Did the Government Bailout of Chrysler in 1979 Help the Automobile Industry?

Even Though Chrysler Will Soon Be a Leader in Electric Cars, the First Government Bailout for a Corporation Probably Didn't Help Anybody

If you find it tough seeing the federal government bailing out our banking institutions, imagine seeing them consistently giving bailouts to behemoth corporations on the brink of collapse. Fortunately, that hasn't happened in America's history other than a couple of times, even though the criticism still persists in the first ever government bailout of a corporation: Giving loans to Chrysler to help pay off enormous debts. It was in early September of 1979 two months before the stressful Iran hostage crisis when Carter was temporarily riding high in popularity with the peace deal between Israel and Egypt and weeks away from signing the Camp David Accords. A visit one day to Congress by Chrysler CEO Lee Iacocca stunned everybody. Yes, he was begging the government to bail out his company or the famous car company would soon be bankrupt before the end of the year.

At issue was that they needed a governmental guarantee to pay off about $1.2 billion in debts that had built up in the company throughout that decade through lagging sales, despite strong ad campaigns. Thinking it would bring on a domino effect of financial Armageddon if Chrysler went down (and because we were going through an energy crisis already), the government listened and acquiesced, albeit with trepidation. After all, this was the first government bailout of a corporation in our country's history with no guarantees is was going to work, plus the consideration of solvency in corporations never being a sure thing.

And that's been the major criticism of the Chrysler Corporation Guarantee Act President Jimmy Carter signed later that December. Back then, it didn't hurt quite as badly to loan out $1.2 billion to a corporation as it would be now. Had things been the way they are now in America, our government probably would have refused to help Chrysler and write it off as a necessary sacrifice for the sake of keeping everybody else afloat. But, today, Chrysler still stands by the government action taken and keeps reminding us how they've become the leader in cars for the last 25 years--including being a possible leader in electric cars soon.