Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Tue, Mar 17 1992 Date: Tue, 17 Mar 92 05:44:53 EST Message-ID: 03-17 0000 BONUS: GM's Eaton to succeed Iacocca USA TODAY Update March 17, 1992 Source: USA TODAY:Gannett National Information Network Chrysler passed over its own president and reached across an ocean into a rival company to find a replacement for its outgoing chairman, Lee Iacocca. The No. 3 U.S. automaker anointed Robert Eaton, 52 - head of European operations for rival automaker General Motors - as Chrysler's supreme commander in waiting. Eaton began work at 8 a.m. Monday as Chrysler vice chairman and chief operating officer. He will become chairman and CEO when Iacocca retires Dec. 31. WHAT WAS BEHIND THE ANNOUNCEMENT? After months of what analysts considered dawdling by the Chrysler board, the Eaton announcement came suddenly Monday. Just two weeks ago, Iacocca said an announcement was unlikely before Chrysler's annual meeting May 14 and said it could come as late as next fall. Fierce pressure to resolve the succession issue came from a nervous Wall Street and other investors, who have bid up Chrysler's stock price 70% since Christmas and thought themselves entitled to know on whom they are betting. WHO DID CHRYSLER STEP OVER IN ITS OWN COMPANY TO GET EATON? Chrysler President Robert Lutz, 60. He is credited for a string of potentially hot new models that could dramtically revitalize Chrysler. He was considered a strong contender for Iacocca's throne. IS LUTZ DISAPPOINTED? "Of course I am. Who wouldn't be under the circumstances?" Lutz said Monday at the announcement of Eaton's hiring. "But you don't sulk or quit when somebody else is selected to be captain of the team." He promised to stay for "as long a haul as you can when you're age 60." That was a relief to a legion of Lutz partisans among investors, lenders, analysts and car buffs. WHY ARE INVESTORS HAPPY THAT LUTZ IS STAYING? They credit him for the potentially hot new models: Jeep Grand Cherokee and Dodge Viper out next month; LH family sedans this summer; new compacts, subcompacts, sports coupes and trucks the next few years. Some fretted that if a piqued Lutz left, others key to important new models might, too - including engineering chief Francois Castaing. "A lot of brows unfurrowed when he said he was staying," says auto-industry analyst Joseph Phillippi of Shearson Lehman. "Incredibly successful new products are the only thing that's going to put cash in the till." HOW ARE EATON AND LUTZ ALIKE AND HOW ARE THEY DIFFERENT? Both Eaton and Lutz are considered car guys - executives who'd rather spend time inventing fine, fast autos filled with personality than crunching numbers. And both have experience in Europe - valued by Chrysler as an increasingly significant market for profitable Jeeps and minivans. But the two have dramatically different personalities. Eaton is low-key, unassuming, cautious. Lutz, by contrast, is high-profile, intense, a risk taker - a lot like Iacocca, in fact. He and Iacocca are said to have clashed many times, though Iacocca called those reports "crap, spelled with a big `C.' " WHY DIDN'T LUTZ GET THE JOB? Chrysler wouldn't say so, but Lutz' fighter-pilot demeanor is widely believed to have been fatal in the race for the corner office. That view says Iacocca preferred a ductile replacement who would follow the Iacocca vision for Chrysler's future. "It seemed a little like anyone but Lutz," Phillippi says. Michigan State University management professor Eugene Jennings foresees a bloody clash: "Eaton's major job will be to get control of operations, which means to move against the Lutz forces or co-opt them." Such a battle would be "an absolute tragedy," says Lutz comrade David Davis Jr., editor of Automobile magazine. WHAT IMPRESSED CHRYSLER ABOUT EATON? Eaton looked good to Chrysler because of his: Relative youth. He could run the automaker another 10 or 15 years - stability that soothes lenders and investors who are important to a reviving but still cash-thin Chrysler; Hands-off management. His delegation of authority is in sync with the team approach Chrysler believes is the linchpin of its survival. Chrysler's platform teams assign workers from all departments to a certain car or truck project, and they stay with it from concept to showroom, speeding the process and slashing costs by making nearly all decisions without consulting top executives. WHAT ELSE MADE EATON LOOK GOOD TO CHRYSLER? European experience. Eaton, a 29-year veteran of leviathan GM, says he is ready for the leaner Chrysler: "My most recent experience in Europe runs a lot like Chrysler without a lot of structure, a lot of committees or a lot of bureaucracy." WHAT DID IACOCCA SAY MONDAY ABOUT EATON? Europe was an imposing piece of Eaton's resume when Iacocca introduced him to the press Monday morning at Chrysler's Highland Park, Mich., headquarters. Iacocca praised Eaton for improving quality 50% at some European GM plants. Under Eaton, GM Europe enjoyed what Iacocca called a "a remarkable 9% return on sales" - about twice the normal return and infinitely better than lately as carmakers pile on so many incentives, they literally sell cars at a loss. WHAT EXACTLY DID GM DO UNDER EATON'S MANAGEMENT? Eaton, an engineer, took over as president of already-successful GM Europe in June 1988. On his watch, the GM unit posted record combined profits of nearly $4 billion in 1990 and '91, while GM's North American operations lost $12 billion. GM surpassed Ford as the top-selling U.S. car company in Europe, moving up to No. 3, behind Volkswagen and Fiat. WHAT'S THE DOWNSIDE OF HIRING EATON? Credentials notwithstanding, Eaton is an outsider. Hiring him instead of promoting Lutz creates "unnecessary instability within the corporation, which already has had nine people leave the executive ranks in the last two years," says analyst Arvid Jouppi of Keane Securities. Adds Michigan State's Jennings: "Iacocca's been at Chrysler more than 10 years. He had plenty of time to build a team. The fact that he went to an outsider is an admission that he's failed. ... The revolving door is going to continue swinging." ARE INVESTORS WORRIED? No. Chrysler stock closed up 1:2 at $17 1:4. Iacocca acknowledges bypassing Lutz was dicey: "I had long discussions with people at my house (Sunday). ... Key people. ... I gave them assurances. Wall Street analysts found Eaton palatable and cheered the end of the succession soap opera. Says Jay Leopold of Legg Mason Wood Walker: "It all has to do with performance, no matter who's at the top. If the new Jeep and the LH are hits, people will love (Chrysler). If they're not, it doesn't matter who's at the top." Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM