In 1978, the U.S. auto industry had grown far from its entrepreneurial roots. Although modern automotive chieftains wielded power over vast corporate domains, Henry Ford II seemed to be the last of the imperial, larger-than-life tycoons.
Then, on July 13, 1978, Ford called Lee Iacocca, the pugnacious, brilliant president of Ford Motor Co., into his office. Flanked by his brother, William Clay Ford, Ford ended months of acrimony by firing Iacocca. Ford told him, 'Sometimes you just don't like somebody.'
By firing him, Ford created an industry superstar. The sacking was high corporate melodrama. It made front pages and national newscasts after scooped the world on the story. A few months later, when Iacocca re-emerged as president of the ailing Chrysler Corp., the media circus was even more intense.
Iacocca became a genuine pop star. Amid the commercials, best-selling books, Statue of Liberty restoration and presidential ambitions, it was sometimes difficult to recall Iacocca's real accomplishment: steering Chrysler away from the brink of collapse.
Today, there is criticism of Iacocca's reign at Chrysler, centering on the company's slide back into financial peril in the early 1990s. Even so, few question Iacocca's role in saving Chrysler.
'Just his presence was more important than anything else,' says David Cole, director of the University of Michigan Office for the Study of Automotive Transportation in Ann Arbor, Mich. 'He really represented hope for Chrysler.'
Indeed, restoring confidence in Chrysler was Iacocca's central challenge. The day he took the job, the company reported a third-quarter loss of $160 million, the worst quarter ever. Chrysler lost $204.6 million in 1978, followed by losses of $1.1 billion in 1979 and $1.7 billion in 1980.
The red ink came as Chrysler thought it had a turnaround product: the front-wheel-drive K car. After the cars became a success, Iacocca was frank about their parenthood. The K car is sensational, he wrote in his autobiography. 'It's OK for me to brag about it; I arrived at Chrysler too late to play much of a role in its creation.'
Iacocca's contribution was finding the money to bring the cars to market.
Chrysler's bankers were wary of losing loans in a bankruptcy filing, much less making new loans, recalls Law-rence Gardner, then head of the City National Bank of Detroit's national lending group.
'Money was really needed for working capital,' Gardner said. 'But the banks were not in a situation where they really wanted to lend.'
Gardner, now the head of Lawrence Gardner Associates, a Troy, Mich., consulting firm, recalls attending a meeting at which Iacocca was introduced to bankers. By chance, he sat at Iacocca's table and was impressed by how quickly Iacocca captivated his tablemates: 'He was one of the most charismatic people that I've ever met.'
Iacocca would need all his charisma and fabled salesmanship. To get the money to build the K car, he had to lure two well-regarded Ford financial people - Steve Miller and Gerald Greenwald - to Chrysler. Most grueling of all, Iacocca lobbied Congress and President Carter to win federal backing of loans in the $1.5 billion Chrysler Loan Guarantee Bill, passed by Congress in December 1979. Chrysler triumphantly paid back the loans in 1983, seven years early.
Gradually, the new team plowed through the mass of problems. It ended an inefficient production system that sent cars into a 'sales bank' rather than gearing output to dealer orders. Staff cutbacks reduced Chrysler's break-even point from 2.4 million cars per year in 1980 to 1.1 million in 1982. It sold non-core assets.
As the U.S. economy emerged from the deep recession of the early 1980s, Chrysler got well. And Iacocca was a star.
His 1984 autobiography rode to the top of best-seller lists. The mixture of car-guy tough talk, gossipy details about 'that evil man' Henry Ford II, complaints about Japanese trade and inspirational homilies launched Iacocca into mainstream celebrityhood. That, according to critics, is where Chrysler's next round of troubles began.
As Iacocca became involved with activities like the Statue of Liberty renovation and marketing wine from his villa in Italy, Chrysler strayed from its disciplined approach. As Paul Ingrassia and Joseph White put it in Comeback: The Fall & Rise of the American Automobile Industry, '. . . After earning $2.38 billion in 1984 and $1.64 billion in 1985, Iacocca and his underlings had so much cash that they didn't know what to do with it all.'
Iacocca resumed quarterly dividends and bought back stock. Then he began a string of acquisitions, buying Gulfstream Aerospace Corp., FinanceAmerica, Electrospace Systems, Lamborghini and American Motors. The tab: $2 billion.
That diversified empire was meant to protect Chrysler from the industry's economic cycles - but Chrysler had raised its break-even point to 1.9 million vehicles.
The company also stumbled in product decisions. A venture with Maserati to build a coupe lost $400 million. And continual reuse of the basic K-car body and drivetrain put Chrysler behind the curve.
Ingrassia and White peg the total of Chrysler's acquisitions, stock buyback and money-losing projects at $4.85 billion.
Still, Chrysler was not without strengths. The minivan helped it through the second crisis.
But the future again looked shaky. Iacocca initiated talks to sell the company to Ford and Fiat. Chrysler was forced to develop a lean, team-based production process and keep costs down.
As Chrysler rebounded again, its board of directors became anxious to find a successor to Iacocca, who turned 65 in 1989 and seemed in no hurry to depart. Finally, in 1992, Robert Eaton, the head of General Motors' operations in Europe, was brought in and Iacocca was discreetly shown the door.
Iacocca exited to a chorus of accolades. But there was to be an unpleasant sequel: In 1995, Iacocca shocked the nation by joining financier Kirk Kerkorian, Chrysler's second-largest shareholder, in an attempted takeover of Chrysler.
Kerkorian and Iacocca wanted to put much of the company's $7.3 billion cash reserve into the hands of shareholders, particularly themselves. The takeover effort was rebuffed by Eaton - although the dispute lingered until February 1996, when Chrysler and Kerkorian's firm, Tracinda Corp., reached a truce.
Iacocca was required not to comment publicly about Chrysler for two years. He received $53 million - $21 million from Chrysler and $32 million from Tracinda - in return for dropping his lawsuits over canceled stock options.
The takeover bid made Iacocca persona non grata at Chrysler. And it cost him his reputation. Automotive News Publisher Keith Crain wrote, 'Now Iacocca has stunned the world again. And in the blink of an eye, he destroyed all the goodwill that he built over almost five decades.'
Iacocca's saga was irresistible. Successive authors pondered the contradictions of the man himself: the ethnic outsider who became an agile corporate climber, the engineer with a genius for marketing, the common folks' hero who savored perks, the media phenomenon whom friends described as shy.
But Iacocca's latest contradiction was a sour one: the corporate savior bitterly estranged from the company he rescued. *
Dave Guilford is managing editor/special projects of Crain's Detroit Business, a sister publication of Automotive News.