Yesterday the Chrysler Group said it had repaid $7.6-billion in outstanding U.S. and Canadian government loans, essentially using new loans from the private sector -- $1.7-billion went to Export Development Canada (EDC) and $5.9-billion to the U.S. Treasury (all figures in U.S. Dollars).
The Federal and Ontario governments still have a two per cent equity stake in Chrysler and some day they hope to sell it to recover the remaining $1.45-billion outstanding in bailout money in the company that went through U.S. bankruptcy court two years ago.
Okay, so what have we learned from Chrysler’s story and the general state of calamity in Detroit’s auto industry for the last few years? We’ve learned that crises can be good.
The restructured Chrysler and General Motors, not to mention Ford Motor which did not take government bailout money but has restructured operations just the same, are lean operations now. All three Detroit auto makers are also focused on building and selling vehicles real consumers want to buy.
Detroit spent most of the last 30 years going stale. The crisis sparked by the financial meltdown of 2008 forced these once fat and lazy car companies, with their hidebound cultures, unimaginative management, irresponsible boards and complacent unions, to reinvent themselves. The changes have been painful and many have lost jobs. Investors and bond holders in GM and Chrysler took big haircuts, too.
That said, look at what Detroit’s auto makers have done – or re-done – in just a couple of years. We’re seeing innovative design ideas, forward-thinking technologies and best of all a new wave of small cars such as the Ford Fiesta and Focus, Chevrolet Cruze and Buick Verano and Fiat 500.
Meanwhile, once-gas-guzzling SUVs are morphing into smooth-handling crossovers with much better fuel economy. The new Dodge Durango gets better fuel economy than the old Chrysler Aspen Hybrid and the 2011 Ford Explorer gets up to 25 per cent better fuel economy than the vehicle it has replaced.
Even more fuel-efficient offerings are on the way, too. Earlier this year at the Detroit auto show, Ford CEO Alan Mulally bragged about the company's strategy to build 10 different compact car and crossover models using the same basic chassis, or “platform” – from the new Focus to the coming Escape replacement. Ford is not alone in taking this world view, either.
Then there is this little matter of quality. Consumer Reports, in its annual forecast of new vehicle reliability, said Ford and GM are both making significant gains. Sure, Toyota Motor and Honda Motor models still dominate the rankings, but not like they once did. And even Chrysler's efforts to upgrade its existing cars are paying off to the extent that CR says the improved Chrysler products are now “on the consideration list,” in the words of CR auto test director David Champion.
Detroit’s auto makers are clearly competitive now, though it would be foolhardy for any of them to declare victory. Of the three, Ford is clearly the farthest along in its turnaround, though this is a race without a finish line, therefore who knows where the competition will be next year.
At least this latest crisis in Detroit wasn’t wasted – and that means we have good reasons to believe governments didn’t waste taxpayer money in bailing out Chrysler and GM.
