The Auto Writer

The Day of Decision Has Arrived

One of the most important days in the lengthy history of two automakers — General Motors and Chrysler — has arrived. Today is D-Day or Documents Day, where each automaker must submit recovery plans to the federal government in order to justify their existence.

Well, what I said is somewhat of an exaggeration, but what each automaker has to prove is that they have the right to continue functioning as independent entities by offering their own plans outlining their long term survival.

And getting to this point hasn’t been easy.

Making A Good Faith Effort

Just weeks after receiving federal funding in the form of billions of dollars of taxpayer monies, General Motors and Chrysler must show a good faith effort that they are moving forward, toward the eventual goal of being profitable.

Along the way, both companies have hit several snags.

GM, for instance, hasn’t been able to secure additional givebacks from the United Auto Workers, who appear to be insisting that they’ve already gone far enough with their concessions over the past few years. To be fair, GM is asking a lot from their unions, but until recently only decided to lay off thousands of white collar workers in a bid to spread the pain across all levels of the company.

Then there is also the matter of executive pay and bonuses, a point of contention with the Obama administration as well as with the rank and file.

Chrysler Gets Some Fiat Love

Chrysler may have bought itself some time by announcing that they would partner with Fiat to build several lines of small cars at its North American plants. These vehicles will be badge-engineered Fiats, likely sporting Dodge and Chrysler monikers.

In exchange for providing product, Fiat would gain a 35% stake in Chrysler as well as access to the company’s dealer network, just the right place where the Italian automaker might reintroduce Alfa Romeo and possibly Lancia to the American public. Two other Fiat AG brands are already sold stateside — Ferrari and Maserati — but don’t look for them to be included in whatever deal is struck.

Of course, the Chrysler-Fiat alliance raises questions about helping a “foreign” company as Chrysler would effectively be controlled by Fiat and Daimler which, combined, would own at least 54% of Chrysler LLC. Congress isn’t likely to be too keen about assisting an automaker whose owners aren’t American citizens.

More Questions Than Answers?

Here’s my thinking on how things will play out today: we won’t hear a whole lot about the details of each company’s plans in the short run, but when the news does emerge in a few days hence, we’ll likely find that Congress will be asking for clarification on several of the points.

Should Congress and the president be dissatisfied with the documents as received, structured bankruptcy could be in the offing. But, given the political climate today, don’t expect that to happen: there are too many higher ups in Washington, DC who are beholden to the union vote and laying off rank and file workers would be the worst slap in the face to organized labor.

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