The strategy worked in 1977, with production increasing almost 9 percent over depressed 1976 levels. By the late 1970s production was less a concern than inflation, costs, and quality control. Automobile production was basically flat from 1977 to 1978. The inflation rate, however, rose from 7 percent in May 1978 to 11.3 percent in July 1979, a rise which was the product of both inflationary pressures still rampant in the economy and new tensions in the Middle East.

The Bell Tolls.

In December 1978 the government of Iran cut off oil exports to the world. Already that year the market share for imported automobiles had risen to 18 percent, an all-time high. The ensuing rise in gasoline prices — up 52 percent from year-earlier levels in September 1979 — pushed domestic automakers seemingly to the brink of failure. By September 1979 Chrysler was insolvent and considering bankruptcy. Only a government- guaranteed loan negotiated by union officials and politicians from Michigan, and...