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What was the 1979 Chrysler Bailout?


Question: What was the 1979 Chrysler Bailout?
As bailout plans are considered in 2008, the 1979 bailout of Chrysler by the Federal Government can give some guidance. How exactly did the Federal Government intervene in 1979 and was it successful? How does it compare?
Answer: According to my fellow guide at USPolitics.about.com, many of the same arguments, pro and con, plagued Congress when it decided whether or not to bailout Chrysler in 1979.

In response, Congress passed the Chrysler Corporation Loan Guarantee Act of 1979. The act required Chrysler to find $2 billion in commitments or concessions (mainly obtained from employee unions, backers and dealers) before the government would act to guarantee $1.5 billion in private loans for it. Ultimately, the private loans were paid back by 1983 with the United States Treasury ahead approximately $350 million.

What, then, are the similarities and differences between Chrysler of 1979 and the big-three crisis of 2008?

  • Same: Rising oil prices hastened Chrysler's demise in 1979; oil prices in recent years have contributed to the auto-industry crisis of 2008.

  • Same: The UAW was willing to make concessions to obtain federal help.

  • Different: The big-three companies that formed the U.S. auto industry of 1979 formed a bigger part of the gross national product than they do today. In 1979, Chrysler was simply too big to fail. This rationale is at least consistent with the Federal Government's bailout of AIG and Bears Stern in 2008.

  • Different: The plight of the big-three car companies in 2008 was heavily exacerbated by the financial-industry crisis and the resulting credit crunch.

  • Different: The Chrysler bailout in 1979 was unprecedented at the time. In 2008, the Federal Government has bailed out the financial industry without nearly the same preconditions required of the car companies in either 1979 or 2008.

  • Different: According to The Washington Times, the City of Detroit and the NAACP were staunch proponents of the 1979 bailout.

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