by William M Wright BBA MBA (5-2-2012)
When Chrysler Chairman John Riccardo brought in Lee Iacocca as president and chief operating officer in late 1978, Iacocca, a 32-year Ford company man, was faced with the impossible task of rescuing an American flagship on the brink of bankruptcy. Iacocca took on the challenge for just $1--humble pie ( gambling stock options might some day be worth something).
Those of us living in Detroit and working in the motor city knew the story of Iacocca Lee better than the national recession news stories of the time. Lee was a man looking to rebuild his image and self confidence in Detroit after being axed as Henry Ford II's No. 2 man. Henry wasn't interested in have a second opinion to his.
Though Riccardo needed the bold self-confidence of Iacocca's leadership skills, it was Iacocca's salesmanship to Congress in late 1979--now as chairman--that led to the signing of the Chrysler Corp. Loan Guarantee Act of 1980.
When President Jimmy Carter put his pen to the law on January 7th, Chrysler, which had lost $1.1 billion in 1979, was strutting with $1.5 billion in federal loan guarantees and an accompanying $2 billion in concessions from labor, dealers and other creditors. Iacocca's pitch sealed the deal with all groups. He said that Chrysler's failure (forecasted inevitable without government support) would end up costing the feds more in unemployment benefits than it would cost to back Chrylser's debt.
Iacocca's strategy was a combination of paring units, consolidating suppliers and getting labor to accept the companies financial reality.
The legendary K-car enabled Lee to consolidate and cut cost while seeking to recreate the 1960 Falcon's success. It was mid-sized, roomy, pragmatic and more fuel efficient while still capable of hauling six adults. It appealed to traditional loyal American-car buyers now interested in fuel economy. Front-Wheel-Drive was another new selling feature. Although the K-car saved Chrysler in the eighties via cost reduction, it did little or nothing to stem the tsunami from Japan. Still, the story of the little Chryslers is a large one, especially given Lee Iaccoca's endless marketing imagination or what we call in business college as product line extention. Lee streched the K-car into everything from K-New Yorker, K-Convertibles, Daytona (make believe 70's muscle cars) Coupe, Mini-Vans and yes even K-Strech Limos.
The real iPod sales expander came in 1984--the first full year of sales for the Dodge Caravan and Plymouth Voyager minivans. By 1994, one in ten cars sold in Canada and the U.S. was a minivan--40% were made by Chrysler. It was the strength of the minivan, a 1985 deal with Mitsubishi and the 1987 pick up of AMC (maker of Jeep) on which Iacocca rebuilt Chrysler.
In hindsight it's easy to see. Chrysler and Iaccoa needed each other to succeed.
Chrysler rescued Lee's career and Lee saved Chrysler.
by Lee Iacocca
I'm proud to be a first generation American and prouder still to be raised by two of the finest parents anyone could ever have. My father, Nicola, first came here from Italy when he was twelve years old. Nineteen years later, he'd saved enough to travel back to get my grandmother. How's that for determination? It was on that same trip back that he met and fell in love with a beautiful young woman named Antoinette. Fortunately for both of us, he was charming enough that she came back too.
Growing up, our family lived in the steel making belt of Pennsylvania where my father opened and ran a hot dog restaurant that still stands today - Yocco's, which is how the Pennsylvania Dutch pronounced Iacocca. After high school, I went somewhere very different, but not very far away: Lehigh University in Bethlehem, PA. I left four years later with some great experiences under my belt, a degree in industrial engineering and a Wallace Memorial Fellowship to Princeton University (where I had the good fortune of attending during Albert Einstein's tenure). After Princeton, I landed my first job as an engineer at the Ford Motor Company.
"Any supervisor worth his salt would rather deal with people who attempt too much than with those who try to little"
It didn't take long for me to realize that I was better suited to the sales and marketing side of the car business. The bosses agreed and soon I made the move. After leading several successful initiatives, I began to move up the ranks, ultimately finding my true calling in product development. It was also during this period that I married my beautiful wife, Mary, with whom I would have two amazing daughters, Kathryn and Lia. With my family by my side, I continued my ascent within the Ford company.
Becoming president of Ford in my forties was a dream come true for the son of immigrants. The 1960s were an incredible period for us at the company, marking the launch of the Ford Mustang and Lincoln Continental Mark III, among others. Our success continued into the 70s, but by the end of the decade Henry Ford II and I could no longer co-exist. In 1978, I was fired despite the fact that we'd netted a $2 billion profit for the year. Of course, though I may not have realized it at the time, some of my best years were still ahead of me.
"In times of great stress, it's always best to keep busy, to plow your anger and energy into something positive"
At first, being hired to head up Chrysler seemed like going from the frying pan into the fire. This venerable company was on the verge of bankruptcy, and I had some tough decisions to make. To save the company, I had to lay off some workers, sell off our European division and close several plants. And of course, I had to secure the now famous loan we received from Congress-which I paid back early with interest.
Once Chrysler was solvent, our next step was to seriously rethink the market. We realized that there was a simultaneous need for two very different types of vehicles. The first was a more fuel-efficient, "compact" vehicle (the country was in the midst of a serious fuel crisis). The second was a concept vehicle that inspired me to bring over my old friend Hal Sperlich from Ford. Together, we spearheaded development of a prototype we'd initially kicked the tires on at Ford - the minivan. The minivan was a phenomenal success, and a precursor to the SUV.
But while the early 1980s were years of great
career success, they were also ones of great personal loss as Mary finally succumbed to her diabetes in 1983. It was after her passing that we began The Iacocca Foundation to help find a cure for this terrible disease. (Since I've been retired, this has become a primary focus of my energies and I'm optimistic we may still find a cure in my lifetime.)
"Motivation is everything. You can do the Work of two people, but you can't be two people. Instead, you have to inspire the next guy down the line and get him to inspire his people"
After Mary's passing, I poured myself back into work. Chrysler continued its resurgence as the decade went along, acquiring AMC and Jeep in 1987. When I retired from the company in 1992, it was in great shape. I was 68 years old and frankly, feeling a little bored. At that point, I considered everything from public office to the Commissionership of Major League Baseball. None quite intrigued me enough to sign on, so I took the consulting route instead.
After several years of consulting, I finally and officially retired from the private sector... for a while. In 2000, my son-in-law and I launched Olivio Premium Products, a line of products made from olive oil. I finally faced the fact that I had flunked retirement. Today, I spend most of my time working with the Foundation, the Iacocca Institute, and other philanthropic endeavors. My frustration with our nation's lack of leadership propelled me to write Where Have All the Leaders Gone? I can't sit on the sidelines while this nation needs me.
"If a guy is over 25 percent jerk, he's in trouble. And Henry (Ford II) was 95 percent" -Lee Iacocca