Passion for Products

A book with some flaws manages to deliver an important message about the difference between back-seat and front-seat drivers.
Author:
Publish date:

Robert A. Lutz, Guts: The Seven Laws of Business That Made Chrysler the World's Hottest Car Company, John Wiley & Sons, 1998, 226 pages.

Analysts regard automakers as good investments these days. They say American, foreign, and multinational car manufacturers are highly profitable and somewhat undervalued. So a story about how one of the most colorful, outspoken guys in the business helped one of the former "Big Three" survive its second financial crisis and become a success story for the 1990s should be a worthwhile read for both the investor and the management student.

Bob Lutz's

Guts

(not to be confused with anyone else's "Guts" book) tells such a story -- for the most part.

Lutz sprinkles details of his business background throughout the book. In short, here's what happened: He left

Ford Motor

(F) - Get Report

to join

Chrysler

in 1986, partially through Chrysler's first turnaround, the one for which

Lee Iacocca

has accepted much of the credit. In March 1992, Chrysler hired

Bob Eaton

away from

General Motors

(GM) - Get Report

to jump past Lutz and replace the retiring Iacocca as chairman of Chrysler. (Lutz retired in 1998, just before

Daimler-Benz

combined with Chrysler. While

Guts

doesn't tell readers much about

DaimlerChrysler

(DCX)

, it does reveal the qualities the Germans were interested in -- especially innovation in marketing, product development and parts sourcing.)

If Lutz bore any grudges against Eaton for the next six years they worked together, it didn't show. Eaton wrote the forward for

Guts

, and before that, Eaton & Lutz took their act on the road, appearing together in auto-show skits to introduce new vehicles to the automotive press.

The two Bobs oversaw Chrysler's renaissance. From Iacocca/Lutz to Eaton/Lutz, Chrysler's cars went from ho-hum K-car variants to rather sensuous designs like the Dodge Intrepid, Chrysler 300M, the Dodge/Plymouth Neon, and especially, the Dodge Viper, and to high-profit-margin trucks like the Jeep Grand Cherokee and Dodge Durango.

Like any good management guru, Lutz constantly spreads the credit for successes and admits to personal mistakes. Mistakes, in fact, are part of the game for Lutz. His advice to take so many risks that a certain number are doomed to (sometimes-embarrassing) failure is refreshing in the auto industry. And his seven laws are not for the squeamish executive. They are: The customer isn't always right; the primary purpose of business is not to make money; when everybody else is doing it, don't; too much quality can ruin you; financial controls are bad; disruptive people are an asset; and teamwork isn't always good.

He offers a set of equally "outrageous" corollaries, as well. "Outrageous" is in quotes here because Lutz is a bit too proud of his iconoclasm. (He's a cigar-smoking, martini-drinking vegetarian, for example.) Cutting some of this might thin 30 or 40 pages from the book. Weeding out cliches would thin the volume even more. And if you're already tired of "right brain/left brain" comparisons and references, you don't want this book at all.

Cliches and redundancy aside,

Guts

manages to disseminate an important message -- that running a monolithic corporation that makes complex, high-ticket items requires passion for the product. What makes Chrysler, and arguably

the

hot car company of the moment -- Ford -- hotter than General Motors and some foreign competitors like

Nissan

is that gasoline-in-the-veins car people like Lutz and Ford's

Jac Nasser

are shepherding interesting car designs sans all the usual market research and budget analysis. Lutz describes in great detail how he helped do this at Chrysler, and it will be a lesson worth learning for many interested in management issues.

He writes that he got the idea for a car like the V10-powered Viper, an $80 million project, by "blasting my 1985 Autokraft Mk IV Cobra ... around some of southeastern Michigan's more interesting roads one day in the warm-weather months of 1988, pondering Chrysler's situation and reflecting on how the original Cobra, with its lightweight, two-seat aluminum body and its outrageously powerful Ford V8 engine, had become the single-most-imitated sports car in history."

You'd be surprised how many other car company execs know cars only from the back seats of corporate limos.

Does the investor benefit? Yes, if only being shown that good investments are, in the case of automakers, the result of more than achieving dominant U.S. market share, gathering engineering resources and paying attention to shareholder value.

Following Lutz's formula, the less-tangible quality to seek when investing in advertising agencies, movie studios, biotech and computer companies and, of course, automakers, is management that

loves

advertising, movies, biotechnology, computers and autos.

Todd Lassa covers new cars, future cars and automaker insider news as senior editor for news at

AutoWeek

, a Detroit-based car enthusiasts' magazine. He can be reached at

toddalas@aol.com. TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.