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Groundhog Day



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Time magazine, August 20, 1979:

After weeks of rising pressure for a federal fix for the multiplying problems of Chrysler Corp., (the Carter Administration) produced a Government bailout. It was designed to prevent the nation’s No. 3 automaker from sliding into a bankruptcy that could have put many thousands out of work and sent a shudder through U.S. financial markets. (Treasury Secretary William Miller) recommended Government loan guarantees that will have to be approved by Congress.

The company specializes in making larger cars, vans and recreational vehicles. Since the gas crisis started, sales of these relics have, in (CEO Lee) lacocca’s words, “been dropping like a rock.”

The roots of this crisis are old and deep. . . . Chrysler entered the 1970s lacking the financial resources to weather three recessions, two oil crises and an enormous wave of environment, safety and fuel-economy regulations.

In 1975, the public was demanding smaller, more fuel-efficient cars, but Chrysler lacked the money to retool and redesign quickly. . . . Now Chrysler appears to have one hope: to stay solvent in any way possible until lacocca can bring forth the cars to save the company. He will need help — and not just from Washington. Said UAW President Douglas Fraser: “We’ll take into consideration whatever is needed for the survival of Chrysler Corp.”

As for other sacrifices . . . top managers could well announce token salary cuts and the sale of the company’s three corporate jets.

Remarkable. Thirty years later and — in the words of Yogi Berra — it’s déjà vu all over again.

Chrysler is still dependent on light trucks and minivans for 70 percent of sales, UAW costs are still uncompetitive, Washington has loaded it with still more fuel mandates, and the company is back at the taxpayers’ doorstep (although this time joined by GM and Ford).

Still, many in Detroit point to Chrysler’s successful repayment of its over $1 billion in federal loans within a decade against considerable odds as evidence that a bailout can succeed again. But today’s auto market is not the auto market of 30 years ago. Big Three market share has declined from 75 to 47 percent as foreign imports compete in every segment of the market. Also, Chrysler benefited from a return to lower gas prices in the 1980s, allowing the company to thrive on sales of its bread-and-butter large vehicles.

The hill has gotten steeper.



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