Why Eaton Got Noticed

It was Friday the 13th, but it was the start of a lucky weekend for Robert J. Eaton, president of General Motors' European unit. That day, Eaton, 52, drove a gleaming white Astra off the assembly line at GM's plant in Szentgotthard, Hungary--the first car produced in that country in half a century. From there, Eaton headed straight to New York, where, within 48 hours, Chrysler Corp.'s board named him successor to Chairman Lee A. Iacocca.

Eaton's sudden departure stunned the staff at GM Europe's tightly knit corporate headquarters near Zurich. An easy-going, well-liked executive, he was known for lunching in his shirtsleeves at the company cafeteria. In the days after his abrupt departure, colleagues refused to criticize Eaton. "Nobody around here is going to brand Bob a traitor, even though he left for a competitor," says one glum GM Europe executive.

That's a tribute to his performance as General Motors Corp.'s European chief--a performance that probably landed Eaton Chrysler's top job. In contrast to GM as a whole, Eaton's European operation has made enormous progress in the past four years. Indeed, GM Europe is helping keep its beleaguered parent afloat. Last year, the total company posted a $4.5 billion loss, mostly because of red ink from its North American auto operations. GM Europe, however, racked up its fifth straight year of profits in 1991--netting $1.8 billion, a margin of 7% on sales of $25.4 billion.

RUDE RHYME. There are a lot of similarities between today's Chrysler and the GM Europe that Eaton took over in June, 1988. The unit had fallen on hard times in the late '70s. Things were so bad that German schoolkids derided its German-made Opel, chanting a rhyme that went in part: "Every yokel drives an Opel."

But by the time Eaton arrived, the company was already on the mend--as some analysts believe Chrysler is now. The Opel Kadett, introduced in 1984, was selling well, and the unit was showing real profits. It needed a solid detail man to keep the momentum going--and that's just what it got in Eaton. During his tenure, profits grew, and GM Europe's market share rose to 11.7% last year from 10.4% in 1988 (chart).

Eaton doesn't get all the credit for the comeback. Much of the groundwork was laid by his predecessor, John F. Smith, now back at GM's Detroit headquarters. But Eaton has a bent for manufacturing and team-building--two skills Chrysler needs if it's to improve efficiency and quality. Iacocca credits Eaton with boosting GM Europe's auto quality by 50% and making it Europe's lowest-cost producer. "He fits in with the management and team philosophy that we've built here at Chrysler," says Iacocca.

Eaton also has boldness that Chrysler needs to survive against bigger rivals. For instance, even before the Berlin Wall fell in November, 1989, Eaton was engineering a move into Eastern Europe, particularly Hungary and Poland. Once the Wall was breached, he backed a push by GM's German unit to build a $650 million Opel plant in Eisenach, eastern Germany. That helped Opel outsell even Volkswagen in the region last year.

Indeed, with the October launch of the Astra, Eaton was just beginning a nervy, take-no-prisoners assault on VW. This sporty midrange model is aimed at overtaking VW's Golf as Europe's top-selling car. So far, so good: GM Europe already has booked 400,000 orders for the Astra and expects to sell 700,000 of them this year. What's more, Eaton was increasing the pressure on VW by expanding GM's European capacity by 25%, to 2 million units by 1995.

Part of Eaton's strength is that he's a car buff. He started tinkering with engines at age nine while growing up in Colorado, and by age 11, he was tuning up a '32 Chevy. Ex-colleagues say he's never happier than when he's out on the road testing a new model. That's why the Astra, developed under Eaton, has plenty of nifty features, from a peppy five-speed transmission to extra protection against side collisions.

To Chrysler, Eaton's talent for cost control may be his best point--particularly since the company's current No. 2, Robert A. Lutz, is also a car guy. Karl Ludvigsen, chairman of London consultants Ludvigsen Associates Ltd., credits Eaton with "running a tight ship." Largely, that has been a matter of using a quality program, cutting the fat out of production, and outsourcing to keep component costs down.

Eaton also spent heavily on upgrading plants. GM Europe started "investing early in productivity and product," says Bruce Blythe, strategy chief at Ford of Europe Inc., who admits that competitors such as Ford are having to spend more to catch up. And Eaton set a frugal tone. Andre Van Roy, head of GM's Continental operations in Antwerp, Belgium, says Eaton demanded plain-vanilla hotels and meals when he came to visit and once complained, only half-jokingly, that the food was "too good" in a restaurant Van Roy chose.

LABOR COUP. Then there are Eaton's management skills. One of his biggest coups: an innovative deal with Europe's sometimes-fractious auto unions. In 1988, he got GM's Belgian unions to agree to a schedule that keeps GM's Antwerp plant running 20 hours a day. He later negotiated three-shift schedules that keep the company's Zaragoza (Spain) plant and Bochum (Germany) plants going around the clock. Now, says John Lawson, an analyst at London's Nomura Research Institute: "They are a model for the U.S." Chrysler wants to move to such a system at home, and Eaton's experience could smooth the transition.

Not all of Eaton's initiatives turned out so well. In 1989, he negotiated the deal in which GM outbid Italy's Fiat by paying $600 million for a 50% stake in Swedish luxury carmaker Saab Automobile. Saab's losses quickly mounted when its three key markets--the U.S., Britain, and Sweden--tanked. GM's share of the losses totaled $1.1 billion in 1990 and 1991. Saab may break even this year thanks to cost-cutting.

Eaton acknowledges that his work at GM Europe wasn't finished. To match Japanese rivals, Eaton says, European producers, including GM, still need to ax "$1,000 or more per car." Just before taking the Chrysler job, Eaton said of GM Europe: "We need to get double-digit annual productivity gains--and we are still not there in most of our plants."

That may sound like Mission Impossible, but Eaton thinks such goals can be achieved by steady improvements. "There's no magic in this," he says. Maybe not. But a dose of what Eaton has been doing at GM Europe may be just what Chrysler needs.

— With assistance by Patrick Oster

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE