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Thread: weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

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    Default weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

    from

    (snip)"Rumors, credible rumors, are beginning to circulate in the car industry and the automotive press, that Chrysler may not make it another year primarily due to its falling sales and growing financial losses at partner Fiat.

    Chrysler sold a 62,197 cars in September, down 42% from the same month last year. The figure was down from 93,222 in August when traffic to dealers was pushed up by the ”cash for clunkers” program.

    Chrysler’s problems may only be beginning and, if so, Fiat, the ”managing partner” among Chrysler’s owners may not be able to keep the American company intact.

    Chrysler has operated at a disadvantage to the Japanese for some time. That has been true of all three U.S. car companies. Now that each has restructured, each has more leverage against a lower costs base. That should allow General Motors, Ford (F), and Chrysler to make an operating profit even with domestic light vehicles sales running at a rate of only 10 million a year. But, Chrysler still has disadvatages which start with the age of its fleet and extend to the problem that it no longer has enough market share to cover even a lower cost base.

    GM has the capital and the daring to offer its cars for a 60-day test drive. There is some financial risk to the action, but GM has enough new models coming to market that the odds of people turning in cars is relatively small.

    GM had a hard September with sales down 45% to 156,673, but the new promotion ought to improve its share in October and November. Ford has demonstrated the ongoing strength of its new model line. In September, Ford’s sales only dropped 5% to 114,655. That means that Ford is picking up market share rapidly and some of that is probably coming at Chrysler’s expense.

    The Congressional Oversight Panel has already said taxpayers will not see most of the $81 billion that they put into the American car industry. The $14.3 billion put into Chrysler is more and more likely to be lost completely. The biggest single loser if Chrysler cannot survive is the UAW which owns 55% of the company.

    The daily management of Chrysler is controlled by Fiat which owns 20% of the U.S. company with options which could take that amount to 35%. Fiat has not put any money into Chrysler, so if the American firm becomes a significant operational or management burden there are very few reason for the Italian company, which has sales troubles of its own in Europe, to stay long term. Fiat lost $254 million in the second quarter, so its board may eventually believe that Chrysler is a distraction and one without a future.

    Chrysler is not just up against the traditional competition of its two domestic rivals and Toyota (TM), Honda (HMC), and Nissan. South Korean upstart Hyundai is posting sales improvements even as the car market remains weak and in September it posted a sales increase of 27% to 31,511, about half of Chrysler’s sales for the month. Hyundai’s strength is in small fuel-efficient cars, the market where Chrysler needs to find success with its products and those from Fiat. "(snip)


    What's that about US gov't 'stimulus' spending being even more successful than the politicians expected ?

    What are the odds that the US gov't will come up with even more billions for another round of (equally unsuccessful) auto industry bailouts ?

    I would also point out the fact (as stated in this and other articles) that Hyundai / Kia is the only non-luxury car brand which is gaining sales volume / market share right now. This is arguably the result of the lower labor cost / energy cost / environmental and worker safety cost structure of their new production facilities in the Czech republic and Slovakia which recently went into full production, combined with the 'WalMart-ization' of the auto buying budget of middle class American customers.

    ~
    Last edited by Melonie; 10-02-2009 at 09:01 PM.

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    Default Re: weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

    Quote Originally Posted by Melonie View Post

    I would also point out the fact (as stated in this and other articles) that Hyundai / Kia is the only non-luxury car brand which is gaining sales volume / market share right now. This is arguably the result of the lower labor cost / energy cost / environmental and worker safety cost structure of their new production facilities in the Czech republic and Slovakia which recently went into full production, combined with the 'WalMart-ization' of the auto buying budget of middle class American customers.

    ~
    Again, you are making stuff up based on your ideology.

    http://news.prnewswire.com/ViewConte...5037131&EDATE=

    More than half of all vehicles sold by Hyundai Motor America are manufactured in the United States at Hyundai Motor Manufacturing in Montgomery, AL. In total, Hyundai directly employs more than 5,000 people in the U.S., with facilities in 14 states across the country. Including its almost 800 dealers and suppliers, Hyundai has created more than 35,000 jobs in the United States.

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    Default Re: weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

    ^^^ check the fine print. The Alabama facility primarily ASSEMBLES imported components and sub-assemblies into complete vehicles ... as a means of avoiding the US 'chicken tax'. This is NOT the same thing as an auto company producing engines / transmissions / other high value added subassemblies in the USA. The reason of course is that it is the manufacture of engines / transmissions / high value added components that have the highest energy costs, the highest relative labor costs, and the highest potential environmental costs - and thus the greatest cost advantage if not done in the USA. Stamping sheet metal, painting, and bolting subassemblies together in Alabama is far less labor / energy / environmentally intensive but counts towards the 'US content' necessary to beat the US 'chicken tax'.

    And it is precisely because of this offshore subassembly manufacturing cost advantage that Hyundai / Kia can offer vehicles of comparable quality and features at a US dollar price that is significantly lower than low-end Chrysler Corp. vehicles - a price which Chrysler cannot possibly match and still remain profitable with it's US based cost structure - and a price which the American middle class can still hope to afford despite stagnant / shrinking paychecks and rising taxes.

    ... which brings us right back to the original topic ... the fact that the US taxpayers' 14.3 billion dollar 'bad loan' to Chrysler arguably did absolutely nothing to assure the future of the company. What it DID do is cover Chrysler's operating losses and fund another 18 months worth of Chrysler Corp. UAW paychecks. This is particularly noteworthy in light of the fact that a 'second round' of stimulus spending is now being discussed in Washington !

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    Last edited by Melonie; 10-03-2009 at 06:04 AM.

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    Default Re: weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

    Including its almost 800 dealers and suppliers, Hyundai has created more than 35,000 jobs in the United States.

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    Default Re: weekend commentary - 14.3 Billion in US Taxpayer money lost forever ? (Chrysler)

    ^^^ I don't dispute this assertion at all. But don't make the mistake of assuming that these 30.000 Hyundai jobs are net 'new' jobs ! All of the 3000 assembly plant jobs in Alabama came at the expense of a 'Big 3' manufacturing plant job in a northern state (and Hyundai's workers are paid far less than the Big 3's UAW workers). Every Hyundai dealership sales job came at the expense of a 'Big 3' dealership sales job ( with Hyundai's salespersons being paid far less per vehicle sold than Big 3 salespersons). Sheet metal / paint / glass suppliers simply 'rotated' customers from the Big 3 to Hyundai ( and arguably agreed to lower pricing in order to preserve their business levels via Hyundai replacing lost Big 3 purchases )

    But again your attempt to argue semantics avoids discussing the central point of this thread ... which is the fact that US Taxpayers essentially 'gave' Chrysler Corp. 14.3 billion dollars ( that they did not similarly give to Hyundai ), that Chrysler Corp. was unable to 'get a sustainable economic model together' by continuing to pay UAW wages and by continuing to build engines / transmissions / high value added subassemblies in the USA with union labor and benefit costs / US energy prices / US environmental and worker safety costs etc., that Chrysler is still not able to operate profitably, that Chrysler Corp is only being kept out of bankruptcy via burning through US Taxpayer money to subsidize these higher costs, that Chrysler will run out of its 14 billion 'first' injection of taxpayer money quite soon, and that Chrysler will then either face bankruptcy (again) or expect yet more billions in US Taxpayer money to continue the 'enabling' of its unworkable business model.

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