When Barack Obama was running for President—as opposed to, you know, being President—he criticized the Bush administration for not having a clear exit strategy in Iraq. It isn't too early for the new President and his advisers to start asking themselves that same question about Detroit.

Put another way: Unless Detroit is to become an industrial version of Iraq, we need an exit strategy as part of the government financial assistance program—which the Obama administration will soon start to reshape in its own fashion, after inheriting the interim "bridge loans" from President Bush.

The exit strategy must be clear to everyone, especially to the companies and the United Auto Workers union. It needs three key elements: limits on money, limits on time, and real power for any "car czar" to decide the terms of Detroit's restructuring, as a bankruptcy trustee would do. All three things are critical because Detroit's needs have a way of, well, evolving.

Exhibit A is the new deal under which Fiat will ride to the rescue of Chrysler, sort of. The non-binding agreement announced this week calls for the Italian automaker to get 35 percent of Chrysler. Fiat won't put any cash into the ailing American automaker, but it will pay for retooling Chrysler's U.S. factories to build new small cars based on Fiat's designs.

The problem here is that the new Dodge Italianos won't hit the market for the better part of two years. That's how long it takes to redesign a car, even one that's based on an existing European design, for the U.S. market and to retool the factory to build it. Meantime, Chrysler is out of money.

So how is the company supposed to stay alive for two more years? Is the government supposed to keep pouring cash into Chrysler even though the company's two major shareholders—Fiat (assuming the deal is completed) and Cerberus LP, the private-equity firm—have decided not to do so?

The other big issue here is that the entire auto industry is beset by excess capacity—even mighty Toyota, which expanded its U.S. operations far too rapidly in recent years. So if Chrysler stays alive, even in shrunken form, the capacity cuts will have to occur at other car companies. So government subsidies might be a lifeline for Chrysler, but they will hurt other car companies that are struggling to survive.