Chrysler’s near-term prospects are bad enough, according to this AP article. But you have to read several paragraphs of the article before you see exactly why spending tens of billions of dollars last year to bail out the United Auto Workers — I mean, Chrysler and GM — was such a bad idea:
Speaking to the Automotive News World Congress in Detroit, [Fiat and Chrysler Group CEO Sergio] Marchionne said the global auto industry must reduce factory capacity in order to survive, especially in Europe.
World automakers can build 94 million cars and trucks a year, but that’s 30 million more than it can sell, he said. (emphasis added)
So, one-third of the vehicles being made right now cannot be sold. One-third! Yes, Marchionne said much of the over-capacity was in Europe. But this is no solace to GM and Chrysler shareholders American taxpayers, unless European governments suddenly get tired of subsidizing over-production. Fat chance.
The problem, then, is not just that GM and Chrysler are making cars that too few people wanted to buy. There are too few buyers for cars of any kind — at least, too few buyers relative to the number of producers. And that’s despite the fact that GM, for one, cut production by 30 percent between 2007 and 2009
The market is totally off-kilter, and Washington has only made matters worse by propping up two auto makers.