Chrysler's Familiar Rocky Road

By Steven Mufson and Kendra Marr
Washington Post Staff Writers
Thursday, April 30, 2009

The last time Chrysler staggered up to death's door it was saved by a combination of the charismatic Lee A. Iacocca, taxpayer money and new brands that grabbed the attention of American motorists. By the mid-1980s, five years after receiving federal aid, Chrysler was profitable again, its minivan, K cars and convertible were popular, and there was a groundswell of support for an Iacocca presidential run.

This time, the Obama administration is hoping a similar combination of a charismatic executive, taxpayer money and new brands will once again rescue the ailing American carmaker -- even if it must pass through the purgatory of bankruptcy.

But the fact that the Obama administration has been forced to look to Italy's Fiat for an executive and design expertise to revive Chrysler is an indication of just how pale a shadow of its former self the 84-year-old U.S. carmaker has become.

"Chrysler's product line is not competitive, and it's going to take at least two years and billions of dollars before any Fiat cars could be sold in the U.S. And it's unlikely that those cars will be profitable," said Maryann N. Keller, an independent automobile industry analyst and author.

The Obama administration auto task force is betting that isn't the case, and that its rescue plan will put Chrysler back on the road to viability.

Founded in 1925 by Walter P. Chrysler, the company pioneered such engineering innovations as wheel rims and hydraulic brakes, oil filters and carburetor design. From 1936 to 1949 it was the second-biggest U.S. car company. Its memorable early models include the moderately priced Plymouth, introduced in the 1920s, and the luxurious Imperial, introduced in 1955. Later it promoted "muscle" cars with names like Challenger and Road Runner, which shook up the world of car racing, and in the 1960s it expanded into Europe.

But soaring gasoline prices and economic slowdowns in the 1970s drove Chrysler to the brink of bankruptcy. Consumers flocked to the company's compact Dodge Dart and Plymouth Valiant, but shunned the gas guzzlers that made up most of Chrysler's product line. Costs soared. By 1979, the company brought in Iacocca from Ford and negotiated over a 10-month period a $1.5 billion federal loan guarantee, which was soon repaid in full.

Building a New Image

Iacocca made Chrysler a symbol of U.S. manufacturing, and he became a symbol by standing up to the encroachment by Japanese products in the U.S. marketplace. The company ran a nationalistic ad campaign, urging people to buy American.

At first, the company relied on what it called K cars, a lackluster line that did well "because Iacocca was such a brilliant promoter," Keller said. Then, she added, in 1984 came "the vehicle that saved Chrysler" -- the minivan. Its design appealed to suburban families shuttling kids from place to place. In 1987, Chrysler bought American Motors, acquiring the Jeep brand that remains one of Chrysler's main assets.

Iacocca became a celebrity, and his autobiography sat on top of bestseller lists for more than a year. He dispensed political advice, urging a tougher stance on trade with Japan, a lower deficit and a gasoline tax to stabilize fuel prices. "I would go through the mail and it came from people all over the country," said Jodie Allen, then an Iacocca adviser and later a journalist. "And they were saying 'I've been through tough times, too, and I've gotten great inspiration from your book.' "

After the economic slump of 1991, the company rebounded and was very profitable. It rang up $3.7 billion in profit in 1994 and $3.5 billion in 1996, when Chrysler's market share hit its highest level since 1957.

That attracted the attention of Daimler-Benz, which acquired Chrysler in 1998 for an eye-popping $36 billion. The company talked about the synergy of an up-market German company with a mid-market American firm. Daimler boss Jurgen Schrempp described the DaimlerChrysler match as a "marriage made in heaven."

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