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June 7, 2009

Auto bailouts aren't new fad

GM, Chrysler aren't alone in needing help



Name a failing automaker that needed outside help to survive.

Not General Motors or Chrysler. That's too easy.


How about BMW, Nissan, Renault and Ferrari? Among the world's most admired brands and companies, none would exist today if somebody hadn't thrown them a lifeline.

Tokyo Electric was within hours of shutting off the lights at Nissan headquarters when Renault came in with a low-ball offer and new management in 1999. Renault itself had been in shambles 15 years earlier when the French government ousted the chairman and installed new leadership.

BMW was about to close its car business when the strength of an upcoming car convinced the Quandt family to bail it out in the late 1950s.

As Americans reel from the fact that General Motors is in bankruptcy and Chrysler survives only thanks to government cash and Fiat engineering help, it's worth noting that history is littered with automakers that hit the rocks and went on to success.

They got into trouble in the same ways GM and Chrysler did: economic downturns, management mistakes, product and quality foul-ups.

At this point, though, the whys and wherefores of the downfall amount to fighting the last war. What matters is the road forward, what history says about GM and Chrysler's future.

What makes for recovery, and a company that goes on to build great vehicles? What's the difference between a successful salvage job and a holding action against inevitable failure?

"If you have strength in your brands and a vision of the future, you can succeed," said Ken Gross, auto writer, historian and former director of the Petersen Automotive Museum in Los Angeles.

"Fiat's done this before," Gross said. "They've been very good managers of Alfa Romeo and Ferrari. They built on the brands' strengths and made them better. Fiat clearly has the opportunity to do that again, especially with Dodge and Jeep."

Fiat itself was nearly bankrupt a few years ago. New management, a cash infusion from the Agnelli family that controls the automaker and a $2-billion payment from GM in 2005 set the stage for recovery. Fiat has become a model of efficiency and financial stability.

BMW was ready to close its failing car-making business in the late 1950s. The Bavarian government stepped in and convinced the wealthy and secretive Quandt family to review BMW's prospects.

A look at the engineering center and the upcoming BMW 1500 sedan, forerunner of the sport sedans that are BMW's hallmark, convinced the Quandts that BMW had a future.

"The Quandts said, 'If they can build a car this good, this company is worth supporting,' " Gross said. A series of British nationalizations of failing car companies failed, however, largely because the companies never improved their quality, efficiency or technology.

There's not much history of American automakers recovering from bankruptcy, but Studebaker entered Chapter 11 in 1933 and survived into the 1960s, said Bob Casey, curator of transportation at the Henry Ford Museum in Dearborn.

"If people bought Studebakers from a bankrupt company in the heart of the Great Depression, they'll buy Chevrolets and Dodges today, if the cars are good," Casey said.

Article:Auto bailouts aren't new fad | Freep.com | Detroit Free Press
 
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