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July '03
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Leadership
The Saga of Lee Iacocca: from Ford to Chrysler
- P Mohan Chandran
The case discusses the leadership qualities and management style of Lee Iacocca
and how he transformed a near bankrupt company, Chrysler, into one of the
leading automobile manufacturers in the world. The case discusses at length the
major achievements of Iacocca at Ford Motors and Chrysler, and critically
examines the positive as well as negative aspects of Iacocca's leadership.
Iacocca's speeches are often blunt and humoros; they're always interesting and
delivered in a unique style. Iacocca is a master at turning a phrase. He is one of
the best communicators on the American scene.
- Douglas Fraser, President Emeritus, United Auto Workers; Professor of
Labor Studies, Wayne State University.1
Iacocca was honest, shared the power and glory of Chrysler's success with the
workers and went on to challenge the graduating seniors. He knew his audience
and appealed to them. His integrity and values came across loud and clear. He
gave inspiration to the graduating seniors to get out there and give it your best
shot.
- Stan Kahn.2
In 1982, Lee Iacocca (Iacocca), the then Chairman and CEO of Chrysler was
presented with the `Automotive Industry Leader of the Year' award 3. This award
was instituted for the first time in 1982 and Iacocca became its first recipient.
Soon after in 1984, Iacocca also won the Ralph Coats Roe Medal. The medal
recognized the exceptional contribution of an engineer towards better public
understanding and improving the standard of society. In 1994, Iacocca was
inducted into the coveted `Automotive Hall of Fame'. The Automotive Hall of Fame
was the highest place of honor accorded to the achievers in the global automotive
industry.
According to Jeffrey K Leestma, President of the Automotive Hall of Fame, "The
honor is bestowed each year to the individual who best exemplifies the image,
foresight, leadership, integrity and purpose contributing most to the success of the
motor vehicle industry." 4
These awards and recognitions stand testimony to Iacocca's invaluable
contribution to the automobile industry. In his 32-year stint at the leading global
automobile giant, Ford Motor Company (Ford) and 14-year stint at Chrysler
Corporation (Chrysler), Iacocca played a major role in introducing several
innovative products. He transformed Chrysler into one of the leading automobile
manufacturers in the US.
Chrysler was facing a severe financial crisis and was on the brink of closure, but
Iacocca resurrected the company and turned it into a profit making one in a short
span of six years. He was proclaimed as a turnaround specialist, who saved
Chrysler from bankruptcy.
Complementing the skills and abilities of Iacocca, author Anthony Robbins5 said,

"All truly successful people such as Lee Iacocca have a driving force within them
that sets them apart from others. A desire, an energy that gives them the fuel to
reach their true potential. This force is a part of them 24 hours a day, seven days
a week. It never subsides. Their total existence is sustained for the fulfillment of
their goals. The passion within this individual to achieve has been so deeply
implanted, that their mental power is driven by this force and will not let them do
anything other than achieve." 6
Background Note
Lido Anthony Iacocca, popularly known as Lee Iacocca (Refer Table I) was born in
Allentown, Pennsylvania in the US on October 15, 1924. His father, Nicola Iacocca
and mother Antoinette Iacocca were Italian immigrants. Since his childhood,
Iacocca believed in the value of hard work and never shirked from any kind of
work. At the age of 10, he used to take his vehicle to departmental stores and
transport shoppers' items for a small amount. At the age of 16, he worked for 16
hours a day in a fruit market. Iacocca graduated in Science (Bachelors in Industrial
Engineering) from Lehigh University, Bethlehem, Pennsylvania, US in 1945. In
1946, he also completed his Master's degree in Mechanical Engineering from
Princeton University, New Jersey, US.
Iacocca began his career at Ford in August 1946 as an apprentice engineer. He
was inducted in a training course known as `loop training,' which provided on-thejob training for a week in every department of the company. However, after
staying for nine months in this 18-month program, Iacocca realized that he was
not interested in an engineering job. He gradually changed his career path and
moved to sales. He worked in a small office at Ford in Chester, Pennsylvania.
Within a decade of joining Ford, i.e., 1956, he became a sales manager.
Iacocca made notable contributions as a sales manager at Ford. In the very first
year, Iacocca introduced a program called `56 for 56.' This program enabled a
customer to buy a new 1956 model of a Ford car by paying just 20% of the car
amount as down payment. The balance was to be paid in installments of $56 a
month for the next three years. Due to this unique and innovative program, Ford
was able to sell an additional 75 million cars. Iacocca's district, which had
registered the lowest position in sales prior to this program, went on to register
the highest sales among all districts in the US.
In 1960, Iacocca was promoted as the Vice-President and General Manager of
Ford. Soon after becoming the Vice-president and General Manager, Iacocca
constituted a group of young men and women with innovative ideas. This group
was known as the Fairlane Committee. The objective of this committee was to
introduce a small-sized, light and economical sports car. The committee gathered
and utilized extensive research data for the same. The research during the early
1960s revealed that there would be a 50% increase in car consumers between the
age group of 20 to 24 in the US. The committee also predicted that the number of
families owning two cars would increase and that there would be a substantial
increase in the number of female buyers.
Taking all these factors into consideration, a set of specifications were laid down. It
was decided that the car should be small, should seat a minimum of four persons
and the cost of the car (along with accessories) should not exceed $2500. The
group wanted the car to appeal to all segments of consumers simultaneously. This
resulted in the creation of Ford Mustang in 1962. In October 1962, the prototype
of Mustang, christened `Mustang I' was introduced while the car was officially
launched in April 1964.
The car offered a host of benefits to the consumers including style, performance
and economy. It was designed to match the needs and tastes of consumers. Its
slogan read - "the car to be designed by you." Mustang initially offered three
options to the consumers in three unique styles - Affordable, Sporty and Luxury.
Mustang soon became Ford's most popular model after Model `T' (Thunderbird).
More than one million Mustang cars were sold in the first 16 months of its
manufacturing.

The Mustang project earned him international recognition. His inherent qualities
like willingness to listen to customers' demands, risk taking ability to introduce a
new product, and creative management style were appreciated by consumers and
automobile experts all over the world.
Iacocca was also hailed as the stepfather of Falcon, one of the most popular cars
of Ford introduced in 1960. Falcon was positioned as an economy car with simple
styling. Though Falcon had registered impressive average sales of 4,17,000 units
per annum during 1961-63, the profit margin on each car was very less. Iacocca
devised ways to improve this margin by introducing Falcon at a higher price with
value-added features such as bucket seats, air conditioning and power steering.
The customers responded positively to the new Falcon and its sales increased
significantly.
Following the success of Mustang and Falcon, Iacocca was promoted as the
President of Ford on December 10, 1970. Iacocca was primarily responsible for
developing cost-cutting strategies and increasing profits of Ford. With this
objective, he introduced a program called `Shuck the Losers.' The program aimed
at making the various departments of Ford profitable within three years, or close
them down.
In 1971, Iacocca introduced another model called Pinto 7. He was very particular
about the design and cost specifications of Pinto. Giving instructions about his
specifications, Iacocca said, "The Pinto was not to weigh an ounce over 2,000
pounds and not cost a cent over $2,000." The Pinto was targeted to provide fuel
efficiency and be cost-effective so as to compete well with other international cars.
Unfortunately, this project boomeranged.
The crash tests conducted during the production and design stage revealed that
the fuel tank of the car was susceptible to inflammation on being hit from behind.
The tests also disclosed that in a crash at a speed of over 25 miles per hour, its
fuel tank busted. The design of the fuel tank was later modified and the tank was
made tougher.
During his tenure at Ford, Iacocca was perceived as a change agent and nonconformist, dexterous and `on-the-feet-thinker'. He was responsible for taking up
many new initiatives at Ford. However, a personality clash with Henry Ford II, the
CEO of Ford, led to Iacocca's resignation in 1978. He had worked in Ford for 32
years spending a major part of his career with the company. In the same year,
Iacocca took up his new assignment as the Chief Operating Officer (COO) of
Chrysler. Within a year of his joining (September 1979), Iacocca was promoted as
the Chairman and CEO of the company.
Tenure at Chrysler
When Iacocca joined Chrysler, the company was facing problems on several fronts.
Coordination across different functions was virtually absent. Iacocca identified that
information dissemination, the spirit of camaraderie8 and esprit de corps9 were
completely absent among the employees in the company. The company's products
were perceived to be of poor quality. Financial controls were virtually non-existent.
The company's finished goods inventory had risen to unprecedented levels, which
resulted in production cuts from time-to-time. Iacocca later recalled, "What I
found at Chrysler were 35 vice-presidents, each with his own turf. There was no
real committee set up, no cement in the organizational chart, no system of
meetings to get people talking to each other. I couldn't believe for example that
the guy running the engineering department wasn't in constant touch with his
counterpart in manufacturing. But that's how it was. Everybody worked
independently. I took one look at that system and I almost threw up. That's when
I knew I was in really deep trouble."10
Soon after becoming the Chairman and CEO of Chrysler, Iacocca thoroughly
revamped the management and set up a new team. He recruited several key
executives from Ford. They were asked to look after important functions such as
finance, product planning and quality. Iacocca himself began to look after public
relations. He was also forced to take harsh measures which included sacking off

few senior company executives, scaling down non-productive operations, shutting


down plants and convincing the labor management unions to accept low wages 11,
forgoing few employee benefits and opting for temporary layoffs.
Iacocca also initiated several measures to improve relations with the United Auto
Workers (UAW)12 union. A joint UAW-Chrysler management quality program was
also introduced. To strengthen his credibility while bargaining with the Union,
Iacocca reduced his annual salary to $1 for one year. Through this act, he
demonstrated to the employees of Chrysler that they should not flinch from
sacrifices, but willingly come forward, to ensure that their company successfully
survived the period of adversity.
In the late 1970s, Chrysler had piled up debts amounting to $4.75 bn and was in a
severe financial crisis. Iacocca and his team went through tough negotiations with
almost 400 banks and financial institutions to obtain concessions worth $660 mn.
Loans worth $4 bn were rolled over for another four years at an interest rate of
5.5%. Meanwhile, Iacocca also issued preferred stock and formed a strategic
alliance with PSA Peugeot Citroen of France. Even though these measures helped
reduce the level of debt, Chrysler's funding needs had increased to such an extent
that government support was needed. In 1980, Iacocca persuaded the Federal
government to stand guarantee for loans worth $1.5 bn through a loan guarantee
legislation signed by the then President, Jimmy Carter.
Under Iacocca, Chrysler also expanded its product line substantially (Refer Table
II). Due to the ever increasing prices of fuel, Iacocca decided to focus on designing
fuel-efficient models of cars. These were called the K-cars13. Though they faced
some setbacks initially, they became very popular later. Iacocca took active part in
advertising and he himself appeared on TV ads and urged the American consumers
to purchase Chrysler's K-cars. It was the first time in the US that the CEO of a
company appeared in an advertisement to endorse his own company's product.
Through his cost-cutting efforts, Iacocca also succeeded in reducing the breakeven
volume for Chrysler from 2.3 million vehicles in 1979 to 1.1 million units in 1982.
By the early 1980s, the company seemed to be recovering from the crisis. The
company repaid the guaranteed loans in 1983, seven years ahead of schedule.
Turning Around Chrysler
In 1984, Chrysler declared record profits of $2.4 bn. This achievement catapulted
Iacocca's fame and he soon became very popular all over the US. He ranked
among one of the highly-paid business executives in the US. Two of the books
written on Iacocca, namely, his autobiography, `Lee Iacocca' published in 1984,
and `Talking Straight' published in 1988 became international best-sellers. Iacocca
soon became popular all over the world with seven million copies of his
autobiography being sold out. In 1984, Chrysler launched the mini-van which
turned out to be very successful and became one of the best selling automobiles in
US.
During the period 1984-88, Iacocca made a number of acquisitions including
Gulfstream Aerospace Corporation, a corporate jet maker at $637 mn and
Lamborghini, the Italian luxury carmaker at $15 mn. Other major acquisitions
included Finance America, EF Hutton Credit Corporation and American Motors
Corporation (AMC)14. In December 1987, Chrysler also increased its shareholding
in Mitsubishi Motors Corporation and formed a strategic alliance with the South
Korean electronics giant, Samsung.
In the late 1980s, Chrysler's financial condition began to deteriorate once again.
Chrysler's earlier momentum in new product development slowed down. Iacocca
cut down investments and spent $1.4 bn on stock buyback. To restore Chrysler's
competitive position, Iacocca launched another round of cost-cutting measures.
More than 10,000 white-collar jobs were eliminated between 1987 and 1990. A
program, Supplier Cost Reduction Effort (SCORE) was introduced in 1989. In
response, suppliers made several suggestions to cut costs. The company also
began to cut medical costs incurred on its employees. Chrysler also sharpened its
focus on new product development and introduced fuel-efficient vehicles such as

Dodge Shadow and Plymouth Sundance.


In 1989, Iacocca also started a $1 bn cost-cutting and restructuring program in
Chrysler. This program aimed at eliminating redundant costs and utilizing the
available resources optimally to focus on the company's core competency business
- the automotive sector. Iacocca also introduced a novel way of producing cars and
trucks by forming `platform teams'. In this method, one representative from each
of the departments of the company, i.e., manufacturing, purchasing, marketing,
sales, designing, planning, finance and engineering, and so on formed a team and
worked on one product line of vehicles throughout its lifecycle. Each team
functioned like a small independent company by itself and took total accountability
for its entire operations and the success or failure of the product. The platform
team introduced its first vehicle the Dodge Viper, a V-10 roadster car. Later, the
platform team also came out with several other vehicles like the Jeep Grand
Cherokee (1992), Chrysler Concorde (1993), Dodge Intrepid and Eagle Vision
(more popularly known as the `LH' cars).
In 1991, Iacocca initiated the construction of the $1 bn Chrysler Technology
Center (CTC). The CTC integrated and supported the different cross-departmental
functions of Chrysler like engineering, manufacturing and product designing. CTC
enabled Chrysler to design, build, test and market a vehicleall under one roof. The
sophisticated technological facilities enabled Chrysler to achieve the lowest-cost
automobile manufacturer status in the automotive industry by the mid-1990s.
Iacocca retired as the CEO of Chrysler on December 31, 1992. Recollecting his
experiences, he said, "Running Chrysler has been a bigger job than running the
country. I could handle the national economy in six months."15
Iacocca - The Leader
According to analysts, Iacocca was popular for his bold decisions and risk-taking
abilities. He felt that every business and every product had its own inherent risks
that had to be overcome to achieve success. Iacocca was proclaimed as a
visionary who could see far beyond the day-to-day activities of business. He used
to think differently from others and always came up with innovative ideas. He was
not afraid of taking unpopular decisions to solve major problems.
Analysts felt that Iacocca's success could be attributed to his ability to adjust to
any kind of situation very quickly. An attribute that set him apart from others was
his ability to take quick decisions. Emphasizing on the need for right planning, he
had once said, "The lesson we must draw from the failure of planning is not that
planning itself is bad, but that bad planning is bad. Those who feel that planning of
any kind is alien to the capitalist system should consider where IBM, Honda, and a
hundred other successful businesses would be today if they had not committed
themselves to sound planning. It has been my experience that any organization
that does not take planning seriously does not take thinking seriously. They go
together and cannot be separated. The only way we are going to cope with change
and complexity is through effective planning."16
Iacocca considered proper utilization of time as one of the important pre-requisites
for a successful manager. He said, "If you want to make good use of your time,
you've got to know what's most important and then give it all you've got."
According to him, managers should not confine themselves only to decisionmaking, but should also motivate people to work to the best of their abilities. He
felt that communication was vital for motivation and one should cultivate the habit
of listening more and talking less. He used to say, "Start with good people, lay out
the rules, communicate with your employees, motivate them and reward them. If
you do all those things effectively, you can't miss." Iacocca motivated people well
in the organization. He said, "Motivation is everything. You can do the work of two
people, but you can't be two people. Instead, you have to inspire the next guy
down the line and get him to inspire his people." In 1988, he founded the `Iacocca
Institute' in collaboration with Lehigh University for nurturing organizational
competitiveness in business (Refer Exhibit I).
Iacocca was very popular among the US citizens as he frequently participated in

talk shows like `Today Show' and `Larry King Live Show.' He had appeared in 80odd TV commercials. Iacocca never believed in origin or race of the people. He was
against ethnic discrimination. To prove this point, Iacocca appointed Gerald
Greenwald as Vice-President of Chrysler, though he was a Jew. He always gave
due significance, recognition and respect to people for their contribution to the
organization.
The other Side of Iacocca
Although most people recognized Iacocca's achievements in the corporate world
and his leadership qualities, a section of analysts and media reports highlighted
the negative side of Iacocca's leadership. Iacocca's management style was
reported to be dictatorial due to which he was disliked by his subordinates. Critics
also felt that Iacocca's self-confidence sometimes took the form of arrogance and
affected everyone he dealt with including his employees, suppliers, government
and banks. Iacocca was also believed by some analysts to be head-strong and
over-enthusiastic. He was considered to be egoistic and self-centric.
According to media reports, Iacocca had a large appetite for money. He was paid
$3,60,000 as annual compensation at Ford and he earned around $1 mn including
all bonuses. In 1986, Iacocca earned approximately $24 mn which was the highest
among all CEOs in top automobile companies. When he joined Chrysler, he lost his
severance package of $1.5 mn, due from Ford, but he claimed it from Chrysler as
the signing amount for joining the company. At one time, Iacocca's annual
compensation was even more than that of John Riccardo ($3,40,000) 17, the
Chairman of the Board of Chrysler. It was reported that Iacocca constantly
engaged in disputes with the management of Chrysler over his compensation
package. He even sued Chrysler when the company's board refused to pay him the
money on 1,12,500 shares which he held as stock options. He was successful in
the lawsuit and compelled Chrysler to pay him $21 mn as compensation. Iacocca
also pressurized the company's board with his lawyer to hike his pension amount
which was already considered very high.
Analysts also accused Iacocca for taking many wrong decisions, which deteriorated
Chrysler's financial performance. Some of these included diversifying Chrysler into
the advanced technology and financial sector, investing millions of dollars in a
single project on a sports car which did not click and buying back Chrysler's shares
at $22 and re-issuing it later for $10. His decision to acquire AMC in 1987
weakened Chrysler's financial position considerably. Chrysler was in deep trouble
when an economic downturn struck the automotive industry in 1990. The
company's market share in the US automotive industry declined from 13.9% in
1988 to 9.3% while its revenues dropped from $359 mn in 1989 to $68 mn in
1990. In 1991, Chrysler's market share declined further to just 8.4%. The share
price of the company also plummeted from a high of $30 in 1989 to a low of $10
in 1991.
In the last few months prior to his retirement, Iacocca vehemently opposed
Chrysler when they wanted to elect a successor18 to him. Reportedly, Iacocca
worked hard to thwart the chances of product specialist, Robert Lutz becoming the
Chairman of Chrysler. This episode led some employees working in Chrysler to
sarcastically ridicule him by saying that Iacocca stood for `I Am Chairman of
Chrysler Corporation Always.'
Even after his retirement, Iacocca demanded Chrysler to provide him a private
airline and stock options. In 1995, Iacocca fell into a major controversy when he
helped Kirk Kerkorian (Kerkorian)19 in a hostile takeover bid to purchase Chrysler's
shares at the rate of $55 per share. The top management of Chrysler turned down
the bid and strongly reprimanded Iacocca for supporting Kerkorian. Iacocca was
also accused of sharing some secret information with Kerkorian, and demeaning
the company and its products. Chrysler also alleged him of behaving in a manner
which was detrimental to the interests of the company. According to the
advocates, "Iacocca has acted willfully, wantonly, maliciously, and outrageously to
injure Chrysler."20 Recollecting some of his ill experiences at Chrysler, Iacocca once
said, "I forgot to shake hands and be friendly. It was an important lesson about

leadership."
Additional Readings and References
1. Taylor, Alex III Legend in His Own Mind? www.fortune.com, July 24, 1995.
2. Sharf, Stephan Lee Iacocca as I knew him; he was certainly the right
man at the right time... wardsauto.com, May 1, 1996.
3. Taylor, Alex III A Superstar CEO Crashes Back to Real life- The Story of
Iacocca's Troubled Retirement is a Cautionary Tale For E-Fortune,
www.fortune.com, June 24, 1996.
4. Irvin, R Whatever Happened To...? www.csmonitor.com, September 16,
1999.
5. Lee Iacocca's EV Global Motors Company the Recipient of Clean Air
Award; Company Recognized for their Efforts to Promote Zero Emission
Transportation, www.findarticles.com, May 5, 2000.
6. Motivation is everything, www.dailycelebrations.com, October 15, 2000.
7. A Suit to undo the Chrysler Merger, www.cbsnews.com, November 27,
2000.
8. Collins, Jim Level 5 Leadership, Harvard Business Review,
January 2001.
9. Cole, Dave Lee Iacocca, the Man with the Plan,
www.news.smallbusinessstudio.com, March 8, 2001.
10. Once Again, Lee Iacocca Leads the Way towards A New Transportation
Era, www.lidomotors.com, April 2001.
11. Aiello, Al Lee Iacocca, Stepfather of the Falcon,
www.westcoastfalcons.com, August 2001.
12. Lee Iacocca named Honorary Chairman of 2001 Golf Cart Parade, Palm
Desert Chamber of Commerce, www.lidomotors.com, October 2001.
13. Lee Iacocca Named Honorary Chairman of Palm Desert's Golf Cart
Parade, The Desert Sun Newspaper, www.lidomotors.com, November 4, 2001.
14. Lee Iacocca- Lido Electric Car, www.hammacher.com.
15. Swinfin S Connie, Biography of Lido A Iacocca, www.stfrancis.edu.
16. Pennsylvania Lee Iacocca, www.netstate.com
17. Useem Jerry, The Embattled CEO, www.fortune.com, 2002.
18. Lehigh and The Iacocca Institute, www.lehigh.edu.
19. Lee Iacocca, www.emediaplan.com.

20. Iacocca, Lee, www.britannica.com.


21. Iacocca Lee, www.encyclopedia.com.
22. Lee Iacocca, www.ie.metu.edu.
23. The History of Ford Mustang, www. bpsd.k12.pa.us.
24. The Wild Horse, www.sdst.org.
25. Design Defects of the Ford Pinto Gas Tank, www.fordpinto.com.
26. The Ford Pinto, www.geocities.com.
27. The Exploding Ford Pinto, www.korpios.org.
28. A Brief History of the Ford Falcon, www.ffcclub.com.
29. Lee Iacocca, www.essays.cc
30. Lee A Iacocca, www.forbes.com.
31. Lee Iacocca Speech, www.geocities.com.
32. Lee Iacocca Biography, www.exsands.com.
33. Lee and Me, www.senioronesource.com.
34. A Truly Global Company, www.daimlerchrysler.com.
35. Power Direct Marketing, www.rayjutkins.com.
36. Chrysler Corporation Corporate History, www.users.erinet.com
37. www.amazon.com.
38. www.hbcollege.com.
39. www.fortunecity.com
40. www.automotivehalloffame.org
41. www.asme.org
42. www.newsworld.co.kr
43. www.shop.store.yahoo.com
44. www.auto-enthusiast.com
1

Posted on www.wsuppress.wayne.edu, Wayne State University Press.

In an article titled "TACOM conducts 3rd Annual Quality Survey" by Stan Kahn
posted on www.pica.army.mil dated December 1997.
2

The Automotive Industry Leader of the Year Award was a mark of honor for those
who contributed significantly to the automotive industry. The award was given to
those committed, hardworking and determined people who converted their dreams
and visions into reality.
3

In an article titled "The Automotive Hall of Fame," December 11, 2001 posted on
www.dispatch.co.za.
4

Anthony Robbins is an expert in psychology. He is an advisor to the President of


the US and the members of the royal families. He is a bestselling author and has
to his credit three book titles published in 14 languages all over the world. He has
authored the book "Unlimited Power."
5

In an article titled "Cool Cash Ezine," dated March 15, 1998, posted on
www.freecoolcash.com.
6

The Ford Pinto was launched in 1971 as a competitor to the imported and
domestic small-sized cars. Pinto was targeted to compete with Volkswagen and
various other Japanese automobile companies. Pinto was produced in a record
time of 25 months as against an average of 43 months. It consisted of nonventilated windows, slim line high uplift bucket seats, vinyl upholstery, 2 pod
instrument bundles, glove box, interior dome light, floor-mounted transmission
controls, hot water heater, rack and pinion steering, direct-air ventilation system,
and 6 x 13 rayon black wall tyres.
7

Goodwill and light-hearted rapport among friends or colleagues.

A common spirit of partnership, intimacy, enthusiasm and devotion to a particular


cause among the group members.
9

From the book Lee Iacocca: An Autobiography by William Novak published in


1984.
10

11

Chrysler had 1,40,000 workers in 1979.

UAW, established in 1935, is one of the largest and diversified unions in North
America and includes members from every economic field. The UAW includes over
950 local unions. UAW has been engaged in all civil rights litigations since the
1950s. A few breakthrough laws brought about by the UAW include the Family and
Medical Leave Act, Employee Retirement Act, Occupational Safety and Health Act
and so on.
12

The K-car was robust, well-designed, fuel-efficient and spacious. It could seat six
persons. It was a luxurious front-wheel-drive vehicle that worked on just four
cylinders. It gave a mileage of 25 miles per gallon on city roads and 41 miles on a
highway drive.
13

14

AMC was acquired by Chrysler in August 1987 for $1.2 bn.

In an article titled "The Embattled CEO" by Jerry Useem posted on


www.fortune.com.
15

In an article titled "Power Direct Marketing," dated July 2001 posted on


www.rayjutkins.com.
16

John Riccardo's salary was later raised to $3,60,000 by giving him a raise of
$20,000 and making it on par with Iacocca's salary.
17

Robert Eaton was named as the successor to Chrysler after Iacocca's retirement.
He had worked with General Motors for 30 years from 1963 to 1993.
18

Kerkorian, a maverick investor bought 9.7% of Chrysler's shareholding in 1990.


Kerkorian increased his shareholding further in 1991, and gave indications that as
the Chrysler's largest individual investor, he would look for a more active role in
the management of the company's affairs.
19

In an article dated June 24, 1996 in Fortune.com, titled, "A Superstar CEO
Crashes Back to Real Life-The Story of Iacocca's Troubled Retirement is a
Cautionary Tale for E-Fortune" by Alex Taylor III.
20

Exhibit I: The Lee Iacocca Institute


As a mark of respect to his Alma Mater - Lehigh University - Lee Iacocca
founded the `Iacocca Institute' in collaboration with the Lehigh University. This
institute was formed with the vision of furthering global competitiveness of
business organizations. The main purpose of the institute was to help other
companies succeed, by training their employees/managers. This institute
became popular worldwide for its excellence and quality of programs offered in
organizational competitiveness. Elated on the institute, Iacocca said, "This is
the kind of program that could make you more competitive. I'm honored that
my name is associated with the Institute."
Source: www.lehigh.edu

Table I: A Profile of Lee Iacocca


Personal Profile
Born

October 15, 1924

Place of Birth

Allentown, Pennsylvania

First Marriage (1956)

Mary McCleary

Second Marriage (1986)

Peggy Johnson

Third Marriage (1991)

Darrien Earle (divorced in 1994)


Academic Profile

Bachelors Degree

Bachelor of Science in Industrial Engineering,


Lehigh University, Pennsylvania, 1945.
Master of Engineering, Princetown University,
1946.

Masters Degree

Professional Profile
Posts held at Ford Motor Company
Salesman and Sales Manager

1946-56

Truck Marketing Manager

1956-57

Car Marketing Manager

1957-60

Vehicle Marketing Manager

1960

Vice-President and General


Manager

1960-65

Vice-President (Car and Truck


Division)

1965-69

Executive Vice-President

1967-69

President

1970-78
Posts held at Chrysler Corporation

Chief Operating Officer (COO)


Chairman and CEO

1978-79
1979-92
Books on Iacocca

Autobiography

Lee Iacocca with William Novak (1984)

Biography

Talking Straight (1988)

The Unknown Iacocca (1987) by P Wyden


Behind the Wheel at Chrysler (1995) by DP
Levin
Source: www.cnn.com

Table II: Cars Introduced during Iacoccas Reign


at Ford and Chrysler (Partial List)
Year

Designation and Company

Name of the car/model

Vice-President and General Manager,


1964
Ford Motors

Ford Mustang

1971 President, Ford Motors

Ford Pinto

1984 Chairman and CEO, Chrysler Corp.

Chrysler Minivan

1984 Chairman and CEO, Chrysler Corp.

Dodge Daytona (Chrysler


Daytona in Canada)

1984 Chairman and CEO, Chrysler Corp.

Daytona Turbo

1984 Chairman and CEO, Chrysler Corp.

Daytona Turbo Z

1984 Chairman and CEO, Chrysler Corp.

Chrysler Laser

1987 Chairman and CEO, Chrysler Corp.

Daytona Pacifica

1987 Chairman and CEO, Chrysler Corp.

Daytona Shelby Z

1987 Chairman and CEO, Chrysler Corp.

Chrysler LeBaron Coupe

1989 Chairman and CEO, Chrysler Corp.

Daytona ES

1989 Chairman and CEO, Chrysler Corp.

Daytona C/S (Carroll Shelby)


competition Package

1989 Chairman and CEO, Chrysler Corp.

Daytona ES Turbo

1989 Chairman and CEO, Chrysler Corp.

Daytona Shelby

1990 Chairman and CEO, Chrysler Corp.

Plymouth Laser

1990 Chairman and CEO, Chrysler Corp.

VNT Daytona Shelby

1991 Chairman and CEO, Chrysler Corp.

Daytona Shelby IROC


(International Race of
Champions)

1992 Chairman and CEO, Chrysler Corp.

Daytona IROC/RT

Compiled from various sources.

CASE ANALYSIS
The Good, the Bad and the Ugly
- Bala Krishnamoorthy
Lee Iacocca, the automobile industry legend, has earned his place of pride due
to relentless hard work and a brilliant streak of innovation. While admiring his
leadership skills, one must appreciate the inner driving force that worked as a
propeller and facilitated quick decision-making. Lee made notable contributions
at Ford as a sales manager. When he introduced `56 for 56' in 1956, making
people visualize a car as a durable item instead of a luxury would indeed have
been quite a difficult task. Lee made the car a utility. For a common man, a
scheme like `56 for 56' was a boon as all his worries of bank loans and
guarantee were put to rest.
Lee did not stop at that. as he rose to higher posts, he carried his team with
him. The Fairlane Committee was a unique team-building exercise. This

scheme would have helped retain the youngsters and enthusiastic people to
stick to their job. I would say it was an excellent retention policy and served as
a great non-monetary motivator for people to be associated with Ford and
identify themselves with the company.
The issues of customer focus and roping in the customer into the company
were given due attention by Lee Iacocca. This is evident in his Mustang I
experiment. Customers designing the car along with the company experts and
developing a feedback system can be seen as precursors to the customer
relationship management techniques of today. He was ahead of his time and
thus established a distinct identity of his own in the automobile industry.
Lee was daring in his style of leadership. Look at his program of Shuck the
Losers. This scheme put the departments on fire and compelled them to
perform. Lee had innovative ideas and cost-cutting strategies. A perfect
change agent and, as an analyst rightly pointed out, an `on-the- feet-thinker'.
He had the ability to go ahead unhesitatingly with his change plans and the
caliber to sustain it with his charismatic leadership style. I call it charismatic
because at Chrysler where he made major changes, he was already
appreciated for his contributions to Ford.
The uniqueness of Lee's leadership was also due to another important factor,
which was his lack of fear of criticism. Very few people can forge ahead
ignoring the comments of colleagues and seniors in an organization. This was
an attribute inborn to Lee's style of functioning. One can also see this as a
contributing factor for his very high demands and unrealistic negotiations with
Chrysler for compensation.
Lee also did not bother to compare himself with his counterparts. His sense of
identification with the companies that he worked for was so great that he very
often forgot that he was only an employee and not the owner. One can refer to
him as a headstrong person because of his confidence in himself, but one must
admit that he could influence and motivate people and encourage them to
perform. From this perspective, he was also a people's leader. He was certainly
a trendy contemporary leader as he focused on cost-cutting, the mantra of
many leading global corporations today, which paid rich dividends at that point
of time as well.
Lee had certain shortcomings too as a leader. He had a very long tenure at
Ford followed by a 14-year stint at Chrysler. At Ford, his leadership role was
different because he rose from the ranks and file, and the extent of impact of
his leadership must have been limited. At Chrysler his entry was dramatic, as
he entered as a troubleshooter and had to shoulder major responsibilities and
deliver results. His team was with him throughout the difficult time and
sustained the pressures of recovering from the crisis. However, over a period, I
think, these types of leaders generate a lot of discomfort in the team and
ultimately the team gets tired of the leader. This factor is amply evident from
the comment from the employees that Iacocca stood for, "I am Chairman of
Chrysler Corporation Always."
This statement clearly shows the negative inner feelings amongst the
employees about Lee's autocratic nature and about how he thought himself to
be indispensable. His relationships with the management and persistent
demands for higher compensation could have made the employees grow sick
of his ways of handling things. This could have demoralized the employees,
resulting in a stagnant situation. This was perhaps one of the major factors for
the deteriorating performance of Chrysler before Lee stepped down. However,
all said and done, one must also realize that leadership alone would not have
led to the deterioration of a huge corporation like Chrysler.
The author is Faculty Member, Narsee Monjee Institute of Management Studies
(NMIMS), Mumbai.
ICFAI Press. All Rights Reserved.

The author is Research Associate, ICFAI Center for Management Research.


ICFAI Center for Management Research (ICMR). All Rights Reserved. For
accessing and procuring the case study log on to www.ecch.cranfield.ac.uk