Obama Auto Task Force has Scathing Criticism for Chrysler

This week’s auto industry task force report from the Obama Administration was especially scathing about Chrysler.

Chrysler is too small to compete globally, too thinly capitalized to invest in new products and flexible manufacturing plants, too heavily dependent on trucks, and too concentrated in North America, the report said.

Other news has overshadowed this top-to-bottom criticism of Chrysler, like the federal government forcing GM Chairman and CEO Rick Wagoner out of office; March sales reports, which showed another dismal month of U.S. auto sales; and incentive programs at Ford and GM, aimed at reassuring would-be buyers worried about their jobs and about trade-in values.

But it’s worth remembering that the government report flatly disputes Chrysler’s earlier happy talk about how it could survive on its own. It also revisits an old, familiar weakness: Chrysler’s reputation for poor product quality.

That’s a sore subject Chrysler would prefer to dismiss. In January, Jim Press, Chrysler vice chairman and president, said Chrysler quality is terrific, and that warranty claims on Chrysler’s newest products are the lowest in the company’s 80-year history.

Maybe so, but the government report accurately points out that even if newer products are better built, it takes years to change a reputation for poor quality.

The report also notes that Chrysler’s Jeep, Dodge and Chrysler brands are all in the bottom 25 percent in the J.D. Power APEAL Study. APEAL stands for Automotive Performance, Execution and Layout. Based on surveys in the first 90 days of ownership, APEAL measures how well buyers like their new vehicles. Logically, those customers should like a brand the most, since after all, they just bought it. On the other hand, a poor APEAL score reflects disappointment.

The task force report says repeatedly that Chrysler has no foreseeable future on its own, and that its only hope for continued government support – that is, its only hope, period – is Chrysler’s proposed merger with Fiat.

 ”After extensive consultation with financial and industry experts, the Administration has reluctantly concluded that Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability,” the report said.

The Administration directed the U.S. Treasury to provide Chrysler with enough working capital for 30 days, to conclude its agreement with Fiat. That’s not much time, although there’s nothing in the report stopping Treasury from later providing additional time and money.

Publicly, at least, Chrysler reacted to the task force report as if it were an endorsement, instead of a laundry list of Chrysler’s shortcomings: “Today (March 30) marks an important milestone for Chrysler LLC. We are encouraged by the commitments of the Administration, U.S. Treasury and President’s Auto Task Force to the American automobile industry and Chrysler’s viability, with a Fiat alliance,” said Chairman and CEO Bob Nardelli, in a written statement.