Chrysler Bailout

The Chrysler Bailout and the Challenger Disaster are two examples of possible outcomes when implementing a strategic decision-making process. Without the presence of a decision‐making model a successful outcome is extremely unlikely. Chrysler’s decision to secure subsequent loans from the government resulted in success because it used a judgmental approach in search of a satisficing solution.
In the case of the Challenger Disaster, the decision to launch deemed to be premature because the launch objective was not attainable within the closed decision-making process. Instead of using judgment pertaining to this singular event and within an open decision-making model, NASA chose a computational approach by predetermining the outcome, and
while acting within a closed decision-making model. As a result, the mission failed. The following identifiable problems were analyzed:
• NASA’s decision makers treated the Challenger Launch as a Category 1 rather than a category 2
• NASA’s decision makers employed a computational decision-making strategy instead of a judgmental strategy
• Used closed decision making process rather than open decision making

Problem Analysis
Category I
The Chrysler Corporation suffered from persistent financial problems that resulted from poor management practices. Without financial relief, Chrysler was estimated to lose $2.5 billion and its shutdown would have disrupted:
• Direct and indirect job markets of the automobile industry
• Competition within the automobile business
• Economy would have been adversely affected
The decision to construct The Chrysler Corporation Loan Guarantee Act of 1979 provided numerous constraints:
• Environmental, characterized by a high level of turbulence and complexity
• Time a sense of urgency, conveyed as desperation by Chryslers’ management
• Cost, significant factor
• Cognitive limitations, strained by information overload
The constraints were dealt with by employing an open decision-making model under the conditions of bounded rationality, which called for a satisficing decision. The bailout proved to be that satisficing choice by eliciting commitment from Chryslers’ stakeholders to obtain $1.5 billion in non-federal stakeholder funds and the government would match dollar for dollar through loan guarantees.
The NASA Challenger launch was a stand-alone experience that was complex in nature. The category II decision was a nonrecurring action in that each launch was new in nature. The decision makers lacked proper information, which engendered the decision makers to implement the wrong approach. NASA’s decision-makers disregarded the available alternatives, which were to:
• Delay the Challenger launch
• Postpone to repair/replace O-rings and other critical items
• Postpone to redesign aircraft dependence on O-rings and other critical items
NASA proceeded with an outcome that would support its own preference by overlooking its limited cognitive ability, overestimated its ability to control the outcome, and ignoring the multitude of diverse constraints surrounding the Challenger launch. Both generic and unique constraints existed, such as:
• Imperfect information – O-ring problems and the written recommendation
• Time and Cost limitations – stay as schedule and maintain cost effectiveness
• Weather conditions –freezing temperature below 53 Fahrenheit
• Political – predetermine decision, increase political favor
• Organizational - unstable leadership, undefined accountability and structure
• Institutional or image – maintain publics’ perception and favorability
• Technical – tightly coupled and highly complex system

Computational Decision-Making Strategy
Despite the Chrysler Bailout and Challenger Disaster being distinct situations, both required a judgmental decision-making approach. The lack of this approach in the Challenger disaster could be attributed to the fact that the face of failure was invisible to the decision makers compared to the Chrysler Bailout. Chrysler’s sales numbers indicated that if a swift and effective decision were not implemented the company’s existence would be short-lived.
In preparation for the Challenger launch, the decision makers were anxious to uphold the prominent capabilities of NASA, while disregarding the possibility of an unfavorable outcome. This computational approach should only be used when the outcome is known and not just expected. There were concerns regarding the O-rings and a specific joint that warranted the Challenger inability to be launched below 53 degrees. However, the decision makers did not see these reports. It is unclear but one can assume that because of their perceived high level of knowledge of the outcome, the decision makers did not seek out alternatives or conflicting views. The Challenger disaster exemplified a type D strategic choice by using a computational strategy to attain unattainable objectives. The objectives took precedence over utilizing the correct approach.
Closed Decision Making Model
The Challenger launch was an attainable objective for NASA.
However, the spacecraft failed its mission and proved to be a fatal disaster. NASA decision makers implemented a pre-determined decision in a closed decision-making model. The challenger launch was neither systematic nor routine. Because of NASAs’ closed decision-making process the launch was rendered unattainable. NASA failed to search the alternatives that were available and recognize the constraints that would have prohibited the launch of the Challenger. Had NASA operated in an open model decision-making process, this would’ve allowed NASA decision makers to consider all of the available alternatives and recognize the constraints.
The Chrysler bailout was successful in using the open-model. Although, the Chrysler decision was impacted by the environmental constraints such as:
• Increase of over-seas competition
• Succeeding General Motors in market share
• Increase of intrusions by the federal government placed on manufacturing
• Increase of monetary dependency on the federal government
The open decision-making process allowed Congress to search and consider the available alternatives and recognized the constraints that were set before them.
Recommendations
Classify as II Decision
The decision makers at NASA should have correctly classified the decision as category II. This could have been implemented if these questions were asked:
1) Is this a unique or generic event?
2) Is the structure of the decision procedural
or far more complex?
3) Are there rules and principles that we should follow?
Or do we have to rely on our judgment?
These questions serve as the road map to determining which decision is at hand.
Employ a Judgmental Strategy
After categorizing the decision as category II, NASA’s managers should have approached the task at hand from a judgmental perspective. Taking a look at the Chrysler bailout, it was successful because the decision makers recognized the situation as one with an uncertain outcome, as was NASA’s. A judgmental strategy could have been implemented using the Delphi method. Within the process, the experts would have listed the pros and cons of all alternatives and narrowed the search, based on which alternatives met the objectives with minimal costs.
Use an Open Decision Making Model
We recommend that NASA’s decision makers use an open decision-making model when the decision contains environmental constraints. rather than the closed decision-making model. The open decision making model includes recognition of all of the constraints, which limits the maximizing outcome. If the engineering consultant’s report would have made it to the decision maker, then one could assume that the conditions would have highlighted the need to reassess the implemented closed decision-making
model.