THE TROUBLED YEARS
Chrysler set sales records in 1972 and 1973, but gasoline shortages, political uncertainty, high interest rates, severe inflation and weakening consumer confidence drove Chrysler into a financial crisis in the mid-70s. American consumer demand soared for smaller, more fuel-efficient cars. Japanese manufacturers were the first to respond, making great inroads into the U.S. market. The combined domestic market share of the total U.S. car market fell while the market share for imports rose to 23.4 percent.
In the midst of the financial crisis, John J. Riccardo become Chairman on October 1, 1975. Responding growing economic trouble, Riccardo hired Lee A. Iacocca as Chrysler President on November 2, 1978. Ten months later, Riccardo resigned and Iacocca was elected Chairman on September 20, 1979.
Iacocca applied his experience of 32 years with Ford Motor Company to meet the challenge of rejuvenating Chrysler's sagging operations. Chrysler reduced costs, restructured its management and recruited new executives to deal with its serious financial problems. Despite these measures, external factors continued to limit Chrysler's ability to finance its programs fully. Chrysler was forced to seek assistance from the federal government in the form of loan guarantees.
In late December 1979, the U.S. Congress passed the Chrysler Corporation Loan Guarantee Act, which President Carter signed into law on January 7, 1980. The act provided Chrysler $1.5 billion in federal loan guarantees
Concessions from UAW-represented workers, white-collar employees, suppliers, creditors and lenders kept Chrysler operating despite record losses of $1 .7 billion in 1980. Chrysler cut inventories by $1 billion, reduced white-collar staff by 50 percent and cut its break-even point by 50 percent in its drastic efforts to manage finances.
Through the travail, Chrysler doubled its fleet average miles-per-gallon and in 1978, introduced the first domestically produced front-wheel drive small cars -- the Dodge Omni and Plymouth Horizon. Chrysler was also the first American company to convert its fleet to front-wheel drive. Chrysler was on its way to recovery.
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