Chrysler's Profit Projections

I read this morning's headline in the Wall Street Journal's Marketplace section. It's chilling-

"Chrysler Forecasts Profit- In 2012"

Followed by this in smaller, italicised type,

"Auto Maker Lost About $17 Billion in 2008; Some Secured Lenders Seek to Block Sale of Assets to Fiat."

What investor in his right mind would be sitting still for a profit forecast that showed, for 2008-2012, a net loss? Judging by the chart accompanying the article, Chrysler forecasts about $3B in profit in 2012.

We're clearly not talking about a borderline-profitable business going through a temporary problem. Chrysler should be dead. It's a failed business enterprise. Its business model didn't work.

It didn't work alone. It didn't work with Daimler-Benz. It hasn't worked under private equity ownership, which is generally the last stop on the way to total failure.

If the hardnosed, flinty capitalists who run Cerebrus couldn't make Chrysler profitable, are we supposed to believe that the guiding hand of the US federal government is going to succeed?

A bunch of appointed, unelected bureaucrats are going to succeed where the most self-interested, cloaked-from-public-view turnaround veterans failed?

Joseph Schumpeter must be spinning in his grave. The Chrysler bailout out, as well as that of GM, is precisely the sort of roadblock to recycling business resources that he would have abhorred.

At least the Fiat move resembles Schumpeter's notion of salvaging the pieces of failed companies to use in better, more profitable applications by someone else. Granted, the senior secured lenders have the right to block the sale of parts of Chrysler to Fiat, if their rights are being subverted. But all of this would have already been in process months ago, had the Bush administration had the backbone to just say 'no' to the two auto makers headed for Chapter 11.

As it is, we have the ludicrous display of a failed car maker seriously projecting net cumulative losses through 2012, and apparently believing this is reason to continue to fund its existence.