TIME: Almanac 1993/TIME Almanac 1993.iso/time/030590/0305208.000

Text File | 1992-08-28 | 5.8 KB | 124 lines

                *·T                                                          BUSINESS, Page 40

Can Iacocca Do It Again?


With Chrysler in crisis, the Comeback Kid hopes for an encore

By S.C. GWYNNE -- With reporting by John F. McDonald/Washington


    Flying at 30,000 ft. over the frozen flatlands of Ohio,
where a winter storm was barreling eastward, the Gulfstream jet
shuddered violently. The big man in the comfortable leather
seat looked sharply toward the cockpit, as if to ask "What the
hell is going on in there?" He has been wearing that expression
quite a bit lately, for the man is Chrysler chairman Lee
Iacocca, 65, and he has been weathering a storm of his own for
the past few months. Even the elegant corporate jet on which
he flew last week was symbolic of the crisis. A week earlier
Iacocca had agreed to sell Gulfstream Aerospace, a firm he
bought in 1985, to raise $825 million for his suddenly embattled
company.

    Signs of Chrysler's troubles are multiplying. The company
lost $664 million in the last quarter of 1989, announced plant
closings in Detroit and St. Louis, and laid off more than 2,300
of its 31,000 salaried workers. For the first time since 1982,
when Iacocca used federally guaranteed loans to bring the
company back from the edge of bankruptcy, Chrysler is losing
money on its North American automaking operations. The
company's market share is slipping, and its stock is being
battered. Iacocca has already responded by shuffling his
management and pursuing a $1.5 billion fat-trimming program.

    Can the Comeback Kid do it again? To show off his vigor and
dispel negative reports about the company, a determined Iacocca
flew to Washington last week to kick off a six-city tour.
Standing before a display of Chrysler products, Iacocca
harangued the crowd: "Every time I pick up the paper, I seem
to read another story that reinforces the idea that things made
overseas are somehow better than anything made in America," he
said. "We're not going to let that kind of crap go unchallenged
anymore."

    Next month Chrysler will launch a national ad campaign with
the theme "Advantage Chrysler." Aimed primarily at Japanese
rivals, the ads will feature Chairman Lee touting the ways in
which his cars are as good as or better than foreign makes.
Among the features: air bags as standard equipment, greater
cargo room and longer warranties. While denying he was Japan
bashing, Iacocca declared, "Japan today is wrapped in a Teflon
kimono, especially when it comes to cars."

    Chrysler's current misfortune is the result of several
factors. One is the burden of $900 million in debt the company
took on when it acquired American Motors in 1987. Another is
rising competition from Japanese "transplant" factories in the
U.S. A more insidious element was Chrysler's own success
selling K-cars, minivans and Jeeps in the 1980s, which brought
the company huge profits. "We became a little too rich and fat
doing things that were not germane to the basic thrust of the
company, which is to become the low-cost, highest-quality
producer," says Iacocca.

    Iacocca concedes that his attention wandered from the
company during the latter part of a decade that included his
rise to international celebrity, the death of his first wife,
his remarriage and divorce, and the publication of two
best-selling books. But Iacocca, who is due to retire next
year, insists that he is back on the job full time. "I've got
my adrenaline flowing again," he says. "We've got a $3
billion-a-year product program, and we will be formidable
competitors. If I thought we weren't going to do that, I'd
retire and get the hell out. But we're going to do it."

    Iacocca, who has always been viewed more as a charismatic
leader than as a hands-on manager, seems to relish the crisis.
While Chrysler's road will be rough, the company is in far
better shape than it was when Iacocca took over in 1978. This
time Chrysler will benefit from its diversification into
financial services, which provided $284 million in profits last
year, and from its rapid expansion into Europe. By selling
Gulfstream, 45% of its shares in the Japanese automaker
Mitsubishi and other assets, Chrysler will generate more than
$2  billion to add to its cash kitty of $2.2 billion. While
Chrysler's share of the U.S. car and truck market slid half a
percentage point last year, to 13.5%, the company exited the
decade with a larger portion than it had at the beginning,
10.6%.

    The most persistent criticism of Chrysler in recent months
is its lack of new products. But Chrysler executives point out
that the K-car replacement models, the Dodge Spirit and
Plymouth Acclaim, debuted in 1988 to generally good reviews and
have sold consistently well since their introduction. Chrysler
plans to roll out a new, streamlined minivan this fall and a
new version of the Jeep Cherokee next year. Criticized for its
reliance on Mitsubishi for sophisticated engines, which power
Chrysler's hot new Plymouth Laser and Eagle Talon, the company
has introduced a family of U.S.-built V-6 engines. The
automaker's real product gap is in the mid-size-car category.
To counter that, Chrysler will introduce a striking auto in
1992, code-named the L/H, which will boast, among other things,
a new multivalve Chrysler engine.

    Chrysler's strategic problem is twofold: the rising costs
of incentives, which now run at an estimated $1,200 per car,
and the lag time between its current lineup of cars and the
arrival of the L/H. Iacocca's road show is an attempt to prove
that the company has a potent strategy and that he is firmly
back in control of Detroit's No. 3 automaker. Critics who would
dismiss his chances of pulling the company out of the fire this
time should try to remember how badly his doubters
underestimated the man a decade ago.