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Failure is always rewarded; Chrysler receives $4 billion

By Amarendra Bhushan for CEOWORLD Magazine Updated:January 3, 2009

Failure is always rewarded at the top of the pyramid.

It looks as if Chrysler has its first bailout. It will be asking for another in the near future. 4 billion dollars is pretty good. So far all they have had to do is stop flying around in their private jets for a couple of weeks. US car maker Chrysler confirmed that it received an initial infusion of 4 billion dollars from the United States government.

Why is everyone missing the point here. Chrysler is a privately held company. Why should the governnment bail out a privately held company?

A public company I understand, to protect the shareholders that are the little guys. Including private companies in a bailout is a huge mistake. Take from us to give to the rich. Bad idea.

What i think, the government shouldn’t be bailing out anyone, public or private. One of the premises behind capitalism is ‘risk and reward’: shareholders risk their money in the markets with the anticipation of profits or losses. When the government removes that risk by bailing out poorly managed companies, they remove that risk. This is called socialism.

Remember when small companies try to raise money through friends and family, and in fact they survive because of this infusion of capital. The same thing has happened here, as these companies grow and become fat,lazy, incompetent, mismanaged, they go back to the theory of surviving through friends and family capital, in this case the lobbying money that they have greased in DC, all of the sudden has helped them obtain badly needed loans, grants from the Govt to survive.

In statement from corporate headquarters in Detroit, Michigan, Chrysler head Robert Nardelli said the funds would “allow the company to continue an orderly restructuring, while pursuing our vision to build the fuel-efficient, high-quality cars and trucks people want to buy.”

The US government moved during the New York’s holiday to free up money for auto loans and to start emergency infusions of billions of dollars directly into the car industry.

General Motors recently received $US4 billion ($A5.69 billion) of the $US13.4 billion ($A19.07 billion) lifeline promised to the industry by US President George W Bush late in December.

Under the terms of the $US13.4 billion ($A19.07 billion) direct loans, GM can claim $US9.4 billion ($A13.38 billion) and Chrysler LLC gets $US4 billion ($A5.69 billion) over December and January.

The funds come with the conditions that GM and Chrysler prove they can return to viability or the money could be withdrawn by March 31, likely leaving no option other than bankruptcy.

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