In Praise of Chrysler

At first blush, the news might have seemed inconsequential.  This past week, General Motors’ Cadillac ATS found itself named Car of the Year at the North American International Auto Show in Detroit, while Chrysler’s Dodge Ram 1500 Pickup was named Truck of the Year

Seriously; think about that.  Think about how far these two have come in just the four years since that they received their combined $15 billion government bailout. Car of the Year and Truck of the Year for two companies that as recently as the early days of the Obama administration were coughing, wheezing and threatening to spiral downward into a full-fledged death rale.  It’s astounding.

But the one I’d like to focus on today is Chrysler, as well as some of the lessons we might learn from its remarkable comeback.  For the smallest of Detroit’s Big Three, it all began with the hiring of CEO Sergio Marchionne, the Italian-born iconoclast who in 2009, following the Fiat merger, inherited the Motor City’s leakiest ship from Robert Nardelli, the guy who’d been working as a hired gun for a private equity group. 

Nardelli, if you recall, was the bozo who earned his bozo rep the old-fashioned way; by driving Home Depot’s stock into the dumpster, by being named by one of Fortune magazine’s “worst CEOs of all time,” and by becoming – justifiably – the poster child for insane CEO compensation packages that often seemed to defy logic, reason, and most of all, performance. 

The man also unwittingly served as a perfect foil and an ideal counterpoint to Marchionne.

In short order, the open-collared, roll-up-your-sleeves Italian turned the culture of Chrysler upside down and, by doing so, turned its list of priorities upside down as well.  These days at Chrysler – as critical as things like stock price, ROI and profits remain – they have become secondary to operational considerations like quality, productivity, innovation, and engineering.  The brash and often brusque Marchionne understands that if a manufacturer focuses intently on the latter, the former will invariably result.

That’s why one of the first things he did was to move his and the other executive offices out of the penthouse at Chrysler – a floor that remains empty to this day – down to the fourth floor, where they’re now located adjacent to the engineering offices.

What’s more, Marchionne didn’t just talk about Toyota’s famed TPS philosophy and its dogged pursuit of high quality and low inventory; he embraced it like a long-lost son. 

And in 2011, while clearly alienating some powers in Washington by arguing that the government loan to Chrysler came at “usury” interest rates, he somehow repaid the company’s debt in full.  Bam, just like that.

But to truly wrap your head around the remarkable change Marchionne initiated at Chrysler, think of it in these terms.  Remember the last time Chrysler got a government bailout?  In was the dawn of the 80s, and Lee Iacocca held the reins.  The company had spent a decade making so-so cars that, frankly, fewer and fewer people wanted to buy.  But then Iacocca rolled out the Chrysler K Car, an affordable and serviceable, but entirely non-descript vehicle that came along just as runaway inflation was putting a choke-hold on the U.S. economy and the first whispers of the “Buy American” refrain were starting to rumble throughout the land. The car sold like hotcakes and pulled Chrysler, at least temporarily, out of the fire.

The problem was K Cars were crap and began falling apart long before most of the loans used to buy them were even paid off.  What’s more, two things happened.  Honda began making inroads in the U.S. with their Accord and their Civic, both of which were affordable, not to mention solid, well-engineered and built to last. 

And as this was happening, Chrysler took it upon itself to launch an all-new ad campaign with Iacocca pointing his finger into the camera and daring American car buyers, “If you find a better car, buy it.”  Well, that’s exactly what they eventually started doing; especially after most of them began to realize how much better built Hondas and Toyotas were than Iacocca’s cheap, tinny little K Cars.

Now, fast forward 30 years to 2012 Super Bowl, and a grainy, earthy and eye-catching ad narrated by rapper Eminem; an ad for Chrysler that ended with the wild and daring but absolutely unforgettable tagline, “Imported from Detroit.”  That much-talked-about and now award-winning campaign, unlike Chryler’s prior one, was one backed by real substance and something more more fundamental that just a camera-friendly executive and some corner office bluster.  And like the very vehicles it was designed to move, the campaign was innovative, imaginative and fantastically well-engineered.  That’s the difference between then and now. 

During its 1979 bailout, Chrysler had great marketing and a pretty bad product. Today, thanks to Marchionne, it’s a whole different story.  Today both are great.

And today, for the first time in roughly two generations, there is something fundamentally game-changing taking place in the American auto industry. Today, just maybe, the light at the end of that long, dark tunnel many view Detroit as might just turn out to be something other than an on-coming train.

Lessons Learned
The lessons?  There are three big ones as far as I can see. 

One; business, like life, is a cycle.  And because that cycle will repeat itself many times, good and bad, companies must try to extend their good cycles for as long as they can.  That’s why, at this week’s Auto Show in Detroit, even as Chrysler execs were busy patting themselves on the back, their CEO was gently reminding them they still had plenty of work to do.  He knew that, just as with fabulously successful companies like ESPN, Groupon and Microsoft — companies that fundamentally changed they way they behaved once they’d stuck gold — the way most organizations behave when they’re lean and hungry, and the way they behave when they’re  fat, bloated and gorging on their own success, are often two radically different things.  Marchionne wants his team to stay hungry, and to that end he continually urges them to remain in the mindset of a startup or an outsider; one utterly fixated on not so much enjoying the view from the mountaintop, but working like hell to get there.

Two; when it comes to manufacturing, quality always wins out.  Always. And when trying to battle for market share, while price may be able to get a a foothold, the only way for a manufacturer to ensure long-term, sustainable growth is with superior quality.

And three; when things are done right, government does not have to be a hindrance to corporate America.  And any executive who disagrees with that is only flapping his gums or whistling in the dark.  To the contrary, a good, responsive government will work hand in glove with an industry, and in the end establish policies that ensure they both grow and prosper.  Likewise, bailout money from a government — any government — comes at a price. And part of that price is for the recipient to fundamentally change the way it operates and to learn from its mistakes.

Like Chrysler, a company which, even as you read this, continues to write one of the most unlikely, uplifting and downright exciting American business stories this manufacturer has read  in a long, long time.

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