Doing the Lido shuffle: Lee Iacocca, Bob Lutz, and Bob Eaton

sergioSergio Marchionne has a reputation. One we may have seen before.

Let us return to the fateful time when Chrysler Corporation’s independence would become pre-ordained as a thing of the past — the moment when an independent Chrysler’s death became inevitable. That moment was in the Spring of 1992.

Chrysler was about to turn itself around, showing to the world the heavy-hitting Dodge Viper and the hot new LH cars — which revolutionized the moribund world of the full-sized sedan, which had been consigned to irrelevance by most autowriters. The Viper and Intrepid would quickly vault Chrysler to new levels of respect; that position would quickly be cemented by the highly successful 1993 Dodge Ram, the first profitable American small car in many years (Neon), and award-winning mid-sized cars (Cirrus, Stratus, Breeze).

1981 lee iacoccaHere’s what we saw in 1992:

For more than a decade, Lee Iacocca was synonymous with Chrysler Corp. — for good and for ill. Almost single-handedly, 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 grew to became a household name.

Back at the Highland Park, Michigan, 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. 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 (who squeamishly would not confront Iacocca to retire) 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 went as planned, he would succeed Iacocca as chairman and chief executive when the latter retired. Iacocca, who had sought to stay on as chairman past that date, and had made no plans to retire even after that date, would take the lesser but still influential post of chairman of the executive committee. Still managing to keep his hand in somehow.

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 Iacocca. "He's coming back to the U.S. after a four-year absence when the culture has changed. I don't play elder statesman, [THAT is a GIVEN!] but he would need my guidance for a while. He understands that. [Whose opinion was this?] There's plenty of responsibility to go around." Concurred 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 protégées 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 was sacked by Henry Ford coming to Chrysler, in 1979. As Sperlich faded, Greenwald rose to become vice chairman. Just as Greenwald was approaching the throne, however, Iacocca plucked another Ford star in 1986, when he hired Lutz, who was rumored to be looking around past Henry Ford II, as executive vice president for Chrysler, potentially sacking Sperlich.

iacocca and other leaders

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 at the age of 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 highly successful businessman Roger Penske. But Penske apparently got cold feet over Iacocca's foggy arrangements to surrender the wheel and as the wise businessman he is,  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 (Miller would end up head of the bankrupt Delphi).

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  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 Iacocca's failure to create a clear line of succession, the directors 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 momentum of that business after becoming president in 1988. Last year he helped make GM-Europe the most profitable car firm on the Continent, providing $1.96 billion in earnings as an offset to GM's staggering $8.7 billion loss in North America. "Eaton was a very high-energy, direct and pragmatic manager," noted John Smith, vice-president for planning at GM-Europe. "He was engaging, and he loved cars. It was a personality combination that worked."

Experts viewed Iacocca's failure to groom a successor from within as perhaps his greatest managerial shortcoming. "Chrysler should never have gone outside the company," observed Eugene Jennings, a (then) management professor at Michigan State University. Even after Iacocca retired, said Jennings, he tried to cling to power through his chairmanship of the executive committee.

Other students of Chrysler contend that Iacocca would inevitably find fault with Eaton's management 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. [Iacocca tried but it failed at the Board level.]

"Lee won’t change," 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 that was in the air, it's little wonder that many did not rule out Lutz as the eventual winner. While the then-Chrysler president graciously pledged allegiance to the new order, under Eaton, 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 was just saying he lost the first round and is still going to get it by default. Meanwhile, he did stand aside and let Eaton take the heat and hoping he would get chewed up."

Executive turbulence was a dangerous distraction from Chrysler's real task of completing the comeback that 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 watched the industry for Shearson Lehman Hutton. At the same time, Chrysler's chronic cash crunch (it lost $795 million in Iacocca’s last year) makes it crucial for the (then)  vehicles to be a hit.

Friends and colleagues of Iacocca know it would 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."

We make no guarantees regarding validity, accuracy, or applicability of information, predictions, or advice. Please read the terms of use and privacy policy. Copyright © 1994-2000, David Zatz; copyright © 2001-2016, Allpar LLC (except as noted, and press/publicity materials); all rights reserved. Dodge, Jeep, Chrysler, Ram, and Mopar are trademarks of Fiat Chrysler Automobiles.


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