May 1, 2009 at 1:00 am

Chrysler's history full of crises, comebacks

Underdog automaker has dealt with many ups and downs, but always perseveres

Former Daimler-Benz chairman Juergen Schrempp, left, and then-Chrysler chairman Bob Eaton shake before announcing the firms' merger. Chrysler has survived many near-death moments over the years. (Johnny Eggit / Getty Images)

Chrysler LLC's bankruptcy filing on Thursday marks a somber milestone in the colorful history of Detroit's automakers.

As sad as the news was, it wasn't unexpected.

In recent years, as the smallest and most vulnerable of Detroit's Big Three, Chrysler has been described as the canary in the coal mine, the company that gasped first in any downturn.

Compared with its crosstown rivals, its performance was characterized by more highs and lows, near-death experiences and miraculous comebacks.

"This is a company that has a particular claim on our American identity," President Barack Obama said Thursday. He proceeded, however, to announce that Chrysler would go through what government officials and company executives hope will be a quick bankruptcy to shed some of its debts and liabilities and emerge as a healthier company.

While most automakers, even Toyota Motor Corp., are struggling in this downturn, Chrysler was particularly ill-equipped to cope with a spike in fuel prices last year followed by a collapse in the auto market.

It was more dependent than General Motors Corp. or Ford Motor Co. on the American market, it relied more on sales of large vehicles than they did, and its brands had been weakened by poor vehicle quality and inconsistent design. Models like the Chrysler 300 sedan turned heads, but the Chrysler Sebring and the Jeep Compass were widely panned by car critics.

Last month, after studying Chrysler's recovery plans, the U.S. government concluded that it would not be able to survive as a standalone company.

That was the same conclusion that former Chrysler President Bob Eaton reached more than 10 years ago when he agreed to a merger with then-Daimler-Benz AG of Germany.

But neither Daimler, nor Cerberus Capital Management LP, was able to set Chrysler back on a firm footing.

"After Daimler purchased them, it was never the same," said former Michigan Gov. Jim Blanchard, who as an Oakland County congressman helped shepherd the original Chrysler bailout bill through Congress in 1979.

"I think it was a culture clash between two very different companies, and I think Chrysler became a stepchild at that point," he told The Detroit News.

Cerberus promised to restore Chrysler's American identity when it bought the automaker in 2007 but has relinquished its stake less than two years later in exchange for government aid for Chrysler.

On Thursday, Chrysler signed an alliance agreement with Italy's Fiat SpA -- and then filed for bankruptcy.

"Hopefully, this will be quick, and structured in a way that allows Chrysler to move ahead," Blanchard said.

Certainly in the past, Chrysler showed that it could make good cars, he said. "After the rescue of 1979, they pioneered the minivan. They also pioneered the SUV by redesigning the Jeep, and everyone copied them, including the Japanese. They've had good products, and in a normal cycle, those sell quite well."

The company was founded in 1925 by the curious Walter P. Chrysler, who took a car apart and put it back together before learning how to drive. For the next 30 years, Chrysler Corp. grew steadily. From 1936 until 1949, it was the No. 2 American automaker, ahead of Ford.

"In recent decades, it's had a more turbulent time, with more ups and downs than other automakers," including its famous brush with bankruptcy in the late 1970s before the government bailed it out, said David Lewis, professor emeritus of business history at the University of Michigan's Ross School of Business.

Then-Chrysler Chairman Lee Iacocca became a household name with his television sales pitches that challenged consumers: "If you can find a better car, buy it." He also was among the first corporate bosses to put his salary on the line, offering to take only $1 a year.

"Each decade, it seemed that Chrysler had a crisis," Lewis said. But the automaker, the plucky underdog of the Big Three, would invariably roll out a hit that would turn its fortunes around.

"It wouldn't surprise me if they came back," Lewis said. "It has been a resilient company. You can never fully count Chrysler out."

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