Friday, May 6, 2011

Chrysler announces profit for first time since 2006

I'm a big fan of Kia and Hyundai (and the former GM Daewoo, for that matter), but I also get excited when American car companies do well. And the good news is that Chrysler registered a very modest profit — but a profit nonetheless — and that may signal that the beleaguered Detroit automaker is truly on the mend.

Of course, a lot of this turnaround still comes from the sale of large gas guzzlers, and Chrysler must work to provide more efficient but still fun vehicles for the American market which could also resonate with car buyers in places like, say, South Korea. I would love to see the occasional Chevrolet-versus-Chrysler race on the streets of Seoul.


  1. Any company, no matter how bloated, can be profitable if it just puts a few lazy, over compensated UAW workers on early retirement.

  2. Can you alert me to a good article laying out the case that Chrysler's (or any of the other Big Three) problems are primarily the result of overcompensated auto workers or retirees?

  3. Kush,

    Just look at GM and Chrysler's financial statements with an accountant's eye and it's pretty obvious. UAW pension fund obligations are $55 billion and counted as debt on GM's balance sheet. Industry leading wage percentage in the Cost of Goods Sold section of an income statement. This means that less money can be used to buy higher quality materials and capital equipment. It also makes it harder to make smaller cars in the U.S. and make money on them. The UAW had to take a special deal for the GM Ohio plant in order to make the Chevy Cruze in the U.S. Otherwise, I'd bet all The Cruzes would have to be made in Korea or China.

    The reason why there is so little formal literature on this is that the UAW does wield considerable political power and has the sympathy of the left leaning press. For example, you'll never see this analysis on NPR!

  4. I'd like to point out that, it being radio, you don't actually see anything on NPR.

    At any rate, I listen to PBS far more than NPR.

    What I was getting at is that it seems that poor marketing decisions, like excelling largely with gas guzzlers that (a) was/is an unsustainable growth model in the US, what with energy competition with China (and soon India) means cheaper-than-water gasoline couldn't last forever, and (b) are not great sellers in markets like Europe, Japan, South Korea, China, etc., may be major problems as well. In fact, were those problems not there, it could perhaps negate the issues with the pension fund.

    Just a thought.

    I honestly don't know enough about the UAW and their pay situation, but I know a lot of people in different sectors trade lower pay for higher retirement benefits, and the companies (perhaps shortsightedly) push for that because it means short-term gain, but then the chickens come home to roost and the workers get blamed.


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