Yesterday's Wall Street Journal reported Fiat's interest in taking a controlling interest in Chrysler.
According to the article, Fiat would begin by taking a 35% position, with the option of increasing to a controlling 55% ownership. Incredibly, Chrysler has fallen so far that all Fiat must do for this position is to cover
"the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S."
Thus, my claim, along with others, expressed in this November post, is being shown to be true. Given the opportunity, other auto makers will step in to buy parts of the troubled Detroit-based US auto makers, when they prove attractive for those buyers' own strategies.
Fiat is essentially getting a US base on the cheap. They don't even want to build Chrysler cars, just use the existing plant infrastructure. Then they'll escape foreign-import laws and sell their cars as US-made.
If Congress and the prior administration had simply let GM file Chapter 11, the same sort of market self-cleansing would have occurred. Maybe it still will, but the odds grow longer as Wagoner feels he's successfully elbowed his way to the Federal cash trough.
It's really a shame, because now, during the very week of US political power transfer, Schumpeter's theory of creative destruction is being proven true for the zillionth time.
Chrysler's millstone becomes Fiat's new beginning in the US market. Problem solved!
When, if ever, will politicians, collectively, ever learn that markets do right themselves, and, short of that, forced, arbitrary intrusions by government, and false price-setting always distorts or delays eventual market self-healing?
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