Chrysler's Second Amazing Comeback

By WILLIAM MCWHIRTER DETROIT

ONLY A YEAR AGO, GENERAL MOTORS WASN'T THE only industrial crisis brewing in Detroit. Chrysler, the smallest of the Big Three, seemed to have everything going wrong. Finances? The company was losing $795 million for the year. Products? Chrysler's midsize cars were based on a 10-year-old platform plagued by rattles and defects. Leadership? The company's succession battles would have appalled Al Capone.

Then why is Lee Iaccoca popping up on TV again, flashing his patented proud- paterfamilias smile? Because Chrysler customers have begun to notice that something is different. The new Jeep Grand Cherokee (base price: $19,000) is / an instant favorite of all those suburban Indiana Joneses. The Viper, a politically incorrect, 10-cylinder roadster ($50,000), is the most sought- after sports car in years. And thanks to a redesign, the Chrysler Town & Country and Dodge Caravan ($14,600) have held on to their 50% share of the lucrative minivan market.

As a crowning touch, Chrysler last week began selling its long-awaited LH models, a new line of midsize sedans: the Chrysler Concorde, Dodge Intrepid and Eagle Vision ($16,000 to $22,000). The cars feature an innovative "cab- forward" design to allow more passenger room and window area. Highly praised by auto experts, the new cars are expected to be worthy rivals to such popular models as the Ford Taurus, Honda Accord and Toyota Camry. All told, "Chrysler is the hottest company in the car business," declares David E. Davis Jr., editor of Automobile magazine.

Chrysler's second success story bodes well for its incoming management. The first comeback belonged almost exclusively to Chrysler's self-touting legend, Iacocca, who towed the company out of the wilderness in the early 1980s. The second was much more the victory of a management team that learned painful lessons and persevered through fierce internal clashes. In late 1987, Chrysler was slipping again, and Iacocca began to recognize the problems, including the overly autocratic force of his own leadership. He instigated what has since become known as Truth Week, during which the company's top 500 executives went to a rural Wisconsin retreat to conduct an unsparing self-examination. Doug Anderson, a motivational expert who acted as a session leader, recalls the intensity of emotion. "The pain within the Chrysler corporation was evident from Day One," he says. "They cared a lot about the business and took enormous pride in having been part of the greatest turnaround in U.S. industrial history. There was a grave sense of disquiet that it could happen again, damn it, on their watch."

Even more surprising was Iacocca's admission that in spite of all his public Japan-bashing, Japan was in fact building superior cars. After the retreat, Chrysler assembled a team of 25 young recruits to spend a year at Honda's plant in Marysville, Ohio, to study everything from its assembly methods to corporate culture, which the Japanese company allowed as a political courtesy. No senior executives went along on the mission. "We wanted open minds not poisoned by Detroit," admits Iacocca. Their report, still secret, led to a greater emphasis on customer satisfaction, an increase in continual training and the empowering of shop-floor workers to make decisions.

Those changes became a matter of necessity because Chrysler was preparing to eliminate 23,000 salaried and hourly jobs, fully 25% of its work force. That meant not only streamlining its bureaucratic structure and reducing layers of supervisers, but also ending the turf wars between separate divisions, especially design and engineering. Iacocca himself agreed to surrender some of the chairman's prerogatives, including military-style reviews on the design floor in which he had been able to issue imperial orders for a new grill design or a new fender curve.

Rather than simply demanding that their key suppliers cut costs overnight, as GM is now doing, Chrysler enlisted supplier support to make design and engineering changes that would add value and boost productivity. As a result, Chrysler's parts suppliers have turned in 3,900 suggestions that have saved the company an estimated $156 million in production costs.

Finally, Chrysler spent money where it counted, notably on a $1 billion technical center where teams are developing a new generation of compact cars, among other creations, with little meddling from top brass. The company also committed $30 million to a training blitz last summer for its dealer and service networks, staging two-day workshops to prepare them for the new LH cars and the high expectations of drivers who have grown accustomed to imports.

Iacocca plans to retire in January, at age 68, but he will leave behind a noticeably happy family at Chrysler. Last spring he chose as his successor Robert Eaton, the chief of GM's successful European operations, which rankled some Chrysler insiders at first but has produced a smoothly working triumvirate that includes the former heir apparent, president Robert Lutz. Iacocca sees the upheaval as a positive force. "We do run better scared," he says. "When we have trouble, we're used to that. That has been the beauty of Chrysler for 50 years." While Chrysler still has $15.9 billion in debts rated at junk-bond levels, last month the company surprised analysts by posting $202 million in earnings for the third quarter, making Chrysler the only profitable member of the Big Three.

With reporting by Joseph R. Szczesny/Detroit