Friday, May 01, 2009

Stakeholder Capitalism at Chrysler

The pending "surgical bankruptcy" of Chrysler (which sounds clean and painless, except perhaps for the patient) will bring big changes to the company's corporate structure, as I point out in the Guardian today:
The new Chrysler will look vastly different from the old, and not just because it will be smaller. The United Auto Workers will own a 55% stake in the company in return for concessions worth billions of dollars. The US government will own 8% percent, and Canada will own another 2%. Fiat will be given three seats on the board, and will be able to earn up to a 15% stake in the company if it hits certain benchmarks, including producing a 40-mile-per-gallon vehicle in a US factory.
This new corporate governance model, with government and unions involved, shifts Chrysler from shareholder capitalism to a different model called stakeholder capitalism. In shareholder capitalism, return on investment is paramount. Management considers other stakeholders such as workers and suppliers as tools to earn a profit.
And for those who object to government and unions having a say in how the company is managed, it's worth pointing out that the feds stepped in when Chrysler had nowhere else to turn for capital.


Anonymous Edmund Dohnert said...

Chrysler has been losing market share for years and will probably continue to do. Their marriage with Daimler Benz turned out to be a fiasco, and I don't see why Fiat and the other 'stake holders' will fare any better in some reorganized Chrysler.

And even without our current depression, the US has for year had far more auto production capacity in relation to any realistic projection of demand. Quite simply, we have an industrial bas capable of producing far more cars than are required. There are also far more auto workers than are required.

So, in the end I don't think that 'saving' Chrysler will save many US auto industry jobs, simply because the industry in its current form can only support so many workers and no more. So, it hardly matters whether those workers are spread out amount two remaining US auto companies (Ford and GM) or the original Big Three.

I predict this move will prove to be a total waste of taxpayer's money, just like all the other bailouts.

11:18 AM, May 02, 2009  

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