7th SEPTEMBER 1979 CHRYSLER`s BAIL-OUT BY US GOVERNMENT

Chrysler

From Wikipedia, the free encyclopedia
This article is about the automobile company. For the flagship car division of FCA US LLC, see Chrysler (division). For other uses, see Chrysler (disambiguation).
FCA US LLC
Chrysler
Limited liability company
Industry Automotive
Predecessor Chrysler Group LLC
(2009-2014)
Chrysler LLC
(2007–2009)
DaimlerChrysler AG
(1998–2007)
Chrysler Corporation
(1925–1998)
Founded Chrysler Corporation
June 6, 1925
Chrysler Group LLC
June 10, 2009
Founder Walter P. Chrysler
Headquarters Auburn Hills, Michigan, U.S.
Number of locations
List of Chrysler factories
Area served
Worldwide
Key people
Sergio Marchionne
(Chairman and CEO)[1]
Products Automobiles
Commercial vehicles
Automotive parts
Revenue Increase US$83.06 billion (2014)[2]
Decrease US$1.557 billion (2014)[2]
Decrease US$1.202 billion (2014)[2]
Total assets Increase US$49.02 billion (2014)[2]
Total equity Decrease US$-2.846 billion (2014)[2]
Number of employees
77,817 (2014)[2]
Parent Fiat Chrysler Automobiles[3]
Divisions Chrysler
Dodge
Jeep
Ram
Mopar
SRT
Website fcausllc.com

Chrysler (/ˈkrslər/), officially FCA US LLC, is an American automobile manufacturer headquartered in Auburn Hills, Michigan and owned by holding company Fiat Chrysler Automobiles, headquartered in London, U.K.[4] Chrysler is one of the “Big Three” American automobile manufacturers. It sells vehicles worldwide under its flagship Chrysler brand, as well as the Dodge, Jeep and Ram. Other major divisions includeMopar, its automotive parts and accessories division, and SRT, its performance automobile division. In 2014, FCA US LLC is the seventh biggest automaker in the world by production.[5]

The Chrysler Corporation was founded by Walter Chrysler in 1925,[6] out of what remained of the Maxwell Motor Company. Chrysler greatly expanded in 1928, when it acquired the Fargo truck company and theDodge Brothers Company and began selling vehicles under those brands; that same year it also established the Plymouth and DeSoto automobile brands.

In the 1960s the company expanded into Europe, creating the Chrysler Europe division, formed from the acquisition of French, British and Spanish companies. In the 1970s, a number of factors including the 1973 oil crisis impacted Chrysler’s sales, and by the late 1970s, Chrysler was on the verge of bankruptcy, forcing its retreat from Europe in 1979. Lee Iacocca was brought in as CEO and is credited with returning the company to profitability in the 1980s. In 1987, Chrysler acquired American Motors Corporation (AMC), which brought the profitable Jeep brand under the Chrysler umbrella.

In 1998, Chrysler merged with German automaker Daimler-Benz AG to form DaimlerChrysler; the merger proved contentious with investors and Chrysler was sold to Cerberus Capital Management and renamed Chrysler LLC in 2007. Like the other Big Three automobile manufacturers, Chrysler was hit hard by the automotive industry crisis of 2008–2010.

Through a combination of negotiations with creditors, filing for Chapter 11 bankruptcy reorganization on April 30, 2009, and participating in a bailout from the U.S. government through the Troubled Asset Relief Program, Chrysler managed to remain in business. On June 10, 2009, Chrysler emerged from the bankruptcy proceedings with the United Auto Workers pension fund, Fiat S.p.A., and the U.S. and Canadian governments as principal owners. The bankruptcy resulted in Chrysler defaulting on over $4 billion in debts. By May 24, 2011, Chrysler finished repaying its obligations to the U.S. government five years early, although the cost to the American taxpayer was $1.3 billion. Over the next few years Fiat gradually acquired the other parties’ shares while removing much of the weight of the loans (which carried a 21% interest rate) in a short period. On January 1, 2014, Fiat S.p.A announced a deal to purchase the rest of Chrysler from the United Auto Workers retiree health trust. The deal was completed on January 21, 2014, making Chrysler Group a subsidiary of Fiat S.p.A.[4] In May 2014, Fiat Chrysler Automobiles, NV was born by merging Fiat S.p.A. into the company. This was completed in August 2014. Chrysler Group LLC remained a subsidiary until December 15, 2014, when it was renamed FCA US LLC, to reflect the Fiat-Chrysler merger.[7]

History

Main article: History of Chrysler

The Chrysler company was founded by Walter Chrysler (1875–1940) on June 6, 1925,[8][9] when the Maxwell Motor Company (est. 1904) was re-organized into the Chrysler Corporation.[10][11]

Walter Chrysler arrived at the ailing Maxwell-Chalmers company in the early 1920s. He was hired to overhaul the company’s troubled operations (after a similar rescue job at the Willys-Overland car company).[12] In late 1923 production of the Chalmers automobile was ended.[13]

In January 1924, Walter Chrysler launched the well-received Chrysler automobile. The Chrysler was a 6-cylinder automobile, designed to provide customers with an advanced, well-engineered car, but at a more affordable price than they might expect. (Elements of this car are traceable to a prototype which had been under development at Willys during Chrysler’s tenure).[14] The original 1924 Chrysler included a carburetor air filter, high compression engine, full pressure lubrication, and an oil filter, features absent from most autos at the time.[15][16] Among the innovations in its early years were the first practical mass-produced four-wheel hydraulic brakes, a system nearly completely engineered by Chrysler with patents assigned to Lockheed, and rubber engine mounts to reduce vibration. Chrysler also developed a wheel with a ridged rim, designed to keep a deflated tire from flying off the wheel. This wheel was eventually adopted by the auto industry worldwide.

Following the introduction of the Chrysler, the Maxwell brand was dropped after the 1925 model year. The new, lower-priced four-cylinder Chryslers introduced for the 1926 year were badge-engineered Maxwells.[17] The advanced engineering and testing that went into Chrysler Corporation cars helped to push the company to the second-place position in U.S. sales by 1936, a position it would last hold in 1949.

In 1928, the Chrysler Corporation began dividing its vehicle offerings by price class and function. The Plymouth brand was introduced at the low-priced end of the market (created essentially by once again reworking and rebadging Chrysler’s four-cylinder model).[18]At the same time, the DeSoto brand was introduced in the medium-price field. Also in 1928, Chrysler bought the Dodge Brothers[19] automobile and truck company and continued the successful Dodge line of automobiles and Fargo range of trucks. By the mid-1930s, the DeSoto and Dodge divisions would trade places in the corporate hierarchy.

1955 Imperial car model shown on display at January 1955 Chicago Auto Show

The Imperial name had been used since 1926, but was never a separate make, just the top-of-the-line Chrysler. In 1955, the company decided to spin it off as its own make and division to better compete with its rivals, Lincoln and Cadillac.

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1955 Chrysler – Philco all transistor car radio – “Breaking News” radio broadcast announcement

On April 28, 1955, Chrysler and Philco had announced the development and production of the World’s First All-Transistor car radio.[20] The all-transistor car radio Mopar model 914HR, was developed and produced by Chrysler and Philco, and was an $150.00 “option” on the 1956 Imperial car models. Philco was the company, who had manufactured the all-transistor car radio Mopar model 914HR, starting in the fall of 1955 at its Sandusky Ohio plant, for the Chrysler corporation.[21][22][23]

On September 28, 1957, Chrysler had announced the first production electronic fuel injection (EFI), as an option on some of its new 1958 car models (Chrysler 300D, Dodge D500, DeSoto Adventurer, Plymouth Fury). The first attempt to use this system was by American Motors on the 1957 Rambler Rebel.[24][25] Bendix Corporation‘s Electrojector used a transistor computer brain modulator box, but teething problems on pre-production cars meant very few cars were made.[26] The EFI system in the Rambler ran fine in warm weather, but suffered hard starting in cooler temperatures and AMC decided not to use this EFI system, on its 1957 Rambler Rebel production cars that were sold to the public.[25] Chrysler also used the Bendix “Electrojector” fuel injection system and only around 35 vehicles were built with this option, on its 1958 production built car models.[27][28] Owners of EFI Chryslers were so dissatisfied that all but one were retrofitted with carburetors (while that one has been completely restored, with original EFI electronic problems resolved).[28]

Imperial would see new body styles introduced every two to three years, all with V8 engines and automatic transmissions, as well as technologies that would filter down to Chrysler corporation’s other models. Imperial was folded back into the Chrysler brand in 1973.

The Valiant was also introduced for 1960 as a distinct brand. In the U.S. market, Valiant was made a model in the Plymouth line for 1961 and the DeSoto make was discontinued during 1961. With those exceptions per applicable year and market, Chrysler’s range from lowest to highest price from the 1940s through the 1970s was Valiant, Plymouth, Dodge, DeSoto, Chrysler, and Imperial.[29]

In 1987 Chrysler purchasedAmerican Motors from Renault

In 1985, Chrysler entered an agreement with American Motors Corporation (AMC) to produce Chrysler M platform rear-drive, as well as Dodge Omnis front wheel drive cars, in AMC’s Kenosha, Wisconsin plant. In 1987, Chrysler acquired the 47% ownership of AMC that was held by Renault. The remaining outstanding shares of AMC were purchased on the NYSE by August 5, 1987, making the deal valued somewhere between US$1.7 billion and US$2 billion, depending on how costs were counted.[30] Chrysler CEO Lee Iacocca wanted the Jeep brand, particularly the Jeep Grand Cherokee (ZJ) that was under development, the world-class, brand-new manufacturing plant in Bramalea, Ontario, as well as AMC’s engineering and management talent that became critical for Chrysler’s future success.[31] Chrysler established the Jeep/Eagle division as a “specialty” arm to market products distinctly different from the K-car-based products with the Eagle cars targeting import buyers.[32] Former AMC dealers sold Jeep vehicles and various new Eagle models, as well as Chrysler products, strengthening the automaker’s retail distribution system.

In 1998, Chrysler and its subsidiaries entered into a partnership dubbed a “merger of equals” with German-based Daimler-Benz AG, creating the combined entity DaimlerChrysler AG.[33] To the surprise of many stockholders, Daimler subsequently acquired Chrysler in a stock swap,[34] before the retirement of Chrysler CEO Bob Eaton. His lack of planning for Chrysler in the 1990s, to become their own global automotive company, is widely accepted as the reason why the merger was needed. Under DaimlerChrysler, the company was named DaimlerChrysler Motors Company LLC, with its U.S. operations generally called “DCX”. The Eagle brand was retired shortly after Chrysler’s merger with Daimler-Benz in 1998[35] Jeep became a stand-alone division, and efforts were made to merge the Chrysler and Jeep brands as one sales unit.[36] In 2001, the Plymouth brand was also discontinued.

On May 14, 2007, DaimlerChrysler announced the sale of 80.1% of Chrysler Group to American private equity firm Cerberus Capital Management, L.P., thereafter known as Chrysler LLC, although Daimler (renamed asDaimler AG) continued to hold a 19.9% stake.[37] The economic collapse of 2007 – 2009 pushed an already fragile company to the brink. On April 30, 2009, the automaker filed for Chapter 11 bankruptcy protection to be able to operate as a going concern, while renegotiating its debt structure and other obligations,[38] which resulted in the corporation defaulting on over $4 billion in secured debts.[39] The U.S. government described the company’s action as a “prepackaged surgical bankruptcy.”[38]

The sale of substantially all of Chrysler’s assets to “New Chrysler”, organized as Chrysler Group LLC was completed on June 10, 2009. The federal government provided support for the deal with US$8 billion in financing at near 21%. Under Sergio Marchionne, “World Class Manufacturing” or WCM, a system of complete and thorough manufacturing quality, was introduced and several products re-launched with quality and luxury. The 2010 Jeep Grand Cherokee very soon became the most awarded SUV – Ever. The Ram, Jeep, Dodge, SRT and Chrysler divisions were separated to focus on their own identity and brand and 11 major model refreshes occurred in 21 months. The PT Cruiser, Nitro, Liberty and Caliber models (created during DCX) were discontinued. On May 24, 2011, Chrysler repaid its $7.6 billion loans to the United States and Canadian governments.[40][41] The US Treasury, through the Troubled Asset Release Program, invested $12.5 billion in Chrysler and recovered $11.2 billion when the company shares were sold in May 2011, resulting in a $1.3 billion loss.[42][43][44][45] On July 21, 2011, Fiat bought the Chrysler shares held by the United States Treasury.[46] With the purchase, Chrysler once again became foreign owned; however, this time Chrysler was the luxury division. The Chrysler 300 was badged Lancia Thema in some European markets (with additional engine options), giving Lancia a much needed replacement for its flagship.

On January 1, 2014, Fiat announced it would be acquiring the remaining shares of Chrysler owned by the VEBA worth $3.65 billion.[47] The deal was completed on January 21, 2014.[4] Several days later, the intended reorganization of Fiat and Chrysler under a new holding company, Fiat Chrysler Automobiles, together with a new FCA logo were announced.[48] The most challenging launch for this new company came immediately in January 2014 with a completely redesigned Chrysler 200. The vehicle’s creation is from the completely integrated company, FCA, executing from a global compact-wide platform.[49][verification needed]

On 16 December 2014, Chrysler Group LLC announced a name change to FCA US LLC.[50]

Corporate governance

Chrysler House landmark executive offices in the Detroit Financial District

Board of directors

Management team

  • Mark Chernoby, Senior Vice President of Quality
  • Reid Bigland, Ram brand CEO, U.S. sales chief & President and CEO Chrysler Canada[51]
  • Saad Chehab, President and CEO – Chrysler brand[52]
  • Mark M. Chernoby, Senior Vice President of Product Development
  • Olivier Francois, Chief Marketing Officer, Chrysler Group and Fiat Group Automobiles, Head of Fiat Brand[53]
  • Scott R. Garberding, Senior Vice President of Manufacturing
  • Ralph Gilles, SRT brand CEO and President of Design[51]
  • Pietro Gorlier, Mopar brand CEO and President of Service, Parts and Customer Care
  • Bill Cousins
  • Mircea Gradu, Head of Transmission Powertrain and Driveline Engineering (departing)
  • Peter M. Grady, Vice President of Network Development and Fleet
  • Michael J. Keegan, Senior Vice President of Supply Chain Management
  • Timothy Kuniskis, President and CEO of Dodge brand
  • Scott G. Kunselman
  • Jody Trapasso
  • Jason Stoicevich
  • Robert (Bob) Lee, Head of Engine, Powertrain and Electrified Propulsion Systems Engineering
  • Robert E. Lee
  • Holly E. Leese
  • Laurie A. Macaddino
  • Michael Manley, President and CEO Jeep brand and COO APAC (Asia Pacific Region)
  • Richard Palmer, Senior Vice President and Chief Financial Officer
  • Barbara J. Pilarski
  • Nancy A. Rae, Senior Vice President of Human Resources
  • Gualberto Ranieri
  • Scott A. Sandschafer
  • Joseph Trapasso
  • Joseph Veltri
  • Daniel W. Devine, Vice President, Office of Tax Affairs

Sales and marketing

United States sales

Chrysler is the smallest of the “Big Three” U.S. automakers (Chrysler Group LLC, Ford Motor Company, and General Motors). In 2013 Chrysler sold 1,800,368 vehicles, 9% up from 2012, and fourth largest in sales behind GM, Ford and Toyota.[54]

Chrysler’s sales have fluctuated dramatically over the last decade. In 2007 sales reached 2,076,650,[55] falling to 931,402 units in 2009, the company’s worst result in decades.

It is reported that Chrysler was heavy on fleet sales in 2010, hitting as high as 56 percent of total sales in February of that year. For the whole year, 38 percent of sales of Chrysler were to fleet customers. The industry average was 19 percent. However, the company hopes to reduce its fleet sales to the industry average in 2011 with a renewed product lineup.[56]

Global sales

Chrysler is the world’s 11th largest vehicle manufacturer as ranked by OICA in 2012.[57] Total Chrysler vehicle production was about 2.37 million that year, up from 1.58 million in 2010.

Product recalls

Brake booster shield recall, March 2014

In April 2014, Chrysler recalled brake boosters from Dodge Durango and Jeep Grand Cherokee Vehicles manufactured in the years 2011-2014 stating that, “A brake booster’s center shell may corrode and allow water to get inside, which could freeze and limit the braking ability of the vehicle, increasing the risk of a crash.” Chrysler is offering a free repair for any affected SUV worldwide, all that is required is the drive to a local dealer for the repair.[58]

Marketing

Lifetime powertrain warranty

In 2007, Chrysler began to offer vehicle lifetime powertrain warranty for the first registered owner or retail lessee.[59] The deal covered owner or lessee in U.S., Puerto Rico and the Virgin Islands, for 2009 model year vehicles, and 2006, 2007 and 2008 model year vehicles purchased on or after July 26, 2007. Covered vehicles excluded SRT models, Diesel vehicles, Sprinter models, Ram Chassis Cab, Hybrid System components (including transmission), and certain fleet vehicles. The warranty is non-transferable.[60] After Chrysler’s restructuring, the warranty program was replaced by five-year/100,000 mile transferrable warranty for 2010 or later vehicles.[61]

“Let’s Refuel America”

In 2008, as a response to customer feedback citing the prospect of rising gas prices as a top concern, Chrysler launched the “Let’s Refuel America” incentive campaign, which guaranteed new-car buyers a gasoline price of $2.99 for three years.[62] With the U.S. purchase of eligible Chrysler, Jeep and Dodge vehicles, customers could enroll in the program and receive a gas card that immediately lowers their gas price to $2.99 a gallon, and keeps it there for the three years.

Lancia co-branding

Chrysler plans for Lancia to codevelop products, with some vehicles being shared. Olivier Francois, Lancia’s CEO, was appointed to the Chrysler division in October 2009. Francois plans to reestablish the Chrysler brand as an upscale brand.[63]

Ram trucks

In October 2009, Dodge’s car and truck lines were separated, with the name “Dodge” being used for cars, minivans and crossovers and “Ram” for light- and medium-duty trucks and other commercial-use vehicles.[64]

Calendar year U.S. Chrysler sales  %Chg/yr.
1999[65] 2,638,561
2000 2,522,695 Decrease4.4%
2001[66] 2,273,208 Decrease9.9%
2002[67] 2,205,446 Decrease3%
2003 2,127,451 Decrease3.5%
2004[68] 2,206,024 Increase3.7%
2005[68] 2,304,833 Increase4.5%
2006[69] 2,142,505 Decrease7%
2007[69] 2,076,650 Decrease3.1%
2008[70] 1,453,122 Decrease30%
2009[71] 931,402 Decrease36%
2010[72] 1,085,211 Increase17%
2011[73] 1,369,114 Increase26%
2012[74] 1,651,787 Increase21%
2013[75] 1,800,368 Increase9%
2014[76] 2,090,639 Increase16%

“Imported From Detroit”

In 2011, Chrysler unveiled their “Imported From Detroit” campaign with ads featuring Detroit rapper Eminem, one of which aired during the Super Bowl. The campaign highlighted the rejuvenation of the entire product lineup, which included the new, redesigned and repackaged 2011 200 sedan and 200 convertible, the Chrysler 300 sedan and the Chrysler Town & Country minivan.[77][78] As part of the campaign, Chrysler sold a line of clothing items featuring the Monument to Joe Louis, with proceeds being funneled to Detroit-area charities, including the Boys and Girls Clubs of Southeast Michigan, Habitat for Humanity Detroit and the Marshall Mathers Foundation.[79] Following the Eminem ad, there was also an ad for Detroit Lions defensive tackle Ndamukong Suh driving a Chrysler 300 to Portland, Oregon, to visit his mother, an ad featuring Detroit-born fashion designer John Varvatos cruising through a shadowy Gotham while Kevin Yon’s familiar baritone traces the designer’s genesis.[80]

In March 2011, Chrysler Group LLC filed a lawsuit against Moda Group LLC (owner of Pure Detroit clothing retailer) for copying and selling merchandise with the “Imported from Detroit” slogan.[81] Chrysler claimed it had notified defendant of its pending trademark application February 14, but the defendant argued Chrysler had not secured a trademark for the “Imported From Detroit” phrase. On June 18, 2011, U.S. District Judge Arthur Tarnow ruled that Chrysler’s request did not show that it would suffer irreparable harm or that it had a strong likelihood of winning its case. Therefore, Pure Detroit’s owner, Detroit retailer Moda Group LLC, can continue selling its “Imported from Detroit” products. Tarnow also noted that Chrysler does not have a trademark on “Imported from Detroit” and rejected the automaker’s argument that trademark law is not applicable to the case.[82][83] In March 2012, Chrysler Group LLC and Pure Detroit agreed to a March 27 mediation to try to settle the lawsuit over the clothing company’s use of “Imported from Detroit” slogan.[84] Pure Detroit stated that Chrysler has made false claims about the origins of three vehicles – Chrysler 200, Chrysler 300 and Chrysler Town & Country – none of which are built in Detroit. Pure Detroit also said that Chrysler’s Imported From Detroit merchandise is not being made in Detroit.[citation needed]

Chrysler’s Jefferson North Assembly, which makes the Jeep Grand Cherokee and Dodge Durango, is the only car manufacturing plant of any company remaining entirely in Detroit (General Motors operates a plant which is partly in Detroit and partly in Hamtramck).[85]

In 2011, Eminem settled a lawsuit against Audi alleging the defendant had ripped off the Chrysler 300 Super Bowl commercial in the Audi A6 Avant ad.[86]

“Half Time in America”

Again in 2012, Chrysler advertised during the Super Bowl. Its two-minute February 5, 2012 Super Bowl XLVI advertisement was titled “Half Time in America”. The ad drew criticism from several leading U.S.conservatives, who suggested that its messaging implied that President Barack Obama deserved a second term and, as such, was political payback for Obama’s support for the federal bailout of the company.[87]Asked about the criticism in a 60 Minutes interview with Steve Kroft, Sergio Marchionne responded “just to rectify the record I paid back the loans at 19.7% Interest. I don’t think I committed to do to a commercial on top of that” and characterized the Republican reaction as “unnecessary and out of place”.[88]

“America’s Import”

In 2014, Chrysler started using a new slogan, “America’s Import” in ads introducing their all-new 2015 Chrysler 200, targeting foreign automakers from Germany to Japan with such ads (German performance and Japanese quality), and at the ending of selected ads, the advertisement will say, “We Built This”, indicating being built in America, instead of overseas.

Slogans

  • Engineered to the Power of Cars (1998–2001)
  • Drive = Love (2002–2004)
  • Inspiration comes standard (2004–2007)
  • Engineered Beautifully (2007-mid 2010)
  • Imported From Detroit (2011-2014)
  • America’s Import (2014–present)

Product line

Ram 1500, one of Chrysler’s best selling vehicles[69]

  • Chrysler: Luxury sedans, convertibles, and minivans
  • Dodge: Passenger, performance cars, minivans, crossovers and SUVs
  • Ram: Trucks and commercial vehicles
  • Jeep: Off-road vehicles, SUVs and crossovers
  • Mopar: Upscale versions of selected cars, trucks, and SUVs from Chrysler, Dodge, Ram, Jeep, and Fiat (new for 2012). Also brand for dealer service and customer service operations.

Mopar

  • Mopar: Replacement parts for Chrysler-built vehicles.
    • Mopar Performance: a subdivision providing performance aftermarket parts for Chrysler-built vehicles.

Fiat

In 2010, Fiat Auto was planning to sell seven of its vehicles in the U.S. by 2014, while Fiat-controlled Chrysler Group was to supply nine models to sell under Fiat brands in the European market, according to a five-year plan rolled out on April 21, 2010 in Turin, Italy, by Fiat and Chrysler CEO Sergio Marchionne. At least five of the Fiat Auto models were expected to be marketed in the U.S. under its Alfa Romeo brand. Showing the level of integration envisioned, a product introduction timeline envisaged Chrysler-built compact and full-size SUVs going on sale in 2012 and 2014, respectively, in both European and North American markets.[89]

Chrysler Uconnect

First introduced as MyGig, Chrysler Uconnect is a system that brings interactive ability to the in-car radio and telemetric-like controls to car settings.[90] As of mid-2015, it is installed in hundreds of thousands of Fiat Chrysler vehicles.[91] It connects to the Internet via the mobile network of Sprint, providing the car with its own IP address.[91] Internet connectivity using any Chrysler, Dodge, Jeep or Ram vehicle, via a Wi-Fi “hot-spot”, is also available via Uconnect Web. According to Chrysler LLC, the hotspot range extends approximately 100 feet (30 m) from the vehicle in all directions, and combines both Wi-Fi and Sprint’s 3G cellular connectivity.[citation needed] Uconnect is available on several current[when?] and was available on several discontinued Chrysler models including the current Dodge Dart, Chrysler 300, Aspen, Sebring, Town and Country, Dodge Avenger, Caliber, Grand Caravan, Challenger, Charger, Journey, Nitro, and Ram.[92]

In July 2015, IT security researchers announced a severe security flaw assumed to affect every Chrysler vehicle with Uconnect produced from late 2013 to early 2015.[91] It allows hackers to gain access to the car over the Internet, and in the case of a Jeep Cherokee was demonstrated to enable an attacker to take control not just of the radio, A/C, and windshield wipers, but also of the car’s steering, brakes and transmission.[91] Chrysler published a patch that car owners can download and install via a USB stick, or have a car dealer install for them.[91]

Electric and hybrid vehicles

The first electric vehicle produced by Chrysler was the 1992 Dodge EPIC concept minivan. In 1993, Chrysler began to sell a limited-production electric minivan called the TEVan; however only 56 were produced. In 1997, a second generation, called the EPIC, was released. It was discontinued after 1999.[citation needed]

Chrysler owned the Global Electric Motorcars company, building low-speed neighborhood electric vehicles, but sold GEM to Polaris Industries in 2011.

Chrysler intended to pursue new drive concepts through ENVI, an in-house organization formed to focus on electric-drive vehicles and related technologies which was established in September 2007. In August 2009, Chrysler took US$70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans. ENVI was disbanded by November 2009.[93]

The first hybrid models, the Chrysler Aspen hybrid and the Dodge Durango hybrid, were discontinued a few months after production in 2008,[94] sharing their GM-designed hybrid technology with GM, Daimler and BMW.[95]

Chrysler is on the Advisory Council of the PHEV Research Center, and undertook a government sponsored demonstration project with Ram and minivan vehicles.[96]

In 2012, Chrysler/Fiat CEO Sergio Marchionne said that Chrysler and Fiat both plan to focus primarily on alternative fuels, such as CNG and Diesel, instead of hybrid and electric drivetrains for their consumer products.[97]

Special programs

During World War II, essentially all of Chrysler’s facilities were devoted to building military vehicles (the Jeep brand came later, after Chrysler acquired American Motors Corporation).[98] They were also designing V12 and V16 hemi-engines producing 2,500 hp (1,864 kW; 2,535 PS) for airplanes, but they did not make it into production as jets were developed and were seen as the future for air travel.[99] During the 1950s Cold War period, Chrysler made air raid sirens powered by its Hemi V-8 engines.

Radar antennas

When the Radiation Laboratory at MIT was established in 1941 to develop microwave radars, one of the first projects resulted in the SCR-584, the most widely recognized radar system of the war era. This system included a parabolic antenna six feet in diameter that was mechanically aimed in a helical pattern (round and round as well as up and down).

One of Chrysler’s most significant contributions to the war effort was not in the field of vehicles but in the radar field. For the final production design of this antenna and its highly complex drive mechanism, the Army’s Signal Corps Laboratories turned to Chrysler’s Central Engineering Office. There, the parabola was changed from aluminum to steel, allowing production forming using standard automotive presses. To keep weight down, 6,000 equally spaced holes were drilled in the face (this had no effect on the radiation pattern). The drive mechanism was completely redesigned, using technology derived from Chrysler’s research in automotive gears and differentials. The changes resulted in improved performance, reduced weight, and easier maintenance. A large portion of the Dodge plant was used in building 1,500 of the SCR-584 antennas as well as the vans used in the systems.[100][101]

Aircraft

Missiles

In April 1950, the U.S. Army established the Ordnance Guided Missile Center (OGMC) at Redstone Arsenal, adjacent to Huntsville, Alabama. To form OGMC, over 1,000 civilian and military personnel were transferred from Fort Bliss, Texas. Included was a group of German scientists and engineers led by Wernher von Braun; this group had been brought to America under Project Paperclip. OGMC designed the Army’s first short-range ballistic missile, the PGM-11 Redstone, based on the WWII German V-2 missile. Chrysler established the Missile Division to serve as the Redstone prime contractor, setting up an engineering operation in Huntsville and for production obtaining use from the U.S. Navy of a large plant in Warren, Michigan. The Redstone was in active service from 1958 to 1964; it was also the first missile to test-launch a live nuclear weapon, first detonated in a 1958 test in the South Pacific.[102]

Working together, the Missile Division and von Braun’s team greatly increased the capability of the Redstone, resulting in the PGM-19 Jupiter, a medium-range ballistic missile. In May 1959, a Jupiter missile launched two small monkeys into space in a nose cone; this was America’s first successful flight and recovery of live space payloads. Responsibility for deploying Jupiter missiles was transferred from the Army to the Air Force; armed with nuclear warheads, they were first deployed in Italy and Turkey during the early 1960s.[103]

Space boosters

In July 1959, NASA chose the Redstone missile as the basis for the Mercury-Redstone Launch Vehicle to be used for suborbital test flights of the Project Mercury spacecraft. Three unmanned MRLV launch attempts were made between November 1960 and March 1961, two of which were successful. The MRLV successfully launched the chimpanzee Ham, and astronauts Alan Shepard and Gus Grissom on three suborbital flights in January, May and July 1961, respectively.

America’s more ambitious manned space travel plans included the design of the Saturn series of heavy-lift launch vehicles by a team headed by Wernher von Braun. Chrysler’s Huntsville operation, then designated the Space Division, became Marshall Space Flight Center’s prime contractor for the first stage of the Saturn I and Saturn IB versions. The design was based on a cluster of Redstone and Jupiter fuel tanks, and Chrysler built it for the Apollo program in the Michoud Assembly Facility in East New Orleans, one of the largest manufacturing plants in the world. Between October 1961 and July 1975, NASA used ten Saturn Is and nine Saturn IBs for suborbital and orbital flights, all of which were successful;[104] Chrysler missiles and boosters never suffered a launch failure.[citation needed] The division was also a subcontractor which modified one of the Mobile Launcher Platforms for use with the Saturn IB rockets using Saturn V infrastructure.

Discontinued brands

See also

Countries

Backgrounder #276 on Regulation

July 13, 1983

The Chrysler Bail-Out Bust

By

For an update on automotive bailouts, read “Putting the Brakes on the Automotive Bailout” and the Housing and Financial Markets.

Chrysler Corporation auto sales are roaring into high gear. And so is the myth of the Great Chrysler Comeback. The resurgence of the once dying automaker has become the favorite example cited by proponents of national industrial policy who call for massive and costly federal efforts to revive what they describe as a desperately ailing American economy. The way they tell the story, Chrysler in 1979 seemed destined for bankruptcy, and now it’s showing a profit. What saved Chrysler, we are told, are the $1.2 billion in loan guarantees provided by the federal government-so successful was the timely injection of cash that the company could announce today that it will pay off the remaining $800 million by September. And it didn’t cost the taxpayer a penny, did it, they ask gloatingly. Chrysler chairman Lee Iacocca, who came to Washington four years ago with begging bowl in hand, is now in the vanguard of the push for more government intervention in American industry. Federal loan guarantees, import quotas, and a well-defined industrial policy, he promises, will be the key to American corporate success in the years ahead

If it all seems too good to be true, it is because it isn’t true. The popular version of the Chrysler bail-out is simply a fairy tale. The bail-out is a bust. Closer scrutiny of it reveals that the “great success” rests on a bedrock of myths and half truths. These myths cloud and distort important issues involved in the larger question of industrial policy and a closer business-government relationship. Confronting the Chrysler myths with Chrysler facts reveals Chrysler’s true financial condition and the real impact of those federal guarantees. It shows that if the bailout is indeed the model for an American industrial policy the consequences could be disastrous

Myth No. 1: Government loan guarantees prevented the Chrysler Corporation from going bankrupt.

The truth is that the Chrysler Corporation has gone bankrupt by every normal definition of the word. In the past three years, Chrysler has renegotiated its debts and restructured its organization in a way that greatly resembles a company going through Chapter 11 bankruptcy. Its creditors, like those of bankrupt firms, were forced to swallow sizeable losses.

This was the result of a clause in the Chrysler Corporation Loan Guarantee Act of 1979 that required creditors to make certain “concessions” to Chrysler. With this clause to exploit and with Treasury Department officials, including then-Secretary William Miller, pressuring its creditors, Chrysler was able to pay off more than $600 million in debts at just 30 cents on the dollar. In addition, the company was allowed to convert nearly $700 million in debts into a special class of preferred stock-paper relatively worthless in the financial markets because the shares earned no dividends and were to be unredeemable for several years. In early 1983, Chrysler reached a tentative agreement with its creditors to trade this preferred stock for Chrysler’s regularly traded common stock. However, the creditors still get the short end of the financial stick: the face value of the common stock to be received will almost certainly be less than the face value of the original debt.

Chrysler’s creditors are not alone in being socked by the company’s quasi-bankruptcy. The firm’s workers have paid an even greater price. Despite the fact that the loan guarantees were approved by Congress mainly to protect jobs at Chrysler, the company has sent home nearly half of its employees, cutting its white collar work force by 20,000 and laying off 42,600 of its hourly workers since the loan guarantees were signed into law. Many observers, including Senator William Proxmire (D-Wisc.) complain that the number of employees laid off at Chrysler in this period is at least as large-and may even have been larger-than the number of jobs that probably would have been lost had Chrysler actually been forced into bankruptcy.

The only difference between the actual bankruptcy that Chrysler faced in 1979 and the quasi-bankruptcy that Chrysler has gone through in the past three years is that under this quasi-bankruptcy the federal government is responsible for guaranteeing over $1 billion in Chrysler loans. Chrysler’s creditors and employees have paid a price no different than they would have paid in reorganization under the bankruptcy laws. If it has not been the workers and creditors who have benefited from federal generosity, who has? The answer: Mainly Chrysler’s shareholders.

But not even all of Chrysler’s shareholders benefited: sensible stockholders-the ones who carefully monitored Chrysler’s financial and management performance-probably sold the stock well before the bailout occurred. Therefore, only two types of Chrysler stockholders really benefited from the bail-out: (1) less informed investors who either ignored the warning signs of Chrysler’s impending bankruptcy or else failed to act on them, and (2) the stockholders who were gambling that the federal government would come to Chrysler’s rescue and minimize their potential losses.

The Chrysler version of industrial policy, therefore, fleeced the company’s creditors, resulted in a 50 percent reduction in Chrysler’s workforce, rewarded the least deserving of Chrysler’s stockholders, and let the U.S. taxpayer risk his money in a bankrupt company. This we are told, is the shining example for America’s new industrial policy.

Myth No. 2: Federal 1oan guarantees were justified because Chrysler’s financial problems were brought on by the federal government.

Although federal regulations have certainly played a part in the financial decline of the automobile industry, these rules apply to every firm in the industry, not just Chrysler. It was Chrysler’s management, rather, which put it on the road to bankruptcy. Throughout the late 1930s and into the early 1940s, Chrysler was actually the second largest car manufacturer in the United States, ahead of Ford. The company’s problems began shortly after World War II, when it decided to stick with prewar manufacturing and styling methods instead of retooling to meet the expectations of postwar automobile buyers. Ford and General Motors, in contrast, developed a sleek and streamlined design that sold well.

By the time Chrysler’s management admitted their mistake in the 1950s, the company had slipped to third place among the nation’s automakers. But because Chrysler’s new management reacted by emphasizing sales and production over engineering, the firm’s cars were little more than delayed copies of Ford and General Motors products. “Chrysler was always into a fad, but always into it at the tail end, after it had crested,” says Maryann Keller, automobile industry analyst for Paine Webber.

Even Chrysler chairman Lee Iacocca does not accuse the federal government of total responsibility for Chrysler’s plight. “I don’t blame regulations for all of Chrysler’s problems,” Iacocca admitted to a congressional committee. “I think that half of all Chrysler’s problems were tough management mistakes.” Regulations may have played a part in forcing Chrysler over the edge, but the stage had been set for Chrysler’s problems long before seat belts and bumper standards were a gleam in the regulators’ eyes.

Myth No. 3: The loan. guarantees cost nothing since Chrysler has not gone bankrupt.

Under the provisions of the Loan Guarantee Act, Chrysler is supposed to compensate the federal government for the risk that the government has taken in making the guarantees. The House Committee on Banking, Finance, and Urban Affairs defined this risk as “the difference between the rate that the guaranteed loans carry and the rate that Chrysler would be required to pay if the loans were obtained without the federal guarantees.”[1]

Just how large is the difference between the two rates? In early 1980, Chrysler was able to issue government-guaranteed bonds at an interest rate of only 10.35 percent, while Ford Motor Company was forced to pay about 14.50 percent for its unguaranteed bonds. If Chrysler did not have the loan guarantees, it would almost certainly have to pay a higher interest rate on its bonds than the more secure Ford Motor Company. Therefore, one would assume that Chrysler should be paying the federal government a guarantee fee of at least four percent. Yet Chrysler pays only one percent, or about $12 million a year.

Chrysler attempted to make up the difference by giving the government 14.4 million “warrants,” which are certificates that give the government the right to purchase a share of Chrysler stock at $13 a share. Even if the stock price does rise to the point where American taxpayers would be fully compensated for the $300 million in interest subsidies that Chrysler will enjoy during the 1980s, the company is clearly not eager to see taxpayers collecting on those warrants In early 1983, Chrysler publicly demanded that the Treasury Department return the warrants to Chrysler, claiming that cashing in now-valuable warrants would amount to “usury.” Due to adverse public reaction, a Chrysler spokesman said that the company “would not press” the demand at this time.

Moreover, Chrysler has petitioned the federal government to reduce the one percent loan guarantee fee it currently pays down to the statutorily mandated minimum of one-half percent. The federal government put more than one billion in tax dollars at risk for Chrysler. But if Chrysler survives it appears that the company is very reluctant to reward Uncle Sam for that risk.

Myth No. 4: Chrysler’s top management has taken deep salary cuts until Chrysler’s financial problems are resolved.

When Chrysler was petitioning the federal government for the financial assistance it wanted, in 1979, the company announced its Salary Reduction Program. Under this, executive salaries were cut between two and ten percent; Lee Iacocca’s salary was reduced to one dollar a year (although it was made clear that, under the program, Iacocca would collect the balance of a recruitment bonus due to him in 1980). If Chrysler’s financial performance was adequate after two years, the executives would be eligible to receive retroactive salary payments to make up for these reductions.

Despite the fact that Chrysler lost nearly $500 million in 1981, the Salary Reduction Program ended that year, and executive salaries were restored to their 1979 level. Moreover, the company made retroactive payments to its executives for about two-thirds of the income they lost while the program was in effect, on the theory that its stock price in 1981 was about two-thirds of its 1979 price. Iacocca himself received over $360,000 in salary supplemental payments, and director’s fees in 1981-including “amounts paid in accordance with the Salary Reduction Program,” according to documents filed with the Securities and Exchange Commission. All of this despite the fact that Chrysler was still losing money. Not that there is anything inherently wrong in paying high salaries; Iacocca probably could be making much more money at a much healthier company. But the much heralded sacrifices made by Chrysler executives did not last long-just about long enough to secure federal support for the company.

Myth No. 5: Chrysler’s new-found profitability shows that it is on the road to financial recovery.

Chrysler’s supporters were elated when the company reported a net profit of over $170 million in the first quarter of 1983-the largest quarterly profit in the company’s history. Lee Iacocca has also announced that the remaining $800 million in federally guaranteed loans will be repaid by September-seven years ahead of schedule. Many observers call this a “comeback.” Rumors of Chrysler’s resurrection, however, may be premature.

Chrysler claims that cost cutting has been an important factor in the company’s success. But Chrysler’s version of cost cutting provides a shaky foundation for long-term profitability.

Examples:

  • Carry-forward of tax losses. Chrysler’s massive losses in 1979, 1980, and 1981 have given the company large tax deductions to cut its tax bills almost to zero throughout the 1980s. Of the $170 million “earned” by Chrysler in the first quarter of 1983, only half actually represents operating profit; the other half is attributable to Chrysler’s large loss carry-forward.
  • Cuts in research and development (R&D) spending. Chrysler boosted R&D spending from $161 million in 1972 to $358 million in 1979 (or $207 million in 1972-equivalent dollars). But between 1979 and 1982, R&D spending was cut to $307 million (only $133 million in 1972 dollars). R&D includes product planning and design for Chrysler’s future models. Slashing such outlays may mean quick paper profits at the cost of future innovation and competitiveness.
  • Decreases in capital investment. Industry analysts are concerned that Chrysler is sacrificing long-term capital investment in the interest of short-term profit. “We still have long-term concerns about the company and the fact that during this period of trial and tribulation, they have not spent much money for product, plant, and equipment,” says Harvey Heinbach, automobile industry analyst for Merrill Lynch. “This year [1982] Chrysler will have invested $500 million in capital spending compared to General Motors’ $8 billion.”
  • Deferrals of pension costs. In January 1982, Chrysler reached an agreement with the United Auto Workers to defer $220 million in pension fund contributions. The UAW is not likely to allow deferrals to continue indefinitely.
  • Decreases in labor costs. In January 1981, Chrysler negotiated special concessions from the UAW that saved the company more than $600 million in 1981 and 1982. The union is now fighting to restore those benefits for its workers. After a threatened strike in the United States and an actual strike by Chrysler’s Canadian workers in late 1982, Chrysler was forced to give back many of those concessions. More management climb-downs are expected when the current agreement expires in January 1984, and wage parity with General Motors and Ford workers is an avowed goal of the auto workers union and its members. Currently Chrysler pays two dollars an hour less to UAW workers than do General Motors and Ford. If all of Chrysler’s 40,000 hourly workers were paid the union rate, and they worked eight-hour days through the first three months of 1983, then nearly $40 million would disappear from Chrysler’s profit in the first quarter in 1983.

Not all of Chrysler’s cost cutting has occurred in these five areas, of course. But these samples illustrate that Chrysler’s current profitability-as well as its prospects for future profit ability-depends to a large extent upon a set of unique and inherently temporary circumstances.

Myth No. 6: Chrysler’s survival has improved America’s position in the international automobile market.

One argument made in support of the Chrysler loan guarantees was that it would make it easier for the United States to compete in the world market for cars, since four American companies would be competing in that market instead of three. The following statistics refute this: In 1980, when Chrysler began obtaining its guaranteed loans, Chrysler cars accounted for 7 percent of all automobiles registered in the United States, while other domestic cars accounted for 65 percent, and imported cars accounted for 28 percent. In 1981, when Chrysler received its second “wave” of loans, Chrysler’s share increased to 9 percent, imports increased slightly to 29 percent, and other domestic cars slid to 62 percent. Statistics for 1982 generally mirror those of 1981. In other words, Chrysler has increased its market share not by making inroads into foreign competition, but by taking customers away from other domes tic manufacturers.

When Chrysler was on the verge of bankruptcy in 1979, the marketplace was signaling that the slackening automobile market would only support three U.S. car manufacturers. By granting the Chrysler loan guarantees, Congress ignored that signal. If Chrysler survives, it will probably mean that the shrinking automobile market will be shared by four ailing domestic automakers, rather than the two or three relatively healthy car manufacturers that would have emerged had Chrysler been allowed to go into formal bankruptcy.

CONCLUS ION
When the loan guarantee program was being considered by Congress, Chrysler’s unions and top management constituted the “visible” constituency, pleading its case in Washington and begging to be pulled back from the jaws of bankruptcy. Unrepresented and unheard was a huge “invisible” constituency. They included:

  • Current and future laid-off Ford and General Motors workers, who never understood that their tax dollars were being used to destroy their own jobs in order to save jobs at Chrysler
  • Small businessmen and private individuals, who never understood that the Chrysler bail-out would squeeze $1.2 billion out of the credit market, making it difficult and more costly for them to raise business capital or finance a mortgage on a new house, all of which would have created new jobs
  • Over 60,000 now laid-off Chrysler workers, who expected the bailout to save their jobs
  • American car buyers, who never understood that Ford and General Motors would have taken over much of a bankrupt Chrysler’s market and produced cars more efficiently, reducing the cost of domestic automobiles.

The problem with the Chrysler bail-out-in fact, the problem with all “industrial policy”-is that it is necessarily political in nature; the loudest interest groups get the greatest reward, while the scattered and fragmented “invisible constituency” is largely ignored. But a free market is a tangled web of infinite and subtle interaction, in which the full impact of intervention is not always recognized until too late. In the case of the Chrysler bail-out, a big chunk of taxpayer money was committed to a shaky and inappropriate venture. Every American became an involuntary and uncompensated partner in a company whose future is still in doubt. The precedent established is extremely dangerous. On top of this, the bail-out even failed in its purpose.

Prepared for The Heritage Foundation by James K. Hickel a Washington-based policy consultant. Based on: “Lemon Aid,” Reason, March 1983. Text appearing in the article reprinted with permission. ©1983 by the Reason Foundation, Box 40105, Santa Barbara, CA 93103.

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