I couldn’t let this pass. Declares a Treasury spokesman after Fiat signs to purchase Chrysler – with $6b in taxpayer dollars:

“This morning’s closing represents a proud moment in Chrysler’s storied history!”

Who’s writing this stuff? The Chinese government? The Chinese Ministry of Babble. What kind of proud moment is it when the corpse of Chrysler is carried off in the meat wagon?

“The Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker.”

Here, the Treasury confuses the appearance of a thing with the thing itself. Chrysler is still a ruin, getting its debts off the Chrysler books does not give it customers. 

Then again, perhaps part of the Obama health care initiative will be the mandate to purchase a Chrysler- made SUV or pickup truck.

The Treasury’s new ‘Partner’, Fiat, will be back at the loading dock off 15th Street for more and more cash. It will take years for Fiat to alter its vehicles to meet California emissions and US safety regulations.  There is nothing extraordinary about Fiat power trains or technologies. Fiat has always made small cars … so does Honda, Mini (BMW), Smart (Daimler), Suzuki and Toyota. This is in a shrinking market dominated by the expanding downstream effects of peak energy availability.

What will Fiat/Chrysler sell? What will they sell ultimately as well as in the interim? For the time being, Chrysler is stuck with SUV’s and giant pickup trucks. With gasoline prices edging back toward $3 a gallon, the bloom is off the rose for these types of vehicles.

Ultimately, the bloom is off the entire industry. Cutting adminsitrative costs and ending legacy commitments does not reduce the capacity of the industry. There are still too many car factories. The Obama adminstration hubristically believes it can dictate over market forces. A six- year old can tell what the outcome of this effort will be.

The energy situation will not be denied. As the industry’s costs multiply, its products’ prices will increasingly exceed the ability of purchasers to afford them. Tight energy works this way; it increases costs while constraining purchasing power. As the industry refuses to examine this problem in a meaningful way and make adjustments, the point where it cannot adjust is likely to arrive with the industry unprepared.

The result will be more and more Treasury  ‘clients’, with the governments’ power to bail being constrained. I will leave to your imagination what the outcome of this will be. While I am not an inflationist, it is difficult to be bullish on treasuries. It’s all reminiscent of the Soviet Union …

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