White House to let Chrysler fail

John Byrne Published: Monday March 30, 2009
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Goodbye, Chrysler.

At least that's the message from the White House, whose newly released plan for the automakers includes financing for just 30 days, after which point the Administration will leave the firm in the hands of the banks and an Italian company that's proposed a partnership.

The Administration appears to have dispatched a slew of anonymous sources to spread the message: on Monday, Politico played host to a handful of aides who variously bashed the automaker's plan for its own resurrection, questioned their "too big to fail" importance and derided their cars.

Compared to General Motors, which employs more than 200,000, Chrysler employs 58,000.

“They are, of course, much smaller,” a senior administration official was quoted as saying.

In a conference call with reporters, the official also dismissed the quality of Chrysler's cars, saying he "could think of no industry recognition for Chrysler vehicles."

"Chrysler has no cars that are recommended by Consumer Reports," the official said.

Chrysler could receive a cash infusion from Fiat, an Italian carmaker that's seeking entry into the US market. Fiat has tentatively agreed to give Chrysler access to technology and research worth $10 billion in exchange for a 35% ownership stake. But that deal isn't final, and its unclear if Fiat would come through with cash.

If the deal was consummated, however, the Administration says they'd be willing to pony up as much as $6 billion in more bailout funds.

Moreover, Chrysler has made "little progress" getting its lenders to waive debts. The company has offered to give its creditors ownership stakes in exchange for debt forgiveness. But as of yesterday, Chrysler hasn't had "any negotiations" with JP Morgan Chase, Citigroup, Goldman Sachs and Morgan Stanley, which holds the firm's debt.

Barring debt forgiveness or aid from Fiat, Chrysler's days appear numbered. While the firm could go into "structured bankruptcy," which would give it some level of shielding from creditors, a bankrupt automaker would likely find its cars hard to sell because consumers wouldn't have faith in the vehicles.