Life After Lee At Chrysler

Few new top executives have ever had to hit the ground running quite so fast as Robert J. Eaton must. The career General Motors Corp. executive takes on Chrysler Corp.'s top job just as the No. 3 automaker looks to be making a comeback. But if it fizzles, Eaton, 52, may find himself mired in a snake pit of political infighting.

In winning the right to Chrysler's chairmanship, the affable Eaton bested two of corporate America's more sizable egos--current chairman Lee A. Iacocca and his presumed heir, Chrysler President Robert A. Lutz. Iacocca, 67, had lobbied directors to stay on past his scheduled retirement on Dec. 31, and Lutz, 60, was thought to be a near shoo-in to replace Iacocca when he did leave. Now, Iacocca promises to step aside gracefully at yearend and "not be a force" at Chrysler--though he will stay on as chairman of the board's executive committee. Lutz says he will remain at the company and do his "absolute best" to help Eaton.

But former Chrysler executives are skeptical that either man can keep his promise. Many think that Lutz, a former Marine pilot, will find it hard to swallow his pride as Eaton consolidates power. "The problem will come when Chrysler's vice-presidents start giving their allegiance to Bob Eaton," says one. And tension between Lutz and Eaton--or a deepening of Chrysler's financial problems--could encourage Iacocca to try once again to stay on as CEO. Predicts another former Chrysler executive: "In November, I foresee Lee saying to the board: 'They're eating each other alive. I'm going to have to stay on.' "

Even if no political sniping materializes, Eaton is coming on board at a delicate moment for Chrysler. After 18 months of losses, the company has a raft of new models rolling off the line, including a new Jeep Grand Cherokee sport-utility vehicle and the much ballyhooed line of LH sedans. Thanks to heavy cost-cutting, analysts even expect it to eke out a narrow profit this year, while larger rivals Ford Motor Co. and GM will probably continue to lose money. Wall Street has bid up Chrysler's shares 80%, to 18, since December (charts).

But plenty of pitfalls could stop Chrysler cold. The company is counting on a solid turnaround in the auto market--which still looks iffy. After ticking up nicely in early February, U.S. car sales in early March fell again. And while Chrysler's trucks and minivans are moving smartly, its aging car lineup is losing market share: In the first two months of 1992, Chrysler's piece of the U.S. auto market dropped two points, to 8.2%. One of Eaton's crucial tasks will be to get the LH line out next fall--and ignite sales of the vehicles--before Chrysler's auto market share falls any lower.

With a little luck, of course, Eaton's timing could be just right. Signs are that the Grand Cherokee may be a strong seller. Dealer Donald W. Warnock says that when the first models hit his East Hanover (N.J.) dealership on Feb. 29, "we had a waiting line for people to drive them." He adds: "That hasn't happened to me in a long, long time." The stylish new LH models are also drawing raves from analysts and buff magazines such as Car & Driver.

THIRD SHIFT. Moreover, Chrysler's balance sheet is improving. The company ended 1991 with nearly $3 billion in cash on hand. Since then, Chrysler has added $862.5 million to its coffers from a private placement. As a result, Standard & Poor's Corp. recently upgraded the auto maker's credit-watch status from negative to stable.

Eaton's strong background in cost-cutting also may be just what Chrysler needs right now to keep its momentum going. It's aiming to cut an additional $750 million out of costs this year, using techniques such as the ones Eaton employed at GM Europe. It is also just starting to squeeze more production out of its plants by running them on a three-shift schedule--a system Eaton successfully installed at GM Europe.

If Eaton's experience can help make that transition, he'll play a crucial role in boosting Chrysler's profits. When Chrysler's St. Louis minivan plant switches fully to three shifts later this month, its annual output is expected to increase by 55,000 vans. Considering that Chrysler makes an estimated $4,000 per minivan, that's a nice pop. Two Ontario plants may also make the switch.

Of course, it's far from certain that Eaton can duplicate his GM successes at Chrysler. Political infighting aside, Chrysler's freewheeling, stripped-down operating style may be hard to adjust to after the ponderous GM. "His biggest challenge is making that cultural change," says a former Chrysler executive. Still, Eaton proved himself remarkably adaptable when he moved from Detroit to Switzerland to head GM Europe. Tomorrow's question: Can he do as well at Chrysler on the return trip?

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