Chrysler

CHRYSLER DOWNFALLS

Chrysler & 1979 Bail Out  

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Chrysler is a automobile giant of America. Chrysler was on the verge of bankruptcy in 1979. It was saved by American government through the bail out. American gov. has given the bail out to the company of amount $1.5 billion.

Reasons of Down fall      

High Gas Price High interest rates Dropping automobile sales Types of vehicle sold Downgraded debt Heavy international competition

Dropping automobiles sales 

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Increment in the gas and oil prices reduced the sales of the company. Company woul’nt able to curve out the increased rates. But its competitors like Ford and Gm some jowcurved out the increased rates of the oil and gas bcoz of their huge sales. This leads to the dropping out automobile sales.

High Gas Price 

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In 1970 crysler was affected by two major spikes in the prices of oil and gasoline. This lead to the reduction in sales in the companies product. Competitors were offering fuel efficient cars. That got demand in the market.

High Interest Rates 

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In 1970’s high gas crisis lead to the increament in the price of the product. That lead to the Inflation. And to curve out the inflation, interest rates were increased by the banks. And this leads difficulty in financing the cars. Finally sales of the co. got down.

Types of vehicle sold 

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Mainly chysler dealt in Cars and heavy vehicles. Due price increament customer were prefering high fuel efficient cars and HMV. That was provided by the GM and FORD.

Downgraded Debt 

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Due to fall in sales ,profit of the company also falls. This gave the chance to rating agency for under estimating the companies bond. Once companies bonds underestimated, for raising the future capital they need to pay high interest. To curve out this prob. Co. decided to reduce its working capital that affected adversely the performance of the

Heavy international competition 

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Co. was facing competition from the Japanies and Germany’s car maker. They were producing more quality product then the Crysler. It affects the sales of the Crysler. So these were the reasons due to which company become bankrupt.

Why USA Gov saved Crysler….    

National Security Implications Saving Jobs Saving Suppliers Improving American automobiles

National Security Implications 

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The US gov. had given the contract to the Crysler for making the tanks.That’s why they bailed out Crysler. At that time cease war was going so security was the priority.

Saving Jobs 

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USA gov. wanted to save the 360000 jobs. That is why they bailed out.

Saving Suppliers 

There were alots of suppliers depended upon the company and to save them gov bailed out the co.

Conclusions 

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The problems that Chrysler faced came to the forefront in 1979. There were a number of factors that all worked together simultaneously to put the company on the verge of bankruptcy. All of these factors forced the company to heavily lobby both Congress and the White House for a $1.5 billion loan to stay in business and protect millions of jobs.