Tag Archives: Mini-Van

Lee Iacocca: Government Is Self-Interested & Transfer R&D Where Squandered

By 1983, the operating profit of Chrysler was $925 million, which was the best performance in Chrysler history. A new stock offering of 12.5 million shares was made. Within the first hour, 26 million shares were sold with a market value of $432 million. Since any new issue of equity dilutes the existing outstanding shares the price typically dips but at $16.63 the shares then surged to $25 and then $35 per share.

Fortunately, Chrysler was in a position to repay its government loan guarantee that was made from 1980 in 1983 which was 7 years earlier then expected. Unfortunately, the government could force Chrysler to issue 14.4 million shares at $13 at anytime until 1990, this also includes the interest rates of 24%. When Iacocca asked the government to not impose this indecent profit that it had been privy to, the public outcry was massive. Chrysler ended up buying back the warrants at $350 million and the government used those funds not help laid off workers (which might have been appropriate) but rather towards the US deficit.

The final cherry on top for Chrysler was the production of the world’s first minivan. Hal Sperlich developed the Mini-Max at Ford with initial R&D of $500,000 in 1974. There were 3 rules for its creation. 1) the step up height had to be low, 2) the car to fit in a North American-style garage, 3) there had to be ‘nose’ with an engine up front to protect the occupants in the event of an accident. Unfortunately, Henry Ford shot the idea down because he did not want to experiment. So Chrysler released the mini-van in 1984 with major traction and Ford and GM quickly scrambled to develop their own minivans.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Lee Iacocca: Go Small Or Go Home

Hal Sperlich and Lee Iacocca had initiated the K-car series in 1977 with the intention of bringing these four cylinder, 25 miles per gallon vehicles into market. The Aries and the Reliant were genuine sellers for Chrysler. All new cars were derived from the K-car platform including the LeBaron, Chrysler E Class, the New Yorker, Dodge 600 etc. Instead of creating a car for the different price ranges in the 1980s every car was built on the same chassis to save money. Building a new car off of the old was common in Detroit, considering the Mustang was a retooled Falcon.

Initially, these K-cars were priced at $5,880 but with options that would hike the price up to $8,000 or $9,000. This triggered sticker-shock for consumers because too many Chryslers were released with multiple-options. Also, in 1980, the interest rates were as high as 18.5% and as low as 13.5%. And because the government loans came in 3 installments the publicity was bad every time a cheque was carved. For the last loan, Chrysler had to find more concessions from banks. The government even made Chrysler sell the private jets even though they were used to get a top manager from plant to plant quickly. The corporate jet was not a perk but rather a necessary tool for completing their work.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Lee Iacocca: External Factors Cannot Be Predicted

When the Shah fell in January 16th, 1979, the price of gas doubled. Gas guzzlers like RVs were the first to stop selling. The myth that the Big Three could have anticipated the spike in gas prices is foolish according for Iacocca. Until 1979, the customers wanted big V8 engines and demand was very high. Iacocca argues that small cars do not sell well in good times. The customers were leading the way. In 1978, Chrysler had small car but customers did not want to buy them. Period.

Customers were not interested in small cars before 1979 as evidenced by Honda and Toyota who were not performing well in the US. The fact is that Toyota and Honda built nothing BUT small cars so whenever the shift occurred they would benefit. Everything changed when 700,000 Toyotas were sold at black-market prices with $0.65 per gallon price tags. There was a 15% rise in demand for small cars in the first 5 months of 1979. This is a catastrophic shift. In one day, van sales fell by 42%. Iacocca was ready with plans for his K-car but the recession nosedived Chrysler towards a brutal destruction.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Lee Iacocca: Change Your Marketing Talent Where Necessary

In the early 1980s, Iacocca removed BBDO from Chrysler and brought on Kenyon & Eckhardt instead which had developed the “Ford has a better idea” campaign. K&E had also helped with the Lincoln-Mercury division with the sign of the cat. Iacocca made sure that K&E was brought in on the early details of production of new models so that the $100 million investment on production received extensive thought on marketing. Trying new things with old friends was what Iacocca was all about when he brought K&E in. One gimmick used was to have customers consider a Chrysler with a test drive, and if they then decided to buy a competitors car, they would get $50 bucks for at least testing a Chrysler. The dealers thought this would be gamed but it worked. There was also the money back guarantee ‘buy a Chrysler and if you don’t like it after 30 days, then bring it back for a full refund.’ The paperwork alone would have killed Chrysler but fortunately, most people play fair and only 1 percent of customers would bring their car back.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Lee Iacocca: Bring Cohesion & Build Your Team The Right Way

You need to bring cohesion and unity into the company. Fire people that don’t know what they are doing, and replace them with experience quickly. Iacocca didn’t fire the board immediately because they didn’t have much information (although he was tempted). They were excluded from understanding the true situation at Chrysler. For Iacocca, the vice presidents were all square pegs in round holes. The entire company was in shambles and very poorly managed.

In order to ensure better communication between departments, Iacocca initiated quality circles so that the plant workers are more involved in the building process. If the design is super but building it is not possible, then that idea is really bad. Iacocca brought in Hans Matthias who would pull five units off the line at random to test quality. He would also get a new Toyota into a Chrysler plant and ask the assembly line team to look at the difference between their product and Toyota’s. Quality and productivity are part of the same product so Matthias brought in 250 new improve quality control people even though Chrysler could not afford it. When quality is higher, your warrantee costs go down as a company.

Iacocca went through his notebooks from Ford in order to poach the best and brightest. Lee brought in Jerry Greenwald who was running Ford in Venezuela. Greenwald told Henry Ford II that he was quitting to help out with an ailing giant (ie. Chrysler) which was similar to what Ford II himself had done in 1945 to save his grandfather’s company. Immediately, Greenwald centralized accounts and controls. At the time, no one knew who was responsible for controlling costs therefore no one was responsible. In order for Greenwald to get promoted, he brought in Steve Miller to be the CFO, as a replacement for himself.

There was no centralized financial data system. Iacocca purged the old guard at Chrysler and looked for young talent that had ‘fire in their eyes.’ Hal Sperlich was fired by Henry Ford II in 1977 and become one of Iacocca’s right hand men at Chrysler. Gar Laux was brought in to repair the relationship between Chrysler headquarters and dealers throughout the country. Dealers were upset about the quality of the cars and the expectation that they could sell them. Gar Laux helped the dealers to sell Chrysler in a new way: to love the customer the moment he/she walks through the door. Dealing with customer’s takes knowledge, time and patience.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.