Nevertheless, I judge the Chrysler "bailout" to have already been a success.
Why? Well, let's think of the timing. Back in December 2008 the financial system was still close to implosion, as was General Motors. Confidence across the economy lay somewhere between gloom and doom. At the time Chrysler clearly was not viable – not that that has changed, with or without Fiat. The "rescue" is in that sense a bit of a misnomer, because the patient will never be resuscitated. With the final denouement, billions in government funds will vanish (I don't want to count, but remember there is indirect lending via the government-owned GMAC, not just the direct "bailout" money).
But given the timing, a Chrysler collapse Christmas 2008 would have been a present worse than a lump of coal in a child's stocking. It would have been fat on the fire of prevailing fear, marginal financial institutions burned critically. GM would have seen suppliers shut their doors, and once that happened, Toyota and the other new entrants ("Detroit South") would likewise have had to shut their assembly lines. Three-quarters of a million workers would get the post-Christmas message that for the time being they had no job to return to. The spin-on from that ("multiplier effect" in economist's lingo) would have been horrendous; unemployment would have jumped almost overnight to double-digit levels.
Now the economy can handle Chrysler's liquidation, and (with less assurance) that of numbers of key suppliers. GM will not collapse; financial panic has been quelled, and that Chrysler was expiring would not be news. Detroit would be in mourning; even I might shed a tear, since I paid college tuition with summer jobs at Chrysler plants. But the economy would not be pushed over the brink.
And I might be wrong. Chrysler has lived from crisis to crisis. But this time around I don't think they'll make it.
I made this point in a forum at the Auto Finance Risk Summit in Miami on 20 May 2009, organized by Royal Media Group. Thanks to a discussion forum there for stimulating me to make various "devil's advocate" arguments. I've concluded that this line of argument is (sadly) more than just a good debating point.