There must be a sweet taste of revenge in Motor City these days, what with Chrysler having successfully raised $7.5 billion by selling bonds to Wall Street. Sure, the Fiat-run American automaker had to pay a stiff interest rate, but it did manage to raise money from the same folks who balked at taking a haircut when Chrysler was desperately trying to restructure its loans during the financial crisis. The Street eventually took a scalping then, and now it stepping back up to buy again. (They never learn, do they?) Chrysler used the money to pay off $5.9 billion to the U.S. government, and $1.7 billion to Canada, more than six years ahead of schedule.
If there is any remaining doubt that the much debated government bailout bought time enough for the U.S. auto industry to regroup, this should end it. Chrysler was in the worst shape of the Detroit Three, bleeding cash and without much in the way of product in the pipeline. But the crisis was going to end sometime, and any still around was going to make some money. “The loans gave us a rare second chance to demonstrate what the people of this company can deliver and we owe a debt of gratitude to those whose intervention allowed Chrysler Group to re-establish itself as a strong and viable carmaker,” said Sergio Marchionne, ceo of the Chrysler Group and Fiat, which will buy an additional 16% of Chrysler. “Paying back the loans, along with the financial community’s investment in our refinancing packages, marks another step in the company returning as a competitive force in the global automotive industry.”
What won’t end is the argument of whether the government should have ever intervened in the first place. Strict capitalists thought the government had no business in the bailout, but strict capitalism simply doesn’t operate much of the world. Governments worldwide support their auto industries, not the least of which because they are critical to employment and technology development. That didn’t hold water everywhere. “The financial situation facing the Big Three is not a national problem, but their problem,” said Alabama Senator Richard Shelby at the time. “I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.”
Shelby was dead wrong on both counts. It was a national problem, given that entire communities across the country, including primary and secondary parts suppliers, would have faced 15%+ unemployment. The Midwest industrial belt would have been toast. Detroit neither continued nor compounded its mistakes because the government installed new management in GM and Chrysler that refused to repeat them. Quality rose. The new stuff coming of Detroit today is globally competitive.
Chrysler is in the middle of a new model binge with 16 new or refreshed offerings at the dealers. It is enjoying healthy sales. Its Super Bowl commercial (“Imported from Detroit”) rocked. That’s not to say that the company won’t have any problems in the future. But if it does, it will be Rome’s problem as much as Washington’s.