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Chrysler and Poltical Parties

May 29, 2009

Facts around the Chrysler Bankruptcy and Dealer     Closings

Chrysler will eliminate roughly a quarter of its 3,200 U.S. dealerships. It wants to shed 789 dealerships by June 9. Many of the dealers’ sales are too low, just over 50 percent of dealers accounting for about 90 percent of the company’s U.S. sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

About 187,000 jobs from GM and Chrylser could be lost from the closing of dealerships. Chrysler dealers sold about 208 cars per dealer, Honda Motor Co. sold about 1,200 vehicles per dealer. Chrysler said its dealer network “needs to be reduced and reconfigured in a targeted manner to strengthen the network and dealer profitability and to achieve optimal results for the dealers and consumers.”

                        The Government Role

The problem now is the President sought a political solution for an business problem. Remember the giving hand is also a taking hand, a saying we will all learn to hate in the Obama years.

A better proposal would have been what I laid out in December 2008 in the New Journal. Bankruptcy for the car makers with no funds being allocated to prop a company which clearly can not survive. Debtor In Possession financing could have been through the government but as  means of making an entity which can thrive on its own, not survive off of government money.

Instead Obama chose to turn the bankruptcy process upside down by ignoring established standards of recovery rights. The political sellout to the UAW will come back to haunt the Obama team. Those actions are why we now have people questioning the process of donors and political party affiliation.

In the end, if Obama plans to solve health care, social security and medicare the same way he has botched the car maker challenges we are in for a very rough ride

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