Daimler Chrysler: Your Turn To Drive, Mr. Holden
James P. Holden remembers looking up from his desk at Chrysler Corp. one day in 1995 to see Chairman and Chief Executive Robert J. Eaton walk in and close the door behind him. "I need you to go do a project," the boss said, adding mysteriously: "You're probably going to disappear for awhile." Holden, then one of about two dozen Chrysler vice-presidents, was flattered and intrigued.
The mission: to explore the viability of a massive joint venture with Daimler Benz to sell cars and trucks in Asia, Eastern Europe, and Latin America. Eaton was holding top-secret talks with the German automotive and aerospace giant, and he wanted someone he could trust to check out the pros and cons. Holden, a rising star who had earned a reputation as an independent thinker as he worked his way up Chrysler's ranks, was Eaton's man.
After a year on the project, code-named "Q-star," Holden concluded such a joint venture would fail because neither had a strong presence in those developing markets. The problem, he told Eaton, is that "we're trying to combine our weaknesses, not our strengths." The only way such a venture could ever work, he advised, would be to combine operations in markets where both were powerful. Holden's advice: "Either we don't do it, or we go all the way."
Chrysler walked away from a linkup then. But in May, 1998, when the two sides stunned the industry by coming together in a $36 billion merger, it was, indeed, "all the way." Now, in one of life's ironies, it falls on the once-wary Holden to help save what's turned out to be a troubled corporate marriage. In a management shakeup two months ago, Holden was named president of DaimlerChrysler's U.S. operation, following the ouster of his predecessor, Thomas T. Stallkamp.
Holden has a huge job ahead. The unit--the company's largest--brings in more than half of total sales and profits. His complex mission is to deliver the merger synergies promised when the deal was announced, while restoring the morale and entrepreneurial spirit that made Chrysler the comeback kid of the 1990s. It won't be easy. Although the company says it will reach its 1999 goal of $1.4 billion in cost savings, the integration has been slowed by bickering. So much so, in fact, that in September company executives decided that for now, they were better off keeping the German and American auto businesses separate.
STAR INSIDER. Does Holden have what it takes to get Chrysler back on track? Although little known outside the auto industry, he has long been recognized as a star inside Chrysler. The behind-the-scenes driver of key reforms in the early 1990s, Holden deserves much of the credit for revitalizing Chrysler and its culture following its second brush with bankruptcy in a dozen years. As a leader of Eaton's brain trust, Holden, then a general sales manager, was instrumental in developing the benchmarking strategy that helped transform then-stodgy Chrysler into a world-class company. "We saw him as one of the hottest-potential people around here a long time ago," says Eaton.
Holden's ties to the auto industry go way back. A Canadian who spent his early years mostly in Windsor, Ont., across the Detroit River, Holden was the third of four children born to a railroad Morse Code operator and his wife. The family moved to the U.S. in 1966 when his father took a job running Ford Motor Co.'s phone system. As a teenager, Holden commuted by bus to his after-school sales job at a downtown Detroit men's store. The only one in his family to finish college, he later followed his father to Ford. Moving up through a series of sales and service jobs, Holden quickly showed a knack for solving problems. When calling on dealers, recalls early mentor Patrick Keegan, the mechanically gifted Holden often helped technicians diagnose puzzling engine problems. "If it's broken, he can fix it," says Keegan. Holden's technical competency didn't stop in the garage, however. He also proved a whiz at computers, later helping Ford's industrial engine operations convert to new software systems.
Though clearly on the fast track at Ford, Holden, sensing opportunity, jumped to Chrysler in 1981 as a truck division sales manager. That was just two years after the troubled auto maker first skirted bankruptcy. "It was the challenge of being part of something that could be wonderful, but was screwed up," explains Holden. A quick study who dealt as easily with his corporate bosses as he did with local dealers, Holden rose through Chrysler's sales ranks during the 1980s. "Jimmy is smart, he can read people good," says Martin J. "Hoot" McInerney, a Detroit area dealer.
Holden landed in a pressure cooker in 1989, when he was put in charge of managing the delicate job of setting dealer incentives. It was a critical time for Chrysler, and a wrong move could spell the difference between profits or bankruptcy. Give customers too much of a break, and profits get sapped. Give them just the right amount, and sales soar. But Holden understood the market well enough to keep customers coming in the door without busting the company's budget. "Jim always had the unique ability to manage a crisis," recalls M. John MacDonald, Holden's boss at the time.
All along, Holden showed a natural bent for taking charge and leading others. In 1992, Eaton joined Chrysler from General Motors, replacing then-CEO Lee Iacocca. One of his first moves was to select Holden and a handful of other rising executives to help set the cultural and strategic changes that ultimately allowed the company to restore its financial health. Although no one person was in charge of the group, Holden quickly emerged as the de facto leader, say several Chrysler executives.
Holden and the team of young turks set about benchmarking the world's best companies on everything from product development and quality to such "soft areas" as customer service and human resources. Moreover, he flatly told Eaton that unless his top 25 managers bought into the new approach, it was useless to proceed. Today, Holden says many senior officers did resist the proposals, complaining that such squishy issues didn't matter in the auto business. But with Eaton's support, Holden forced them to dedicate four hours a week to learning the new philosophy well enough to teach it to their subordinates.
DOMINANT GERMANS. The effort gave birth to a series of initiatives that dramatically changed Chrysler. The company set up new teams to develop new cars and trucks, improved quality controls, and put in place a new manufacturing operating system. It remains one of Holden's proudest achievements. "A lot of things sprouted from that," he says.
Yet all of it may seem like child's play compared with the challenge now facing Holden. So far, the DaimlerChrysler merger has proven that cultural differences can be all but insurmountable in such large transatlantic alliances. With Co-Chairman Jurgen Schrempp and other German executives clearly emerging dominant in what was billed as a "merger of equals," the frictions have led to the departure of several top Chrysler executives as well as many talented midlevel managers and engineers. Investors, sensing more tough times ahead and worried about whether expected cost savings will be realized, have pushed the stock down 33% since January, to 73.
To reduce the tensions, DaimlerChrysler decided that, for now at least, Mercedes-Benz and Chrysler will be run mostly as separate entities. But executives have hardly given up on the idea of wringing synergies out of the merger. They have created a new automotive council that will look for ways to take advantage of the company's huge international presence by sharing platforms, technology, and components.
"NOT MR. MILQUETOAST." In the meantime, Holden's top priority is to rally the old Chrysler, where morale is low. With his mixture of easy confidence and disarming humor, the plain-spoken Holden is more diplomatic than his often acerbic predecessor, Stallkamp. It was Stallkamp's persistent questions about how the management board worked that ultimately led to his downfall. Holden's easygoing ways, by contrast, are better suited for dealing with his German colleagues, company insiders say.
Many add, though, that they believe Holden will be every bit as outspoken as Stallkamp, only with a bit more finesse. "I'm not Mr. Milquetoast," he says. "I didn't get this job in the lottery, or because I'm the best friend of Jurgen Schrempp." Quite the contrary. Business associates of Schrempp's say he values Holden's opinions. "Schrempp says the only one who argues is Holden," says one former top executive. It was Holden, for instance, who pressured his German counterparts to abandon plans for a Mercedes minivan in order to protect Chrysler's most treasured franchise.
Holden will stand his ground, even if it takes years. Take DaimlerChrysler's recent confirmation that it will dump its historic Plymouth nameplate. Holden pushed for that decision inside Chrysler for most of the 1990s, arguing the company was wasting resources marketing virtually identical vehicles under different brand names. His former boss, retired Vice-Chairman Robert A. Lutz, disagreed. But Holden kept up the pressure. Eventually says Lutz, "I knuckled under," although the company didn't announce the decision until later.
Will such strengths allow Holden to bring back the magic that made Chrysler such an attractive partner in the first place? Jurgen Schrempp is betting on it. For his own big plan to pay off, he needs this onetime skeptic to turn Chrysler's troops back into true believers.