Chrysler's Second Amazing Comeback

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Those changes became a matter of necessity because Chrysler was preparing to eliminate 23,000 salaried and hourly jobs, fully 25% of its work force. That meant not only streamlining its bureaucratic structure and reducing layers of supervisers, but also ending the turf wars between separate divisions, especially design and engineering. Iacocca himself agreed to surrender some of the chairman's prerogatives, including military-style reviews on the design floor in which he had been able to issue imperial orders for a new grill design or a new fender curve.

Rather than simply demanding that their key suppliers cut costs overnight, as GM is now doing, Chrysler enlisted supplier support to make design and engineering changes that would add value and boost productivity. As a result, Chrysler's parts suppliers have turned in 3,900 suggestions that have saved the company an estimated $156 million in production costs.

Finally, Chrysler spent money where it counted, notably on a $1 billion technical center where teams are developing a new generation of compact cars, among other creations, with little meddling from top brass. The company also committed $30 million to a training blitz last summer for its dealer and service networks, staging two-day workshops to prepare them for the new LH cars and the high expectations of drivers who have grown accustomed to imports.

Iacocca plans to retire in January, at age 68, but he will leave behind a noticeably happy family at Chrysler. Last spring he chose as his successor Robert Eaton, the chief of GM's successful European operations, which rankled some Chrysler insiders at first but has produced a smoothly working triumvirate that includes the former heir apparent, president Robert Lutz. Iacocca sees the upheaval as a positive force. "We do run better scared," he says. "When we have trouble, we're used to that. That has been the beauty of Chrysler for 50 years." While Chrysler still has $15.9 billion in debts rated at junk-bond levels, last month the company surprised analysts by posting $202 million in earnings for the third quarter, making Chrysler the only profitable member of the Big Three.