Planet Gore

Inconvenient Truths about Today’s Chrysler Celebration

Chrysler and the White House will celebrate the Detroit icon’s $5.9 billion repayment of government loans Tuesday in a ceremony that will be hailed by both sides for the same reason: The government bailout had become a liability for all concerned.

In fact, government-free Chrysler is hardly free of debt, but is simply refinancing with private rather than public debt-holders. For its part, the U.S. government will still have a 6.6 percent equity stake in Chrysler — but by removing itself as the company’s loan shark, the White House can boast of the unpopular bailout’s success in returning taxpayer loans six years ahead of schedule. That’s an important sound-bite in an election year.

But there is one inconvenient truth you won’t hear at today’s Sterling Heights, Mich., ceremony: Chrysler wouldn’t be here had it not defied its green White House masters. Chrysler’s return to profitability is a direct result of the fabulous success of its SUVs.

The White House handpicked Fiat to shepherd Chrysler out of bankruptcy in June 2009 because Barack Obama is obsessed with remaking Detroit’s automakers in the image of their European peers. Convinced that Americans craved small cars to fight the warming scourge, the president demanded Fiat bring its best-selling 500 Eurobox to the States as part of the acquisition deal. Obama was convinced that Fiat could reform the immoral, gas-swigging, SUV-dependent Chrysler.

The exact opposite occurred.

Two years later, the little 500 is about to go on sale in dealer “boutiques” — but it is the resurgence of America’s appetite for trucks that has brought Chrysler back from the dead. Chrysler Group reported sales were up 17 percent to 1.1 million vehicles in 2010 on the strength of its wildly popular, redesigned Jeep Grand Cherokee and Dodge Durango SUVs. For CEO Sergio Marchionne, the SUVs’ success in the U.S. market has been a revelation and he is planning to expand the SUV lineup into Europe with Alfa Romeo and Maserati-badged trucks. Marchionne is no starry-eyed green — he has realized that trucks like the Cherokee typically rake in two to three times the per-vehicle profit of cars (thus the beleaguered company’s speedy repayment of U.S. loans).

Chrysler’s truck sales — largely ignored by Obama’s green-media parrots — has also been good to UAW workers as Chrysler’s Detroit assembly plant is running at full, three-shift tilt.

But there is one more inconvenient truth: Chrysler has been here before.

After it repaid its ’80s loans under the legendary hand of Lee Iacocca, Chrysler was unable to diversify into smaller vehicles. Today, as the truck boom fades before the specter of $4-a-gallon gas, Chrysler is still heavily dependent on truck sales.

Chrysler is back. But is it just 1980s déjà vu all over again?

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