Chrysler Corp. survived with strong leaders, dealers' help
Walter Chrysler built his company from the ashes of a couple of long-forgotten brands, Maxwell and Chalmers. He sealed his move into the big leagues by acquiring Dodge, which was noted for its powerful dealer network. Iacocca saved the company from the threat of bankruptcy. (See story, Page 70.)
The story of Chrysler Corp. is an unlikely tale of survival, of brands acquired and cast aside. The names Maxwell, Chalmers, DeSoto, Valiant and Plymouth are gone, but all contributed to the tapestry.
It is also a story of multiple mergers, from the Dodge brothers through American Motors to the present-day DaimlerChrysler AG.
The original Mr. Fixit
Walter Chrysler started in the railroad locomotive manufacturing business. He worked at Buick and Willys-Overland before the directors of Maxwell Motor Corp. asked him to bail them out of a jam in 1920.
Chrysler would use Maxwell as the springboard he sought to make cars under his own name. But he had to fix big problems at Maxwell first.
About 26,000 Maxwell vehicles were deteriorating on rail sidings because dealers refused to take them. The cars' axles were weak and tended to snap going over rough roads. Their gasoline-tank mounts had a habit of breaking.
Chrysler shut down the Maxwell factory in Highland Park, Mich., and refused further parts deliveries. Through sheer tenacity, he negotiated a $15 million loan from the company's reluctant bankers.
Wrote Vincent Curcio, Chrysler's biographer: "Since the cars were in the field, he sent out mechanics and materials to fix them where they stood. They braced the shaky gas tanks and put strong new struts on the axles, replaced bad transmissions and got rid of anything else on the cars that was no good."
Chrysler slashed the price of the Maxwell touring car to $995, which left a $5 profit on each vehicle. The bankers had hoped for a larger profit, but Chrysler convinced them they should count themselves lucky to make any money at all on distressed merchandise.
Chrysler and his marketing team dubbed the repaired cars the "Good Maxwell" in an advertising campaign aimed at distinguishing them from the junk the company had been selling.
"Chrysler later said every time he heard the words 'good Maxwell,' he wanted to gag," says Barry Dressel, director of the Walter Chrysler Museum in Auburn Hills, Mich. The phrase "good Maxwell" implied there had been a "bad Maxwell."
Dealers accepted the repaired cars and managed to sell them. The Maxwell was spared. But it didn't take long for Chrysler's first car, the Chrysler Six, to eclipse Maxwell, which died after the 1925 model year.
In his 2003 book, Riding the Roller Coaster - A History of the Chrysler Corporation, Charles Hyde wrote that "the network of dealerships selling the Chrysler brand quickly grew from 2,000 outlets in fall 1924 to 3,800 a year later, but despite its sales success, Chrysler Corporation struggled in the late 1920s to expand its dealer network.
"Chrysler placed advertisements in 1926-28 appealing to businessmen, especially those operating a franchise for other car companies, to consider becoming a Chrysler dealer," Hyde wrote. "These efforts notwithstanding, growth was slow; by early 1928, 4,600 dealers were selling Chryslers."
The year 1928 would change everything. That was when Chrysler would swallow a larger company: Dodge.
The Dodge brothers
A periodical of the era described brothers John and Horace Dodge as the "two best mechanics in Michigan." They built a reputation for making well-engineered cars that offered great value for the money.
The Dodges entered the industry in 1903 as machinists who supplied engines, transmissions and axles to Henry Ford. In 1914, they began making their own cars.
The brothers enjoyed soaring success, going from 17,858 units sold in 1915 to 145,389 in 1920.
The brothers' talents were complementary. John Dodge negotiated contracts, managed finances and directed marketing, sales and advertising. Horace Dodge was "a mechanical genius who designed the products the Dodge Brothers manufactured and many of the machines used in their operations," Hyde wrote.
The brothers provided their employees the industry's best working conditions. Forge and foundry workers even got cold beer and sandwiches on summer afternoons. The vehicles the brothers made at the Dodge Main plant in Hamtramck, Mich., were noted for their reliability.
But misfortune befell the Dodges. In January 1920, both brothers caught the flu while attending the National Automobile Show in New York. John Dodge died Jan. 14 with his brother at his side. Horace Dodge initially recovered but, weakened physically by the illness and psychologically by his brother's death, died later that year.
The company survived to build cars through the 1920s. But it struggled without the brothers' guiding vision.
Their legacy was the prototype of a modern car business, including a modern factory and distribution system.
"One feature of the Dodge business that appealed to Walter Chrysler was its large, efficient systems of dealers and distributors, generally viewed as one of the best in the industry," Hyde wrote. "To produce the low-priced Plymouth that would compete with Ford and Chevrolet without an extensive dealer system already in place would have been a daunting task."
Chrysler and Dodge each had an estimated 4,600 dealerships in 1928. The merger that year of the two companies created a combined U.S. network of about 9,000 dealerships.
By late 1929, after Plymouth and DeSoto were well-established brands, the combined Chrysler dealer network had about 12,000 outlets in the United States, 2,600 in Canada and 3,800 overseas.
Automotive News summarized the benefits of Chrysler's takeover of Dodge: "It costs much time and money to build a dealer organization, and by this merger Chrysler is taking over a full-fledged and powerful merchandising army."
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