The rise and fall of Chrysler

A century ago, the American automobile industry was more crowded than a vegetable market on a Sunday morning, with such a wide variety of stuff on sale that buyers were spoilt for choice. Buyers could pick and choose, bargain, pay up and drive out with the newly purchased vehicle. 

Those days, there were around 1,500 car companies in America! More vendors than you see in a vegetable market!

Since that time, a century ago, the number of sellers in the American car market has steadily declined. Now you can count them on the fingers of one hand. 

Around 1950, America had four big car companies left – General Motors, Ford Motor, Chrysler Corporation, and Studebaker. Of these, only two survive today as independent entities. General Motors and Ford Motor. 

Chrysler continues to live on, but it is no longer American; it is part of a European conglomerate called Stellantis, founded on 16 January 2021. That was after its courtships with Germany’s Daimler and Italy’s Fiat had broken up. 

But let’s go back to the beginning of the Chrysler story. 

It began with Maxwell Motor Company

In the early 1920s, there was a company called Maxwell Motor Company, which was created in 1904, which was going through a serious crisis. Having over-extended itself in an ill-advised expansion of production, half the company’s production remained unsold during the recession that followed the First World War in 1920. 

The company had over-extended itself, and was heavily in debt. It couldn’t survive. 

Walter P. Chrysler (1875-1940), an automobile industry veteran with years of experience with Buick and Willys-Overland, identified the failing car company as a good investment bet. In 1924 he bought a controlling stake in Maxwell Motor, and then used it to create the foundation for his own company, Chrysler Corporation, which was incorporated on 6th June 1925. 

This was after the big two auto companies in America, General Motors and Ford, had already been selling their cars for two decades, and had strong positions in the market.

Reputation built

The Chrysler-branded cars quickly built a reputation for good quality and solid performance. During the late 1920s and early 1930s, the company achieved good growth as Walter Chrysler’s commitment to engineering excellence paid off. 

The company’s success was partly attributed to its innovative engineering, which included features like hydraulic brakes and an all-steel body construction. Customers were happy. 

In 1928, Chrysler introduced the DeSoto brand as a mid-priced line, further expanding its market presence. The company also introduced the Plymouth brand in 1928. The Plymouth Model Q was a success, offering a well-built and affordable vehicle at a time when the Great Depression was looming. 

By the early 1930s, Chrysler Corporation became acknowledged as one of the ‘Big Three’ American automakers, alongside General Motors and Ford. 

Then the Great Depression intervened.

Crisis after crisis

The Great Depression of the 1930s was a bad time for everybody, and Chrysler was not immune to the economic difficulties of the era. The company’s sales declined, and it faced financial difficulties. 

Not deterred by the adverse situation, the company launched the Chrysler Airflow in 1934. The Airflow was an aerodynamically advanced car for its times, and should have done well, but its unconventional design failed to resonate with consumers, and sales were disappointing. What it did, though, was showcase Chrysler’s commitment to innovation and engineering.

The general economic problems persisted. So the company introduced the Chrysler Corporation Recovery Program in 1937, which included cost-cutting measures and attempts to improve manufacturing efficiency. These efforts helped the company weather the worst of the Depression years. 

Then the Second World War, which began in 1939, threw the world into utter chaos. During the war, Chrysler, like other automakers, shifted its production to support the military. The company manufactured tanks, artillery, and aircraft engines, contributing to the American war effort.

When the war ended in 1945, Chrysler faced the challenges of transitioning back to civilian production. But the post-war years also brought good opportunities. 

Post-War launches

In 1946, the company introduced its first post-war model, the Chrysler Town & Country, a wood-paneled station wagon that became very popular in America. 

The company also unveiled the Hemi V8 engine, known for its power and performance.

The 1950s were marked by continued innovation at Chrysler Corporation. In 1951, the company introduced the Chrysler New Yorker, which featured the revolutionary ‘Hydramatic’ automatic transmission, enhancing driving convenience.

The mid-1950s saw the launch of the Chrysler 300 series, known for its powerful Hemi V8 engines. The Chrysler 300 became an icon of American muscle cars and stock car racing success. Chrysler’s innovation extended to safety as well. 

In 1956, the company introduced the ‘Highway Hi-Fi’, the world’s first in-car record player. While it was a short-lived novelty, it highlighted Chrysler’s commitment to pushing boundaries.

The 1960s brought some successes to Chrysler; they also brought challenges, and the challenges became worse during the 1970s. 

In 1970, Chrysler introduced the Plymouth Valiant Duster, a compact car that was well-received by customers and helped boost sales. The company also launched the Dodge Challenger in 1970 to compete in the muscle car market.

Oil crisis; Iacocca’s efforts

The company introduced the Plymouth Barracuda and the Dodge Charger, contributing to the muscle car era. But its success did not last long.

In 1971, the company faced a setback with the discontinuation of the Plymouth Barracuda. Chrysler’s market share declined, and it teetered on the brink of bankruptcy.

Chrysler struggled financially throughout the 1970s, largely due to factors like the oil crisis and rising fuel prices, and stricter emission standards.

The crisis continued into the 1980s, and the company, facing severe financial problems, sought federal assistance. In 1980, the US government provided Chrysler with a $1.5 billion loan guarantee, which helped the company avoid bankruptcy.

Lee Iacocca, who had previously been with Ford and played a key role in the development of the Ford Mustang, took over as Chrysler’s CEO on 2nd November 1978. Under Iacocca’s leadership, the company launched a major turnaround effort. 

The ‘K-Car’ platform, introduced in 1981, played a crucial role in revitalizing Chrysler’s product lineup. It featured innovations such as a transverse engine, front-wheel drive, independent front suspension, and semi-independent rear suspension. These were a complete departure from Chrysler’s earlier, 1970s reliance on solid axle, rear-drive unibody configurations.

Chrysler also introduced the minivan concept in the 1980s, with the launch of the Dodge Caravan and Plymouth Voyager. These innovative family vehicles became highly successful and helped reposition Chrysler in the market.

All to no avail! The problems did not go away. Losses continued to pile up.

Enter Daimler, then Fiat

In 1998, Chrysler merged with Germany’s Daimler-Benz to create DaimlerChrysler. The merger aimed to create a global automotive powerhouse, but there were too many cultural differences and technical challenges in integrating the two companies. 

The DaimlerChrysler experiment flopped, and in 2007, the Chrysler part of the company was sold to Cerberus Capital Management, becoming Chrysler LLC. Operations continued to be beset by declining sales and financial losses.

Barely had the Daimler break happened when Chrysler was hit by the global financial crisis of 1009. The company filed for bankruptcy, received US government assistance, and emerged from bankruptcy as Chrysler Group LLC.

Then, in 2014, Chrysler Group LLC merged with Italy’s Fiat SpA to form Fiat Chrysler Automobiles. The merger allowed Chrysler to access Fiat’s technology and global distribution network. The company introduced new vehicles such as the Chrysler 200 and the Chrysler Pacifica minivan. 

It also expanded the Jeep brand, capitalizing on the growing popularity of SUVs and crossovers.

Too little, too late

Sadly, Chrysler’s luck ran out. It was, of course, more than luck that caused the company’s downfall. As happens in such cases, there was the hubris that came from its initial successes, which pushed aside any sense of caution that its managers might have had that might have got them to take a serious look at how to diversify the risks in the focus on gas-guzzlers.

1. Dependence on trucks and SUVs: Chrysler depended heavily on its line of trucks and SUVs for sales. A truck, in America, includes pick-up trucks as well as lorries. In India, the word ‘truck’ is used for cargo vehicles. This dependence on vehicles that were heavier than cars left the company vulnerable to shifts in consumer preferences when fuel prices surged from $3 per barrel to $12 by 1974 following the global oil crisis. As demand for fuel-efficient vehicles increased, sales of Chrysler’s larger, less fuel-efficient vehicles was hit. The company’s ‘muscle cars’ such as the Charger and Barracuda, which were initially successful, proved unsustainable because of their fuel inefficiencies.
2. Limited product diversity: The problem with Chrysler was that its product portfolio was relatively limited compared to its competitors’. The company was weak in the small car and compact car segments, which began gaining popularity due to rising fuel prices and environmental concerns.
3. Quality control issues: In the 1970s and 1980s, Chrysler faced quality control problems that damaged its reputation. The company gave priority cost-cutting over quality, and the result was shoddy workmanship and unreliable vehicles. This alienated customers and damaged the company’s reputation. The company had to make frequent recalls, and questions about the durability of its vehicles eroded consumer trust and brand loyalty. 
4. Financial struggles: Chrysler’s financial problems were exacerbated by high labor and pension costs. The company’s pension obligations to retired employees became a burden on its finances, limiting its ability to invest in R&D and product improvement. Chrysler lagged behind its rivals in the harnessing of new technologies, including fuel-efficient engines. This made it difficult for the company to meet changing regulatory requirements as well as consumer preferences.
5. Competition: The crisis hit Chrysler just at the time it faced intense competition from foreign as well as domestic car makers. Fierce competition for market share put pressure on pricing and profitability.
6. Ill-advised acquisitions: Chrysler’s aggressive expansion through the 1987 acquisition of American Motors Corporation (AMC), owner of the Jeep brand, proved unsustainable, leading to a significant debt burden. 
7. Merger with Daimler-Benz: The merger with Daimler-Benz in 1998, forming DaimlerChrysler, was meant to exploit synergies between the two companies. What they got instead was cultural clashes and operational challenges. There were immense difficulties in integrating the two companies, and that caused inefficiencies and a neglect of Chrysler’s core brands.

In conclusion, Chrysler’s failures cannot be attributed to one single factor, but rather a series of external challenges, strategic missteps, and internal conflicts. There were too many things that went wrong, from quality and adaptability to leadership issues.

Still, Chrysler enjoyed periods of success and innovation, and its legacy lives on within Stellantis. The future will depend on its ability to learn from past mistakes, capitalize on its strengths, and navigate the rapidly changing landscape of the automotive world.

Not easy at all!