FROM OUR ARCHIVES: Before takeoff, a pilot gives advice, analysis

Originally published: June 22, 1998

Elegant and brash. An international businessman and an American car guy. Self-absorbed and yet self-aware. And always very human.

Chrysler Corp. Vice Chairman Robert Lutz is a commanding figure in the world auto industry, for both his business successes and his big personality.

On the eve of his retirement, Lutz talked with Automotive News Editor Peter Brown over dinner at a quiet restaurant in his hometown of Ann Arbor, Mich. Here are highlights:

What are you going to do starting July 1?

I had hopes that the sale of New Venture Gear could be consummated and I was going to be part of the group that bought that. That didn't work out because of labor reasons.

So at this point it's uncertain, but all of the options are pleasing to me.

A lot of people would think that Bob Lutz making transfer cases would be a waste of 'car genes.' You're thought of as a guy who knows what kind of cars people want to buy.

In a way, I almost think that's a bum rap, because on the one hand, I enjoy the reputation for having a feel for what people want. But on the other, it makes me very angry that people say, yeah, well, he's a great product guy, but let's let somebody else look after the business. I am extremely tough on the business side.

Do you want to be known as a businessman ...

No, it's too late.

... or a great car guy?

Ideally, you'd like to be known for both. But if it's pick one, I suppose I would like to be known primarily as a creative person. But that doesn't mean you don't regret not being equally respected as a person who's very tough on costs, very much in favor of lean organizations and frankly was always pushing the sales and marketing people for pricing wherever the opportunity occurred. Because the alpha and omega of this whole business is margins. Frankly, I always pushed for margins.

At Chrysler, how much do you care about what consumer research says?

I think some companies have the philosophy of: Let's go research everything and then try to develop a product out of this mass of research data. We go the other way. We sort of say, hey, we've got this great idea for an all-new product category that nobody has done yet, or an all-new styling philosophy, as we did with the Ram pickup. And let's do it, and then research it and see who likes it and who hates it, why they like it, why they hate it, and we may have to make some modifications.

How do those decisions get made at Chrysler? Who gets to be the mad genius who says, 'Let's do this crazy Ram pickup truck that on first sight will scare people'?

That has to be a top management process where your designers and your other creative people feel absolutely free to serve up stuff that scares top management. And sometimes they don't scare us enough.

I mean, we had a process on the new LH-series cars where the first few go-rounds, Bob (Chairman Bob Eaton) and I looked at the cars and said, 'Not far enough. Not enough difference from today's car.'

What advice would you give to your successors at Chrysler or at DaimlerChrysler to see that product freedom continues to be there? Because it doesn't just happen.

My advice to both would be to focus on the strengths of the other and try to make them your own. But do not ever try to make the other company conform to your own image. I think Daimler can benefit from Chrysler's expertise in rapid product development, intuitive thinking, etc. Chrysler can certainly benefit from the solidity, that tradition, and frankly from a lot of the parts bin of Daimler-Benz.

Let's go back to 1992. You learn that Bob Eaton is coming in to become chairman of Chrysler. It's my opinion that in some ways that was the best thing that ever happened to you as a human being.

You're probably right. I had obviously had ample preparation for the fact that (Chairman Lee) Iacocca wasn't going to anoint me as chairman, so my expectations had been reduced to the level of 'I hope it's somebody I can live with.'

Frankly, one of the things that played in my mind was, hey, wait a minute, the guys and I have put in so much effort to turning this thing around that I'm not going to quit and let somebody else take the credit.

Was that the best part of your career?

Yeah, I'd say the best job I ever had was being president and COO of Chrysler, under a guy like Bob Eaton. If I had been under a dogmatic control freak who wanted to do everything himself, it wouldn't have been anywhere near as much fun.

What was the problem with you and Lee Iacocca?

I think it was basically two things. One, I had profound business disagreements with him on the diversification strategy. I felt very strongly that we were better off focusing ourselves on the automobile business.

That was part of it. Another part was I think I was unnecessarily provocative and at times disrespectful and probably guilty of a cardinal sin, which is to not show solidarity with the officially appointed leader.

What was your favorite Chrysler product program?

I would have to say it was the original LH program. That was the first program where everything came right. Cost. Investment. Product attributes. Breakthrough styling. The product program that was the most significant in terms of marking Chrysler's turnaround from being a marginal producer on its way out to being a respected automobile company was the '93 LH program.

Was there a moment at which you and some of the guys smiled and said this is starting to feel good again?

Yeah. That was very early on. That was way before the press got it and Wall Street got it. I would say as early as late 1989. The year we showed the Viper prototype at the Detroit auto show and everybody went crazy over the Viper. We knew then even if we ran out of money, we could bring in investors and show them what we had in the pipeline and they would say we can't let this go to waste.

How did Lee Iacocca recruit you?

I had written to him after his departure from Ford and I think it was one of the nicer letters he had received.

When I went back to Ford of Europe, I felt that I was going back under a cloud, and I'm going to get that place straightened out and demonstrate that the situation wasn't due to any lack of business acumen on my part.

I gave it the two years at Ford of Europe and sure enough turned it completely around.

That's when I called Lee back and I said, 'Hey, I've proved what I wanted to prove. I believe I have rehabilitated myself in the eyes of the Ford Motor Co. hierarchy. I don't believe I'm ever going to make president or chairman here' - which in the fullness of time I now think I probably might have. If you look at the way succession stacked up and who left and who didn't, I might have. And Iacocca made a firm offer and I went to Chrysler.

Is there any chance that in retirement you will be a European?

No. Fundamentally, I spent my teenage years in the U.S. I served nine years in the U.S. Marine Corps. Patriotically, I feel American. I love Michigan. I have a wonderful home here in Michigan, and anything that would trigger a change in location would be out of the question. I am not going to leave Michigan. No way.

What advice would you give to a young engineer or young marketing person entering the car business?

If you don't care about cars and trucks, and you're viewing it purely clinically as 'something to do,' forget it, because you're not going to be successful. You should be passionate about the product. You should really care. You should be willing to be angry if the company that you are working for is not producing the best product that it could. You should never be fearful about speaking up.

Ultimately, the person who speaks up not only does the best for his company but also does the best for his or her career if he or she does it in a polite and nondestructive way.

Disruptive is OK. Destructive is bad. I didn't always get that balance right in my career. At times my criticism of the company that I was working for, its products and its senior management and its philosophy, went beyond being constructive and probably in the eyes of the management at the time became destructive.

What's changed in the business since you started?

When I started, it was the dominance of the Big 3.

What's changed is the feeling of absolute dominance of the American way of life. The American way of doing things. The American car ethic. Then, from viewing ourselves as kings of the world, we went into a phase of viewing ourselves as the rock bottom of the world.

The rock bottom, would that be 1989-92?

That's when not only we but also the press and everybody was saying, well, the American car business is done for. I think that's when we finally as an industry came to grips with the fact that, hey, we're not only not the best, we're not even average. We're probably the world's worst right now.

Now, I think in the business we have learned the value of leanness, of speed.

This last decade of my time in the American automobile business has been the decade which to me is the most satisfying because it's the decade where everybody has shown the most willingness to admit that we don't know everything.

And yet it's 1998 and America owns the world ...

We may own it because I think our system of brutal market capitalism does cause the fittest to survive. Japan had a very closed mercantilistic form of managed capitalism, which for a while looked like it was going to dominate the earth.

Like many people predicted, even some Japanese intellectuals predicted, it ain't going to work long term. And guess what? It didn't.

But the economy became dominant, too.

That's because of the unflinching belief in the fundamental rightness of our philosophy. We won the economic war by hanging in there and believing in market capitalism, not believing in a managed economy.

Nothing is forever, but right now I think we've defeated Japan.

Describe the auto industry 10 years from now. DaimlerChrysler is a really critical event. It whacked the notion of nationality. Are we going to see things like DaimlerChryslerNissan 10 years from now?

Yeah. I think we are going to see a new era where nationality is no longer a barrier and where it's economic realities that drive mergers as opposed to nationalities.

I would say that DaimlerChrysler has established a model. There are going to be others. I think it's a good thing.

If you envision a world 10 years from now that's linked by a single capital market, where the so-called SEC regulations are the same all over the world, where capital flows freely and where companies can link up between Asia, the former Soviet Union and the former Eastern bloc, Europe, Latin America - you can create these combinations which are not only best for shareholder value, but ultimately best for the consumer.

I think that is a great vision for the future. Business has always been ahead of the politicians. The United States as an economic entity was probably driven by businesses starting to do business across state lines when the politicians were still fighting.

I lived through it in the European community. Business started taking advantage of the European market, and it was businesses in Europe that made Europe Europe.

The politicians sort of belatedly followed because the businesses already created the reality of the united Europe 10 years ahead of the politicians.

This is again business reason driving political reason. And it's a good thing, because a world that is all linked by businesses -how are we going to make war?

I have the same theory. Commerce makes for a civilized and civil world.

I think it's the driver. I think world peace is too big an issue to be left to the politicians.

Tags: Bob Lutz

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