After Iacocca, Who?

Chrysler Vice-Chairman Robert S. Miller Jr. has just quit Motown for Wall Street. Does that mean President Robert A. Lutz is the undisputed front-runner to replace Lee A. Iacocca as chairman? No way. Says Miller: "The great management-succession race is still on."

The 67-year-old Iacocca has pledged to step down at the end of the year, but Miller's defection just means there's one less contender to succeed him. In a statement on Feb. 24, Iacocca confirmed that Miller, 50, was "one of several outstanding candidates under consideration." He added that the board's selection process goes on. Lutz isn't talking. But Wall Street is. "This has gone on way too long," says Charles T. Freeman, a portfolio manager at Wellington Management Co. in Boston, one of the top 15 holders of Chrysler shares. "We don't understand why this appointment hasn't already been made."

HANGING FIRE. One reason for the indecision may be that no one wants to rock the boat at a newly revitalized Chrysler Corp. Under Miller's direction, Chrysler in the past five months has rebuilt its balance sheet by raising $1.4 billion through new share offerings and private placements. Lutz has spent his time completing development of the Jeep Grand Cherokee, which goes on sale in April

But the succession issue keeps hanging over the company. Miller's announcement that he will join boutique investment banking firm James D. Wolfensohn Inc. follows the June, 1990, departure of Gerald Greenwald, another financial guy who for a long spell looked like Iacocca's heir. "Since the board apparently can't come up with a succession policy, people with other opportunities are going to take them, rather than wait and take a chance," says John A. Casesa, an analyst at Wertheim Schroder & Co.

Greenwald, now working at Wall Street's Dillon, Read & Co., may still have a shot at Chrysler's top job--particularly since the board has made it clear it is considering outside candidates. But Lutz, 60, has the strongest claim to the throne. A former Marine fighter pilot, he is the car enthusiast behind Chrysler's rash of new vehicles. After working in Europe for GM, Lutz served as an executive and director for both BMW and Ford. The multilingual Lutz has a vast reservoir of car knowledge. He's also a risk-taker, although he stopped flying solo after crashing a helicopter near his home in Ann Arbor, Mich., last summer.

Lutz does have certain liabilities. Most pressing is his lack of financial savvy. "What Lutz cares about most is making greater cars," Says Casesa. "He would rather spend his time making sure the powertrain is perfect than poring over a piece-cost analysis. He needs a partner who will do that." Of course, Chrysler could promote its well-regarded CFO, Jerome B. York, or go outside for a finance officer with a high profile among the banks, rating agencies, and credit markets. For the time being, Chrysler is leaving vacant the slot that Miller holds as vice-chairman.

Lutz's main problem in winning the top job, though, may be in getting Iacocca to vacate it. Some Chrysler managers say they're not convinced he'll actually leave at the end of the year--one has even gone so far as to put odds of just 60% on it. They question whether Iacocca will give up the perks, his podium for commenting on national policy, and an employment contract that awards him 62,500 shares of Chrysler stock for every quarter he stays at the helm.

Wall Street figures Chrysler's board will have to settle the issue soon. "If they haven't decided on Bob Lutz by the time the annual shareholder meeting comes around in May, that would be a sign that Bob's not going to get it," says John V. Kirnan of Kidder, Peabody & Co. The risk, of course, is that Lutz might decide to move on if he doesn't land the job. "I can't tell you how much stock would follow him out the door," says Joseph S. Phillippi, auto analyst at Lehman Brothers. Worries of that sort may be enough to make the board clarify its succession plans soon--and then make sure Chairman Iacocca sticks to them.

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