Wrong, wrong, wrong Mr Obama

Mr Obama blames the bondholders for Chrysler’s problems. In his world people should save, lend their money to a car company, and then convert the loan to a gift. Apparently a company has a right to pay its executives too much, to give generous benefit to its employees, to sell too few cars and then to get a donation from the lenders.

He should stay out of the restructuring. It makes him look weak and cross when they don’t all do what he says. Putting Fiat together with Chysler is putting two weak companies together. That does not normally make a strong company. Chrysler either has to come up with cars people want to buy, or make major reductions in capacity and cost. There is no third way or easy route to riches. Mergers are fashionable amongst governments. They are also anti competitive, put off the day of reckoning, and make the companies too large to fail.

If people are keen to buy Fiat cars, Fiat should negotiate with US dealers and set up a dealer network. If Chrysler think they could make and sell Fiat cars at a profit they should licence the models they think can work. If Fiat think a merger is the way to US taxpayer subsidy they may be disappointed. If Chrylser thinks Fiat has all the answers on how to sell more cars in the USA they are in for a surprise.

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18 Comments

  1. Paul
    Posted May 1, 2009 at 7:38 am | Permalink

    As normal you are right John,

    Until a couple of years ago Chrysler was owned by Daimler ( Mercedes) one of the most successful car companies in the world. It nearly did for them. Daimler got rid of Chrysler at a huge loss but hasn’t look back since.

    Chrysler has struggled for 30 years being on the brink of exstinction many times. Back in 80’s Lee Iaccoca rescued them and famously took a salary of just $1 per year.

    The fact is that they have a couple of good selling models and the rest is rubbish. So completely restructure and downsize is the ONLY option if they are to stay in business. Trouble is they are terrified of Michael Moore and the American left. Chyrsler the new British Leyland

  2. Ian Jones
    Posted May 1, 2009 at 7:45 am | Permalink

    He’s an old fashioned socialist, of course the capitalists are at fault. Surely cannot be the workers for getting such generous pay and perks that there was no money left for investment!!! Not to say the executives aren’t a bunch of thieves but the big money went on the employees.

    This is what unions do!

  3. Simon D
    Posted May 1, 2009 at 7:47 am | Permalink

    I take a different view. I used to work for a British company run by the unions. They blackmailed the company and took high wage and pensions settlements. No blue collar worker could ever be sacked. The moment anything unpalatable was proposed, BBC air time was available to union chiefs to vilify the management. Shares in the company are now worth less than they were 20 years ago. There is nothing wrong with the product but the company will never make money because of its high cost base.

    So with the legacy car makers in the US. In Detroit the unions called the shots and the management were allowed to frolic on the sidelines. You can’t negotiate sensible pay structures when the unions hold all the cards.

    The present stand off is, in reality, between Obama and the Democratic Party’s own clients, the autoworkers union. We should watch the unfolding drama carefully as there may be lessons for us to learn.

    If the unions run a company, keep your money in the building society: you will get a better return. Obama has a tough challenge: I agree with your analysis, but it will be interesting to see how the White House resolves a fundamental conflict of interest between America PLC and its own supporters.

    • oldrightie
      Posted May 1, 2009 at 9:20 am | Permalink

      Spot on.We have a burgeoning union power base again, in this country. Several of the ex-union bosses now doing as bad a job in so called Government. The left always blame Mrs Thatcher’s Premiership. With them, like Brown, it’s always somebody else’s fault.

      • Bazman
        Posted May 1, 2009 at 1:14 pm | Permalink

        Keep your money in a building society? Not in a bank run by a banker? Good advice.
        I suppose it was the unions that have caused the latest financial crash? None of these anti union people have much to say about city being now one of the biggest threats financially to Britain. Massive subsidies going to banks who still will not lend this money to the wealth creating companies. The city firms have just dogged the increase in tax and cuts in bonuses by awarding themselves large pay increases. What sort of pay and conditions would you expect to have, and do have without collective pay bargaining? Companies hate unions because they make them pay fair wages and force safe working conditions on them. Which in the long run is good for business. How does someone get a pay rise and protect there interests (labour rates) like other suppliers of raw materials without a union? Don’t make me laugh righties, no matter how much profit a company makes they will not share it with employees. The car manufactures made a lot of money with no long term strategies on the future The shareholders and executives where happy to take the money and run. Do you seriously think anyone should work for free? Spout your right wing nonsense to the next repair/installation man/company who does work on your house. Point out the minimum wage is less than six quid and he is charging fifty plus an hour. See the back of the van? You did not even get insulted! Must be because of the union or maybe the middle class security system? Does not exist? Ohhh realllly!

        • oldrightie
          Posted May 1, 2009 at 2:48 pm | Permalink

          A typical leftie rant without a peek at history. The real trade union movement was every bit as important as philathropic employers. Good employers recognise the productivity of a contented work force.This Oldrightie was a union official back in the seventies and quit because of the collusion between the central union office and the employer. Thick as thieves they were, just like Labour and Union bosses today. More interested in their own selfish needs than those of the country and or union members. The difference between righ and left is the right is more often right than ever the left has been. Take your tainted dogma and be off with you, Bazman. This Country deserves better.

        • Bazman
          Posted May 1, 2009 at 6:27 pm | Permalink

          Weak unions are the problem for sure.

  4. Robin
    Posted May 1, 2009 at 8:20 am | Permalink

    His decision is more than just sabre rattling at small financiers in the US, it’s more than political posturing – it looks like a declaration of war against finance – but not the banks. The very same financiers that oil the wheels of the capitalist nation he is so proud of.

    The car companies were wonderfully described as pension funds that produced cars. The unions have destroyed the profitablity of these industrial giants. How ironic that Obama is now attacking the small financiers who are facing up to the fact that Chrysler is a busted flush and needs to be restructured under Chpt 11.

  5. Mark M
    Posted May 1, 2009 at 8:26 am | Permalink

    A one term Obama is looking more and more likely as each day passes.

    Socialists are so terrified of unemployment that they will not accept that if your company makes something that no-one wants to buy then you deserve to go bust.

  6. oldtimer
    Posted May 1, 2009 at 8:34 am | Permalink

    You are right. This merger is doomed to fail – shortage of cash and time to effect needed changes plus cultural differences are but three potential reasons for failure.

  7. backofanenvelope
    Posted May 1, 2009 at 9:03 am | Permalink

    The trouble with visions is that they bump into facts!

  8. Stuart Fairney
    Posted May 1, 2009 at 9:26 am | Permalink

    If the US media can bear to be honest in 2012, Obama is a one-termer. I’m not sure they can if 2008 was anything to go by, but the combination of a record of failure, the novelty black candidate advantage now dissipated, and a credible Republican candidate (if such a thing is not a contradiction these days), means Obama = Carter.

    Perhaps Governor Jindal with former Secretary of state Rice as his running mate? I can only hope.

  9. Cliff.
    Posted May 1, 2009 at 10:27 am | Permalink

    It’s all going to end in tears. With Mr Obama running the USA, Mr Brown running the UK and so many socialists running the EUSSR, we are in it up to our necks….Sad times and it will be painful to put right for everyone. I can never remember a previous time when the left had so much power and when we were in so much trouble.

    I was not taken in by the hype regarding Mr Obama, who’s only qualification, according to the media, was that it would be nice to have the first black president. He reminds me of one Mr Blair in many ways.

    • Citizen Responsible
      Posted May 1, 2009 at 6:21 pm | Permalink

      President Obama preached “change you can believe in” during his presidential campaign. He is now laying the groundwork for a massive cultural shift in the US by filling executive and judicial jobs with liberal/socialist activists. Watch for changes to the law in the US on abortion, the Constitution, human rights etc. I don’t think he has openly revealed his true agenda for the US to the American people, much like the deceit and spin of Mr Blair and Mr Brown.

      • Cliff.
        Posted May 2, 2009 at 9:52 am | Permalink

        CR:

        My point exactly!!
        There seems to be a massive shift in policy in most of Europe, the UK and now America towards the left/liberal agenda. Americans that I speak to are worried about the direction their country and way of life is changing. In this case, the Americans, for once, seem to be lagging behind us.

        Too many British politicians have bought into the hype surrounding Mr Obama; On Question Time on Thursday evening, the liberal representative justified many of his comments by saying Mr Obama thought or did the same, as if Mr Obama was some kind of guru. As far as I can see, he remains untried, untested and inexperienced and, in time, history will be his judge. I hope he will turn out to be a good president for both America and the world but, so far, I have doubts.

        I listen to an American based Catholic radio station and it seems to me he has alienated all the American Catholics in much the same way Mr Blair did here. I feel there are many other parallels between Messers Blair and Obama, the biggest being image and presentation over substantive policies. I do feel that religion, rightly or wrongly, plays a much bigger role in America than it does here and there may well be a backlash against Mr Obama if he rides roughshod over the Christians beliefs that many Americans hold, in the same way Labour have over here.
        I feel if Mr Obama, aided by the media, sets out to make religious beliefs something to laugh at or ridicule, as has happened here, he will only serve the one term and his legacy will be a more divided America.

  10. james barr
    Posted May 1, 2009 at 11:18 am | Permalink

    President Obama maybe “charismatic” but does he know what he is doing? For me the jury is definitely still out.

  11. Adam Collyer
    Posted May 1, 2009 at 3:32 pm | Permalink

    If you look at the terms of this deal, from Fiat’s point of view it’s a great deal. They are putting NO MONEY in and getting a 20% stake in Chrysler. Depending on the company’s performance, they could end up with 51%. Apparently their contribution is “small car technology and engines” for Chrysler. (Fiat, by the way, is no longer weak – it’s current CEO, Sergio Marchionne, has transformed it into a soundly profitable company – 5.7% return on sales in 2008.)

    You have to remember that Chrysler owns Jeep, which is a highly credible brand. They are also the US market leader in “minivans” (what we would call “people carriers”) and make a pretty credible pickup called the Dodge Ram. And all the rest will probably be axed as part of the restructuring.

    Which means this is all great for Fiat, great for the Chrysler workers obviously as well as dealers, suppliers and Mr Obama himself. It’s not so great for the bondholders, as you point out, or for the owners, Cerberus and Daimler, who will get NOTHING AT ALL. Which is probably why the bondholders are challenging the deal in the courts.

    • Paul
      Posted May 1, 2009 at 9:53 pm | Permalink

      Trouble is Adam,

      As I pointed out above Daimler Benz tried all this too. The Autoworkers Union is now in the position that Leyland were in the 70’s Red Robbo and all that, emboldened by that charlatan Michael Moore they think they can strike their way out of it. What they don’t understand is that the US auto industry hasn’t made any money from cars for years. Ford and GM made their money from Finance ( in fact at one time GM was the worlds largest bank and consumer credit company) it’s why they’ve gone pop too.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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