In a recent Chrysler Corp. TV commercial, Lee A. Iacocca strides toward the camera and says pointedly: "In the car business, you lead, follow, or get out of the way." After a dramatic 13 years at Chrysler's helm, it's time for the 67-year-old Iacocca to heed his own advice and step aside. No waffling, no hedging, no looking back.
Just as Chrysler's turnaround is accelerating, Iacocca has upset the company's hard-won equilibrium in a last-ditch effort to stay in power. On Aug. 7, his pal and, not incidentally, Chrysler's biggest shareholder, Kirk Kerkorian, declared he was uncomfortable with Chairman Iacocca's planned Dec. 31 retirement. Kerkorian added that he would seek to name one or two board members. That bombshell dropped a few days after the two met in Spain on Kerkorian's yacht during the Olympics.
This simply isn't the time to resurrect doubts about Iacocca's willingness to relinquish control. Under pressure from other large shareholders worried about the succession issue, Chrysler's board last March tapped Robert J. Eaton, a former General Motors Corp. executive, as CEO-designate. Key insiders say that Eaton has quietly forged alliances with top Chrysler managers--including President Robert A. Lutz, whom he beat out for the top job. If Iacocca finagles too much power for his post-retirement position as head of the board's executive committee, he'll undercut Eaton.
SKEPTICAL BUYERS. Meanwhile, Chrysler's troops need to focus all their energy on launching new models. Cars such as the new LH midsize sedans must generate healthy profits, or Chrysler's comeback will stall. A quality problem or marketing blunder now could scuttle Chrysler's chances. Iacocca's shenanigans are a distraction. "The best thing for Chrysler would be if Iacocca would peacefully retire," says one former executive.
That's not to belittle Iacocca's contributions. He snatched Chrysler from oblivion in 1979 by winning federal loan guarantees and nursing it back to health. Iacocca invented catchy marketing ploys, such as cut-rate financing and rebates, to move drab products such as the K-car. He also helped turn the minivan, now Chrysler's biggest product, into a runaway hit.
In recent years, however, he has lost touch. He steered Chrysler into diversifications--only to sell them off later. When profits rose, he bought back stock while neglecting new-product investment. And insiders say that he no longer understands the tastes of younger buyers.
TEAMWORK TIME. What's more, his autocratic management style is out of step with the teamwork ethic that is fueling Chrysler's comeback. The sexy Dodge Viper, rugged Jeep Grand Cherokee, and sleek LHs are hits in part because strong, independent design teams, fashioned after those of Honda Motor Corp., didn't cave in when Iacocca tried to countermand their decisions. The new products are mostly the work of Lutz and his lieutenants. "The product guys are the ones who are really turning this company around," says Daniel P. Becker, an analyst with Waddell & Reed Inc. in Shawnee Mission, Kan., a large Chrysler investor. "It's best for Iacocca to get out."
Whatever Iacocca does, he's unlikely to win a power struggle. Kerkorian aside, most big shareholders back Eaton and the board. Indeed, the board faced down Iacocca last spring, when he tried to delay retirement.
The lesson here goes well beyond Chrysler. Directors never should let CEOs stay on too long. That puts one person's vanity above the interests of thousands of employees and shareholders. Gifted as he is, even Iacocca is no exception. If he won't step aside graciously, his board should nudge him firmly into the passenger seat.