Fiat and Chrysler - Huge Changes Needed

Something is wrong with Chrysler. It's distressed and considering restructuring or bankruptcy protection. There are a host of problems with the company: expensive union labour / management layers, average quality products and declining demand. Fiat was looking to acquire Chrysler, but only if certain concessions are made. Fiat CEO Sergio Marchionne would be stupid not to ask for major changes. He is on the verge of buying garbage, and unless he has some incredible ground shaking plans for over hauling the company, he has to be incredibly careful to avoid disaster.

Whatever your opinion on management, unions and products Chrysler isn't working. And it will take a lot more than just some marginal improvements to bring it back. Union's make a good target because they have exceptionally high labour rates. It doesn't hurt the flow of criticism that the CAW demands seems to be out of touch with the current economic environment.

While supply side economists have often been criticized for being too laissez-faire when it comes to professing the need to let economy's crash and the strong survive (while many who own stock in weak companies are now reconsidering their positions - it's only painful when it happens to you), other economists have to acknowledge the real dangers of artificially inflated costs such as wages in the long run. In retrospect, this shouldn't really have come as a surprise.

And people will always point to other car companies doing well, such as Honda and Toyota saying that it is not impossible to succeed in the current environment. So why should hand outs be given to those who are failing?

I do sympathize with workers and pensioners who have lost a lot of the value of their pensions, however, I wonder how much of their pension plan was composed of Chrysler stock, or even how much of Chrysler stock made up any form of compensation package. How much were workers made to take ownership for the success of the company rather than simply try to negotiate a higher wage.

Rather than always have adversarial positions, was it not possible to compensate workers with ownership? This constantly seems to be a recurring theme in union relationships and the topic of entitlement. They are literally now in a position where they can all lose their jobs if they don't take a major pay cut.

I wouldn't call Marchionne predatory, I'd say he's looking not to get screwed. Unions pride themselves on being a democratic system. Marchionne is merely participating in a financially democratic way (as do other investors and customers of Chrysler), voting with his companies money on which what would be a good investment. Stakeholders of Chrysler are hoping that he doesn't end up voting with his feet.

There is a difference between bailing out AIG, an insurance company who is supposed to instill confidence in the system, versus a car company which was already on its way out. Same with dying newspapers.

The April 30th deadline is fast approaching and it looks increasingly as if this may be the end of the line for Chrysler.