TIME: Almanac 1990s

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<text id=92TT0677> <title> Mar. 30, 1992: Automobiles:Jockeying for Position </title> <history> TIME--The Weekly Newsmagazine--1992 Mar. 30, 1992 Country's Big Boom </history> <article> <source>Time Magazine</source> <hdr> BUSINESS, Page 46 AUTOMOBILES Jockeying for Position </hdr><body> Chrysler's board reaches outside for an heir apparent. But the race to replace Iacocca may be far from over. By John Greenwald--Reported by William McWhirter and Joseph R. Szczesny/Detroit For more than a decade now, Lee Iacocca has been synonymous with Chrysler Corp.--for good and for ill. Almost singlehandedly he persuaded Congress in 1979 to bail out the ailing car company with a $1.5 billion loan guarantee, then paid back the money seven years ahead of schedule. After two best-selling autobiographies and 11 years of hawking his cars on TV, he became a household fixture. Back at the Highland Park, Mich., headquarters of America's third largest automaker, platoons of loyal lieutenants toiled in his broad shadow, the best of them hoping to inherit the Chrysler crown one day. Yet, as the years passed, Iacocca led an elaborate executive-suite game of musical chairs. Somehow, every time the music stopped, Lee was still in the chair--and eventually no fewer than five leading contenders for his job were left standing idly on the sidelines. So it seemed like deja vu all over again when Chrysler's beleaguered directors last week plucked Robert Eaton, 52, from his post as president of General Motors' profitable European business to become Iacocca's latest heir apparent. No sooner had Eaton arrived than insiders began to speculate privately about his departure. "Eaton's biggest problem is that he's probably a nice guy, and nice guys won't last long," predicted a senior executive. "Lee will kill him." But the time for a smooth transition to the post-Iacocca era may finally have come. Chrysler directors chose Eaton during a 12-hour weekend showdown in which they apparently called the chairman on his two-year-old promise to step down. The compromise deal, which muscled aside Chrysler's respected president, Robert Lutz, brought Eaton into the company as vice chairman and chief operating officer. If all goes as planned, he will succeed Iacocca as chairman and chief executive when the latter retires Dec. 31. Iacocca, who had sought to stay on as chairman past that date, will take the lesser but still influential post of chairman of the executive committee. Despite plentiful skepticism within the company, Iacocca and Eaton downplayed any talk of possible friction. "I'm going to be the public-policy guy," says Ia cocca. "He's coming back to the U.S. after a four-year absence when the culture has changed. I don't play elder statesman, but he needs my guidance for a while. He understands that. There's plenty of responsibility to go around." Concurs Eaton, who pulled into Chrysler headquarters in a new Jeep Grand Cherokee at 7:45 a.m. last Friday for his first full day on the job: "If there weren't any personal chemistry between us, I wouldn't be sitting here right now." But the protean treatment by Iacocca of his own proteges hardly inspires confidence that the road will be smooth. The consummate car guy has repeatedly extended and withdrawn his favor since 1978, when he arrived at Chrysler from Ford following his own bitter ouster by Henry Ford II. The first heir apparent was Harold Sperlich, who preceded Iacocca from Ford and developed the K-car line of compact autos that kept Chrysler alive in the early 1980s. Then came financial wizard Gerald Greenwald, also from Ford, in 1979. As Sperlich faded, Greenwald rose to become vice chairman. Just as he was approaching the throne, however, Iacocca plucked another Ford star in 1986, when he hired Lutz as executive vice president. The constant shuffling raised suspicion that Iacocca had no real plan for stepping down but rather, as a bemused insider put it, "wanted to beat Armand Hammer's record" for executive longevity. (Hammer died in 1990 at 92, still at the helm of Occidental Petroleum.) Whatever Iacocca's motives were, he and Lutz soon found Chrysler too small for both their reputedly full-size egos. Lutz sealed his fate by being "honest to a fault," in the words of a close observer (who, like many others, spoke only off the record). Lutz declared all too openly that he thought Iacocca was past his prime and that credit for Chrysler's upcoming line of vehicles was as much his as Lee's. While many experts agreed that Lutz had been the chief engineer, an infuriated Iacocca began talking to directors last year about yet another outsider--this time, race car driver-turned-businessman Roger Penske. But Penske apparently got cold feet over Iacocca's foggy arrangements to surrender the wheel and pulled out of the race. He wasn't alone. In the past three years, nine top Chrysler executives have deserted. They included Greenwald, who left in 1990 to lead an aborted worker buyout of United Air Lines' parent company (after pocketing $9 million for his work on that deal, he landed as a managing director for investment banker Dillon Read); and Robert S. ("Steve") Miller, another vice chairman and prospective Iacocca heir, who quit in February to go to Wall Street after telling the board that the right management team for Chrysler would be Lutz as top man and Miller himself as No. 2. All of this turmoil convinced company directors that the succession issue had to be settled. But the comings and goings had left the company divided into factions. So when board members met on March 14 in Chrysler's opulent suites on the 38th floor of Manhattan's Waldorf-Astoria Hotel, they faced four possible choices: -- Eaton, who had been suggested by Penske and had been talking with directors since late last year. -- Lutz, 60, on whom Iacocca held an effective blackball. -- Greenwald, 56, who had been courted by Iacocca but wanted assurances that he would get quick possession of the CEO's chair, a demand some directors saw as overplaying his hand. -- Iacocca himself, who at 67 wanted to remain chairman past his formal retirement date but was now an isolated faction of one. Exasperated with Ia cocca's failure to create a clear line of succession, the directors obviously wanted a change. Some were further irritated by his blustery anti-Japanese performance as a member of President Bush's trade mission to Tokyo in January. Yet the task of facing down Iacocca remained daunting to the board. "Lee could see the end, but he couldn't believe it," said a Chrysler insider. "This was not just his career and his company. It was his life and his creation. It was like trying to bring down a lion." Eaton, by contrast, is a rumpled, low-key executive who arrives free of entangling alliances and is willing to wait nearly a year to take Iacocca's job. While Eaton was not the architect of GM's European turnaround, he maintained the mo mentum of that business after becoming president in 1988. Last year he helped make GM-Europe the most profitable car firm on the Continent, offering its $1.96 billion in earnings as an offset to GM's staggering $8.7 billion loss in North America. "Bob was a very high-energy, direct and pragmatic manager," notes John Smith, vice-president for planning at GM-Europe. "He was engaging, and he loved cars. It was a personality combination that worked." Yet experts view Iacocca's failure to groom a successor from within as perhaps his greatest managerial shortcoming. "Chrysler should never have gone outside the company," observes Eugene Jennings, a management professor at Michigan State University. Even after Iacocca nominally retires, predicts Jennings, he will try to cling to power through his chairmanship of the executive committee. Other students of Chrysler contend that Iacocca will inevitably find fault with Eaton's management before next December and will raise the succession issue again by relaying his doubts to the board. Iacocca could then suggest delaying his own departure until the problems are solved. "Lee hasn't changed," says a longtime associate. "He's as predictable as the sun that follows the night. His game plan is to be the folk hero by turning Chrysler around for the second time. The first mistake Eaton makes, Lee will be right back in there." Advises another insider: "The first time Lee sticks his fist through, Eaton's got to cut it off." With that kind of talk still in the air, it's little wonder that many have not ruled out Lutz as the eventual winner. While the Chrysler president graciously pledged allegiance to the new order last week, friends say he has not given up. "Lutz has an interesting problem," says a confidant. "He has to figure out whether his real enemy is Eaton or Iacocca. Lutz is just saying he lost the first round and is still going to get it by default. Meanwhile, he is going to stand aside and let Eaton take the heat and get chewed up." Executive turbulence could be a dangerous distraction from Chrysler's real task of completing the comeback that Iacocca began more than a decade ago. On the positive side of the ledger, years of employee teamwork have created a new generation of promising Chrysler cars, Jeeps and minivans. "You couldn't want better vehicles to market, heading into an upturn in the economy," says Joseph Phillippi, who watches the industry for Shearson Lehman Hutton. At the same time, Chrysler's chronic cash crunch (it lost $795 million last year) makes it crucial for the vehicles to be a hit. Whether the power struggles represent a serious threat to the company's survival or not, friends and colleagues of Iacocca know it will be wrenching for him to bow out, gracefully or otherwise. "Lee is constantly plotting," says a family acquaintance and fellow auto executive. "If he sees someone out there who can help him, he's thinking about how to approach him. If he sees someone as an enemy, he watches him. That impassive face covers a hyperactive mind with just one focus, and that's Lee." Iacocca might do well to heed the advice of his latest--and perhaps last--commercial for Chrysler: "In this business," he says, "you either lead, follow or get out of the way." </body></article> </text>