Daniel Gross

The Strange Controversy Over Chrysler’s Ad

Contrary Indicator

There were plenty of objectionable ads during the Super Bowl — the absurdly sexist GoDaddy.com spots, Adriana Lima's come-hither pitch for Teleflora, Coca-Cola's lame polar bears. So it's surprising that the biggest controversy has been generated by Clint Eastwood's spot for Chrysler. The ad, "It's Half-Time in America," told a story of how a country and a city that have both suffered adversity and some tough knocks can nonetheless return to prominence and usefulness through hard work and ingenuity. Of course, the ad was a metaphor for Chrysler, which filed for bankruptcy in 2009, received a government bailout and has been revived under the ownership of Fiat.

Some Republican operatives cried foul. Karl Rove complained that "The President of the United States' political minions are, in essence, using our tax dollars to buy corporate advertising and the best wishes of the management, which has benefited by getting a bunch of our money that they'll never pay back."

Huh?

Let's review the record. Chrysler was run into the ground by Cerberus, a private equity company controlled by Stephen Feinberg, a major contributor to Republican candidates. When push came to shove in late 2008, Feinberg, a billionaire, chose not to use his own resources or those of his fund to meet Chrysler's vast financial obligations. So in early 2009, the Bush administration, for which Karl Rove worked, used funds from the TARP, a piece of legislation the Bush administration proposed and that was supported by Republican Congressional leaders, to help Chrysler. Take a look at the record. On January 2, 2009, the Bush administration lent $4 billion to Chrysler. On January 9, 2009, it lent another $1.5 billion to Chrysler's financing company.

On Tuesday, Bush told auto dealers that he made the loan because he "didn't want to gamble" with the possibility of a Depression. At the time, the economy was losing several hundred thousand jobs each month. Simply letting General Motors and Chrysler go into unsupervised bankruptcy and an almost certain liquidation in 2009 would have been irresponsible and disastrous — not just for the employees of GM and Chrysler, but for the companies' supply chains, vendors and dealers. There wasn't any capital standing in the wings waiting to turn the firms around.

Since that wasn't enough to keep Chrysler alive, the Obama administration in April and May 2009 provided another $8.8 billion in funding to Chrysler. The company filed for bankruptcy protection in late April 2009. Forty-two days later, Chrysler emerged from bankruptcy with new owners, which included Fiat, a United Auto Workers trust, and the Canadian and U.S. governments. In bankruptcy, the company wrote off tens of billions of dollars in obligations. While all creditors suffered and received less than full payment of their obligations, as is common in bankruptcy cases, the UAW trust came out somewhat better than might have been expected.

Ultimately, however, the bailouts and the bankruptcy process put Chrysler and GM into positions where they could be functional companies. The loans provided by the Bush and Obama administrations were converted into shares, and in 2010 and 2011 the new Chrysler paid back the funds in bits and pieces. Last July, the 'investment' that had been initiated by the Bush administration and continued by the Obama administration was closed out. The government received about $10.3 billion back from the company — or more than 80 percent of its investment. The transactions were closed out with a loss to taxpayers of about $1.9 billion.

So, Chrysler is an independent company, with no government ownership. Its new owners, Fiat, have helped revive the company — investing in plants, rolling out new models and, yes, spending money on high-profile ads. And guess what? It seems to be working. In 2011, the company's sales rose by 26 percent. In January, Chrysler reported sales were up 44 percent from January 2011, the best monthly performance since January 2008. Chrysler is a functioning member of corporate society. It employs lots of people and is investing in factories. It purchases billions of dollars in supplies and services. Unlike many other companies, it pays income taxes -- $148 million in the first nine months of 2011.

So at a time when the economy is growing, when employment is rising, and when car sales and Chrysler's own business have bounced back from their lows, a privately held firm running an advertisement that talks about recovery and growth is somehow a political act that is subsidized by taxpayers?

By that logic, there should have been howls of protest over General Electric's upbeat ads about manufacturing that aired during the Super Bowl -- G.E. was a big beneficiary of the financial rescue and guarantee programs of 2008. Or at advertisements by Chase, or American Express, which took TARP funds and then paid them back. Or at advertisements by airlines; most of them received aid after 9/11.

Since when did expressing optimism about the U.S. and its economic prospects become a political act?

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.

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