BOOM & BUST: THE CHRYSLER STORY

Egos collide; Iacocca spurns 'disrespectful' Lutz in CEO derby

1991 - 1994

Bob Eaton, left, Lee Iacocca’s handpicked successor, poses with Bob Lutz and the Prowler.
By his 67th birthday on Oct. 15, 1991, Chairman Lee Iacocca had pretty much done it all in 13 years at Chrysler.

Saved it from bankruptcy. Made money selling a dozen flavors of K cars. Repaid government-guaranteed loans early. Turned a rejected Ford project — the minivan — into a breakthrough product and profit machine. Sold the faltering European operation to Peugeot. Bought American Motors and its jewel of a brand, Jeep.

Once-broke Chrysler was vibrant and poised to become highly profitable as a series of innovative vehicles reached production.

Now it was time to find a successor. For all its gratitude and deference to Iacocca, Chrysler's board was signaling it wouldn't waive its mandatory retirement age policy again.

Iacocca clearly relished holding the reins of power at Chrysler and the spotlight it brought. Reluctantly, he began the search for his successor.

Although several other names circulated as potential candidates — Chrysler CFO Jerry York, entrepreneur Roger Penske, Chrysler Vice Chairman Steve Miller before he left for Wall Street — by early 1992 the most logical candidate was President Bob Lutz.

Camelot years

With Iacocca's support, the Swiss-born Lutz created product development teams of engineers, designers and marketers — experts drawn from a variety of corporate operations. The teams minimized bureaucratic infighting, saved money and brought products to market months quicker.

As the first of these models — the Jeep Grand Cherokee SUV and the LH trio of mid-sized sedans — arrived in 1992, so did profits.

In 1992, Chrysler earned $723 million. And starting in 1993, operating profits soared into the billions.

Iacocca gave Lutz broad authority to run the auto business. Platform team members under Lutz call the early 1990s "the Camelot years," said one engineer who was there. "Iacocca let Bob run wild," he said. "We had a ball."

But there was a problem in Camelot. Iacocca and Lutz detested each other. Two huge egos had a hard time working in the same executive suite. Lutz called Iacocca a "doddering old fart," wrote Paul Ingrassia and Joseph B. White in their 1995 book, Comeback: The Fall and Rise of the American Automobile Industry.

Iacocca considered Lutz, but just couldn't do it. Instead, after a courtesy call to General Motors Chairman Bob Stempel, he approached outsider Bob Eaton, an engineer who was then head of GM's European operations.

Pivotal choice

After a brief courtship, Eaton was named Chrysler's vice chairman on April 26, 1992. He took over as chairman and CEO on Jan. 1, 1993.

Iacocca's choice was pivotal. Lutz and Eaton had far different visions of Chrysler's future.

Lutz, who stayed at Chrysler until 1998, thought Chrysler should stay independent. Eaton, after fighting off a 1995 buyout bid, believed Chrysler was too small to survive on its own.

Just before Lutz retired from Chrysler in 1998, he shared dinner in Ann Arbor, Mich., with Peter Brown, then the editor of Automotive News and now editorial director, and reflected on his relationship with Iacocca.

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

You can reach Jesse Snyder at jsnyder@crain.com

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