Lee Iacocca was a corporate giant for Ford and Chrysler, an executive whose legacy includes the births of both the Mustang and the minivan, and the saving of Chrysler.
He died Tuesday night at 94. Here are six ways the man whom the Harvard Business Review referred to as “the first modern example of a charismatic business leader” transformed the auto industry.
Invoking patriotism to sell cars made in the U.S.A.
Iacocca stood out from other corporate executives by applying a strong patriotic message to products. He aligned buying and driving cars made domestically with American patriotism.
Sonnenfeld said Iacocca tried out an experiment: Thanks to a partnership with Mitsubishi Motors, he put the Japanese manufacturer’s diamond logo on some Chrysler cars and found that people preferred the cars when they thought they were Japanese. That proved that a prejudice existed at home against cars made inside the United States.
“He was unabashedly a supporter of the home team, first and foremost,” Sonnenfeld said.
An eye for marketing strategy
One of Iacocca’s most well-known marketing strategies with his Chrysler television commercials: “If you can find a better car, buy it.”
That same knack for catchy promotions is what initially caught the attention of Ford Motor Co. after he had been working for the company since 1946. Iacocca called his breakout promotion for Ford “‘56 for ‘56”: Any customer who bought a new 1956 Ford could do so with an initial 20 percent down payment and three years of monthly $56 payments. Ford sales in Philadelphia jumped to the front in three months, and Ford vice president Robert S. McNamara (the future defense secretary) incorporated it into the company’s national marketing strategy. The promotion was responsible for selling 75,000 cars.
Sonnenfeld said Iacocca’s strategy of appearing in ads and commercials was a first for corporate marketing.
“He sort of became the standard of CEO personal-branded identification with the mission of enterprise,” he said. “When people did this, they said, ‘They’re the Lee Iacocca of airlines.’”
After he became Ford’s vice president in 1964, Iacocca noticed a new demographic trend in the market: younger buyers. He based new vehicle designs and appearances on the model of “a car you could drive to the country club on Friday night, to the drag strip on Saturday, and to church on Sunday.” And so, the Mustang was born.
The muscle behind the Mustang
Before it hit the market, Ford aggressively promoted the Mustang through test drives by college newspaper editors and commercials frequently broadcast on television networks.
And it worked. The Mustang brought in a record number of sales for the company, with 418,812 models sold and $1.1 billion in profits within the car’s first year. More personally for Iacocca, it kick-started the series of promotions that led to his promotion to be Ford’s president in 1970 — at just 46 years old.
Bill Ford, the company’s executive chairman, issued a statement Tuesday saying Iacocca will be “dearly missed.”
“Lee Iacocca was truly bigger than life, and he left an indelible mark on Ford, the auto industry and our country,” he said in the statement. “On a personal note, I will always appreciate how encouraging he was to me at the beginning of my career.”
The great Chrysler rescue
In 1978, Iacocca joined Chrysler Corp., now Fiat Chrysler Automobiles, two weeks after Henry Ford fired him. The following year, he was elected Chrysler’s chairman and CEO, at a time when the company was falling behind the two other members of Detroit’s Big Three (Ford and General Motors) and nearing bankruptcy.
Iacocca said at the time that he had no other option — it was federal help or bust. He appealed to Congress in person and via national news broadcasts, exposure that boosted his publicity. In 1980, during the Carter administration, Iacocca was able to persuade Congress to approve federal loan guarantees of up to $1.5 billion.
“He understood the role of a major U.S. company in a mixed economy,” said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor.
Sitting across from Iacocca, then-Sen. Adlai Stevenson III (D-Ill.) asked him during a November 1979 hearing if he believed his appeal flew in the face of the free market and Iacocca’s allegiance to it.
“It sure does,” Iacocca responded. “I’ve been a free enterpriser all my life. I come here with great reluctance. I’m between the rock and the hard place. I cannot save the company without some kind of guarantee from the federal government.”
Sonnenfeld said the bailout was controversial and that its opponents saw it as a prime example of “crony capitalism,” but the returns were beneficial for the government.
To pay back the loan, Iacocca virtually flipped the company upside down: He slashed executive salaries (including his own to a dollar a year), closed factories, laid off tens of thousands of employees and instead depended heavily on automation and subcontractors and persuaded the company’s suppliers to accept late payments.
The company paid back its loans $1.2 billion and interest in just three years — seven years ahead of time.
“We at Chrysler borrow money the old-fashioned way,” Iacocca said at a news conference at the time. “We pay it back.”
Another brick Iacocca laid to rebuild Chrysler was the acquisition of American Motors in 1987, which gave the company its Jeep division.
When Chrysler employees needed to remember how to spell his last name, they would recite, “I Am Chairman Of Chrysler Corporation Always,” Reuters reported. Iacocca retired from Chrysler in 1992.
Fiat Chrysler Automobiles issued a statement Tuesday, saying the company was saddened by his death.
“Lee gave us a mind-set that still drives us today — one that is characterized by hard work, dedication and grit,” the statement said. “His legacy is the resiliency and unshakable faith in the future that live on in the men and women of FCA who strive every day to live up to the high standards he set.”
The value of unions
Iacocca was the rare industry executive, at the time and even today, who added a union representative to corporate leadership. He brought United Automobile Workers President Douglas Fraser onto the Chrysler board of directors in 1980, after his crucial role in lobbying for the very legislation that saved the company.
“He understood if he wanted people to give, they had to have a seat at the table where it was spent,” Shaiken said.
Part of saving Chrysler and cutting down costs meant working with Chrysler employees who were UAW members to give up some concessions, mainly by accepting lower wages — which set them apart from competitors like Ford and General Motors.
“That was a very hard sell at the time,” Shaiken said, adding that Iacocca relied on Fraser’s guidance to do it. “They went into the plants. They talked to people. He didn’t issue the order. He understood he had to convince, and it was radiating the depths of his own conviction that I think had an important impact on people.”
As Chrysler recovered and enjoyed profitable sales, the groundwork for a productive relationship for negotiations with UAW had been established, resulting in preserving Detroit-area plants and setting up profit-sharing for employees.
Sonnenfeld said Fraser once told him that he supported Iacocca’s consideration of a presidential bid in 1988, but didn’t think a business leader could make it to the Oval Office.
And when Fraser spoke to Sonnenfeld’s students while he was teaching at Harvard, his students told Fraser they were surprised by his appearance. They said they expected him to be balding, fist-pumping, barrel-chested, chomping on a cigar.
“Oh, you got me confused with Lee Iacocca,” Sonnefeld said Fraser told the class.
The birth of the minivan
Iacocca was responsible for Chrysler’s creation of the minivan, which rolled off the assembly line in 1983, and transformed the world’s options for family-oriented transportation.
Under his direction, the company applied the technology of the compact, fuel-efficient “K Car” platform, which cut down on production costs through parts interchangeability, and applied it into minivan with models like the Dodge Caravan and Plymouth Voyager.
Chrysler was to minivans as minivans were to suburban life in the 1990s, and the cultural impact preserved the company’s recovering profits.