Back on the Fast Track

By William McWhirter/Detroit

Quiet, please. The new generation of power in Detroit is at work.

When Alexander James Trotman was named chairman of the Ford Motor Co. in October, there was no flourish or fanfare, not even a prior announcement. He was handed the keys to one of the largest and most powerful corporate kingdoms on earth in a small, no-frills gathering at the company's plant in Dearborn, Michigan, almost as an afterthought to the introduction of Ford's new Mustang. At General Motors 11 months earlier, affable, unassuming Jack Smith landed just as unceremoniously in that company's top job. Following the virulent boardroom coup that ousted his predecessor, chairman Robert Stempel, and most of his top executives, Smith ascended with no ritual at all, and settled down to business at the world's largest industrial corporation so quietly that he has seldom been seen or heard from in public since. At Chrysler, Bob Eaton owed his job to another noisy boardroom battle to persuade Chrysler's miracle worker Lee Iacocca that it was time for him to retire. After the dust settled early last year, Eaton drove up alone at 7:30 a.m. to Chrysler's factory gates in Highland Park, Michigan, in a new Grand Cherokee sports van, introduced himself to a plant guard and rolled through to work. Since then, Eaton has adopted Chrysler's informal team structure as if it were his own, pushing it along with the enthusiasm of a jolly and bookish college preceptor.

Such a modest and self-effacing style has not always been characteristic of a town that is better known for the flash and brassiness of its bosses, with cuff links the size of silver dollars and stogies the length of private yachts. Although few people outside the industry know their names, the three men who have ascended to power at GM, Ford and Chrysler within the past year have been working hard to accomplish what many said Detroit could never do: reinvent itself and profitably build cars that can stand bumper to bumper with the best the Europeans and Japanese have to offer. After two decades of spectacular management blunders that resulted in job loss on a Homeric scale, their success or failure is a legitimate test of the ability of American manufacturing to compete against the rest of the world.

A revolution in engineering, manufacturing and management has been proceeding in fits and starts since the mid-1980s at all three companies. Now it is finally starting to work. The evidence is found in a new generation of products: cars like Chrysler's white-hot LH sedans and Ram pickups, Ford's Taurus, Explorer and Lincoln Mark VIII, GM's Cadillac STS, the new Chevy Camaro and the Honda- and Toyota-killer Saturn.

For a change, Detroit is having a good year and is enjoying it largely at the expense of the once indomitable Japanese competition. The Big Three's sales have risen against Japanese automakers for the first time in a decade: U.S. cars posted sales increases of 10.7%, twice those of the Japanese carmakers. Fully 76% of Americans now say they are more likely to shop for an American car than they were five years ago, according to a TIME/Yankelovich poll this week.

Contrary to all expectations, the U.S. has become one of the world's lowest- cost producers of cars, thanks mainly to a decade of ruthless job cuts, large investments in technology and the ever widening gap between dollars and yen. One result: profits are returning. So far this year, all three companies have posted gains for the first time since 1984, and sales next year may break through the 15 million-unit barrier. All told, GM's Smith estimates, the recovering industry is now strong enough to add 1 1/2% -- $20 billion -- to the nation's gross domestic product in the last quarter of this year.

"It's been a long time, but you always thought of the U.S. auto industry as the engine of economic recoveries in the 1950s and '60s," says Smith. "I think we could be that kind of locomotive again."

That is an inspiring thought, barely imaginable even a few years ago when Detroit was mired in the worst economic crisis in the history of the auto industry. Collectively, the Big Three carmakers share the unholy distinction of having lost more money in the past three years in the core North American market than they made there throughout the entire 1980s. By the end of this year, their losses will have reached some $51 billion -- more than $38 billion at General Motors alone.

GM has been so badly gutted by those losses that its U.S. business last year actually had a negative net worth of $5.7 billion, an alarming figure that not only precipitated former chairman Stempel's fall but caused some of the company's directors to seriously consider taking the giant corporation into bankruptcy as late as 1991. Chrysler nearly went bankrupt twice: once with great fanfare and publicity in the early 1980s, and once quietly and painfully in the early 1990s. The K-cars and minivans (and a government bailout) saved Chrysler the first time, and the LH cars the second. Ford survived the near collapse of its automotive business in the 1980s and has seen its market share steadily recover since 1990. Even Ford's financial resources could not protect the No. 2 automaker from a $9.3 billion loss over the past three years.

But the critical state of the industry's finances may not have been the worst of its problems. Detroit's real enemy is its past, in an old and dying industrial culture of family intrigues, power struggles and near feudal domains. In the auto industry's view, the Big Three did not lose momentum and market share; the hypercompetitive Japanese carmakers stole them. This form of corporate denial persisted in much of Detroit until just a few years ago.

"I thought they were a bunch of Neanderthals," says John McTague, Ford's vice president for technical affairs, who was offered that job in the mid-' 80s, while serving as President Reagan's science adviser. "They were in trouble, they were way behind the technological curve, they didn't have a hell of a lot of future and they deserved themselves. These guys were a bunch of losers. The U.S. auto industry was the kind of place you didn't want to be." Says GM's executive vice president Bill Hoglund with a candor that would have buried his career under earlier GM regimes: "There were few honest bones in the industry. There was no debate, no discussion, no nothing -- just knives and backsides."

While its management dithered, the market share of the U.S. car industry slid from a pre-eminent 80% in the late '70s to a low of 63% last year. Along the way, plant closings and other layoffs took a horrific toll. GM let go 40% of its hourly work force in the '80s, and Ford trimmed 14.4%. Following its merger with AMC, Chrysler's work force dropped 22.6%. While all that was happening, the industry continued to find ingenious ways to blame almost anyone else -- government regulators, environmental fanatics, unfair trading practices and even fickle customers -- for its own failings. Defects? Detroit didn't want to hear about them. David Power, head of J.D. Power Associates, whose surveys of quality and customer satisfaction are the most respected in the industry, attempted to outline his ways of measuring new-car defects at a Detroit automakers' conference in 1980. While his family watched, he was booed, jeered and heckled as a meddling outsider. "The hostility of the crowd was just unbelievable," Power says today. "In another century they would have burned us as heretics."

To be sure, the turnaround did not start yesterday. Its roots lie in the extraordinary hard times of the 1980s, which forced U.S. automakers to change. Through remorseless cost cutting, improvements in manufacturing technology and astute plant management, Ford had turned itself into a lean, global competitor by the late '80s with innovations like the aerodynamically styled Taurus family of sedans. GM started Saturn as an experiment to see if America could build a competitive small car. The fully unionized plant in Spring Hill, Tennessee, which began producing cars in 1990, has succeeded in turning out exciting, loaded-with-options vehicles and less-than-shocking sticker prices. So far this year, sales are up 21%. None of the industry's fledgling efforts could match the way Chrysler did it. Under Iacocca, Chrysler jettisoned virtually every shred of its old management system. In its place the company assembled the best (even if youngest) designers, engineers, builders and product planners, put them together in platform teams and, heresy of heresies, trusted them to make most of their own decisions and create the cars. "It's just the way we started building cars at the turn of the century," says Chrysler's chief engineer, Francois Castaing. "Maybe 600 or 750 technical people in small teams in a hangar, building five or six models at a time. You wouldn't believe how happy that makes people."

The firstborn of the new system -- Chrysler Concordes, Dodge Intrepids and Eagle Visions -- made their debuts in October 1992. These so-called LH cars, Chrysler's first all-new vehicles in more than a decade, drove the corporation away from its dated, budget-price lines and into the elite automotive company of some of the best nameplates in the world -- Ford's Taurus, Toyota's Camry and Honda's Accord. The radical cab-forward design and high-quality ratings of the LH cars made them instant hits; 138,723 units were sold through the end of their first model year.

Eaton, 53, Trotman, 60, and Smith, 55, each spent his entire career within the auto industry. Still, they were unconventional choices for its top jobs. None of them fitted the mold of the clubby headquarters men who filled the executive suites before them. Detroit's three new CEOs have begun to introduce a similar management style into their very different corporate domains. Modesty, humor (especially of the self-deflating variety), open discussion, candor and team play are all in. Pomp, protocol, pretension and paperwork are distinctly out.

Ford, for example, a company traditionally more comfortable with the patrician styles of Ford's own family princes, had never seen the likes of its new chairman. Trotman has forged his career by going against the patrician grain at every opportunity. As a product manager at British Ford in the late 1950s, he made his first mark by taking on the senior engineers to develop its Cortina, which became one of its most successful product introductions ever. Raised in Scotland, the son of a carpet layer and upholsterer and the only non-college graduate to hold the top position, Trotman is better suited and % more polished these days. But he still likes the rough-and-tumble of an honest working-class spat, almost fondly recalling the good brawls in Britain. "The manufacturing guys were terrifying people," he says with a trace of a burr. "They were barons who would throw you out of the plant if you went in there without permission. Literally. So there was always a culmination of salesmanship, pragmatism, persuasion and logic -- but lots of punch-ups, lots of tempers. Oh, yes, absolutely. Lots of it."

Trotman says he hasn't changed much. "I have a very low tolerance when the key issues are being debated," he says. "I don't like mystery. I'd like to have everyone's cards on the table and get dissent and debate out of the way before we move. After that, we go, we don't look back. We all go for it, very straightforward and simple." After being formally named Ford's chairman and moving into the paneled corner suite on the 12th executive floor of the Dearborn headquarters building known as "the Glass House," Trotman turned to his secretary and asked his first question: "Is there a reason why I should ever have lunch in this building?" One of his first executive decisions was to simplify his name: Alexander became Alex, and the middle initial (J.) disappeared.

To understand Trotman's management style, look at the Mustang. To save the company's new muscle car from the scrap heap -- a mission he took on as a personal project -- he allowed free reign to a skunk-works operation where teamwork and cooperation replaced procedures and hierarchies. One innovation that might never have fitted into an organization chart: putting engineers and computer designers into the same test cars just to keep their very different technical worlds focused on the real product. Trotman and other key Ford executives checked up on the Mustang project in after-hours visits by the back door instead of formal briefings.

Few in Detroit gave Eaton's succession at Chrysler much chance at all. A career GM man, he had spent his recent years in Europe, well away from the turmoil and strife that had gripped his industry's hometown. He was something of a shotgun compromise in Chrysler's boardroom showdown between Iacocca and president Bob Lutz, and in the view of some skeptics, mainly lucked out in grabbing the prize after all the hard work had been done. Eaton arrived alone, brought in none of his deputies (not even his secretary) and fired no one. In Chrysler's recent history, it was a sure sign of either meekness or madness.

Eaton could have easily become the short-term resident that many expected, including those young tigers who had devoted themselves to Lutz's leadership. Eaton stayed, and not incidentally, so did Lutz, becoming a team that has healed the rift and continued to build on the company's momentum. Eaton turned out to be a morale-building coach among a number of individual stars. "I don't believe in one-man shows," says Eaton. "But my style is very, very persistent in pushing for things I think are right. I was surprised at how far along everyone was toward working as a team. That's exactly my style."

No one personifies Detroit's new culture more engagingly than GM's Jack Smith, who has dispensed with nearly all the trappings of solemn power collected by his predecessors, including the dining room. He has even dropped the chairman's Christmas speech, once beamed to GM's faithful around the world. A senior executive says one reason may be the unforgettable scene in the cruelly funny film Roger and Me of Roger Smith reading from Dickens' A Christmas Carol while autoworkers were being evicted from their homes in Flint, Michigan.

Instead of closeting himself in his corner 14th-floor suite in Detroit headquarters, Smith spends most of his 12- and 14-hour days in his modest office at GM's technical center in Warren, 15 miles away. His goal is to convert the research center into the core of GM's new-product operations by bringing together such specialists as chassis, brake and electrical engineers to form platform teams for launches.

Though his task is awesome and he clearly has a very long way to go to clean up the world's largest and most stultifying corporate bureaucracy, Smith's management style is already showing through. The General Motors that used to trumpet each minor fix in its operations as if it were the second Industrial Revolution is reinventing itself with little fanfare. Smith has slashed the number of bureaucrats at GM's Pentagonian headquarters from 13,000 to fewer than 2,000. "There were duplicating functions all over the place," he says. "Basically, they were just checking up on what was going on elsewhere."

Another Smith innovation: "creativity teams." These relatively small groups of 4,000 comprise younger managers across the company in more than 300 areas, from flywheels to door handles, and are charged with coming up with new ways of thinking about such things as prices, quality and worldwide purchasing. Says Bob Burkhart, a senior purchasing executive delegated by Smith to oversee the creativity groups: "Whenever we used to see a roadblock, we'd hide, duck or find a way to do other things and not get beat up. Now our youngest people are being empowered to challenge the status quo."

Smith bluntly concedes that GM is starting out well behind the rest of the Detroit pack. "The problem was never the people," he says. "It was the screwed-up structure we had. We had to change it. It took us years to understand that. You go through a denial phase. Ford went through its own changes a lot earlier than we did, and is very good today. Chrysler really went to the wall and got its act together. We had a history I'd like not to repeat. Now we'd like to get this baby fixed."

The U.S. industry that once took its lumps together is now finding common cause in areas from public policy to jointly financed advanced research. Ford's McTague, Chrysler's Castaing and their GM counterpart, Arvin Mueller, meet monthly for private dinners in Detroit, overseeing their joint-research programs under a consortium called USCAR, which invests $300 million annually (including $75 million in federal grants) in a range of projects including advanced batteries for electric vehicles, lightweight composite materials for better fuel economy, and environmental improvements on paint and fuel emissions and recyclable parts. No project is more ambitious than the agreement, announced in October, to share with the U.S. government the 10- year, $1 billion development costs of new ultralight, low-pollution vehicles.

The three chief executives have also begun holding private dinners once a month, covering mostly trade and political issues (almost anything, in fact, but pricing). Such collegiality would have been unthinkable in the past, mostly because it would have invited a federal investigation into price fixing. Says GM's Hoglund: "The cooperation symbolizes a whole new era of cooperation. Because of the personalities and government suspicions that existed in the past, we were conditioned to not even risk it. Now we are basically testing it all the time."

The new spirit includes meeting with President Clinton, Vice President Gore and other officials of a surprisingly friendly Administration. The recent alliances are a curious reversal of habit: the Americans, who watched Japanese carmakers bust up their market dominance, are countering that assault by building very Japanese-like bonds among themselves and with their government. "The three of us have had more direct contact with this Administration in the past nine months than existed for the past 12 years," says Eaton.

Chrysler president Bob Lutz says competition among the Big Three is no longer aimed solely at creating distress or celebrating the misfortunes of their rivals. "Many of us are at the point where we celebrate each other's successes. We were pleased to see Cadillac's Seville come out as an American luxury car that can hold its own against the best of the imports. Many of us were pleased with Saturn. I know Detroit executives were pleased when we brought out the Viper ((high-powered sports car)). It was, goddam, that's great."

The Big Three are also beginning to score some solid gains in the crucial areas of product quality and customer satisfaction. Although U.S. manufacturers as a group still lag the Japanese some 22% by such measurements as defects per new car, they are rapidly closing the gap. Nine of the top 10 quality-ranked vehicles in the J.D. Power survey remain Japanese, but seven of the 10 most improved vehicles are U.S. brands. Ford Ranger pickups, to take just one of many examples, are 32% better than the models they replaced. At GM, Smith has instituted railhead inspections of cars after they leave their assembly plant. These quality checks nearly doubled the start-up times for GM's new products this fall, causing delays in dealer deliveries that numbered in the tens of thousands. Says Ronald Haas, who has become Jack Smith's point man on quality and reliability: "No one will remember how many vehicles GM turned out in September, but everyone will remember the quality of the one car they bought."

Detroit's sales charts are starting to look healthier. The U.S. companies are being helped by improved products, a price advantage of 16% against Japanese rivals because of currency differences, and the fact that so far both European and Asian competitors have almost entirely missed the fastest-growing market segment of all: vans, trucks and sport-utility vehicles. In the past decade, although car sales have been 30% off their 1985 peak and have suffered two of their poorest years since the 1960s, the truck and van market has exploded to 60% of car sales.

Over the next two years, the Big Three will bring out about 26 new models. Among them: Oldsmobile's four-door luxury sedan, the Aurora -- the industry's first direct aim at the Lexus -- and Ford's front-wheel-drive minivan, the Windstar. But each American automaker still has tough work to do. Chrysler must overcome a reputation for spotty quality; Ford must pump up its profit margins after years of cutting prices to increase volume; and GM, of course, must find ways to turn out new products and restore solid profitability at the same time.

To stay on the fast track, U.S. carmakers must not only win back former customers at home but also enter the much faster-growing markets abroad, particularly in Latin America and Asia. Markets such as China could explode from 5 million vehicles to 40 million in another decade. Ford's exports this year have already grown 68% to Latin America and 283% to Asia and the Pacific. Ford and GM remain the second- and fourth-ranking manufacturers in Europe, the world's largest car market -- where Ford introduced its $6 billion compact Mondeo this year -- while Chrysler exports a small number of vehicles. However, Europe and the U.S. are the most saturated car markets and therefore have less margin for growth. By the end of the decade, the U.S. will account for only 25% of the 10 million growth in new vehicles worldwide.

Once again, Chrysler made the first and most impudent move in the global direction. It introduced its newest small car, the Neon, not in the U.S. but at the Frankfurt auto show in September. There was much that attracted notice and respect: a small car with dual air bags, antilock brakes, a top speed of 125 m.p.h. and the interior space of much larger cars; and it was built from start to finish in a near record 31 months. The home team from Chrysler's two- year-old, $1 billion Auburn Hills, Michigan, technical center was understandably proud of its package but was also ready to give credit to the U.S. industry.

"For too many years," said Bob Lutz in the speech that launched the Neon, "it was said that Americans can't innovate, that they can't build great engines or truly exciting cars or great small cars. That is changing everywhere in Detroit, and it is definitely changing at Chrysler."

David Power, the quality critic Detroit almost rode out of town just 13 years ago, has also become a believer. "The industry was a laughingstock only a few years ago," he says. "But the U.S. automobile industry is going to be a leading example of what can be done in delivering quality products to satisfy the customer."

The newly crowned three kings of the American road intend to steer Detroit in the right direction. "For guys who love cars," says Glenn Gardner, the engineer who launched Chrysler's first platform team, "there's nothing greater than seeing the first cars come off the line, chunk, chunk, chunk, and be letter-perfect." Gardner blows a little victory kiss in the air. Chunk.

CHART: NOT AVAILABLE

CREDIT: From a telephone poll of 500 adult Americans taken for TIME/CNN on Dec. 2 by Yankelovich Partners Inc. Sampling error is plus or minus 4.5%.

CAPTION: Which country makes the best cars?

Compared with five years ago, are you more likely now to shop for a car made by a U.S. company?

Has the quality of cars built by the U.S. companies improved or declined in the past five years?

CHART: NOT AVAILABLE

CREDIT: [TMFONT 1 d #666666 d {Sources: Ward's automotive Reports, American Automobile Manufacturers Association}]CAPTION: GOOD YEAR ON WALL STREET

TURNING THE CORNER

With reporting by Joseph R. Szczesny/Detroit