Firestone, Clunkers and Chapter 11: The Decade in Car News Page 2

December 28, 2009

GM, Chrysler File for Bankruptcy

It seems unreal, but as recently as 2000, GM posted record profits and Chrysler was still healthy, still on its corporate honeymoon with Daimler AG. Both were cutting jobs, though, and by the end of 2000, GM had confirmed it would close the Oldsmobile division. It was a dire omen of the spiral that landed both companies in bankruptcy court this year.

GM's problems were well-known, back into the early 1980s, when a string of failed reorganizations wound out over time, as the world's then-largest automaker continued to see its market share erode. In 2000 GM set 30-percent market share as its goal, and entering the decade, after selling 5 million vehicles in the U.S. in the prior year, it seemed possible. GM held a dozen brands and was fresh from acquiring the other half of Saab it didn't own, and was launching HUMMER. GM last turned a profit in 2004. Debt ballooned to more than $60 billion, and faced with a do-or-die scenario, GM swallowed its pride, took government loans and put itself into a quick reorganization still unfolding today. As of this writing, Saturn and Pontiac have been dumped, with Saab headed to the same fate. HUMMER's still in limbo, with a tentative deal with a very tentative Chinese government and a little-known heavy-duty truckmaker from the Middle Kingdom. And even then, critics are wondering if the handful of brands left--Chevrolet, Cadillac, Buick, GMC, Opel, Vauxhall and Holden--will hold the key to a turnaround.

Backtrack to Chrysler, which in 2000 was the blushing bride in an acquisition that brought it into Daimler-Benz, and nearly into a three-continent alliance with Mitsubishi. By about 2005, Chrysler's expensive product needs proved to be too much of a burden for Daimler, which sawed it off to the Cerberus hedge fund--which then dumped it into receivership and into the arms of Fiat Group. Chrysler had saved itself from peril in the early 1990s with a wave of new product, but that wave isn't due to crash ashore until early 2011 at the earliest, as America gets ready for a score of Chrysler-branded Fiats. Back then, a popular book of the day claimed Chrysler was "taken for a ride," but a decade later, it's probably Daimler that escaped with its life--and Fiat that should be the next to buckle up, and quickly.

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