company that restructures to make politically-correct, green electric cars Congress wants, while avoiding the transformation that would promise profitability.
Taxpayers may want to hold onto their wallets.