Auto Industry Update (Chrysler and Dealers)

Well, it looks like the Chrysler/Fiat thing is a done deal, though this would likely be post bankruptcy, because they cannot get the smaller creditors on to agree to concessions:

The Obama administration last night planned to send Chrysler into bankruptcy, replace chief executive Robert L. Nardelli^* and pump billions of dollars more into the effort, all in hopes the company can emerge from court proceedings as a reenergized competitor in the global economy.

Government officials clung to 11th-hour hopes last night that bankruptcy could be averted, but talks broke down with Chrysler's creditors. A bankruptcy filing could happen as soon as today.

The U.S. government's attempt to save the automaker amounts to another extraordinary intervention in the economy and a landmark event in the history of the American auto industry.

Under the administration's detailed court strategy, ownership of Chrysler would be dramatically reorganized, the leadership of Italian automaker Fiat would take over company management and the U.S. and Canadian governments would contribute more than $10 billion in additional funding.

I would note that Cerberus would be completely wiped out on this deal, and be left with nothing, but they are not complaining, since they bought Chrysler to flip it to GM, and then found themselves having to run it when GM had its own crisis, and the alternative, that various parties go after them is even less palatable.

In related news, the dealers for both Chrysler, with the aid of the NADA, are lawyering up to deal with the consequences of a bankruptcy, which would void their franchise agreements.

Cutting dealerships is necessary, as Chrysler has about 2¾ times as many dealers per car sale as Toyota, which adds costs and inefficiencies to the system.

^*Full disclosure, I worded at GE Transportation Systems (GETS) their locomotive manufacturing unit from 1994-1996, and for about half of my time there, the chief of the division was Bob Nardelli, who I have never met.