Car Guy

Food Stamps for Chrysler

Continuing to build cars nobody will buy.

By 7.13.09

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Chrysler is building cars again. The problem is, they're the same cars Chrysler was building before it collapsed.

Many of these -- like the Sebring and Avenger -- have been obviously uncompetitive for years. Others -- like the PT Cruiser -- are completely out of date. (The PT's basic chassis dates back to the 1990s-era Dodge Neon.)

Thousands of them, built pre-bankruptcy, remain sitting on storage lots all around the country. Yet Chrysler is cranking up to build more of them.

And the government is paying Chrysler to do this.

More accurately, the American taxpayer is providing the financing to Fiat -- the foreign car company that now owns a majority of Chrysler -- in order to make it possible for Chrysler to keep on building lemons.

In brief, it's food stamps for Chrysler.

Some of the re-opened Chrysler plants are not even in this country (such as the Toluca plant in Toluca, Mexico) so it's not even American jobs that are being subsidized. The U.S. taxpayer is being milked to provide a paycheck for Mexican assembly line workers.

Viva Obama!

As for the plants that are located in the United States, one could at least argue that American jobs are being saved. But how is this different from any other make-work project? It would arguably make more sense to at least put these workers onto something that has some value, such as repairing our increasingly decrepit roadway infrastructure or even (and no offense is intended) cleaning up graffiti and picking up trash along the road.

These are, after all, things that need to be done -- and which if done would provide a tangible public good. The same cannot be said of stamping out tens of thousands more example of cars that are proven sales losers, which the market has already pronounced its verdict upon.

What will happen to these legions of PT Cruisers, Avengers and Sebrings once they have been assembled? They will be shipped off to holding lots and ultimately to dealers, where they will sit -- just like the ones already there. Eventually, they will be "sold" at steep discounts, just to get them off the tarmac and pay off at least a portion of the negative equity each one represents.

Chrysler's problem, of course, is that it has nothing better to offer at the moment. Not a single new model will be available for some time to come, so it is stuck trying to hawk products that were challenging to sell pre-crash and all but impossible to unload now. And a big part of the reason for this godawful predicament is that Chrysler was literally sucked dry by its onetime "partner," Daimler AG, parent company of Mercedes-Benz.

Before the "merger of equals" Chrysler was the most profitable of Detroit's once-Big Three. It was literally rolling in das geld -- which is why the Germans wanted in so badly. Chrysler's management team, enticed by the prospect of a huge payout that would have made King Midas blush, pushed things along and the deal was done. Mercedes-Benz got truckloads of Chrysler operating capital, which it used to rebuild and expand its product line (which today includes even a minivan-ish Mercedes) while Chrysler got a second-hand E-Class chassis, over which it draped its own sheetmetal to create the briefly successful 300 series sedan. It also received a hand-me-down version of the Benz SLK roadster chassis, which it likewise converted into the Chrysler-badged Crossfire.

But the money to rehab its product line was gone with the wind. The Germans, wisely, pulled out in the nick of time -- leaving a now cash-poor Chrysler to face an unprecedented downturn with no reserves to design and tool up new models to meet the changing times.

Which brings us back, full circle, to the bailout and the massive, taxpayer-funded make-work project.

Little media coverage has been devoted to any of this. We hear happy talk about "plants reopening" (which is true) and "jobs saved" (also true) but no further elaboration. It stands to reason, given the media is generally clueless about the car industry and wouldn't know a Sebring from a Sapporo. President Obama's "Car Czar," investment banker Steven Rattner, likely wouldn't know, either.

But hey, it's not his money, is it?

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About the Author

Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.