Like HowStuffWorks on Facebook!

How Chrysler Works

Robert Lutz Joins Chrysler
The 1991 Chrysler Imperial’s sales figures stagnated, due in part to the recession that struck in 1990.

Chrysler's future was in doubt in 1990. Incredibly, Chrysler was again flirting with disaster in a market turned sour once more, but this time there was no question of a government rescue. Chrysler's latest woes were clearly of its own doing.

They stemmed from a mid-'80s spending spree amid windfall earnings, mainly from minivans. Optimistically, Iacocca decided that if GM could acquire Hughes Electronics, Chrysler should buy its own aerospace company -- say, Gulfstream Aviation. Trouble was, Chrysler's purchase cost far more than GM's in relation to total assets, and Gulfstream ultimately proved of little direct benefit.

Chrysler spent billions more to acquire American Motors in 1987, landing the lucrative Jeep franchise, but assuming a mountain of debt it could ill-afford. Worse, these and other overreaching moves diverted funds that might have been better used to improve Chrysler's own products and plants. As a result, the company was woefully unprepared when a sharp recession hit in 1990, and sales, earnings, and cash reserves all dropped alarmingly.

As part of its 1980s "diversification," Chrysler split off its vehicle business as a separate Chrysler Motors unit in 1985. But this was an organizational indulgence, and it lasted only five years. In the meantime, the firm began losing the key executives who'd helped engineer its early-'80s comeback, the former Iacocca colleagues from Ford who'd been serving as presidents and chairmen of Chrysler Motors.

First to go was minivan "father" Harold Sperlich in 1988; financial whiz Gerald Greenwald and Bennett Bidwell resigned two years later. These departures ushered in Robert Lutz as president of Chrysler Motors in 1988. Three years later, he became overall president of a reunified Chrysler Corporation.

Lutz arrived in the nick of time. A knowledgeable "car guy" with top-level executive experience at Opel, BMW, and Ford Europe, he knew even better than Iacocca that consumer tastes had changed greatly and that Chrysler had to change with them -- fast. That not only meant more-contemporary, "international" vehicles but a whole new way of designing, building, and selling them.

With Iacocca's endorsement, Chrysler began shedding noncore businesses like Gulfstream while forming "cross-functional platform teams" charged with creating superior cars and trucks -- and getting them to market in three years or less instead of the usual four or five.

Under the "team concept," designers, engineers, production experts, and marketing talent would work together from day one to ensure their products were on target with buyers for features, cost, and quality. The idea was to minimize the delays, mistakes, confusion, and "turf battles" that often arise when people work on separate pieces of the same project.

The decision to produce the hot Dodge Viper sports car provided a timely opportunity to test the new approach on a manageably small scale. It worked beautifully, and the team concept was quickly adopted for all future-product programs. Chrysler also began forging closer alliances with its many suppliers by including them as members of the various teams.

With these and other departures from Detroit tradition, the company liked to say it was "reinventing" itself, hoping to become a "New New Chrysler Corporation" able to make timely, right moves to survive and even thrive in a now vastly changed automotive world. Toward that end, chairman Iacocca was finally persuaded to step down, something he'd resisted for years.

Though Lutz was the obvious heir apparent, Iacocca got in one last surprise by handing the job to Robert Eaton in early 1993. Eaton was a shrewd choice. He came directly from GM Europe, which had recently come back strong under his command, and his low-key manner made a nice contrast with the often outspoken Lutz. To his credit, Lutz agreed to stay on and give his all for the new chairman. They made a formidable team.

Of course, massive change doesn't happen overnight, so the early '90s were transition years for the Chrysler line. Existing models were kept on only until replacements were ready, which would be remarkably soon.

For more on the amazing Chrysler, old and new, check these out:

  • Chrysler New Car Reviews and Prices
  • Chrysler Used Car Reviews and Prices