Chrysler: Detroit Loses Its Muscle

With the clock finally running out for Chrysler, I was reminded of a theme that has run through most of my corporate work, namely that corporate culture is the element of any organization most resistant to change. As I have read (and written) many times, senior management and new management schemes come and go, but the prevalent attitude among the permanent work force is “this too shall pass.” The senior managers move on, and the culture reverts. It takes a “burning platform” to effect real change.

When the corporate culture is aided and abetted by the national culture, as with the auto industry, the day of reckoning can be staved off indefinitely. Every time a structural threat to business as usual has arisen, the fix was in: Gas crisis? Whatever you do, don’t impose new fuel economy standards, and keep gas taxes low while you wait for oil prices to come back down again. Foreign competition? Import quotas. The political culture of Washington, regardless of who controlled the White House or Congress, was inseparable from the corporate culture of Detroit.

This is unsurprising, since the car is so much a part of American culture. The romance of the car never dies, it just morphs into something else. What saved Chrysler when Lee Iacocca ran it? The minivan. Iacocca put a box on top of a passenger car frame just as baby boomers started their families. The 'sixties VW bus, the counterculture’s vehicle of choice for magical mystery tours, was reincarnated for family life as the Dodge Caravan. New wealth in the ‘90s brought back the production muscle car, like a recessive gene that suddenly becomes manifest. Of course it never really went away.

Woodstock has come and gone, but each summer suburban Detroit plays host to its own gathering of the tribes in a rite called American Iron. Loving owners and keepers of vintage GTOs, 442s (I confess, I talked my father into buying one of these when I was in high school, and he promptly sold it when he had to refill the gas tank about as often as Richard Nixon had to shave), and Corvettes park their cars on specific streets throughout the city, assigned according to make and model, where they throw open their hoods to reveal to their automotive kin lovingly restored and chromed vintage 7 liter engines. On schedule, the gentlemen will start their engines, shaking windows and rattling walls for miles around.

I had one brief brush with Chrysler and Big 3 culture in the early 1990s when a PR firm hired me to fly to Detroit and write up a case study for its client, the consulting arm of accountants KPMG. KPMG was marketing a discipline it called Business Process Reengineering. Chrysler had applied this rigorous methodology to something they called the Wire-Housing Case. A wire housing is one of those brightly colored plastic sleeves with holes through which are threaded an assortment of wires, themselves wrapped in brightly colored plastic for easy color-coded connection to the appropriate circuitry.

As I recall the numbers, each Chrysler vehicle contained seven wire housings, each of which was customized to particular electrical components of each model. Some would be used for only a couple of wires, and some many more. Each model had its own set of housings with its own specs written by dedicated teams of engineers, and produced by an extended family of suppliers.

The KPMG BPR team had re-jiggered the design process to reduce the number of housings required for each vehicle from seven to only five, and in doing so realize savings to the company in the millions of dollars. Very impressive. The morning’s discussion was filled with the enormous gains that could accrue to the company if only it attacked each engineering problem with comparable rigor-for-hire courtesy of the firm’s consultants. When I asked the obvious questions, how long did it take to implement the change and how much money did they save in practice, the consultant and the accountant exchanged a look.

In fact, they said, the change had never been implemented. Further questions elicited an impression that the automotive industry functioned internally with its own version of interest-group politics. Each system had its own web of constituencies—design teams, suppliers, brand managers, and so forth—and each thread needed to be appeased. There was no such thing as the greater good, any more than there is with health care reform, the F-22 fighter plane or, to use an example local to me, congestion pricing of traffic in New York City.

The same tendency was on display more recently, and on a grander scale, after Chrysler was acquired by Daimler-Benz. The sages of Stuttgart had the bright idea that the company could save billions by mounting the American models on the frames and chassis of the Mercedes, and thus cut out redundant designers, engineers, and suppliers.

This time, the Daimler engineers went into open revolt. Put those American pigs’ ears on our silk purses? Not on your life. And so another grand effort to rationalize the auto industry went by the boards. Daimler essentially sold the company to Cerberus Capital for parts.

In the years since that visit to Detroit—I can easily place it in time because I also stopped in on an aunt in a nearby suburb who was glued to the O.J. Simpson trial—I have encountered a number of other consultants and their schemes to bring the automotive supply chain to heel. The companies would consolidate their supplier networks, sourcing more parts from fewer suppliers who would achieve economies of scale and provide lower unit costs in return for bigger orders. The suppliers, who simultaneously worked with the competition as well, would take over more of the basic engineering and design, usually with talent offloaded from the Big 3. Personnel and systems for both would be integrated into one another. Unlike the wire harness case, these changes were implemented. It’s not as though the Big Three have been doing nothing all these years, and still it’s not enough.

Now Chrysler is being run by Bob Nardelli, once an also-ran at GE in the race to succeed Jack Welch, and then the overpaid, underachieving CEO of Home Depot. The New York Times March 16th profile of him is an oddly touching piece. Like Donald Rumsfeld and Ernest Hemingway, Nardelli works at his desk all day on his feet. He is pictured as a man on a mission, comparable to Iaccoca, who wants to rescue the whole cow, albeit a leaner version, not chops and steaks as had been expected when he took over. “It’s not about Bob… If I didn’t believe in [the rescue plan] I wouldn’t have put my name on it,” he told the Times. He has already cut 32,000 jobs, but even if it were possible to fix the wire harnesses or improve the fleet average all at once, he couldn’t sell the product, not in this market. On Monday, the Administration voted no confidence. Barring an 11th hour reprieve from Fiat, this is a death sentence.

My aunt lives on the street that briefly each summer becomes known as Mustang Alley. She is anguished by the fate of her community, her immediate family, her friends and her business, all of which are suffering. Watching what is happening to New York as the banking crisis unfolds, I am just beginning to understand know how she feels. Her son-in-law is an engineer who worked for a supplier to the auto industry. On Sunday, he moved south to work for a company that builds windmills.

Henry Ehrlich has written speeches as a freelancer for both the new, white-knight CEO of Fannie Mae and the former, disgraced CEO of Freddie Mac. He is author of Writing Effective Speeches and The Wiley Book of Business Quotations.