All interesting little historical tidbits.
But this is an economics blog, so one piece of historical news interested me most:
May 10, 1980 -- Govt' bails out Chrysler for $1.5 Billion
At the time, it was the largest rescue package ever granted by the U.S. government to an American corporation. Chrysler was founded in 1913, and after decades of expansion, the company's success came to a screeching halt after the 1973 oil crisis led to skyrocketing gas costs and new government standards for emissions. This combination of factors caused problems for Ford, General Motors and Chrysler as the trend towards so-called "muscle cars" in the 1960s had led them to produce vehicles with powerful, gas-guzzling engines.
In an attempt to produce lighter, more efficient vehicles, Chrysler bought shares in Mitsubishi, which began producing subcompact cars in America under the Chrysler name in 1970. By the end of the decade, Chrysler was in dire financial straits. Lee Iacocca, the former Ford executive who became the company's president and chairman of the board in 1978, appealed for a federal loan, banking on the fact that the government wouldn't allow the country's No. 3 automaker to declare bankruptcy in an already depressed economy.
The terms of the $1.5 billion in loans required Chrysler to raise another $2 billion on its own, which Iacocca did by streamlining operations and pushing union leaders to accept some layoffs and wage cuts, among other measures. As a result, Chrysler repaid its debts by 1983, and a year later, posted record profits of some $2.4 billion.
Twenty-five years later, however, plummeting sales and a deepening global financial crisis landed Chrysler in trouble again, and in early 2009 they received another $4 billion in federal funds. Soon after, under pressure from Obama's administration, Chrysler filed for federal bankruptcy protection and after a disastrous partnership earlier with Daimler, is now currently owned by Italian automaker Fiat.
Some thoughts...
1) Remember when $1.5 Billion was considered A Lot of $$??
2) The Unions were pressured hard by Iacocca to take wage cuts and accept layoffs of a portion of its workforce. Hmm, something tells me when Chrysler generated a $2.4 Billion Profit in 1984, they didn't respond by placing wages back to pre-bailout levels or re-hire those previously let go.
3) The 1980 Chrysler bailout set the precedent for the concept of "too big to fail" which has been employed repeatedly by Presidents Bush and Obama during the early stages of the financial crisis. William Miller, Treasury Secretary at the time under Jimmy Carter, said about the bailout that the government "recognizes that there is a public interest in sustaining jobs and maintaining a strong and competitive national automotive industry."
Even the Carter Administration made mistakes... Instead of government interference, what should have happened is Chrysler collapse back in 1980, and from its ashes, would come another car company (or companies) of a different names who would have made cars appealing to customers, develop and grow a niche support base, and from there, expand into a solid business model of success. That is true Adam Smith capitalism- you rise and fall on your own merits.
4) Coincidentally, a Reuters article written yesterday, May 9th, stated that "Italian automaker Fiat SpA could own more than 70 percent of Chrysler Group within a year once it repays its government loans and exercises other options" So all that time and money and effort back in the early 1980s and ultimately its not an American company..
But then again, what is anymore?
In an attempt to produce lighter, more efficient vehicles, Chrysler bought shares in Mitsubishi, which began producing subcompact cars in America under the Chrysler name in 1970. By the end of the decade, Chrysler was in dire financial straits. Lee Iacocca, the former Ford executive who became the company's president and chairman of the board in 1978, appealed for a federal loan, banking on the fact that the government wouldn't allow the country's No. 3 automaker to declare bankruptcy in an already depressed economy.
The terms of the $1.5 billion in loans required Chrysler to raise another $2 billion on its own, which Iacocca did by streamlining operations and pushing union leaders to accept some layoffs and wage cuts, among other measures. As a result, Chrysler repaid its debts by 1983, and a year later, posted record profits of some $2.4 billion.
Twenty-five years later, however, plummeting sales and a deepening global financial crisis landed Chrysler in trouble again, and in early 2009 they received another $4 billion in federal funds. Soon after, under pressure from Obama's administration, Chrysler filed for federal bankruptcy protection and after a disastrous partnership earlier with Daimler, is now currently owned by Italian automaker Fiat.
Some thoughts...
1) Remember when $1.5 Billion was considered A Lot of $$??
2) The Unions were pressured hard by Iacocca to take wage cuts and accept layoffs of a portion of its workforce. Hmm, something tells me when Chrysler generated a $2.4 Billion Profit in 1984, they didn't respond by placing wages back to pre-bailout levels or re-hire those previously let go.
3) The 1980 Chrysler bailout set the precedent for the concept of "too big to fail" which has been employed repeatedly by Presidents Bush and Obama during the early stages of the financial crisis. William Miller, Treasury Secretary at the time under Jimmy Carter, said about the bailout that the government "recognizes that there is a public interest in sustaining jobs and maintaining a strong and competitive national automotive industry."
Even the Carter Administration made mistakes... Instead of government interference, what should have happened is Chrysler collapse back in 1980, and from its ashes, would come another car company (or companies) of a different names who would have made cars appealing to customers, develop and grow a niche support base, and from there, expand into a solid business model of success. That is true Adam Smith capitalism- you rise and fall on your own merits.
4) Coincidentally, a Reuters article written yesterday, May 9th, stated that "Italian automaker Fiat SpA could own more than 70 percent of Chrysler Group within a year once it repays its government loans and exercises other options" So all that time and money and effort back in the early 1980s and ultimately its not an American company..
But then again, what is anymore?
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