Chrysler could be back in business a month after bankruptcy

Before you go, we thought you'd like these...
Before you go close icon

The Obama administration is exercising control over the U.S. auto industry with the kind of efficiency that dazzled the world in the 1950s -- and back then it was America's business management that was at the top of its game. In 1954, General Motors (GM) controlled 54 percent of the North American car market. Today, not so much.

Let's face it -- the bankruptcy of GM and Chrysler forced the companies to do in months what their managers and their boards should have done without government intervention over the past several years. The bankruptcy of these companies is a failure of American corporate governance on the biggest scale yet. As I argued in my book Value Leadership in 2003, boards and management are failing shareholders and change is required.

But President Obama did a great job of getting Chrysler to restructure itself before going to court, so about a month later it's poised to emerge from bankruptcy -- maybe as early as today -- the same day that GM ceased to exist after nearly 101 years. That's because a bankruptcy judge approved the sale of Chrysler to Fiat.

The deal will give the UAW trust 55 percent. Fiat will own 20 percent initially -- going as high as 35 percent if it reaches certain goals. The United States will own eight percent, and Canada two percent.

This bankruptcy process has cost the U.S. a relative pittance -- at least when you compare it to the $12.8 trillion we've used to bail out Wall Street with nary a peep of complaint. Chrysler got $4 billion from the Treasury Department in December and $4 billion more this year.

For all those folks who want to let the free market operate unchecked, consider this: it took the incompetent free marketeers decades to drive these companies into the ground, and in mere months that the U.S. government has stepped in as the adults, it cleaned up their mess.

American is lucky that it managed to get some grown ups in power when it needed them.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.

Read Full Story

Markets

S&P 500 2,238.56 26.33 1.19%
DJIA 19,522.54 270.76 1.41%
NASDAQ 5,388.42 55.42 1.04%
DAX 10,986.69 211.37 1.96%
HANG SENG 22,800.92 125.77 0.55%
NIKKEI 225 18,496.69 136.15 0.74%
USD (per EUR) 1.08 0.00 0.39%
USD (per CHF) 1.01 0.00 -0.27%
JPY (per USD) 113.80 -0.25 -0.22%
GBP (per USD) 1.26 0.00 -0.36%

From Our Partners