Essay: The Chrysler Corporation

In the early 1920s, Walter Chrysler joined the Maxwell company tasked with overhauling the failing automaker, and in 1924 he transformed Maxwell into the Chrysler Corporation. Chrysler’s first automobile, simply named the Chrysler, was groundbreaking in its innovation, featuring many automotive ‘firsts’ at an incredibly affordable price. Around 1928, Chrysler began separating different classes of vehicles by brand: Plymouth was the low end offering, DeSoto the mid-level, and the company added Dodge to its lineup that same year. The acquisition of Dodge, which at the time was surprisingly a much larger company than Chrysler, was a major milestone for the rapidly growing company. Chrysler became an established member of the “Big Three” together with Ford and General Motors. Following the 1929 stock market crash, sales dropped by as much as 75%, but Chrysler’s low-end budget Plymouth brand proved vital to their survival. By by the mid-1930s, Chrysler had surpassed Ford boasting the 2nd most automobile sales in the world.
In 1940, Walter Chrysler suddenly passed away and his handpicked successor, K.T. Keller, took over. With the onset of WWII, the production of civilian vehicles was brought to a complete halt, and a new Chrysler tank plant was built from the ground up. The company took on production ranging from artillery, ammunition, tanks and airplanes.
Following the end of WWII, a radical shift in design language towards longer and sleeker vehicles took place across the industry, but Chrysler boss K.T. Keller remained steadfast in his obsession with conservatism and did not follow suit. The company’s former reputation for blandness came back to haunt them, and in 1954, Ford overtook Chrysler with the 2nd most automobile sales in the country, relegating Chrysler to 3rd place. It marked a tumultuous year for the company, and so they received a $150 million loan from Prudential, the first of many to come.
The 1960s brought huge changes to the automotive industry, mainly in the form of muscle cars, as American car culture swept the nation. Suddenly, cars became a form of expression, and an obsession with speed took control. The obsession with speed at this time coincided with major design changes at Chrysler that were marked by sleekness and a speedy look, such as the Dodge Charger and Chrysler 300, thanks to new chief designer Elwood Engel.
Into the 1970s, Chrysler’s poorly timed bet on larger and heavier consumer vehicles was met by recession, two major oil crises in 1973 and 1979, and most importantly a major shift in consumer tastes towards smaller and more efficient vehicles. Chrysler’s product line at the time was precisely the opposite, and serious financial woes as a result left the company strapped for cash. To add to their misery, in 1976 Honda released the Accord which further ate away at sales. Unable to enact the much needed management and production changes to adapt, in 1979 Chrysler was on the verge of bankruptcy, and the company received a government bailout of $1.5 billion dollars. Following their near failure, Lee Iacocca was appointed as CEO and brought much-needed change.
The Chrysler Corporation bounced back in the 1980s, repaying its government loans in 1984 and successfully launching a new line of Plymouth and Dodge compact cars that captured a whopping 39% of their segment’s market share. Furthermore, the launch of the Dodge Caravan minivan established an entirely new market for ‘family’ or ‘lifestyle’ vehicles, created by Chrysler. Together these vehicles revived Chrysler and in 1987, the company acquired American Motors Corporation, bringing Jeep into its lineup.
The Chrysler Corporation made significant moves to expand internationally in the 1990s under CEO Bob Eaton, entering various partnerships with Mitsubishi through Diamond-Star motors, ultimately culminating in their infamous merger with Daimler in 1998. The Daimler-Chrysler deal was not only one of the largest automotive and corporate mergers in history, but also one of the largest to failures. Major differences in corporate culture, attitude, and client relations created significant problems, and in 2007, Daimler sold 80.1% of its stake to Cerberus Capital Management. Less than a year later, the 2008 financial crisis forced an already unstable Chrysler into severe bankruptcy, and the company announced plans to close all 30 factories. Sparing the technical details, Chrysler ultimately found its lifeline in the form of a $13.4 billion bailout of Detroit’s Big three. On April 30th, 2009 the company filed for bankruptcy, and serious reorganizations took place culminating in the death of the ‘old Chrysler’ and the creation of a new Fiat-owned Chrysler.
Chrysler should undoubtedly be considered a failure not only because the company went bankrupt, but because this bankruptcy was precipitated by decades of serious mismanagement that plagued the company until its inevitable fall. Following the end of WWII, Chrysler’s poor strategy in its conservative design language tainted its image, and the company was relegated to 3rd in total sales behind Ford and GM. In 1954 as a result, Chrysler took on a $100 million loan, marking the first of many. Lacking the financial resources to prepare for the instability of the 1970s gas crises, stricter EPA regulations, and changing consumer tastes, the company’s poor strategy into the ‘70s to build larger and heavier cars proved near fatal: Chrysler escaped bankruptcy and received a $1.5 billion dollar loan from the government. Finally, the failed Daimler-Chrysler merger left the company led by finance people, and not automotive people. The failed merger and ensuing instability placed the writing on the wall for the 2008 financial crash to destroy the company. While some could argue Chrysler rose from the dead and is successful today, the reality is that the ‘new Chrysler’ is an entirely new company, surviving largely from an abundance of government loans.
Ford Motor Company was founded in 1904 by Henry Ford, who approached a group of investors with his quadricycle prototype vehicle. In 1908, the world was changed forever when Ford introduced the groundbreaking Model T, fulfilling Henry Ford’s dream of creating the first affordable and mass produced automobile. Five years later in 1913, the introduction of the assembly line reduced Model T build time from 13.5 hours to just 1.5 hours. By 1927, the Model T’s production run had eclipsed over 15 million units. Ford released the Model T’s successor in 1928, the Model A, which came in nine different model variations, a first in the automotive industry at the time. Its production ceased in 1932, selling 4 million units. As production of cars ran steady throughout the 1930s, Ford sought to bridge the large gap between the affordable Ford cars and the luxury premium-priced Lincoln brand. For this reason, in 1938 the Mercury brand was formed in order to fill this mid-level price point.
As WWII came to fruition, all production ceased, however Ford won the government contract to produce Jeep vehicles for the US Military. Towards the end of the war, Ford’s sales had been lagging behind Chrysler and GM for some time, and Henry Ford’s openly anti-semitic opinions were becoming a growing problem for the company’s image. In 1945, Ford’s wife demanded he either step down and appoint their grandson as President, or she would sell her stake in the company. That year, Henry Ford II took control of the company and brought significant changes that proved highly successful.
Into the 1950’s, Ford’s first post-war vehicle was the F series truck line, which was released in 1948 and came in eight different variants. Its next entirely new vehicle, dubbed simply the 1949 Ford, was arguably the company’s most groundbreaking vehicle since the Model T. Its radical design was unprecedented at the time, featuring an aerodynamic body, fluorescent colors, and various luxuries that were unmatched at its price point. Henry Ford II’s leadership charged the company’s sales past Chrysler and into second place behind GM, a position they would hold onto for decades. Finally, in 1956 Ford went public.
The 1960s were marked by the industry-wide cultural obsession with speed, and in 1964 the Ford Mustang was unveiled. Ford then released the wildly successful Ford Bronco to compete in the family market, and made significant moves to take the company international: in 1967, Ford Europe was established, and was later followed by Asian Pacific operations.
The 1970s were marked by rapidly changing consumer tastes, due to recession and gas crises. In order to meet the new demand for small and efficient vehicles, in 1978 Ford released a newly redesigned, smaller platform called the Panther.  Furthermore, thanks to its strong financial footing, the company was also able to adapt to the new stricter EPA and safety regulations. To close off the decade, Ford acquired 25% of Mazda in 1979, reflecting the company’s push into the Asian market.
In 1984, the Ford Taurus was released, and by 1991, it became the top selling vehicle in the US. As the new SUV market segment started opening up towards the end of the decade, the company released the Ford Explorer, a more comfortable and family friendly alternative to the existing Bronco line. Ford’s SUV lineup proved extremely lucrative, and in 1999 the company profited $7.2 billion dollars, setting a record for the highest margin of any car manufacturer in the world. That same year, the company acquired Volvo, Jaguar, and Land Rover.
Into the 2000s, Ford entered a period of declining sales, and new President Bill Ford sought to repair the brand’s gas-guzzling image brought upon by the wildly successful SUV sales of the previous decade. Coupled with stricter government EPA regulations and rising gas prices, the company took on various ‘green’ initiatives in response. By 2006, the company had reported its 5th straight year of losses, and Alan Mulally was appointed President. The reason Ford can be considered a success, boasting very strong sales into 2017, is largely because of the changes brought by Mullaly. Mullaly immediately sought to drastically resize the company, significantly cut expenses and remove debts, and shut down 14 factories. Dubbed “The Way Forward,” this plan proved vital to Ford’s success as the looming 2008 financial crisis rapidly approached. Finally, in June 2008 as part of these cost-cutting initiatives, Ford sold off Jaguar and Land Rover to Tata Motors. While Ford still received loans from the government, they are the only member of the Big Three that survived without bankruptcy.
Ford’s survival and Chrysler’s bankruptcy is a tale of one player managing to figure out its long term strategy and adjust accordingly, and the other failing to do so and collapsing. Following the failed Daimler-Chrysler merger and subsequent takeover by Cerberus Capital, Chrysler found itself a sinking ship, captained not by automotive executives but rather financial advisors who lacked the necessary foresight and vision shown by Ford. While no one could have predicted the devastating effects of the 2008 financial crisis, when Ford found itself in a precarious position by the mid 2000s, they reacted accordingly: the company executed a top to bottom downsizing effort, eradicating debt from its balance sheets, selling off brands that disagreed with a confusing brand image and product lineup (Jaguar and Land Rover), and closing several factories. Furthermore, in 2005 the company sold off Hertz rent-a-car to a private equity firm for a reported $15 billion. This strong economic foundation was crucial to Ford’s success, and the company has continued to prove itself against harsh Japanese competition into today. In the case of Chrysler, on the other hand, the company failed to establish a strong enough footing prior to the crash, and instead found itself extremely vulnerable. While the failed Daimler-Chrysler merger and takeover by Cerberus definitely contributed to their extreme vulnerability pre-2008, it was a combination of both the company’s inability to fix the serious mismanagement problems that plagued the company for decades, and complacency in creating poor quality products just to save pennies in the short run.