Chrysler No Stranger To Bailouts
RENEE MONTAGNE, host:
Speaking of bailouts, the heads of the Big Three U.S. car companies are back on Capitol Hill today trying again to convince Congress to give them billions in loans so they can avoid bankruptcy. For some at Chrysler, there may be a strong sense of we've been here before.
(Soundbite of vintage recording)
Mr. LEE IACOCCA (Former Chairman, Chrysler): Chrysler has a strong future. We're ready to move forward.
MONTAGNE: That is Lee Iacocca, then Chrysler's chairman, speaking before Congress in 1979. He walked away with $1.2 billion in federal loan guarantees. Paul Eisenstein covered the Chrysler bailout for NPR. He's now an independent auto industry journalist. Good morning, Paul.
Mr. PAUL EISENSTEIN (Independent Journalist, The Detroit Bureau): Good morning.
MONTAGNE: Now, was Congress as tough on Lee Iacocca as they've been on the current executives coming from Detroit?
Mr. EISENSTEIN: They were tough. Iacocca didn't do what these Big Three executives did this time, which was to waltz up to Capitol Hill saying, we've got a problem, give us some money. He went up there knowing he was going to have a battle. Whereas these guys, looking at what Wall Street got simply by showing up, thought that their request would be met with open wallets.
MONTAGNE: How would you compare Lee Iacocca's approach to that of Rick Wagoner and the other auto executives today?
Mr. EISENSTEIN: It was a completely different approach. He lined up Jim Blanchard, congressman from Michigan, to work the floor in Congress. He had a plan laid out for Congress even before he went out there with a request. And so one of the things that people saw were photographs of prototypes of some of the cars that Chrysler was going to bring to market. He ultimately got American consumers to turn in favor of Chrysler, which made it easier for lawmakers to then feel that they could support a bailout bill when it was time to vote.
MONTAGNE: What about the changes that Iacocca ended up making to Chrysler as part of his response to the bailout? Did any of this lead to some of the company's current problems today?
Mr. EISENSTEIN: Well, ironically, one of the things Congress forced Chrysler to do was focus on the American market. Essentially, Chrysler had to give up things like its international operations. That looked good at the time. But today, in an industry that is extraordinarily global, Chrysler is one of the few major players that doesn't have a real international base as a result of that 1981 bailout.
MONTAGNE: Well, just also, what about the cars that Chrysler was making then? Was it asked to make different kinds of cars?
Mr. EISENSTEIN: Well, it was certainly told that it would have to prove it could build cars that the public would want. And the stuff that Chrysler was making back in the late '70s were pretty bad. So Iacocca and his team had to come up with some great cars, or at least what seemed great cars back then.
We laugh at them now, but the K-cars, which were these compact, fuel-efficient vehicles, were a real breakthrough for an industry that back then, much like now, was building larger vehicles that were in Chrysler's case best known for their Corinthian leather as opposed to being small, fuel-efficient, and visually attractive.
MONTAGNE: Then how did Chrysler end up back where it is now, looking for a bailout?
Mr. EISENSTEIN: Really, Chrysler didn't solve the problems that it should have with its bailout in 1981. It really missed the market for small products. You could argue that Americans wanted big vehicles. But Chrysler, like the rest of the Detroit manufacturers, walked away almost entirely from the passenger car segment, vehicles like the Honda Civic or the Toyota Camry. And they ceded it to the Japanese. And so this time, when the market has shifted as dramatically as it did in the late '70s and early '80s, the manufacturers don't have the money to transform themselves - in Chrysler's case, once again.
MONTAGNE: Paul Eisenstein is with the independent auto news service The Detroit Bureau. Thanks very much.
Mr. EISENSTEIN: Good to be with you.