A businessman faces three fundamental considerations in making a business decision: demand, cost, and competition.
The Chrysler Business
Demand: Does anyone want the big, heavy, safe and lower gas mileage cars today? Is there any cachet to owning a Chrysler? Sales are off about 48 percent versus about 30 percent for the other major US automobile manufacturers. Can Chrysler produce a fuel efficient car to meet that part of the market demand? There is some continuing demand for the big Dodge trucks. They have a nice cachet: “Ram tough!” Okay, so demand is a little off. Maybe the new Fiat contribution to the lineup will improve demand. Fiat? What is the demand for Fiat in the US?
Cost: Chrysler is losing money so costs are probably one component of this business model that has to change. The union workers making these products for Chrysler cost roughly twice what non-union workers cost for very similar work. Obviously there are other problems related to cost because Chrysler debt has reached the level that the business is now in bankruptcy court.
Competition: Largely southern US based automobile manufacturers of more efficient foreign car design have beaten Chrysler in the market for years. Non-union shops are hard to compete against at half the UAW workers’ rates. Other domestic competition includes Ford and General Motors. Ford is kind of doing okay. At least Ford has a new model called the Fusion, which is apparently well-received by the consumer. GM is now being run by the government for all intents and purposes so whether it takes a few years or a few decades, they are going out of business eventually. But wait, Chrysler is already in bankruptcy and being reorganized by government fiat (not the car, but the order from on high.)
So would you buy a Chrysler? I heard a dealer appearing on television’s Fox News Channel this morning being asked why should someone buy a Chrysler product. What about the quality? What about the prospects for Chrysler being around in a few years? His answer? Paraphrasing, he said that the President has guaranteed that an excellent warranty plan will be part of the package. Not the President of Chrysler mind you. No credibility there. But POTUS has the credibility needed to save this business apparently.
So, here is how I think President Obama may plan to save Chrysler and the US auto industry:
Demand: The new product will be a fuel efficient vehicle about the size of a bumper car that will have a top speed of 55 and will come in any color you want, as long as it is pink. It will run on solar power or some other non-carbon essence that will be developed very soon because Obama will insist. Everybody will want one so demand is no problem. If it is a problem, laws will be passed to regulate the kind of car you may drive. Problem solved.
Cost: The UAW will own 55 percent of the Chrysler company so they will be mostly paying themselves anyway. The federal government will guarantee profitability with the full faith and force of the American taxpayer. Who cares about cost anyway? The focus should be on results. Besides, Obama will use any means necessary to accomplish the desired ends.
Competition: Once the Employee Free Choice Act is modified appropriately and passed those non-union scabs in the south will be forced to go union. That will help get the competition’s cost more in line with the reality of doing business in America.
Does that sound stupid? It is. But, the unintended consequences of government intervention in the economy will be much worse than stupid: they will continue to be destructive to political and economic liberty at an accelerating rate. That is the real and deadly legacy to your children. Not the massive debt and outrageous spending by government, but the loss of individual liberty.
Buy a Chrysler? I think not.
Copyright 2009 Edward Podritske