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Der Sturm (The Perfect Storm)

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A Bigger Footprint

The implications of the destruction of an American icon go far beyond mere corporate legalities and Wall Street concerns.

"The long-term impact on the United States' industrial base is enormous because their footprint is so large," said Dr. Sheila Ronis, of the University Group, a Birmingham, Michigan think tank, and consultant to the Pentagon and NASA.. "It is not as big as a General Motors, but it's large."

The merger, she said, never was a marriage of equals, but a "constructive taking," described as the acquisition of a business entity by legal means for reasons other than those originally stated.

Schrempp acknowledged as much in comments to that effect that were reported internationally in the Financial Times in January.

A Shadow of its Former Self

What is clear is that no framework of the original Chrysler Corporation continues to exist. Its fragmentation began as soon as the ink hit the page.

And the implications of that "destructuring" go far beyond the edges of the auto industry. They must be considered an attack on the integrity of the very core of the United States' macro economy - in another era what might even be considered an act of war.

Despite growing declarations of such doom and gloom, some analysts see the present industry climate with more positive eyes. Those comments echo proclamations of a speedy comeback by DaimlerChrysler, which has put the blame squarely on the Chrysler side.

But the recovery plan came after the company bled profusely during its fourth quarter that left the Chrysler side with no liquidity at the same time executives at the homefront in Germany were promised bonuses for good work.

"This is a big beehive," said analyst David Cole, who heads the Center for Automotive Research (CAR) in suburban Ann Arbor. "They have kicked the bees and now they're after them, and the're a long way from the pond."

Statements coming from some Wall Street firms have put Ford and General Motors on solid footing despite the financial problems over in Auburn Hills.

Disturbing News

But consider news of the past few weeks.

According to a Reuters news report Feb. 6, ratings agency Standard & Poors put the two auto giants, Ford and General Motors, on watch for creditworthiness. GM is expected to be downgraded by year-end because of "heightened concerns" over its ability to remain competitive. Despite the Firestone recall, Ford in all probability will avoid being downgraded, especially considering the buffer period provided. But being put on S&P's " watch" list presents the possibility of having to borrow at a higher rate.

Predictions have been rampant that the initial steps in Chrysler's reorganization plan, a month before a full report is due, is only the beginning. The announcement on January 29 - so workers would not have to worry about their futures, according to current Chrysler-side chief Dieter Zetsche - has done little to stave off employee concerns.

And industry suppliers, such as Delphi and American Axle, with an ultimatum to cut costs to Chrysler by at least 5 percent, began to announce layoffs of their own. In a ripple effect, GE and Honeywell, recently merged, are expected to trim as many as 80,000 from the resulting combined workforce.

The door that was opened by Chrysler has given other companies the reason to pare their own costs by eliminating jobs.

Futurists, such as Ronis, say there is no reason to believe those belt-tightening measures, as in the past, will not spread into the general economy. That's exactly the pattern during back-to-back recessions at the beginning of the 1980s, when the auto industry took the earliest hit, then the rest of the country followed in a domino effect.

At present, unless economic factors are quickly corrected along with fixes in other areas (not the least of which is General Motors), they can be expected to accelerate a downturn for the entire country. That ultimately could become the basis for a market crash.



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