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Chrysler Case Study

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Chrysler: A Short History

On June 6th, Walter Chrysler founded THE CHRYSLER COMPANY. It

appeared as the Detroit’s third largest auto company after the World War 2.

The Chrysler car was developed as a 6 cylinder automobile, which was

designed with advanced engineering and sold to customers at a more

affordable price than competitors. Chrysler Corporation reached second

position in sales during 1936 because of advanced testing and engineering

that went into developing Chrysler cars.

Chrysler Crisis:

Chrysler was on the verge of bankruptcy in 1979 and was in desperate need

of 1.5 billion dollars from the federal government. Chrysler’s problem

started back in 1960’s when the company expanded in the American and

other global
…show more content…

had already lost 1.1 billion dollars at the time when President Jimmy Carter

was signing document. It was already strutting with a 1.5 billion dollar

federal loan and 2 billion dollars in concessions from labor, dealers and

other creditors. In the end it was Iacocca’s pitch which sealed the deal. He

did warn the federal government that, if Chrysler went bankrupt it would

cost the feds more in unemployment benefits, than lending some amount to


Just when Iacocca joined Chrysler, the company had announced its worst

deficit in history, costing around 160 million dollars loss in third quarter. In

addition to this he even discovered deep aspect’s of Chrysler’s condition

and to top it up, the Iranian energy crises and biggest recession in 50 years

crippled the economy.

During his tenure, Iacocca discovered that Chrysler had security and bad

morale in organization and with consumers. The company had lost 7%
…show more content…

order to supply parts and supplies at a faster pace, Chrysler switched its

logistics from trains to trucks.

During his tenure, there were massive layoffs which comprised of blue and

white collar workers. In April 1980 he was able to save 200 million dollars a

year by getting rid of 7000 white collar employees which increased to 8500

employees and total annual savings reached 500 million dollars through

extensive layoffs.

Iacocca knew he also needed to make a proclamation with his employees.

He decreased his own salary to $1 a year, calling it “fairness of expense.”

Other executive salaries were expurgated up to 10%, and lower-level

salaries were cut too, with the exception of those of secretaries. He

disregarded the stock incentive plan, and shut down more plants.

The break-even point was lessened from 2.3 million units in 1979, to 1.1

million units in 1982. Chrysler produced their best profit in history which

was $925 million, in 1983. Plants had been modernized with the state-of-

the-art technology, and employment was sustained for half a million


In Iacocca’s last full year–1991–Chrysler lost $795 million in part due to

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