Can Iacocca Do It Again?

By S.C. GWYNNE

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.

With reporting by John F. McDonald/Washington