September 7, 1979: The First Chrysler “Bailout”

Dodge Aries

In the early 1980s, the Dodges Aries-K inspired Chrysler’s renaissance.

In 1979, Chrysler was at death’s door and petitioned the U.S. government for $1.5 billion in loan guarantees to avoid bankruptcy. It made gas guzzlers that nobody wanted to buy and it asked for $1.5 billion to keep itself going until a fleet of more fuel efficient cars could take up the sales slack. It was by far the largest government bailout in US history. On September 7, 1979 Chrysler formally petitioned the U.S. government for the loans, and on December 20, 1979 Congress ratified the appropriation in the “Chrysler Corporation Loan Guarantee Act,” which President Carter subsequently signed into law. It was an extremely painful period for Chrysler, but Reed Brothers survived the first Chrysler Bailout and resurgence under Lee Iacocca.

The K-Cars, the Dodge Aries and Plymouth Reliant, were, quite literally, the cars that saved Chrysler from the abyss in 1980. Their only real savior other than the K-Car was a government bailout. Though it came after bankruptcy, they managed to save the company with it by 1983.  The K-Cars were inexpensive, reliable, and they delivered economical transportation for 6 people at an affordable price. Sales from the K-Car enabled Chrysler to emerge from bankruptcy and evolve into a profitable company.

Reeling from the combined effects of a recession and a global energy crisis, in 1979 Chrysler was forced to seek government loan guarantees. Meanwhile, Chrysler chairman Lee Iacocca took the company’s case straight to the people in a series of television commercials. Looking straight into the camera, the legendary auto executive pitched the company’s new K-cars with total conviction, asserting, “America, if you can find a better car, buy it.”

Buyers took up Iacocca’s challenge, flocking to the showrooms to buy their own K-cars. Nearly one million Aries were sold (and another million Reliants), allowing Chrysler to pay off its loans a full seven years early. Soon Iacocca was back on the airwaves with another ad campaign. This one was called “The Pride Is Back.”

These models were soon followed by what would become a home run product for Chrysler: minivans.

Nearly thirty years later, in 2008, Chrysler would receive billions in a new bailout from the U.S. government in the aftermath of the financial crisis that decimated automotive sales over the following few years. In 2009, Chrysler files for Chapter 11 bankruptcy protection. On May 14, 2009, Chrysler left 789 dealerships, about a quarter of its dealer base, out in the cold by rejecting their franchise agreements and giving them about a month to sell all their remaining new cars, factory parts and service equipment.

Whether a franchise is run by a second- or third-generation dealer, or is older than even Chrysler itself, didn’t seem to matter when Chrysler decided to cut dealerships ranks during their 2009 bankruptcy process. After almost 95 years selling Dodges, Reed Brothers was one of the 15 dealerships in Maryland and 789 dealerships nationwide notified by Chrysler that their franchise agreement would not be renewed. Chrysler was acquired in total by Fiat in 2014.

Source: Chrysler

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About Reed Brothers

I am a co-owner of the former Reed Brothers Dodge in Rockville, Maryland. Lewis Reed, the founder of Reed Brothers Dodge was my grandfather. We were a family-owned and operated car dealership in Rockville for almost a century. I served in the United States Air Force for 30 years before retiring in the top enlisted grade of Chief Master Sergeant in July 2006. In 2016, I received the Arthur M. Wagman Award for Historic Preservation Communication from Peerless Rockville for documenting the history of Reed Brothers Dodge in both blog and book format. This distinguished honor recognizes outstanding achievement by writers, educators, and historians whose work has heightened public awareness of Rockville’s architectural and cultural heritage, growth and development.

4 responses to “September 7, 1979: The First Chrysler “Bailout””

  1. Patrick T. Kernan says :

    We had a 1982 Dodge Aries. Ran the wheels off! It lasted until our son wrecked it in 1993. No injuries.

    • Reed Brothers says :

      Hi Patrick, The K’s were good cars and would run forever. I’m betting quite a lot of them became hand-me-downs from parents.

      Thanks for stopping in!
      ~Jeanne

  2. Jonathan B. Richards II says :

    Hello, Jeanne Gartner,
    Thank you for posting this excellent item regarding the bankruptcy filings by Chrysler in 1979 and after. It is sad that the long and historic connection of the Reed Brothers Dodge dealership was terminated by Chrysler but in retrospect perhaps it was the best way to end this automotive saga.You might be interested to know that many U.S. Postal Service rural mail delivery carriers utilized the K Cars on their routes with excellent results.
    I hope you are enjoying a quiet Labor Day and are staying well in these perilous times. Best Regards, Jonathan (Jack) Richards at Chesterfield, MO. Please be advised that I have a new telephone #, viz. Area 314/680-7937.

    • Reed Brothers says :

      Hello Jonathan, I am so glad you enjoyed the post. I had no idea that the postal service used K-cars, however, I am not surprised because there was also a station wagon version of the K-car. I didn’t care for them too much back in the day; too boxy. I was at the age where I preferred a more sporty look! HA!

      I appreciate you reading and commenting!

      Be well my friend,
      Jeanne

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