In the crisis, governments rode to the rescue not just of banks, but of auto manufacturers. The two sectors teach different lessons. The latest news from the car industry shows that state intervention can be successful – but only if it plays according to capitalist rules.
Fiat, the Italian carmaker that invested in Chrysler on the latter’s exit from bankruptcy, has said it will exercise an option to raise its stake in the US auto manufacturer from its current 30 per cent to 46 per cent. As a condition for the deal, Chrysler will repay a $7bn-loan it received from the US and Canadian governments during the financial crisis.
This is a good deal, both for US taxpayers and for the car makers. If Fiat meets one more technical hurdle set in its original deal with the US government, it may up its share further to reach 51 per cent. This would go a long way to meet the ambition of Fiat’s boss, Sergio Marchionne, to consolidate the two companies into a global giant. The US government will get back the funds it injected into Chrysler during its bankruptcy workout. Workers who own most of Chrysler through their union could see their holdings increase in value.