Of course, Iacocca does have a lot to lose. When he announced that he would retire on Dec. 31, 1992, Iacocca, 67, still had his legacy teetering on the brink. He had attained folk-hero status early on, becoming a welcome symbol of America’s can-do spirit when he engineered Chrysler’s return from near death in the early 1980s. But over time, as Chrysler’s health has gone into a tailspin, Iacocca’s image has taken on some warts. What happens in the next year is critical, both for resolving his place in corporate history-and for determining how long Chrysler can survive.
The ultimate pressure player, Iacocca has readied a roll-out of promising new cars and trucks, but there’s little room for error. The U.S. auto industry is in a mess amid a worldwide slump and frenetic competition. General Motors admitted as much two weeks ago when it disclosed its deep plant and work-force cuts. If a giant like General Motors was acknowledging such trouble, it only made the future of Chrysler, the smallest of the Big Three with 12.5 percent of the market, seem even more dicey. While Chrysler isn’t about to go under, the odds are that Iacocca might be sprucing it up for a buyer. “GM and Ford are still awesome companies,” says Ralph Colello, an Arthur D. Little Co. consultant. “But I’m not really sure Chrysler has a right to survive.”
Next week Iacocca begins his final year by joining President George Bush and other executives on a trade mission to Japan, Iacocca’s favorite whipping boy (page 33). But Japan is just one part of Chrysler’s troubles. The company of venerable nameplates like Dodge and Plymouth is peddling an aging line of cars, its sales are dwindling and its cash reserve is dropping. Counting cars alone, Chrysler lost its No. 3 ranking to Honda. It is expected to report a loss of around $1 billion for this year-and its only bright spots, the Jeep and minivan, are facing fierce competition now. The comeback king, the critics now say, had no follow-through. Says Eugene Jennings, a Michigan State University business professor: “The blame has to be aimed right at Iacocca. He made the wrong turns and the Japanese armada ran right over him.”
Gesturing with his trademark cigar, Iacocca is both confessional and combative. Did he make mistakes by spending Chrysler’s profits in unproductive ways? “Yeah, I made a few I don’t like to talk about-a hundred-million-dollar mistake here and there,” he says. But compared with the $2.7 billion the company pays out in rebates to compete, he says, “I mean, who cares? It’s like petty cash.” Iacocca insists he has laid the groundwork to pull off another comeback, provided the economy cooperates. Chrysler’s future hinges on an ambitious launch of products in 1992: a redesigned Jeep and a new line of midsize family sedans, dubbed the LH series (page 32). Their fate, he says, should become clear by fall. “They’ve got to be winners,” Iacocca says. “It’s vital to us. We’ve got to get the old Chrysler guy who for good reason departed-maybe we shipped him some crap-to come back into the fold.”
Few corporate leaders have had the high-profile roller-coaster ride of Lee Iacocca. A former car salesman from Allentown, Pa., Iacocca was credited with developing the legendary Mustang while at Ford. But he joined Chrysler after a falling-out with Henry Ford II. With the company on the verge of failing in the late 1970s, he persuaded Congress to guarantee $1.2 billion in loans. With a new line of K cars, such as the Dodge Aries, Chrysler flourished, the loans were paid off and Iacocca became as famous as Madonna is today. In commercials he implored consumers to buy Chryslers for the good of America. He was named to head the Statue of Liberty renovations and wrote a best-selling autobiography.
But after pulling off one of America’s greatest corporate comebacks, Iacocca seemed to stall. His critics say the demands of celebrity distracted him and he then got swept up in a diversification mania. For example, he acquired corporate-jet maker Gulfstream Aerospace Corp., and doled out more than $700 million for American Motors in 1987. The deal gave Chrysler the highly profitable line of Jeeps, but it also added to the company’s huge liability in employee pensions and health-care funds. Thus, Iacocca was forced to delay a replacement for the aging K car line. “By the time they approached the 1990s, many of their products were just absolutely uncompetitive,” says George Peterson, an auto consultant.
Iacocca’s personal appeal was showing chinks, too. Politicians, who had courted him to run for office, grew disenchanted as he announced a series of plant closings in 1988. The CEO who had symbolized selfsacrifice for accepting only $1 a year while Chrysler was hurting was paid $18 million in 1987-and earned Business Week’s tag as “delivering the least bang for the bucks.” He won populist points for bashing the Japanese, yet seemed hypocritical for forging alliances with Mitsubishi to build small cars. (Iacocca sees no contradiction: “The problem under free trade isn’t that I’m buying from them. It’s that they aren’t buying anything from me.”) Around Chrysler, the once unthinkable was spoken: was Iacocca still the best guy for Chrysler? Says Michigan State’s Jennings, “He is at his best when he’s climbing the mountain. He gets careless when he’s on top.”
Of course, Iacocca has been swamped by forces that have hit the other U.S. carmakers. General Motors and Ford have also been devastated by the recession and have seen their market shares sliced by Japanese rivals. As Iacocca sees it, if car sales depressed for the next year or two, the country will have more to worry about than Chrysler. “It just wouldn’t be Pan Am going out of business,” he says. “It would be a lot of blue-chip companies.”
True enough, but the much smaller Chrysler needs to hit precisely on all cylinders if it is to stay on the road. Iacocca’s $16 billion comeback involves, first, “protecting the flank” of the minivan and the Jeep, whose immense profits have largely kept the company afloat. Costing up to $24,000, minivans account for about 25 percent of Chrysler’s total sales. Last year it redesigned the vehicle and sales remain strong, with Chrysler selling almost one of every two minivans. But it must fight off a host of competitors attracted by the vehicle’s juicy profits. Next April, Chrysler will introduce its first redesigned Jeep in eight years, as it jockeys with competitors like Ford’s less expensive Explorer.
Even if the new minivan and Jeep are hits, Chrysler’s fate will rest on the LH line. The cars, which aim at the lucrative family market and competitors like the Honda Accord, have the potential to revive Chrysler the way the hot-selling Taurus did for Ford in the mid-1980s. But skeptics contend the cars are late to the market. Iacocca concedes cost cutting slowed development of the LH, but sees a silver lining. If the car was begun any sooner, he argues, “we’d have introduced the LH right in the middle of the goddammed gulf war.”
So, can Chrysler survive? On the plus side, Iacocca has carved Chrysler into a lean, well-run organization. If the economy picks up, it is probably better positioned than GM and Ford to benefit. “Our leverage is so big it’ll make your head spin,” claims Iacocca. If Chrysler sells 250,000 LH models, analysts estimate the company will earn $700 million, enough to keep it afloat to develop more cars. “We are not in the position we were at the beginning of the decade by a long shot,” Iacocca says.
Of course, that’s not saying much. Chrysler isn’t on the brink but its position remains tenuous. A continuing recession-or just bad reviews-could easily knock the wind out of LH sales. The company is also laboring under a $3.6 billion pension liability that will drain it of $600 million each year between 1993 and 1998.
The more pertinent question is whether Chrysler can survive more than a few years as an independent company. The consensus is no, with most betting it will end up in a partnership or merger. Last February, after extensive analysis, Ford took a look and passed. Even Iacocca concedes the global car industry is so competitive that Chrysler won’t be able to stand on its own. “For the next five years I think we’re in good shape,” he says. Beyond that he sees the need for linkups with other carmakers to compete globally. But such talk discourages Iacocca. “This is the most lucrative, biggest market in the world, and we’re down to three manufacturers,” he says. “I mean, we invented the goddam car and we have trouble keeping three guys with their head above water. “But as Iacocca understands more than most, the world is no longer just three guys. If in the next 12 months he can whip Chrysler into shape, he will leave’ a company that’s all dressed up and ready to be a profitable player in the North American market. Or ready, perhaps, to be taken over by another carmaker. It’s not the legacy Iacocca had anticipated a decade ago, but it may be the most he can hope for now. Car Troubles
After roaring back, Chrysler’s profits slumped. For 1991, the company may lose $1 billion. CHRYSLER CORP. NET EARNINGS (In Millions of Dollars)
1978 -$250 1979 -$1100 1980 -$1800 1981 -$500 1982 +$200 1983 +$700 1984 +$3000 1985 +$1600 1986 +$1400 1987 +$1300 1988 +$1100 1989 +$400 1990 +$100 1991* -$900 *Through September 30 1991. Source: Chrysler Corp.
If the future of Chrysler lies first in Lee Iacocca’s hands, then Glean Gardner comes in a close second. It’s Gardner’s job as a general manager to bring to market next fall Chrysler’s new family-size sedans, code-named the LH line, and also known as The Car That Will Save Chrysler. If the LH cars sell briskly, Chrysler has a good chance to stay alive for some time. If not, well, they can always blame Gardner.
Priced from $15,000 to $25,000, the LH cars will be known as the Eagle Vision, Dodge Intrepid, Chrysler Concord and a fourth unnamed model to be introduced late in the year. From design and engineering to final production, the cars represent everything that Chrysler will do with its cars of the future, given the chance. The automaker’s most important innovation was to rip up its traditional, turf-ridden system of designing a car and install a “team concept.” If that sounds like the way the Japanese do it, it is. Designers, engineers, manufacturers and finance employees were thrown together and given autonomy to come up with a car-with little interference from the higher-ups. Among other things, that resolved conflicts more easily, so that it will take just 39 months, about a year off Chrysler’s normal development schedule, to move the car from clay model to assembly line. Gardner says the system also improved quality. Sheet-metal panels were designed to require only about four separate operations to make, compared with 10 in older models. “You can recognize how you lose accuracy if you have to hit it 10 times,” he says.
Aimed at younger, import buyers, the LH has a sleek, racy look that markedly contrasts with Chrysler’s traditionally stodgy styling. It incorporates what Chrysler calls a “cab forward” design. The angle of the windshield is made flatter and moved forward to improve aerodynamics, yet it increases interior space without lengthening the car. In addition, Gardner says, the front wheels were moved forward-they call it “wheels at the corner”–to extend the wheelbase, which should improve the ride and handling. “It’s certainly not my father’s K car,” says Gardner, “and it probably doesn’t even look like a Chrysler product.” In this tough environment, even Lee won’t get offended by that remark.
‘Not my father’s K car’: Enhanced photograph of 1993 LH model (JIM DUN–POPULAR MACHANICS)
