Big Three Rescue Part 2 -- Let's learn from Chrysler 1979
Without knowing it, I was in some ways recounting what happened under President Jimmy Carter in 1979 with Chrysler. Check out this wonderful article from Time Magazine’s archives:
- The government guaranteed loans to Chrysler totaling up to $1.5 billion
- Chrysler had to secure another $1.43 billion in private financing at reduced rates from banks
- Chrysler had to gain concessions from suppliers on cost and financing
- Chrysler committed to $462.5 million in concessions from the company’s union employees, plus another $125 million from salaried workers.
- Chrysler shed unattractive assets (wholly owned parts and components factories), cut the workforce.
- The US government also extended the deadline by two years for Chrysler to meet C.A.F.E. requirements.
As referenced in the above article, the Holy Grail was the K car platform. Since I drive one, a 1986 Plymouth Reliant to be exact, I am obviously a big proponent. The K car was under development and would lead to over 10 million vehicles produced off of one platform. The first minivan was derived from the K platform.
The other point made in the article was the charismatic sales leadership of Lee Iacocca. But the substance of the turnaround was both operating changes, AND new great product. Iacocca had to fire thousands of managers and salaried staff. The UAW leadership begrudgingly agreed to concessions. While many suppliers initially balked at the concessions required by the company, they all eventually agreed. Finally, the U.S. banking system, 442 lending institutions, agreed to terms which led to Chrysler accessing the loan guaranteed by the U.S. government.
As I have argued, a radical restructuring must take place.
The other point which cannot be forgotten is that we must stimulate demand. Iacocca did it through pragmatic patriotism. I don’t know if patriotism will work this time around.
Also remember, Chrysler benefited from falling interest rates and a rebounding economy.
Oh, and yes, President Ronald Reagan imposed a “voluntary” restriction on Japanese imports. It may be wise for President-elect Obama to consider that as well for 2009.
I believe some intelligent form of "buy American" -- I have suggested Tax Credits but another idea is more than welcome -- is necessary. Comments welcome!