Try A-Coke-Ah (Part Two)

Iacocca – the Chrysler years.

Image: Time

Reeling from his part-expected firing by Henry Ford, Iacocca was almost immediately offered roles in companies across the globe. One being as a global consultant for Renault, which he turned down, citing a desire for a more hands on role. He also envisaged what he termed Global Motors, a collaboration between Chrysler’s engineering prowess, Volkswagen’s scale and dealer saturation, along with Mitsubishi’s technologies.

Iacocca even had finance plans in hand and seemed openly confident of attracting, if not these car manufacturers, then others such as Honda, Fiat, Nissan or Renault to create a global car superpower to take on the might of GM and now, enemy mine, Ford. Approaching VW with cards on the table, Wolfsburg politely showed the American the door on seeing the troubled financial state Chrysler was in.

Chrysler had opened their doors to Iacocca, ‘an entrepreneur at heart’ only after current president John Riccardo sacrificing his own seat a few months prior to Iacocca’s inauguration in September 1979. The Detroit grapevine told of one, Henry Ford imbibing more than ever upon hearing the news of the Pentastar’s newest acquisition. 

Smiles and handshakes over, it took Iacocca very little time to see the dire straits his new comrades were in, liking it to “Italy in the 1860’s – prima Donna run clutches of little duchies and no-one gave a damn about the others!” In his first week, Iacocca was shown Michigan state fairgrounds, where unsold stock, anywhere up to 100,000 cars worth hundreds of millions, lay motionless and decaying.

The comeback car. Image: Portland Press Herald via motorcities

The old ways of dealers waiting until month end to snap up the inevitable fire sale was stopped immediately, while monthly firings of those duchy vice-presidents lasted three years. However, cutting costs and slashing ‘dead wood’ was still not enough to guarantee any form of financial stability. Plants were closed, thousands of both blue and white collar workers were made redundant, stock and non-automotive investments were sold. Even the lucrative battle tank section, a ‘guaranteed’ $60M per year income stream was sold off – to rival neighbours, GM. 

Iacocca learned that Chrysler had entered the second hand car industry by default, leasing cars to rental firms and buying them back six months later leaving even greater stocks of metal sold on at a fraction of their build cost. And then came the banking fiasco.

Chrysler took on over four hundred loans from small town American banks, to such ‘luminaries’ as Lehman Brothers. Add in several London, German and Japanese banks, along with Lebanese, Finnish and Iranian money lenders – amounting to over a billion dollars. Throw in labour and pension costs and the red ink flowed fast and wide. And then he asked the government for more money!

Homework studied, Iacocca spent weeks attempting to engage the Carter administration to loan Chrysler $1.5 Billion. Arguments swung back and forth, meeting after meeting, perfunctory hearings followed by private counsel with some more lenient officials. Iacocca again admits at one stage to suffering vertigo due to the untold stress levels he faced; raising cash on Capitol Hill, whilst simultaneously running a sinking ship. Knives were out, mud was slung and more than egos were bruised. 

The printing costs of ten thousand documents to satisfy the paying off of loans and convincing the government (House votes – 271-136, Senate vote 53-44) cost $2M alone. Finally, on 24th June 1980, the first of three half a billion dollar instalments was placed in the now single, Chrysler bank, the Manufacturers Hanover Trust. But only after financial advisers, Salomon Brothers creamed off $13,250,000. And a fire in the tower block holding the paperwork the night before the signing caused yet more heart problems. “Perhaps God, the real God, not Henry was telling me something? 

Chrysler were officially back in business. With the financial monkey off his back, Iacocca proceeded at full tilt. We’ll return to the cars actually produced at the time momentarily, but consider what one man’s (and his many of ex-Ford employees) tenacity and dogged ethics had achieved; a financial situation of previously unheard of complexity unravelled, a company’s precarious position restored. 

Whilst reading the book, I warmed to the man. His no-bullshit style must have won Iacocca as many friends as enemies; he seemed genuinely concerned about all those people fired, which many will argue is easy when your personal bank account is bursting[1]. But as he countered with the government, he saved far more from entering an already struggling American economic situation.

Chrysler as a company then had not only got back up after the severest of beatings, it returned as an adversary of not only the Big Two producers but also the government. Iacocca paid back the loan, in full seven years early – that’s confidence. Often such protagonists may not reveal the enjoyment of such battles – living, however frail to fight another day encourages future tussles, the competition continues.

The K-cars, LeBaron convertible and T-115 minivan hardly cut the mustard this side of the pond, though Iacocca’s stoic belief in making great American cars certainly worked for a while. At the time the book was written[2], Iacocca had lost his wife, propelling his ever stronger endeavours to win over jaded American customers. Admitting to “Detroit selling crap for years”, Iacocca turned Chrysler’s fortunes around and had strong plans to maintain such momentum.

Image: Automotive News

We know the inevitable outcomes but as a point in time, his book enthralled as a story of not only magnitude but also magnanimous understanding, a poignant example of trial by fire and winning. He concluded his tale with some revealing ideas on turning the economy around, along with some profound thoughts on car safety, all sadly counting for little.

Fully expecting and welcoming comments, your author recommends you find a copy in order to form your own opinions.

[1] Iacocca’s first Chrysler salary was just one dollar for the year. Subsequent remuneration he fails to divulge but with such high stakes, fortune favours the brave. We live in very different times. 

[2] Co-written with journalist William Novak.

Author: Andrew Miles

Beyond hope there lie dreams; after those, custard creams?

19 thoughts on “Try A-Coke-Ah (Part Two)”

  1. I remember reading this book decades ago. Is there a cartoon of a pair of executives in a crater, and they’re taking a call on the phone and the caption is “if you know a deeper hole, go to it!?”

    1. If there is such a cartoon in it (not yet having seen the book I don’t know) then it’s plagiarism… the original dates to the First World War and a character named “Old Bill’, in his trench with shells bursting overhead and the caption reads “If you know a better hole, go to it!”.

      Excellen article Andrew

  2. Likewise, I read the book around the time it was first published and I’m thoroughly enjoying becoming reacquainted with it, thank you Andrew.

  3. Exceptionally written Andrew, I enjoyed the article and story a lot.
    There is always something to learn from persons of this magnitude!

  4. Any insight into the panic unloading of Chrysler Europe? I wonder whether Iacocca would have made it to the top of the mountain absent the lift provided by the Horizon.

    1. Since the US Horizon is a more or less completely different design under the sheet metal than the Euro Horizon, I would rather put this vehicle in the category of “another waste of money”. Clever looks different to me. But what do I know…

    2. Fred, I found this quote at https://www.allpar.com/threads/creating-the-chrysler-horizon-the-chrysler-europe-design-team-speaks.229863/ :

      quote from Lee Iacocca in the July 22, 1979 Automotive
      News:

      “The 50 leading auto writers of Europe ….. gave the (Car of the
      Year) award to the new Simca Horizon …. because of the technological
      innovations on that car – like automatic transmission, and on-board
      computer, automatic speed control, electronic ignition, and electronic
      trip computer. European technology? No way. They were all developed by
      Chrysler engineers in this country and then made available to our
      French company for use on the Simca Horizon.”

      As you can see, he’s disrespectful. He knows full well that the name of the car is “Chrysler Horizon”. And he is responding to the unquestionable notion that the car proved a success in sales and was lauded in the press on both sides of the Atlantic.

      Importantly, he’s not making your point, which applies to the suspension (in part, also resulting in differences to the front section of the floorpan), construction of windscreen frame (appearing nearly identical in both versions), some interior fittings, and of course bumpers… which is hardly the whole car.

      Chrysler sold over 2 million Horizons and variants thereof in North America through 1990. That’s no failure.

      I appreciate your thoughtful opinion, but I still think my question is appropriately stated.

    3. Gooddog: Given that the Fiat Ritmo (a more deserving winner: discuss) ran the Horizon pretty close for the 1978 award (awarded in 1979), I would agree with you that Mr. Iacocca’s comments are somewhat disingenuous. Especially if we consider that matters like automatic transmission, cruise control and rudimentary on-board computers would probably have mattered little to European judges (to say nothing of customers).

      The Horizon is an odd case. In Europe, people dismiss its notable American success, while in the US, the tendency is to dismiss its European origins, making it a car it’s nearly impossible to discuss rationally.

    4. Eóin, For me that discussion would verge into personality theory, err… therapy. A charmer could be mechanically unremarkable, even unreliable yet… uh… Never meet your heroes once they’ve been federalized? Plastics.

    5. gooddog: I had forgotten that the Ritmo made it across the Atlantic. I’ll get my coat…

    6. …which is exactly what Fiat did, sadly.

      And then I wondered what Archie Vicar would have preferred. Thankfully, we have that answer.

      Ritmo: https://driventowrite.com/2019/04/21/1979-fiat-strada-75cl-three-door/

      vs.

      Horizon: https://driventowrite.com/2019/04/26/1979-talbot-horizon-gls/

      Since he reports gorging and imbibing at the very same hotel for both tests, it’s all quite scientific, though I suspect he is applying a metaphor or such when describing dials situated behind a “glass” panel… (in any case designed by Bellini, no less).

  5. Very interesting Andrew – thank you.

    The K-car story is a fascinating tale in its own right.

  6. To get full context on the Iacocca autobiography, you need to read some of (preferably all of) Bob Lutz’s books. Iacocca was at his best under pressure and at his worst when in clover. Even Iacocca admits this retrospectively. However his autobiography is still great and the man still a hero.

    Another great Chrysler book is called ‘common sense not included’. Find that if you can.

    1. “Iacocca was at his best under pressure and at his worst when in clover.” That puts me in mind of Fiat, always producing their best (little) cars when in dire straits, then growing unbelievably complacent almost as soon as the tides have turned in their favour. Still, as far as Chrysler and Iacocca go – and hubris aside – I liked this advert, especially considering the rather rag tag line up:

      It also puts me in mind somewhat of Winston Churchill, in that Churchill was chronically depressed when not in a war situation. Some people need the thrill of acute danger to perform. In war (or “the wars” as in Chrysler’s case) they’re a great danger to their enemies, while in peacetime they can be as great a danger to themselves or their allies. This does nothing to belittle their achievements, though.

  7. I’ve never read the book, but maybe I should, just to gain perspective on how “Chrysler” and “engineering prowess” ended up the in the same sentence!

    To answer gooddog’s original question, my understanding has always been that the sale of foreign assets was a condition of the government bailout.

    And yeah, it’s rather amusing, the extent to which American popular mythology has downplayed both the Horizon’s Simca origins and its role in Chrysler’s turnaround.* There are even members of my parents’ generation who mistakenly believe it to be a K-Car derivative rather than a Simca with a cheapened front suspension and interior!

    *One random data point: Over the course of the US Horizon’s production life, my maternal grandparents bought four of them, vs. one K-Car and one non-Chrysler product.

    1. Thanks for your reply Joe. I can’t find any evidence that it was a condition of the bailout. The Talbot branded cars were already on sale by the time the Chrysler Corporation Loan Guarantee Act of 1979 was introduced in the US Congress.

      https://www.congress.gov/bill/96th-congress/house-bill/5860

      (I find the last paragraph of that bill fascinating, even though it has nothing to do with what we’re discussing at the moment.)

      I did find this article which sheds a bit of light:

      https://www.roadandtrack.com/car-culture/classic-cars/a30669/one-of-which-was-the-talbot-tagora-a-new-executive-saloon-for-the-eighties/

      I guess Chrysler wasn’t the only one to develop an inexplicably mad crush on the nascent PRV V6. If only they had instead fallen for the Saab Turbo…

    2. Yeah, I guess I never bothered to think too hard about it, let alone research it. (Note that all of this transpired a couple years before I was even born.) It’s entirely possible that what I was told as a child was apocryphal, but I can also imagine that it was a Treasury Department demand in the course of the lengthy negotiations leading up to the formal congressionally-legislated bailout, or that “they had to do it to get the bailout” was just the oversimplified popular understanding of all the asset sales that Iacocca executed just to generate enough cash to keep the company afloat while he lobbied for a bailout. They also divested (or shuttered?) Chrysler Australia around the same time, right?

      (And yes, the last paragraph of the bill is surprising and fascinating–especially for me, as I have some experience with an EV of that period–a few years ago I helped my brother resurrect/upgrade an ’81 US Electricar 953A, a.k.a. a Renault 5 with 1000 lb of lead-acid batteries crammed into it, converted when new by a company in Massachusetts.)

    3. Joe, Chrysler Europe was unloaded for one dollar, I wonder if they weren’t victim of the sunk cost fallacy? I can think of so many instances of car companies cancelling or diverting products in the eleventh hour, or pulling the plug after a very short production run; Chrysler’s actions in this case don’t make much sense to me.

      (As for US government requirements, one from this time period involving an American and French company that comes to mind is the stipulation that AMC divest AM General prior to the deal with Renault.)

      For those who have read Iacocca’s book, maybe a cogent explanation lies therein?

      Also, a half-understood mystery which exemplifies how this woeful mess ultimately turned out for both parties: Chrysler managed to hold on to Roy Axe briefly before he was poached by BL in 1981. IMO, that speaks to shortsightedness on the part of both PSA and Chrysler under Iacocca.

    4. Oh, right, I knew about the $1 part at some point, which probably served to reinforce my understanding that this was a demand from the US Treasury Dept or congressmen who didn’t want to be seen as bailing out overseas jobs.

      And although I can’t cite the precise title, part, and paragraph of US law, the prohibition on foreign ownership of defense contractors (e.g. AM General) is long-standing and well-understood by those in the industry (which included me 2009-2012), although waivers seem much more easy to come by since the end of the Cold War. (I’ve lost track of how many small-time manufacturers of missile guidance circuit boards, ejection seats, drones, etc. have been gobbled up by BAE in recent years.) This same law is why, when the US military wants to buy a foreign airplane, it’s always sold through a US intermediary. In some cases this involves substantial design changes to meet unique US requirements, and final assembly taking place in the US (e.g. McDonnell-Douglas versions of BAe Harrier and Hawk). But in other cases–speaking of Chrysler under Iacocca–when the US Air Force decided they wanted the Aeritalia (nee Fiat Aviazione, now Alenia) G.222, it was officially purchased from Chrysler Corporation, who didn’t actually have an aerospace business, and did nothing more than install some American radios and rivet their data placard over the Aeritalia one, to turn it into the Chrysler C-27A. (More recent US procurement of newer G.222 variants has been via L-3 Communications, who won the competition to provide their “L-3 C-27J” over a Raytheon proposal for a rebadged Airbus product, based in part on a promise to conduct final assembly in Florida, but now I can’t find any evidence that part actually happened, and I did find a published photo of the first USAF-bound “C-27J” making its maiden flight over Turin, making me wonder if that factory ever actually got built or not.)

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