Iacocca's Tightrope Act

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manufacturing techniques of Japan.

The Japanese have cut inventory costs by building parts plants next to assembly plants and using the same part on several car models. Now Chrysler, instead of shipping big batches of transaxles by rail from its Kokomo, Ind., plant to Belvidere, Ill., for assembly, moves smaller loads by truck, gaining at least 24 hours. Total saving on inventory from such measures: $450 million a year. Chrysler has cut the number of different parts it uses to 40,000, from 70,000. That means, for instance, that van buyers can choose only one kind of tinted glass, not two. Total savings: about $300 million annually.

A far greater challenge involves changing a basic tenet of the U.S. auto industry that was laid down in 1921 by Alfred P. Sloan, creator of the modern GM: produce a separate and distinct automobile for every price category. Since Chrysler can no longer afford the $1 billion it costs to build an entirely new model, it will eventually have to use its basic model, the K-car, as the building block for each of its four car sizes: subcompact, compact, intermediate and full size. Thus buyers have to be re-educated not to mind that their luxurious Chrysler may have started out as a lowly Plymouth.

It is a strategy that some automakers have quietly used for many years, particularly Japanese companies. But Chrysler has taken the approach one risky step further. Americans who pay extra for an intermediate-or full-size car want to be convinced that they are getting additional value, not just a knock-off of an existing model. Bigger and better-heeled automakers can still afford to crank up entirely new designs when they are needed. Admits lacocca: "We have to say, 'Do you want vanilla or chocolate?' GM says, 'Do you want vanilla, chocolate or strawberry?' " Later this year, for example, Ford will roll out its replacement for the rear-wheel-drive Ford Fairmont/Mercury Zephyr, known as the Tempo/Topaz. The totally new designs will have front-wheel drive and aerodynamic styling for greater fuel economy, advances that would have been impossible with Ford's old models.

At Ford, lacocca dazzled buyers with the elan of a three-card monte dealer by spinning off the Mustang and Continental Mark series from existing chassis combinations. Now he is trying to do the same thing with virtually an entire line of cars. The $5,900 Dodge and Plymouth 1981-model K-cars begat the $8,100 1982 Chrysler LeBaron and Dodge 400, the $12,300 Chrysler LeBaron convertible (see box) and the 1983 Chrysler E Class and Dodge 600, which sell for $9,000 to $12,000. By stretching the K-car, he produced the luxury Chrysler New Yorker ($12,800). In the fall of '83 will come the Dodge Daytona and Chrysler Laser, sleek sports cars also using K-car components, which are receiving raves in the automotive press. They will sell for $10,000 to $14,000.

To keep the buying public bedazzled, Chrysler is developing vehicles for special market segments, known in Detroit as "niche" cars. These are expected to confer some luster on the rest of the car line as well as to reach relatively small but profitable markets where other carmakers are not competing. Later this year Chrysler will introduce the ultimate in elongated K-cars, the roomy five-passenger Chrysler Executive Sedan and a seven-passenger limousine. lacocca has also ordered up a