Before Chrysler can start building cars that more Americans want to buy, it will have to overcome considerable challenges.
The biggest may be persuading its three principal new owners — the retirement fund for the labor union that President Barack Obama himself said was part of the company’s problems; a government that insists it will keep its hands off day-to-day decisions; and a foreign car company, Fiat — to innovate in ways the carmaker has resisted for three decades.
There is reason for skepticism. For all the optimism expressed by the administration about a downsized, leaner Chrysler, the structure of the new Chrysler sets the stage for a conflict between current workers and retirees.
Chrysler’s workers, of course, are desperate to preserve their job security, wages and generous health care benefits, built up over years of negotiations. But it is Chrysler’s retirees who will hold a seat on the new company’s board, representing the interests of a dwindling — and expensive — retirement health plan.
“There’s a potential conflict there, absolutely,” one of Obama’s aides conceded Thursday.
The innovative element of the new company is supposed to come from Fiat, the Italian automaker that managed a remarkable turnaround in the past five years. Without question, Fiat turns out fuel-efficient engines and sporty, economical small cars — exactly the image of the future American car industry that Obama talks about in glowing terms.
But when Chrysler was controlled by Daimler-Benz, one of Europe’s most successful luxury carmakers, everyone hailed the potential of great cross-border synergies. They simply never materialized.
Members of the team that negotiated the deal insisted on Thursday that they had explored all those risks as they designed the revamped Chrysler and faced down a group of recalcitrant lenders who balked Wednesday night at taking a deal that would give them about 28 cents for every dollar they had lent the company over the years.
The United Automobile Workers will not be managing the company the way unions tried, and failed, to manage United Airlines, they said. Moreover, Fiat is not Daimler — it is geared toward small, mid-market cars, not fine driving machines with wood-burl dashboards, they added.
Obama is trying to portray the government’s role as more venture capitalist than manager. “I’m not an auto engineer,” the president declared Wednesday evening during the news conference marking his 100th day in office. “But I know that if the Japanese can design an affordable, well-designed hybrid, then doggone it, the American people should be able to do the same.”
In fact, in Chrysler’s case, he is relying on Italian technology — Fiat technology — to do what Chrysler has been unable to do itself. And while the White House does not want to advertise that fact as Chrysler embarks on its latest last chance, the plan is for Chrysler to ultimately be a subsidiary of Fiat, in a turnabout of fortune like those in the early days of the auto industry, when giants were consumed by faster-moving competitors.