It will take months (if not years) to ultimately judge the U.S. government's historic bailout of the auto business. But based on the initial comments by Chrysler LLC in bankruptcy court, it might not be too early to declare that, however the company turns out, the U.S. taxpayer appears to be among the losers.
An adviser to Chrysler in court Monday said it was "highly unlikely"
Chrysler would be able to repay the $4 billion in loans the government
advanced the company in the months leading up to last week's bankruptcy
filing, or the additional $4 billion the U.S. Treasury is providing in
debtor-in-possession financing. While that might not come as a surprise
to anyone who has followed Chrysler's struggles, the comments seemingly
resolve any lingering debate about whether the Chrysler assistance was
an investment with an expected return, as some have argued, or a
bailout.
The relevant question is what the U.S. taxpayer is
getting in return for its largess. It is hard to argue that what is
left of Chrysler is pivotal to the survival of the U.S. industrial
base. The automaker's U.S. operations are significantly smaller than
that of either General Motors Corp. (NYSE:GM) or Ford Motor Co. (NYSE:F), and unlike Toyota Motor Co., Honda Motor Co. Ltd. (NYSE:HMC), Hyundai Motor Co. or
others, Chrysler's manufacturing presence is shrinking and not growing.
Rather,
the best way to justify the Chrysler bailout is the jobs saved, but
even by that measure the plan appears expensive. Chrysler on its Web site
boasts that it "touches" 100,000 jobs in the U.S., costing taxpayers $80,000 per job saved. But that number almost certainly includes
dealers, suppliers, mechanics and others who are also touched by other,
healthier automakers, and who may not necessarily be out of work had
Chrysler failed.
Chrysler is coy on its exact number of U.S.
employees, but the company according to United Auto Workers records had
about 26,800 union members in the U.S., prior to the last buyout offer.
Using that figure, the government is spending almost $300,000 per job
saved.
It is hard to put a price on a job, but consider that
even after all of that money spent, Chrysler is no lock to be a
long-term success. The company's hopes are tied to the success of Fiat
SpA-designed vehicles that, while popular in Europe, are untested in
the U.S., where, unless gas goes to $4 per gallon, big cars and SUVs
still rule. Chrysler is still a bit player in a mature market where, in
part due to government actions that have so far prevented failures,
overcapacity remains an issue.
Given the risks, perhaps
letting Chrysler fail and providing $300,000 worth of job retraining
and benefits for each displaced worker would have been a better
bargain. - Lou Whiteman
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The government bailout should consist of food stamps and rent vouchers. Let people work out their own problems.