JEFFREY BROWN: And we turn to an update on one of the big three automakers, as Chrysler pays back billions.
Chrysler CEO Sergio Marchionne made the announcement as he stood before a banner reading "Paid" at a plant just outside Detroit.
SERGIO MARCHIONNE, Chrysler: We have received confirmation this morning at 10:13 a.m. from Citigroup that Chrysler Group repaid, with interest, by wire transfer to the United States Treasury and by bank transfer to the Canadian government, every penny that had been loaned less than two years ago.
(CHEERING AND APPLAUSE)
JEFFREY BROWN: The bill came to $7.6 billion -- $5.9 billion repaid to the U.S. government and $1.7 billion to Canada.
The company financed the repayment with a mixture of bonds, bank loans, and an increased stake from its Italian part-owner, Fiat. Less than two years ago, Chrysler had emerged from Chapter 11 bankruptcy with a government bailout package that also left it under Fiat management.
Ron Bloom was part of President Obama's auto task force.
RON BLOOM, assistant to President Obama for manufacturing policy: This repayment means that U.S. taxpayers have now recouped more than 100 percent of the money that President Obama invested in the company, and over 85 percent of all moneys invested by the U.S. government.
If that doesn't qualify Chrysler for comeback of the year, then I cannot imagine what would.
(CHEERING AND APPLAUSE)
JEFFREY BROWN: Two years ago, a number of Republicans criticized the bailout, charging the Obama administration had overreached.
REP. JOHN BOEHNER, R-Ohio Minority Leader: What we really ought to have is an exit plan to get the federal taxpayers' money back in the treasury and allow the private sector to be itself.
JEFFREY BROWN: And today's announcement immediately became a political football, as the Democratic National Committee released an ad taking note of the earlier criticism and celebrating Chrysler's comeback.
MITT ROMNEY, (R) former Massachusetts governor: ... that, if you write a check, they're going to go out of business.
JEFFREY BROWN: Today's move was the latest step in what may be a broader revival of a Detroit auto industry all but left for dead two years ago.
The smallest of the big three Detroit automakers, Chrysler has been fighting to restore its image, as well as its bottom line, including a big Super Bowl ad featuring Detroit's own Eminem.
EMINEM, musician: This is the Motor City, and this is what we do.
JEFFREY BROWN: And, last quarter, Chrysler posted its first net profit in five years.
Some analysis now from Paul Eisenstein, publisher of TheDetroitBureau.com, a website that tracks the auto industry, and Micheline Maynard, senior editor of Changing Gears, a public radio project on the future of the Industrial Midwest. She's also the author of, "The End of Detroit: How the Big Three Lost Their Grip on the American Car Market."
Micki Maynard, start with you.
To be clear, Chrysler still owes money, right? Now it's just to private investors. And the government still has something of a stake. So, how big a deal is this?
MICHELINE MAYNARD, Changing Gears: Well, Jeffrey, it is a sign that the government made a bet on Chrysler, and it looks like it won this piece of the bet.
Paying back these loans -- or refinancing these loans, I guess you could say -- is something that some people thought Chrysler wouldn't be able to do a couple years ago, when it was flat on its back. So, there are some political points to be had here for the Obama administration in deciding to support two carmakers and get some of its money back.
JEFFREY BROWN: Now, Paul Eisenstein, you were at that announcement this afternoon. What is the case that Chrysler is trying to make in this -- in this action today?
PAUL EISENSTEIN, TheDetroitBureau.com: Well, Chrysler is certainly saying that it was nice to have friends with the Obama administration, even though, as Ron Bloom pointed out, there were plenty of people there who didn't believe in Chrysler and almost blocked a bailout.
The automaker right now is at what Marchionne said, not the beginning of the end, but the end of the beginning. Marchionne admitted that they have got a long way to go before they are truly turned around.
JEFFREY BROWN: And, Paul, fill in a little bit of the picture here. They partly did this because they were paying very high interest rates on that government money, right?
PAUL EISENSTEIN: Yes. In fact, Marchionne got in a little trouble a few months ago when he used a term that people didn't like to describe the very high interest rates that they were paying.
Now, they're still paying a premium, because Wall Street and investors are still a little skeptical of the company. But it's certainly a lot better than the roughly 10 percent that they were paying to the feds. And this is a major turnaround.
That translates into tens of millions of dollars over the life of these loans as they switch to private financing.
JEFFREY BROWN: And, Paul, were the government loans -- there was a sense, I guess, within the company that the government loans were hurting the image of the company still, right?
PAUL EISENSTEIN: There's no question.
If you looked what happened after the bailouts, it was a political football. I talked to Ron Bloom about that today. And the fact was that there were a lot of Republicans, there were a lot of Southern senators who incidentally had -- their states provide a tremendous amount of giveaways to foreign manufacturers to come into places like Tennessee, where Nissan has gotten a lot of money, and they really didn't want these loans.
They were willing to let, as they said, government motors fail. Well, right now you don't hear the term government motors very often, either for GM or for Chrysler.
JEFFREY BROWN: Now, Micki Maynard, look at the company itself as it is right now for us. Are they making the case for themselves through better products, that is, through better new models? Is it through better management? What do you see?
MICHELINE MAYNARD: It's a combination of both.
Chrysler, for probably the last 15 years, has relied on minivans, sport utilities and big pickup trucks. And back in the '90s, when those vehicles were the most popular in the industry, it was making money hand over fist.
But what's happened since then is that gas prices have climbed, climbed, climbed, come down a little bit, but gone back up. And every carmaker in the world knows it has to have small cars. So, Chrysler has a small car that happens to come from its new parent company, Fiat. It's called the Fiat 500. And this is a car that people should think of as Chrysler's attempt to sort of emulate the BMW Mini or the new Beetle that Volkswagen came out with about a decade ago.
It's cute as a button. It's been on sale in Europe for about five years. And it will be very interesting to see if this hits the sweet spot in the United States. There are a couple of other cars. One is the Chrysler 200, the one that you see in the commercial with Eminem.
And then there's also the Chrysler 300, which originally came out a few years ago, and Chrysler is trying to refocus that as a little less gutsy and maybe a little bit more fuel-efficient.
JEFFREY BROWN: Paul, what would you add to that in terms of how the company is trying to make its -- make -- make its way now?
PAUL EISENSTEIN: Chrysler has a real serious problem convincing buyers, not just that they're going to survive, but also that their quality will be up to the world standards that you're starting to see from, say, Ford Motor Company.
That is going to be perhaps their biggest challenge when places like Consumer Reports question how good their vehicles are. J.D. Power is starting to show improvements. But they're not only going to have to bring out better -- better products, but better-built products over the next few years. And that will be the key to success.
JEFFREY BROWN: Now Paul, tell us a little bit more about the role of Fiat now. It took over as manager. It is part owner and a growing stake, I guess. We see the CEO. He is both CEO of Chrysler and Fiat. So, what's going on? How good a fit has that been?
PAUL EISENSTEIN: Well, what -- it's been an extremely good fit.
In fact, what's very interesting is, Mr. Marchionne laid out a very aggressive plan in November 2009, shortly after emerging from bankruptcy, that people really dismissed. I have to say I was a skeptic, too.
Right now, it seems to be coming together pretty much as he outlined it. You're going to see, first of all, Fiat increase its stake, first with the money they will be able to invest after today's payoff, and then by meeting another requirement of the bailout. They will get up to 51 percent by the end of this year. They're now talking about getting up to 70 percent.
Their finances, Chrysler's finances, will now be reported as part of Fiat's. One of the critical steps will be for them to combine product development, so that what Chrysler builds here, what Fiat builds in other parts of the world will share a lot of the underlying componentry.
Surprise? No. This is the same thing that Volkswagen does and Toyota does, General Motors, Ford, all the major makers do. It brings down costs and, if you do it right, improves quality, economies of scale. It's the only way you can succeed, as Mr. Marchionne has said repeatedly.
JEFFREY BROWN: Well, Micki Maynard, what do you see in this combination of Fiat and Chrysler?
MICHELINE MAYNARD: Well, it's almost like a movie we have watched before.
If you think back about 12 years now, there was a company called DaimlerChrysler, where Germany's Daimler-Benz took over Chrysler. It ended in tears. It ended in basically bankruptcy. So, it will be very interesting to see whether Fiat is the right parent company for Chrysler.
You know, it's always been the underdog. It's the company that has had to be rescued twice in the last 30 years. Can Chrysler actually play a role in the American car market? And will it be its Italian parent that helps it play that role?
I think this will be a fascinating story and the story to watch -- one of the stories to watch over the next couple of years.
JEFFREY BROWN: And, Micki Maynard, just in a...
PAUL EISENSTEIN: If I...
JEFFREY BROWN: Oh, yes, go ahead. Go ahead.
PAUL EISENSTEIN: If I can say, the Germans were never truly committed to the partnership. They used to call it a merger of equals, but the reality was, it never was a merger at all.
The two companies operated almost independently. And, frankly, I think a lot of us believe, in the long run, the Germans bled Chrysler for their profits. You didn't see that merger really work, whereas Fiat, the Italians understand that if they don't start drawing from Chrysler's know-how through what they're trying to do, as well as the other way around, Fiat's in trouble, as well as Chrysler.
JEFFREY BROWN: So, Micki, just in our last time here, put this into the larger picture, Chrysler, GM, Ford. Are things generally looking better for the auto industry, or is it still a wait-and-see?
MICHELINE MAYNARD: Well, Ford, of the three, I think everybody would agree, has gotten its act together without a federal bailout, making the most money. General Motors is profitable. It's had a lot of costs pulled out because it also went through bankruptcy.
Chrysler now has gone through the process as well. So, everybody is back on their feet. But, remember, we're in a global car market. Toyota might be down right now, but, some day, they will come back. The Japanese will come back. The Koreans are coming on strong. European companies are coming on strong.
So, you know, everybody is allowed to take a deep breath and maybe shake hands and have a beer, but I don't think that you can declare complete victory until we're out of this economic downturn and we see where everybody stands.
JEFFREY BROWN: A brief final word on that, Paul?
PAUL EISENSTEIN: Well, what we are seeing with the crisis in Japan is, everything in this industry is up for grabs. The people that look like the winners today, Toyota just a few months ago, can be the losers only a few months later.
I agree with Micki. The Detroit makers still have a long way to go. As Mr. Marchionne said, it's the -- it's the end of the beginning. But the fact is, Detroit is not the dead industry that we thought just two years ago.
JEFFREY BROWN: All right.
Paul Eisenstein, Micki Maynard, thank you both very much.
PAUL EISENSTEIN: My pleasure.
MICHELINE MAYNARD: Pleasure.