It took all the charm Lee Iacocca could muster to win a $1.5 billion federal bailout and keep Chrysler Corp. from bankruptcy in 1978.

Now a new financial crisis threatens Chrysler, a unit of Germany's DaimlerChrysler AG, after what was to have been a "merger of equals" two years ago.

It will take shrewd leadership and strong new products for Chrysler to survive the auto industry's continuing consolidation and brutal global competition, some experts say.

"It's a serious problem. It's not necessarily a fatal one, but it could become one if they don't do something on an urgent basis," said David Cole, director of the Center for Automotive Research at the Environmental Research Institute of Michigan.

"There's nothing to get your attention focused like your impending hanging," Cole said.

DaimlerChrysler on Monday announced it would cut 26,000 jobs over three years at Chrysler.

Chrysler has known hard times before.

The smallest of the Big Three U.S. automakers, it was caught unprepared in the 1970s by spiking gasoline prices and the public's shift to small cars.

Chrysler's board turned to Iacocca, former president of Ford Motor Co., in 1978. He negotiated a bailout package that included plant closings and layoffs, worker concessions and federal loan guarantees.

As part of the deal, then-United Auto Workers President Doug Fraser joined the Chrysler board.

"Much is written about Lee Iacocca," Fraser, now a professor in Wayne State University's College of Urban, Labor and Metropolitan Affairs, said Monday. "It's the Chrysler workers who saved Chrysler Corp."

The cuts and popular new vehicles worked to reverse Chrysler's fortunes.

It introduced K-cars, the Plymouth Reliant and Dodge Aries, front-wheel drive mid-size cars with fuel efficient engines, and minivans, which quickly replaced the station wagon as the family vehicle of preference.

As American tastes shifted from cars to high-profit sport utility vehicles and minivans, Chrysler became an industry leader in per-vehicle profits.

In 1983, it paid back guaranteed loans seven years early.

Chrysler workers, who made concessions to save the company, were rewarded with an average of $36,000 each in profit-sharing for 1994-99, Fraser said.

"There have been very many good years for Chrysler workers," he said.

But as trade barriers fell, competition became tougher than ever in the 1990s, and companies began to seek advantage through mergers and acquisitions, Cole said.

Among those consolidations was the creation of DaimlerChrysler through the merger of Chrysler with Germany's Daimler-Benz AG in 1998.

The new German-led company did not stop there, recently buying large stakes in Japan's Mitsubishi and South Korea's Hyundai to extend its global reach into Asia.

Ironically, those acquisitions carried the seeds of DaimlerChrysler's current problems, Cole said.

The Mitsubishi and Hyundai acquisitions were a "tremendous drain on cash, as well as on management attention," he said.

Both factors left the company vulnerable when the U.S. economy markedly slowed in November and demand for Chrysler's high-profit light trucks fell, he said.

In response, DaimlerChrysler Chairman Juergen Schrempp sacked Chrysler's top American management, installing Dieter Zetsche as Chrysler boss in November. He made various cuts, leading up to Monday's 20 percent work force reduction.

Fraser, who went to work at a DeSoto plant in 1936, has seen lots of ups and downs in the auto industry over the years. He said comparisons with Chrysler's brush with bankruptcy two decades ago are unwarranted.

"This situation is not nearly as difficult as it was in 1979, '80 and '81," he said.

In the long run, what matters most is Chrysler's ability to develop and make vehicles that people want to buy, said analyst David Garrity of Dresdner Kleinwort Benson in New York.

Chrysler will survive, but not necessarily in its present form as a unit of DaimlerChrysler, Cole predicted. DaimlerChrysler has denied it plans to unload Chrysler.

If consumer confidence rebounds as a result of interest rate and tax cuts, Chrysler could emerge healthy and profitable, he said.

"If it continues to fall, we've got a real problem," he said.