COMMENTS: Detroit Goes All American

Detroit's Big Three automobile manufacturers are all American once more. After nine years of ownership by the German makers of Mercedes Benz, Chrysler, the smallest of the three, has been sold and privatized. Last year Chrysler recorded almost $1.5bn in losses and laid off 13,000 workers. All three networks led with the DaimlerChrysler deal, making it the Story of the Day.

In retrospect the merger looks like a catastrophe for the Germans. Daimler-Benz purchased Chrysler for $36bn and got rid of 80% of it for a mere $7bn. "Daimler was ready to pay any price for a divorce," was how CBS' Anthony Mason put it. He asked Chrysler's onetime boss and TV pitchman Lee Iacocca his assessment of the merger: "A fiasco." ABC's Dean Reynolds (subscription required), like Mason, at first used the marital metaphor to describe the Detroit-Stuttgart union, but mixed it with incest when he referred to Chrysler as Daimler's "ailing stepbrother."

NBC had Philip LeBeau, CNBC's auto industry expert, explain how Cerberus, the new owner, operates: private equity firms "do not have to answer to public shareholders," he explained. "They have a track record of being aggressive with their investments…sometimes even breaking them up." As for Chrysler's workers, ABC's Reynolds reported that the autoworkers' union had pushed for Chrysler to stay part of Daimler but had finally relented: "What choice did they really have?"

The price of labor bedevils all of Detroit, CBS' Nancy Cordes generalized: so-called legacy costs for pensions, healthcare and buyouts add $1,360 to the price of each Big Three automobile compared with less than $100 for each Toyota. That is why General Motors was "once nicknamed Generous Motors." Cordes predicted that Cerberus, like Ford and GM, would oblige Chrysler workers to take a cut in benefits. Otherwise "they will be forced to move more or all of their production overseas. They would be American cars in name only."


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