Chrysler Bail Out: Necessary or Not

Vanessa Reguitti, August 1979

New developments have arisen in the Chrysler bail out situation. The nation’s third largest automobile company has been attempting to construct plans in an effort to get out of their prevailing economic downfall. Carter proposed that a bail out should not occur until the top members of the Chrysler Company agree to not have increases in their salary, which the president has claimed would save the company “tens of millions of dollars.” Chrysler has asked for quite a large sum of federal aid to deal with their difficulties, and the president along with his administration have begun to bring up a list of “sacrifices” they believe necessary for this loan.

Data Resources Inc. of Lexington, Massachusetts has recently conducted a study that showed a possible Chrysler bankruptcy to actually not have a large impact on the United States’ economy. Although several jobs of course would be lost, this study displayed a large increase in foreign car sales should Chrysler no longer remain running. This study reportedly announced that the, “Foreign trade deficit would climb by $2.1 billion.” Yet, the .5% predicted increase in unemployment should not be ignored, which president Carter has repeatedly kept as a main factor in why Chrysler should receive government aid. Chrysler also is a symbol of American capitalism, with irresponsible spending further affecting the already down spirit of patriotism and trust in our government, as well as the view foreign countries have of our economy.

It can be concluded that the aid president Carter has proposed for Chrysler is overall an intelligent decision, with the minimum being granted under constrictions. A company now put in the spotlight for its huge spending amounts, simply handing over money would only lead other businesses to believe the government is there to bail out any irresponsible actions. Clearly, there is a want from Carter to seem as reluctant to hand over aid as possible, especially in a time where the country is so fragile economically.

Talk of how this possible bail out might make Carter seem open to a move towards more private business has also been circulating, though in the larger picture that can be concluded as a very narrow minded comment. The government sitting back and watching one of its own largest companies fall apart is not a move that would help either the unemployment rate or the spirit of the country, two areas of obvious concern to the president and his administration. Debate in congress has been quite equally split on this matter, for each side does have several reasons to back themselves with. Overall though, the side of a bail out has more to support itself.

The United Autoworkers Union has also backed the bailout of the Chrysler Corporation, along with wage and benefit cuts in order to save the company. Though these agreements seem quite large, some would say they are not enough to back such a large and influential company that can be said to have led itself to its own demise. With the crisis for oil and the economy floundering, it seems as though this just ties the country’s problems together as another symbol of how the United States has to continuously fight foreign countries from beginning to take center stage.

So far, to increase its level of income, Chrysler has developed several different approaches. Including the lay offs of 1/5th its work force and selling a firm in Kansas, it seems as though the company is taking the president’s call for change quite seriously. One of their CEO’s, Lee Iacocca, has also been taking the reigns of the situation through attempts to bring Chrysler back on their feet. He has also been a large proponent in essentially convincing the government such a bailout is necessary.

Talk of a 1.5 billion federal loan has been circulating, though no one can say whether this is the final agreed amount on which the government has decided. With bankruptcy looming, everyone is waiting to see what Carter’s final decision will be.

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