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Yugo Automobile
Zastava was founded as an arms manufacturer in 1853. By the late 1930s, the company had expanded into automobile production supplying Ford-designed trucks to the Royal Yugoslav Army. Vehicle production continued until 1941, when World War II reached Yugoslavia. Following the war, Zastava was permitted to produce Jeeps under license from Willys-Overland until production was halted in the early 1950s.

The first passenger models were produced on 26 August 1953 using designs licensed by Fiat of Turin. The first model designed by Zastava was a sedan called the Milletrecento ("one thousand three hundred") powered by a 1,300 cc engine. Some of the most successful models were those based on the Fiat 128 model, marketed under different names: Zastava 101, Zastava 128, Zastava 311, Zastava Skala, etc.

Zastava continued to produce vehicles for the Yugoslav and European markets until exports were limited by sanctions imposed by the United Nations in the 1990s. In 1984, automobile entrepreneur Malcolm Bricklin tested the United States market for Zastava vehicles, now branded as Yugo. As a result, in mid-1986, Yugo America began selling cars at a starting price of $3,990 for the entry-level GV ("Good Value") hatchback equipped with the 1,100 cc overhead-cam five-main-bearing engine and four-speed manual transmission. The similar GVL offered a plusher interior, but the sporty top-line GVX was powered by the 1,300 cc engine mated to a five-speed manual transmission, and included as standard equipment a number of deluxe features such as a ground-effects package, alloy wheels, and rally lights. However, though the GVX was billed as an upscale, sporty version of the base GV, it went from 0-60 mph in 13.56 seconds, just a half a second faster than the GV. When the political instability in Yugoslavia intensified in early 1992, Zastava was forced to stop exports.

Today, various models are available in the former Yugoslavia, including an agreement signed with Fiat for the production of the 2003 Fiat Punto model.

Many mechanics and even Zastava factory workers agree that the "best" Yugos ever were built between 1988 and early 1991. Quality control was good; high standards were set in terms of plastic quality, seat cloth, and "a well screwed together" interior. Paint and antirust coatings were also well done during that period, evidenced by many cars still showing no signs of rust, tears in the seats, or major engine issues after more than 20 years.

1989 was considered a "golden year" for Yugos because almost 200,000 were built that year, and many can still be seen on the road today. Also, cars were usually branded Yugo instead of Zastava during that period, because the company was taking pride in the (at the time) good sales and reputation established in the export markets, especially in the United States.

In 1990, a batch of 450 cars with automatic transmissions and air conditioning was shipped to the United States. With political problems starting in 1991, quality dropped significantly, coming to such low standards such as plastic parts of the dashboard not fitting correctly.

1991–1996
Because the Yugo was built as a "Yugoslav" car with political problems and civil war breaking out in 1990–91, production slowed down and the supply of parts was interrupted. Most of the plastic came from Croatia, while the alternators and electrical equipment came from Slovenia. With the start of civil war, economic and transportation ties were broken, resulting in shortage of most parts coming from the two seceded republics. Though the sanctions were not in place until May 1992, Yugos built between June 1991 and early 1996 were built with a variety of "leftover" parts: as an example, getting a car with a blue dashboard and a brown steering wheel, seats that were mismatched in color, and most likely an "American" instrument cluster with speeds printed in MPH rather than km/h, and with written labels like water and oil instead of small drawings, and a seatbelt safety warning light were possible. In some extreme cases, the car would come with different interior panels and a steering wheel from other Zastava products such as the Zastava 750. When exports to United States (and the rest of the world) stopped, a number of federalized Yugos were still left in the factory's parking lots, and many people got these "American" Yugos instead of the European ones. When Yugoslavia broke apart in the early 1990s, production rates steeply declined to 14,000 in 1992, 7,000 in 1993 and 1994, and 9,000 in 1995. In 1996, when sanctions were lifted, production rates slowly increased as living standards in the former Yugoslavia started to improve. Even so, problems for the factory started once again when it was put out of production in mid-1999 as a result of war with NATO.

In the United States
International Automobile Importers (IAI) was a company founded by Malcolm Bricklin to import the X1/9 and 2000 Spider after Fiat halted their manufacture. Bertone and Pininfarina carried on production under their own names and Bricklin's IAI took over their U.S. importation. Bricklin wanted to import additional brands, and international dealmaker Armand Hammer had been asked by the Yugoslavs to identify business areas in which they could generate exports to bolster their economy. Hammer thought the idea of exporting the small cars made in Kragujevac, Serbia, by Zavodi Crvena Zastava, would be viable. Zastava had, since the mid-19th century, been a quality armaments producer and sponsored its own museum.

Criticism and response
Along with other Central and Eastern European vehicles marketed in the West during the 20th century — such as the Škoda — the Yugo was subjected to derision by critics who pointed to its use of old-generation Fiat technology and to alleged issues with build quality and reliability. The Yugo was voted as one of Car Talk worst cars of the millennium. Similarly, the Yugo GV was listed on TIMEs "The 50 Worst Cars of All Time" list, and the Yugo 45 ranked #1 on Complex Magazines "The 50 Worst Cars of the '80s" list. Various other critics have added the Yugo to their lists of the worst cars.

Defenders of the vehicle have counter-argued that the Yugo's reputation suffered due to an issue that also appeared with initially inexpensive cars such as the Chevrolet Chevette, Rambler, Crosley, and others — dealers were finding that too many owners were considering inexpensive cars as "disposable", and were failing to perform basic maintenance such as oil changes.

One critical maintenance issue specific to the Yugo 55 and 65 (the 45 was a 903 cc pushrod engine, with a timing chain) was the need for regular replacement of the interference engine's timing belt — every 40000 mi. In a non-interference engine, timing belt failure does not cause further damage to the engine. However, in an interference engine, failure of the timing belt disrupts the synchronization between pistons and poppet valves, causing them to collide with one another (hence the name interference engine), thus potentially destroying the engine. Though this requirement was stressed in owners' manuals, it was frequently overlooked by owners. The factory also stressed the need for 89-octane fuels for the low-compression engines.

Some Yugo owners have reported that regular oil changes and appropriate maintenance allow the cars to remain dependable and trouble-free.

In 1989, 31-year-old Leslie Ann Pluhar, driving a 1987 Yugo over the Mackinac Bridge in Michigan, died when her Yugo went over the bridge's 36 in railing during 50 mi/h winds. The incident was widely publicized, with the make of car prominently identified. Many retellings claim that the car was physically lifted and blown off the bridge. However, a lawsuit by the family of the victim made no such claim, but proposed that the wind contributed to a loss of control that ended with the car's going off the bridge. Expert testimony disputed whether the winds were a major factor. Another proposed explanation is that a collision with a guardrail on the bridge's median "launched" the car onto the opposite guardrail.

Owners of the Yugo and related models in the former Yugoslavia benefit from a ready supply of inexpensive spare parts due to general continuity in the car's design; local mechanics' ready familiarity with the Yugo also lowers the cost of ownership, since Yugos are so common and are even used as practice cars for apprentice mechanics. Also, the simplicity of the car's engine makes it easy to fix, and many Yugoslavian owners tended to fix the car themselves. All parts for the Yugo are readily available in the United States.

A common U.S. joke regarding an inefficient vehicle is "Yugo Nowhere" ("You Go Nowhere"), referring to the failure of the car's sales in the United States.

A Zastava 101 (a sedan variant of the Yugo line) has been featured on the British motoring show Top Gear, where it was featured in a segment filmed in Albania, where the three presenters referred to it as a "Bentley Mulsanne" after Bentley decided not to allow Top Gear to use an actual Mulsanne against a Mercedes S-Class 65 and a Rolls Royce Ghost. While presenters Richard Hammond and James May drove the very new Mercedes and Rolls Royce, respectively, Clarkson was originally supposed to drive the very new Bentley- so he had to drive the Yugo. In addition to Clarkson calling the Yugo "the least refined car I've ever driven", it was lambasted constantly, at one point overheated and failed to start, thoroughly physically trashed, and then driven off a cliff and destroyed while May was driving it to simulate a mock death for May after a staged police chase through Albania. In one segment in that episode, they attempted to put an obese Albanian man playing dead (sticking with their theme of which car they thought would be best for the Albanian Mafia) into the boot (trunk) of their cars. Surprisingly, the Yugo was the only successful car at this challenge, although the "dead" man was very visible in the car. It was also featured in one of Clarkson's motoring programs in the 1990s called Jeremy Clarkson: Unleashed on Cars. He drove the Yugo, and after lambasting its performance, styling, and build quality, he then blew it up with a tank gun, and ran it over and crushed it with that same tank, totally destroying the car and reducing it to scrap metal.