Bankruptcy: A Comparison of Mazda and Chrysler

This article compares the bankruptcy of Mazda and Chrysler in the early 1980s, discussing the factors that led to their financial troubles and the different strategies they used to address them. The article also explores the cultural differences between Japan and the USA that may have influenced the companies' approaches to the problem.

Bankruptcy
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Bankruptcy
Introduction
Mazda was started as the Toyo Cork Kogyo limited at Hiroshima Japan in 30th January
1920 and renamed to Toyo Kogyo limited in the year 1927.in the 1920s the company was saved
from bankruptcy by the Hiroshima saving bank and other business leaders .in 1931 the company
stopped manufacturing machines tools and started the manufacturing of Mazda – go
autorickshaw vehicles.in 1974 the company started the partnership with Ford Motor company
which acquired 24.5% stake in 1979 (Timberlake 2013).
Chrysler Corporation was founded by altering Chrysler in the year 1925 from the remains
of Maxwell motor company. the company was the expanded in 1928 leading to the creation of
Plymouth and Desoto brands.in the 1960s the company further expanded into Europe and took
the control of British and French out companies .in 1970s Chrysler worked hard in adapting the
change in markets, environmental regulation and also the effect resulted by us importation.
Chrysler bankruptcy
Due to market reduction and another production factor the Chrysler Company was
affected by bankruptcy in the early 1980s. the supreme caused a delay on the sale of Chrysler
which lasted for a day and finally gave unsigned, joint opinion dismissing Indiana’s the objection
of treasure which many believed to be politically motivated and pressured. During this process,
the judge declared payments to the dealers and employees. He also dismissed the sale objection
giving a notice that it had no basis on law. The judge also had set up the process of bidding and
moved the case swiftly without major controversy.

Chrysler was then 20% owned by Fiat, employee retirement plan was given 55%, 8% was
located in our treasury and 2% to the Canadian government. Fiat as the CEO started an auto
group which included its share of Chrysler .to keep the group formed manageable fiat use similar
approach to that of Johnson that the owned company would cooperate but it remained largely
independent. The new Chrysler was now managed by nine board of directors of which three of
them were appointed by fiat. The VEBA and Canada each were given room to appoint one
director and the US treasury appointing four directors (Jensen, M. C 2010).
Due to bankruptcy, Chrysler didn’t involve buying back of vehicles, parts or the tools
from the dealers hence lead to franchises loss which resulted in the pairing of buyers.to avoid
complete closure of the dealership many get owned by individual /companies who hold the
company’s franchises (Warren et al 2013 ).
Discussion
Mazda and Chrysler faced common similar threat of bankruptcy in the early 1980s which
made Mazda’s managers agreed to a 25% salary cut and a loss of bonuses for 4 years. Chrysler,
in contrast cut its white-collar staff by 7%, blue-collar workforce by 28% and its senior
executives pay by 2%. Mazda and Chrysler were affected by similar bankruptcy in the early
1980s. The bankruptcy was equally resulted by the same factors such as importation, the face of
competition and al poor management. The importation by their mother country the USA and
Japan affected the growth of the two companies forcing them into bankruptcy. The countries
imported vehicles and vehicle tools at a cheaper price which made the companies not to meet the
production price. This factor affected the company largely in comparison to the other factors as
they were forced to sell their product (vehicles) at a loss price. The issue of poor management
and poor planning also contributed to their bankruptcy (Jensen, M. C 2010). The management

team did not have an alternative way to deal with the arising bankruptcy. Mazda had been
affected by the bankruptcy scenario in the early 1920s and at that time the government and
business partners intervene and uplifted the falling company. Reasoning from the fact that the
Mazda had been affected by the bankruptcy earlier the management was required to plan for an
alternative way of dealing with the bankruptcy. The two companies, Mazda and Chrysler also
were affected by new rising companies which sold their product at a cheaper price than them.
This factor leads to increased importation by Japan and USA.
Due to cultural differences between the two countries, Japan and USA, the companies
used different solution methods which were favored by their motherland environment. Mazda
decided to cut salary to everyone equally in percentage while Chrysler distributed different
percentage cut to the employees.
The method used by the Chrysler appeared to be more friendly as those low paid were
charged at a lower percentage and white color and blue color employee incurred high
percentage.to some, it appeared unfair but generally, this method motivated less paid employees.
Mazda method uniformly affected the salary of its employees which lead to less payment to the
low earning employees which demotivated others forcing them to quit their position.
Cultural differences
Japanese people tend to be more formal compared with the USA people. These cultural practices
create a difference in the way of handling customers and employees. American customer service
is said to be warm and friendly. Taking our argument from such a cultural practice it is easy to
understand what influenced the two companies to use the different method of getting the solution
yet they had the same problem.

Japanese culture is also said to be homogeneous whereby 98% of its population is made up of
Japanese’s population involves different people from different cultural practices hence when
people with different cultures meet another culture emerges which is based on helping each other
and showing fairness to everyone. Such a culture may also have influenced the way the Mazda
and the Chrysler solved the bankruptcy.
Japanese people are not politically described, there are said to be nationalistic while the
American people are politically described. the way Mazda and Chrysler analyzed the bankruptcy
problem can be said to be influenced by the way the people are described as either nationalist or
political.in America, political pressure may have influenced the way Chrysler company solved
the bankruptcy as the company avoided the political pressure if it would have affected all the
employees equally.
The two companies deployed different international human resources strategies as the employees
from Mazda were affected differently to those from Chrysler Company. Some of the strategies
deployed in a way they did not follow the required strategies but they were in a way favored by
their cultural practices.

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