Fallen Pentastar

Chrysler declared bankruptcy today. This is the biggest blow to the American auto industry since Tuesday.

The nation's third-largest (read smallest) major automaker almost avoided this fate. Chrysler managed to negotiate respectable deals with its banks and with the American and Canadian autoworkers' unions to stay in business, but a consortium of forty hedge funds refused to renegotiate their loans with the company and so Chrysler entered Chapter 11. What David Riccardo, Dieter Zetsche, Cerebrus, products like the Dodge Daytona and the Chrysler LeBaron GTS, the Eagle brand, and a series of other missteps and disasters over the past thirty years couldn't do, a bunch of greedy investors managed to do in one fell swoop.

Needless to say, President Obama was not happy with the hedge fund investors. But he does hope to help shepherd Chrysler through the even more difficult period it's now entering. Bankruptcy does not mean going out if business; rather, it means a restructuring of operations, a reworking of debts, and a fresh start once it's through. And with Fiat guaranteed a 35 percent stake in the company, along with the workers owning 50 percent, the federal government will take an eight percent share (with the Canadian federal government getting the remaining two percent) with $8 billion of aid from Washington. And of course, there will be new product, like the upcoming new Jeep Grand Cherokee, as well as small cars from the Fiat connection.

But who will by cars from a bankrupt company? The Chrysler reorganization sounds promising, but will consumers have any faith in it?

Chrysler already has new product creating a buzz, like the newly revived Dodge Challenger, but that may not be enough. After all, Studebaker impressed everyone with the Avanti in 1963 and was gone in five years.