Only a handful of cars deserve credit for turning around – and even saving – an automobile company.
The 1949 Ford comes to mind. It was such a hit it that it allowed Ford Motor Company to regain market share and raise the hundreds of millions of dollars needed to re-tool and launch new products during the heady 1950s. Automotive historians credit the ’49 Ford literally saving the company.
The Plymouth Reliant and Dodge Aries are in the same league, at least when it comes to helping Chrysler Corporation survive its own financial difficulties in the bleak days of 1980 and 1981.
Commonly known as K-cars, Reliant and Aries were launched over 40 years ago, in October 1980. They were introduced – incredibly – by a company in the midst of financial collapse. But the little cars were so well received that their sales bolstered Chrysler’s fortunes and allowed it to prepare for perhaps its best-selling vehicle of all time, its Windsor-built minivans.
Contrary to popular belief, Lee Iacocca wasn’t the so-called “father” of the K-car. The concept of a small, fuel-efficient, front-wheel drive automobile was discussed within Chrysler circles as early as 1977, a year before Iacocca was fired by Ford and hired by Chrysler to help turn the company around.
Chrysler’s executive recognized the fuel crises of the 1970s were not going to go away and that smaller, more fuel-efficient vehicles would be necessary in the coming years.
The problem, however, was money. Chrysler accountants calculated that an estimated $700 million was needed to develop a front-wheel drive model. But in 1977, Chrysler was facing a deficit of almost $1 billion. It was a company in big trouble.
The answer came from a former Ford engineer. Hal Sperlich was fired from the Ford Motor Company a few months before Iacocca but quickly signed on with Chrysler. Earlier in the 1970s, Sperlich tried to convince Ford brass of the importance of front-wheel drive. While visiting Ford’s European operations, Sperlich drove some of the smaller, front-wheel drive vehicles offered in Britain and Germany. They delivered exceptional fuel economy and were fun to drive. And their interiors were remarkably roomy for their size, partly because of an absence of a transmission tunnel.
Now at Chrysler, Sperlich lobbied the management to embrace front-wheel drive technology, despite the hefty development cost. But the need for a new front-wheel drive car was already being discussed, as Chrysler was enjoying rare success with its Horizon and Omni subcompact cars.
The K-car was developed in 1979 and 1980, during Chrysler’s darkest days. Dave Halberstam, in his excellent book, The Reckoning, reports that for long periods in 1980 Chrysler was technically bankrupt and existed at the mercy of its suppliers. For about four months that year, the suppliers carried Chrysler by extending much-needed credit. Had any one of them demanded payment, the corporation would have failed.
On the very day the K-car went into production, in August 1980, Chrysler laid off 3,000 of its 6,500 engineers. The company was teetering. “Rarely had a company so large been suspended on a thread so fail,” Halberstam observed.
Chrysler’s new K-cars were introduced in October during what was then the worst economic downturn since the 1930s. Mortgage rates were almost 16 per cent, the unemployment rate was 7.5 per cent, and the annual rate of inflation was an astonishing 13.5 per cent. Car sales in the U.S. and Canada were down 27 per cent.
The new Reliant and Aries had few initial buyers, what with such tough economic conditions. Some were lured by the cars’ compact size and innovation, but Chrysler had made a mistake in its launch. They had produced the most expensive models first. The new cars were too costly for many pockets. A basic model was supposed to cost $5,880 in the U.S., but with options the price topped out at roughly $8,000. In Canada, some of the early models cost as much as $11,000.
Chrysler quickly introduced more “basic” Reliant and Aries models, but sales remained slow.
Iacocca even trotted out Chrysler’s discarded warranty program. It was a five-year, 50,000-mile warranty on the engine and drive train. Such a warranty had been used in the 1970s, but some of the cars Chrysler had introduced a few years earlier were poorly built, and the warranty program had cost the corporation hundreds of millions of dollars.
Yet Iacocca was so convinced of the quality and workmanship of the new K-car that he felt a new warranty program wouldn’t carry the same financial exposure. It was a huge gamble, but it worked.
Reliant and Aries were small for that era – with an overall length of just 176 inches and a wheelbase of only 101.1 inches. They were squared-off vehicles that came in a two-door, four-door configuration and a station wagon. The cars were sturdy and reliable and offered good, basic transportation – precisely what the public was looking for during that dark economic winter.
Reliant and Aries were initially equipped with a 2-2-litre or 2.5-litre four-cylinder engine. Mated with a manual transmission, they achieved an EPA estimate of 26 miles to the gallon in the city and 41 miles to the gallon on the highway. Those numbers might not hold up today, but 40 years ago they were stunning.
Chrysler sold 317,336 K-cars for the 1981 model year. Not a stellar start, but it was a harbinger of things to come. Over their nine-year run, the corporation sold 2,093,078 K-Cars. Most of them were Reliants, but almost 980,000 Aries models were sold.
Motor Trend magazine gave the twins Car of the Year honours for 1981.
What’s important to understand is the dramatic impact Reliant and Aries had on Chrysler’s overall sales performance and bottom line. The corporation sold a total of 791,258 vehicles for the 1981 model year – and 40 per cent of them were K-cars. Reliant accounted for 38 per cent of all Plymouth sales. Aries accounted for an incredible 45.5 per cent of all Dodge sales.
And so the K-car gamble started to pay off for Chrysler. The cash the little cars brought in helped the corporation keep its suppliers happy and helped it make payments on a monster $1-billion loan from the U.S. government.
By the second quarter of 1982, Chrysler realized a modest $107-million profit. By that time, a third K-car, the Chrysler LeBaron, had been added, and a convertible option was offered.
The wonderful thing about the K-car’s platform was its versatility. Chrysler was able to seamlessly add numerous models to the platform, more than half a dozen over the next several years. Among them was Chrysler’s superstar, the minivan, introduced in late 1983 as a 1984 model.
The K-body platform saved production and purchasing costs. The platform initially cost Chrysler $1 billion over three years to develop. But when the corporation produced the Chrysler LeBaron and Dodge 400, those development costs were only $50 million.
By 1984, vehicles derived from the K-body accounted for approximately half of Chrysler’s operating profits.
Ironically, such automotive gymnastics weren’t new to Lee Iacocca. When he oversaw the development of the Ford Mustang in the early 1960s, he used the platform and mechanics that underpinned Ford’s popular economy car, the Falcon.
The original K-car platform was used until the 1994 model year, although the Reliant and Aries nameplates were shelved in 1989.
The twins will never be remembered with the same admiration assigned to nameplates such as Riviera, Imperial, Corvette or Thunderbird. But they remain a metaphor for Chrysler’s willingness – indeed desperation – to bring fuel-efficient technology to the public in the face of grave financial uncertainty.
They were brave little cars, and they should be remembered as such.