Interesting 1970 Magazine Article

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This is an article from Fortune from April 1970 about Chrysler Corp. and its economic situation.
It's a lengthy read, but I found it interesting nonetheless, especially for Fuselage addicts. The paragraphs that are more interesting in that respect are in blue so you can skip directly to them.

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The sign, on the window of White Plains (New York) Dodge, bespeaks the anguish of Chrysler's dealers around the country.

CHRYSLER'S PRIVATE HARD TIMES

Townsend's toughness turned the trick, and then the trick turned Townsend. Now the directors are getting tough too.

Once again, Lynn Townsend is picking up the pieces at Chrysler. After taking charge of a scandal-ridden and nearly moribund company in 1961, Townsend had restored its honor, improved its cars, revamped its dealer system, and almost doubled its share of the U.S. automobile market. Yet last year, Chrysler's heroic chairman found himself presiding over a precipitous return to hard times. During 1969, Chrysler fell prey to some bad luck and some bad economic conditions. But it also suffered from some bad management decisions. Townsend's success had made him overconfident, and for a while he relaxed his grip; the tight operational controls that had characterized his reign suddenly slackened. Almost overnight, Chrysler's profits plummeted, and many of the gains Townsend had labored for years to achieve were obliterated.

In 1968, Chrysler had climaxed its spectacular comeback by setting all-time records for revenues, earnings, earnings per share, and just about everything else. The final quarter of that year, in which Chrysler earned $112 million, was the most profitable in the company's history. Last year, earnings and earnings per share fell almost 70 percent, to their lowest levels since 1962. For all of 1969, Chrysler netted just $88,800,000, on revenues of $7.1 billion; during the final quarter, the company had a $4,400,000 deficit, the first time it had been in the red since the third quarter of 1961. And it is expected to report an even larger loss for the first quarter of 1970. The company's stock, which reached a peak of $72.75 a share late in 1968, was selling for somewhat more than a third of that early last month, which is about where it was seven, years ago.

Townsend has made a succession of swift moves similar to the tactics he used during the early Sixties. The most painfully reminiscent are his austerity measures. Chrysler has sharply curtailed its capital-investment program, postponing the completion of one plant and the expansion of two others. It has made three across-the-board cuts in the operating budget. And it has fired - "indefinitely laid off," to use the industry jargon - more than 12,000 of its 140,000 U.S. employees, white-collar and blue-collar alike. Among the casualties were several hundred hard-core trainees. Under the U.S. Labor Department's JOBS program, Chrysler had a contract to train 4,500 production workers, but it had to cancel that commitment early this year. This was a particularly desperate action for Chrysler, since Townsend recently became chairman of the National Alliance of Businessmen, which ardently supports JOBS.

In perhaps his most controversial effort to resuscitate Chrysler, Townsend hastened the departure of Virgil E. Boyd from the company's presidency at age fifty-seven. Last January, Boyd, an easygoing man who had been distinguished for his amiable relations with Chrysler's dealers, was given the newly created, and largely ceremonial, position of vice chairman. It appeared as though Boyd was being made the scapegoat for Chrysler's collapse, despite statements to the contrary by Townsend and by Boyd himself.

Replacing Boyd was Townsend's long-time protégé, John J. Riccardo, a forty-five-year-old accountant who had served as group vice president of the U.S. and Canadian automotive division, the third-ranking position in Chrysler's hierarchy. Eugene A. Cafiero, forty-three, an engineer who had held the obscure job of vice president in charge of Latin-American operations, was vaulted over several higher-ranking executives into Riccardo's job.

Earlier, Townsend had acted to prevent a recurrence of some major problems that contributed to last year's profit plunge. He ordered the restyling and re-engineering of the company's top-of-the-line, or C-body, cars for the 1970 model year. The C-body cars - Imperial, Chrysler, Plymouth's Fury, and Dodge's Monaco and Polara - had been restyled and re-engineered for the 1969 model year, but the public had found them unappealing; normally there would have been no important alterations until the 1972 model year.
 
Townsend also introduced flexibility to the company's production schedules. When an economy-minded public began drifting away from big cars and toward small ones early in the 1969 model year, Chrysler found itself locked into producing too many of the former and too few of the latter. Two of its eight North American car-assembly plants were converted before the 1970 model year to "swing" plants, capable of producing either large or small cars - or both - as the market demands. And Town-send ordered an overhaul of the poorly planned and trouble-ridden computer system, which for almost three months had been misreading orders so that cars were assembled incorrectly and then sometimes sent to the wrong cities.

The directors are restless

Nothing Townsend has done is likely to help very much this year, if only because the auto industry is in its widely heralded slump. During January and February, retail sales of American cars totaled 1,136,761 units, down 13.1 percent from the comparable period of last year. Sales of Chrysler's cars were down 9.6 percent while Ford lost 5.2 percent and General Motors was down 19 percent. Chrysler, because it is highly leveraged, suffers more than its competitors in a poor automobile market. Moreover, it has had to cut back production this year more drastically than G.M. and Ford, since its inventories have been proportionately much higher. In February, management predicted a deficit of $10 million to $40 million for the quarter ending March 31.

Chrysler is steering a perilous course. The company will need about $540 million for capital expenditures and special tools this year, and another $28 million for payment to stockholders if the present dividend rate is maintained; the quarterly dividend was slashed from 50 cents to 15 cents during the first quarter. Although the total cash requirements of $568 million will be down more than a fifth from last year, Chrysler will have to strain to meet them. Last month the company made a $200-million offering of long-term debt at 8% and 8% percent, to satisfy immediate cash requirements. The new debt, plus perhaps $400 million in cash flow that will be added to working capital from depreciation and amortization, should be more than enough to offset total cash needs. By making the debt offering so large, Chrysler seemed to be implying that it did not expect much, if any, contribution from earnings this year. And Chrysler's problems might be accentuated if Detroit decides to put up a solid front against the United Auto Workers when the contract expires in September.

Some economists are predicting that the auto market will come roaring back next year, possibly even reaching the long-term trend line, which would mean a record 10-million-car market (9,582,000 cars, including imports, were sold in the U.S. during 1969, second only to the 9,656,000 sold in 1968). But there is reason to question whether Chrysler is equipped to take full advantage of another auto boom. The company has been laggard in its product planning; it won't have its version of the mini-car on the market before the fall of 1971, while the competition, including even American Motors, is bringing out mini-cars this year. Chrysler's international operations, much weaker than those of G.M. and Ford, have been an expensive albatross around the company's neck. And the events of last year have caused a lot of people to wonder whether Chrysler's top management really is as smart and agile as it seemed during the salad days of the Sixties. When Chrysler was on the rise, Townsend had his fellow directors eating out of his hand. Now, however, many of them are restive, and one company insider suggests that the next couple of years will either remake or break Townsend.

The competition retaliates

To some extent, of course, Chrysler's profit decline last year was unavoidable. The company and its two larger competitors were bedeviled by the swiftly rising costs of material and labor, and by soaring interest rates on short-term borrowing. Both G.M. and Ford had revenue gains last year, but lower profits, while Chrysler's revenues were down only slightly from the record high of $7.4 billion set in 1968.

Neither G.M. nor Ford had its profit margins clipped as severely as Chrysler. Each of them lost less than a percentage point, with G.M.'s margin on sales falling from 7.6 to 7 percent, and Ford's from 4.3 to 3.5 percent. By contrast, Chrysler's margin tumbled more than two and a half points, from 3.9 percent to 1.2 percent, its worst performance since 1961. Chrysler plainly had some important problems all its own.
 
Before the 1969 model year, Townsend had enjoyed a string of exhilarating triumphs. Since 1962 the company had increased its share of the U.S. auto market annually at the expense of its competitors. During the 1968 model year, Chrysler's market penetration had risen to 18.9 percent of the U.S. makes sold in this country, up from only 9.8 percent in 1962, when total industry sales were much lower. The company had made a particularly large leap in 1968 - from 16.9 percent the year before -and Townsend let it be known that he expected yet another rise in 1969. During November, 1968, he exercised options to buy 27,040 shares of Chrysler stock, then selling near its all-time high. The purchase slightly more than doubled his holdings.

Chrysler's 1968 performance might have been unduly inflated by the seven-week strike against Ford around the start of the model year. In addition, Chrysler had got more than its share of fleet sales during the 1968 model year - 24.4 percent of the market - through hard-sell, cut-rate deals that yielded the company and its dealers little profit. Moreover, it was well known in Detroit that neither General Motors nor Ford intended to let Chrysler continue to carve out a larger share of the market without swift competitive retaliation. But such realities simply could not survive the rarefied atmosphere at Chrysler's executive headquarters in Highland Park, Michigan. "Townsend got so damned cocky," complains a Chrysler insider. "An executive gets into trouble when he starts thinking he's good." He contends that Townsend had begun holding himself aloof from Chrysler's operations, and had spent too much time on extracurricular activities.

Townsend the superstar had become quite a different man from the lean and hungry Townsend of a few years back. He would second-guess his staff, exclaiming, after something had gone wrong, "Now here's how I would have done it!" "Townsend is good," says the Chrysler insider, "but he shouldn't confess it too much. A lot of us worked on him. We said he was riding for a fall if he didn't keep his hand in. These companies don't run by themselves. Townsend is a leader of people, and can influence people. He has the courage of his convictions, and cannot fail - when he devotes time to it."

"Our biggest program ever"

At the start of the 1969 model year, work was about to begin on a ninth North American car-assembly plant, at New Stanton, Pennsylvania. The $100-million facility was scheduled for completion before the fall of 1970. Its capacity of 200,000 units annually would raise the company's total rated capacity in the U.S. and Canada to almost two million. As further evidence of Townsend's bullishness, Chrysler was expanding its only transmission plant, at Kokomo, Indiana, and was about to expand a parts plant in Toledo, Ohio. And it was ready to unveil what was then, in Townsend's words, "our biggest program ever," featuring a new line of full-size cars.

Today the New Stanton plant is a steel-and-concrete shell, visited mainly by watchmen and pheasants. Work was halted last June, and its completion was rescheduled to 1972. Construction barely got started at Kokomo, and the expansion has been postponed indefinitely; in fact, Chrysler currently has so much extra capacity there that it has agreed to build transmissions for American Motors. The expansion of the Toledo plant never got started.

Chrysler had set aside four of its assembly plants for production of the big cars, and Townsend was confident that the public would make a rush for them. During the 1966 model year, the last time Chrysler had redesigned its C bodies, sales of the company's big cars had risen 6 percent, compared to only 3.3 percent for American cars generally. "We never before had a market that was not strong for new C bodies," Townsend remarks. "The question at the time was not whether we would have too many C bodies, but whether we had enough." That question soon was answered. By January, 1969, consumers were turning away from big cars, and were flocking instead to economy cars, including the imports and the American compacts; another economy car, Ford's new "subcompact," the Maverick, found an eager market after it was introduced in April, 1969. For the entire 1969 model year, Chrysler's C-body sales, which normally provide the highest profit margins, fell by 7 percent, while the market for all U.S. cars rose by 6 percent.
 
Chrysler not only had missed the turn in consumer sentiment, it also failed to design its big cars attractively. It was unable to draw its share even of those buyers who were willing to buy big cars. The public had a lot of disparaging things to say about Chrysler's new cars, and their comments were frantically passed along to management by the dealers. The customers seemed almost unanimous in condemning the flare on the rear fenders of the big Dodges. They also complained that the trim was unattractive, and that the wheels were too close together, giving the illusion that they were "tucked under," in a bowlegged stance. "It is clear," says a Chrysler director, "that the big 1969 cars were turkeys." Even now, Townsend refuses to go along with that opinion. "Styling was excellent," he contends. But while he might not agree, Townsend had to accept the public's verdict. For the 1970 model year, the big cars were given a wider track, the front ends were lengthened, the rear ends were shortened, the grilles were changed, and the trim was altered.

Even though the public was cool to big cars, and particularly Chrysler's big cars, the company found itself unable to adjust. The four assembly plants that were producing C-body cars during the 1969 model year were not equipped to produce other kinds, and Chrysler could not retool them in the middle of the model run. Ford and G.M. had hedged their bets at some plants by putting assembly lines for both big and small cars under the same roof. But Chrysler had no plant flexibility at all. It was stuck with more capacity than it needed to satisfy the demand for big cars, and too little to meet the demand for small cars.

Instead of reducing its production of big cars, however, Chrysler went right on churning them out at full capacity for several months. There was a certain method in this seeming madness. Union contracts require the company to pay up to 95 percent of wages during layoffs, so if there is a chance that a car can be sold, it might as well be built. Townsend, failing to realize the dimensions of Chrysler's C-body disaster, tried the hard sell, a method that had served him well in the past. He was confident that his dealers could weather the storm, and he heaped them with new cars.

In previous years, Townsend had been able to undercut the competition by offering large rebates to dealers, particularly for the sale of cars to fleet owners. But in the 1969 model year, G.M. and Ford decided to play the game just as hard as Chrysler; using their own rebates, they pushed Chrysler's share of U.S.-model fleet sales back from 24.4 percent to 22.8 percent, and cut into its share of general auto sales. By February 10, 1969, Chrysler's factory and dealer inventories had soared to 408,302 cars, a 102-day supply, highest in the history of the company (excluding model change-over periods). At the height of its desperation, Chrysler reportedly was offering dealers discounts as high as $250 per car.


But the dealers could take up only so much of Chrysler's burden. Rising interest rates had made it expensive for them to support those heavy inventories; the cost of money used to finance purchases of cars from the factory had risen to about 8.75 percent from only 5 or 6 percent two years earlier. As dealers balked, the new cars began backing up into Chrysler's own inventory, and on March 20, 1969, the company was holding 77,000 cars not yet sold to dealers.

The 1969 models lingered on, blighting the debut of Chrysler's 1970 models. With all those '69's around, the dealers found it difficult to concentrate on the sale of '70's. As late as March 1, just seven months before the start of the 1971 model year, there were 16,000 of the 1969 models, mostly big cars, in the hands of Chrysler-Plymouth and Dodge dealers.

"A tough launch"

A rash of technical problems plagued Chrysler's big cars in the '69 model year. Normally, there is an exhaustive pre-production stage, in which engineers scrutinize the prototypes and remove any last-minute kinks. Rarely do cars reach the pre-production stage without needing at least a few changes. Though Chrysler's management was fully aware that the program was their "biggest ever," they failed to pace it properly. The program took longer than usual to reach pre-production, the pre-production tests had to be curtailed, and some of the kinks stayed in. Cars were coming off the assembly lines with the wrong types, sizes, and numbers of parts, and often there were not enough of the correct parts available to make changes.

Some defects went undetected until the cars had been dispatched to dealers, or delivered to retail customers. "It was a tough launch," Townsend remarks.
 
It was made even tougher by the failure of Chrysler's computerized ordering and scheduling system. During the 1968 model year, each of Chrysler's forty-two regional sales offices had used a simple keyboard unit; orders from the dealers were recorded on these units, and the information, including the type of car, accessories, and location of the dealership, was transmitted to Detroit. In Detroit this data had to be recoded, then fed to I.B.M. computers that automatically scheduled production and delivery. Chrysler changed its computer programs before the 1969 model year, so that the data from the sales offices would be compatible with the computers in Detroit, and would not have to be recoded. At the same time the company replaced the keyboard units at the sales offices with computers, so that computers could talk directly to computers, a move designed to speed the procedure even more.


After the changes had been made, Chrysler's technicians discovered that they had overloaded the computers in Detroit, and had to expand the system at that end. In addition, the system was crawling with bugs. "It simply broke down," laments Townsend. "We were not getting the distribution we wanted. Cars wanted in Dubuque were going to Jacksonville, Florida. We didn't know where orders were. Dealers did not have the mix or number of cars they wanted."

The computer breakdowns had a particularly harsh effect on the C-body program. Because there was an extra-large array of options available for Chrysler's big cars, each order required two punch cards. This sometimes upset production; one of the cards would be ignored, and cars would limp off the assembly line missing essential equipment. For example, 200 Chrysler New Yorkers, 4,400-pound cars that rank second only to the Imperial in the company's product line, were assembled in stripped condition, with standard transmission, and without a radio, heater, power steering, or power brakes. Such cars could not be shipped to dealers, and had to be foisted off on Chrysler's own field staff. The company could scarcely have devised a more severe loyalty test.


A victim to hubris

For the 1970 model year, Chrysler introduced a more flexible production system. It started assembling the compact Dodge Dart, an A-body car, at its plant in Canada, at Windsor, Ontario, which previously was devoted exclusively to full-size Dodges and Plymouths. By January of this year, as the trend to small cars continued, the plant was turning out only the Dart and another A-body compact, the Valiant Duster. A second plant, at Belvidere, Illinois, which currently produces only C bodies, was also equipped as a swing plant. The company hasn't decided yet whether the plant will produce compacts or intermediate-size models such as the Dodge Coronet and Plymouth Belvedere. The new flexibility has helped. For the first five months of the 1970 model year, Chrysler's share of the market rose to 17.4 percent from 16.7 percent for the comparable period of the 1969 model year. With the industry in a slump, however, total unit sales were off more than 36,000.

It has become fashionable to assume that when a company does a multibillion-dollar business, there is little that one man - even the man at the top - can do to sway its fortunes. "These large corporations are pretty much run on the committee system," remarks a financial analyst. "There's no way you can attach the blame for failure to any particular person." If Chrysler's performance last year is taken as the case in point, it would seem that there is some truth to that statement - but only some. Lynn Townsend did not, for example, personally sketch the C-body designs that were to prove so feeble in the marketplace. On the other hand, he let those designs develop into full-fledged cars; he could have stopped them, had he wished. He could have introduced flexibility into his assembly plants before a crisis showed him the wisdom of such a step. He could have stopped producing big cars before the inventories - not to mention the discounts to dealers - reached record size. He could have paced the 1969 new-car program so that the pre-production tests did not have to be rushed. He could have ordered a gradual, rather than a massive, conversion of the computerized production system.

All this is being said, of course, with the benefit of twenty-twenty hindsight. But the point is that this is the same Lynn Townsend who previously had raised Chrysler from the ashes, never missing a trick along the way. And, with few exceptions, Townsend's staff was the same one that assisted him in that chore. When the head man fell victim to hubris, however, it was inevitable that those under him would relax as well.
 
It remains to be seen whether the recent changes at Chrysler have added strength and depth to top management. Virgil Boyd, who had been president of the company since January, 1967, was planning to retire when he reached the age of sixty, in July, 1972. Seven years older than Townsend, he had no reason to expect that he would succeed to the chairmanship. Townsend had long been grooming John J. Riccardo, formerly his colleague at the accounting firm of Touche, Ross & Co., for the presidency, and last year's collapse provided the perfect excuse for handing Riccardo that position. Townsend explains that under less harrowing circumstances, Boyd might have continued as president until he retired, but that the company's troubles required a change in long-range plans. "Virgil would have been making decisions, with my help, that would have had effect years after he retired," Townsend remarks. "In view of the need for reorganization, the need to pull ourselves together again, the review of past decisions that was necessary, I felt we had come to the point where we should put a young president in." Despite Townsend's protestations, the change gave many people the impression that Boyd was the man to be blamed - and punished - for what happened at Chrysler last year.

A reward for leadership

After Riccardo came to Chrysler in 1959, he was promoted almost annually until April, 1967, when he settled in for a time as group vice president of the U.S. and Canadian automotive division. Brusque but articulate, Riccardo has the reputation of being a hard-nosed, demanding manager. His demeanor caused some of the directors to object when he was proposed as president; he was well known to the directors, having been a member of the board himself for three years. A minority of the board felt that while Riccardo was "good at executing things," he might lack the ability to win friends and influence people, not only on the Chrysler staff but also among the franchised dealers, who had been accustomed to courtly treatment from Boyd. Riccardo acknowledges that he is a stickler for getting a job done. "I expect people to meet the commitments they make to me," he says. "When they don't, I plunge in. I'm not interested in excuses. I'm interested in what we can do to get back on the track."

It was at Riccardo's request that Eugene A. Cafiero, forty-three, was named to replace him as the head of the North American car and truck division. Although Cafiero, as boss of Latin-American operations, was low on the pecking order among the company's thirty vice presidents, his achievements had impressed Riccardo. "Cafiero could live up to his commitments," Riccardo remarks. "He was making his objectives month after month after month." Under Cafiero's leadership, Chrysler boosted its vehicle sales in Latin America from 66,000 in the 1967 model year to more than 100,000 during the 1969 calendar year.

A native of Brooklyn, Cafiero came to Chrysler in 1953 when the company acquired the auto-body business of his employer, Briggs Manufacturing. Before that, he had graduated from Dartmouth College, spent a year in the postwar Navy, and served in various engineering capacities with Ford Motor. Cafiero's first assignment with Chrysler was as a planning coordinator for the automotive-body division. He subsequently became manager of Chrysler's machining plant in New Castle, Indiana, manager of industrial engineering for the corporation, and general plants manager in the power-train group. In January, 1967, he was put in charge of Latin-American operations, and a year later he was given the title of vice president.

Cafiero usually works a ten-hour day, and has few hobbies. He is an avid reader, managing to finish two or three books a week. A lot of the books are about business, but he recently read a history of Portugal and a volume of Swinburne's poetry. Just before his latest promotion, he was reading Gibbon's Decline and Fall of the Roman Empire.

"I'm demanding as the dickens in terms of performance," Cafiero says. "People are capable of doing a heck of a lot more than they think they are. If you want to challenge people, you can't just ask them to make an improvement. In Peru, we had 10 percent penetration. I don't think anybody would have done much thinking if I'd said to make it 11 or 12 percent. But when I said we had to double penetration, I made them think, and we almost did double it. One of the things I always tell people is that they'll never get into trouble by trying something. With me, you'll have trouble if you just sit and do nothing. I'm asking our people to challenge what the company has been doing. Nothing is sacrosanct."
 
A finicky public

Lynn Townsend today faces a challenge that differs greatly from the one he faced and overcame during the early Sixties. When he took over, the auto makers were about to enjoy some prosperous years. Sales increased from 6,577,000 cars in 1960 to 9,582,000 in 1969, and Townsend cashed in on that growth. Now, however, the market is more volatile, and it has been complicated by the intensified competition from imports. And the car-buying public has turned finicky. U.S. manufacturers are compelled to offer mini-cars, sporty cars, and specialty cars to buyers who once were satisfied simply with high-, medium-, and low-priced cars.

The failure of the C-body program last year was only the latest indication that Chrysler is weak in product planning. The company seems to have more trouble than G.M. and Ford in anticipating and interpreting the desires of car buyers. During the middle Sixties, for example, when the public began to crave sporty cars, Ford offered the Mustang and Cougar, G.M. the Camaro and Firebird, but the best Chrysler could manage was to put a fastback on its humble Valiant and call it a Barracuda. Chrysler finally came out last fall with a Barracuda that is a worthy competitor, and at the same time it introduced another formidable model, the Dodge Challenger. In the meantime, however, the rage for sporty cars abated; they represented only about 7 percent of the U.S. makes sold in the first five months of the 1970 model year, compared to more than 11 percent in 1967. Chrysler's management explains that it didn't catch the sporty-car trend at its crest because, when it was rebuilding the company during the Sixties, other matters took priority.

The $70 handicap

Chrysler may also have damaged itself by waiting so long to develop a small car. Responding to the onslaught from foreign cars, which took 11 percent of the U.S. auto market last year, each of the major American manufacturers conceived a mini-car to compare roughly in size and price with such popular imports as the Volkswagen and the Toyota. The American Motors Gremlin goes on sale this month; G.M.'s mini-car, code-named XP-887, will be out in late August; and Ford's entry will be in the showrooms this fall. But Chrysler's car, with the code name 25, isn't expected to be on sale before the fall of 1971. Chrysler plans to market versions of its mini-car through both the Chrysler-Plymouth and the Dodge divisions. The car will have a 91-inch wheel-base, which is three and one-half inches shorter than the Volkswagen's, but the over-all length of 166 inches will be seven inches longer than the Beetle's.

Townsend decided to build a mini-car only with great reluctance, and he is reluctant even now. A little more than a year ago, he was publicly proclaiming that an American mini-car would not be sufficiently profitable, and that U.S. consumers eventually would revert to cars that were more comfortable, and more suitable for superhighways. He still talks that way. "I don't know whether any of us were right," he says. "The U.S. subcompact is not a very good-looking business when you sit where I sit. The possibility of a profit really is quite slim. If you define the sub-compact as being the same size and type as the Volkswagen, there is a cost differential of $70 between the same car built in Detroit and one built in Europe and laid down in Detroit, with the advantage to the European car because of lower labor costs. We can't overcome this advantage." Townsend says Chrysler will make "an American car with an American-car feel, not a European car built in America." He claims it will be sturdy enough for use on superhighways. As for the price: "We are not going to dedicate ourselves to having the lowest-priced car on the block."

There are some strong arguments for a mini-car. For one thing, since G.M., Ford, and American Motors will have a mini-car, how could Chrysler omit one from its product line? In addition, the mini-car conceivably could be used as a loss leader, to lure customers into Chrysler showrooms. There is also the chance that a united effort against the imports could reduce the foreign manufacturers' share of the U.S. market. A Ford executive estimates that if the U.S. manufacturers can knock the imports down from 11 to 7.5 percent of the total U.S. car market, they will make a profit on their small cars in a healthy auto year. G.M.'s Chairman James M. Roche thinks his company's mini-car can sell at a rate of 350,000 to 400,000 units a year, which in itself would be 3.5 to 4 percent of a 10-million-car market. He declines to estimate how many of those sales might be cannibalized from other G.M. lines.
 
By delaying his own mini-car, Townsend also is leaving himself the option of not producing one at all. If the other U.S. auto makers fail to compete effectively with the imports, or if the small-car fad suddenly fades, Townsend could cancel his mini-car and emerge with a pretty wide smile. If these things don't come to pass, however, Chrysler's late entry into the mini-car market could condemn it to the role of a remote also-ran, which is the role it occupied for years in the sporty market, and the one it continues to occupy in the luxury market.

Frayed edges in Europe

Any new Townsend plan for Chrysler will have to include radical improvements in Chrysler's international operations, which pale by comparison with the robust overseas activities of G.M. and Ford. Outside the U.S. and Canada, Chrysler accounts for 21 percent of the car sales by American companies and their affiliates, compared with 40 percent for G.M. and 38 percent for Ford. The fault in this case does not lie with Townsend. His predecessors simply did not have the vision to recognize the potential of the burgeoning foreign market for motor vehicles, which now exceeds the U.S. market by a comfortable margin. In 1958, while still a group vice president, Townsend persuaded the Chrysler management to buy 25 percent of Simca, the French auto maker. In 1963, after Townsend had taken charge of the company, Chrysler increased its Simca holdings to a majority, and two years later it bought an interest in Rootes Motors Ltd. of Great Britain. Today, Chrysler has plants in eighteen foreign countries.

Because it began shopping late in the international market, Chrysler frequently has had to settle for dismal leftovers. Its total investment abroad amounted to $500,800,000 at the end of last year, with the bulk of the money in three European companies: Simca, in which Chrysler now has a 77 percent interest, Rootes, in which it holds 77 percent of the voting shares, and Barreiros Diesel S.A., of Spain, in which it has an 86 percent interest. Simca, once a troublesome property, is profitable, but Rootes and Barreiros have been losing money. Chrysler's net from overseas operations last year came to just $19 million, a return of 3.8 percent on investment, and a margin of only 1.2 percent on revenues of $1.6 billion.

There is no sudden revival in sight for Chrysler, and the company may find that it will have to march in step with the rest of the industry for a while. The long rise in market penetration during the Sixties merely put Chrysler back where it was during the mid-Fifties, before the Dark Ages began. Under Townsend, Chrysler has gone beyond the auto industry for growth - for example, into consumer financing, boat manufacturing, and real estate (a company subsidiary continues to invest in real estate at an average rate of $2 million weekly). But Chrysler is scarcely on the brink of becoming a conglomerate: 95 percent of its revenues still derive from its motor-vehicle business.

The next couple of years will provide the crucial test of Townsend's leadership. With the auto market a washout this year, no one expects extraordinary results right away. But a source close to Chrysler's board of directors warns that Townsend will have to acquit himself respectably in the next healthy auto year - be that 1971 or 1972. One more experience like last year's, he says, could provoke yet another change in Chrysler's top management."

***
 
Very interesting article. As a kid i wasn't up on all the management issues but i remember the new "C" bodies were not selling. I liked the "Fuselage Shape" commercials and thought the cars were good looking. Dad being in body design pointed out the curved glass and the flush c-pillar to qtr. panel detail.
First clue a knew sales were slow was when the sales bank of "C" bodies grew beyond 100 days. Then in Jan. dad was asked to turn in his two co. cars and pick a couple Cs out of the sales bank. We ended up swapping cars a couple more times through-out the year. Though it was kinda neat getting new cars, mostly Newport Customs and a few 2dr Furys and Polaras dad's original ordered cars were great that year. Had a loaded VIP and V8 notchback Barracuda.
The European connection was interesting too. We had a Simca 1000, 1204 and a Sunbeam Alpine for co. cars other years.
 
The only messed-up car dad got that year was an early build Newport Custom. This car was loaded needing two Monroni labels. (even had power vents guys!) But, it had blackwall tires in place of the w.w.s. ordered for the car. Instantly turning a real nice car onto a grandpa's car. Dad was happy to turn that one in!
 
standard transmission, and without a radio, heater, power steering, or power brakes
I'd have to see it to believe it; however, it would be great to throw in the face of those that think in absolutes. This article does explain why 1969 models have "one year only" features.
 
I started working for Chrysler in 1969, having joined straight out of engineering school at the University of California, Berkeley. I was accepted into the Chrysler Institute of Engineering when I first applied, and started rotating through 8 different assignments over a two year period. I started in the body and hardware group and went through a stint at the Chrysler Proving Grounds midway and ended up finally in the fuel systems lab as my last assignment, and where I ended up going permanent. They also paid for me to attend the Univ. of Michigan to get my Master's Degree and put me through the Chrysler Insititue of Engineering in that same two year period. They accepted me into that program because I made it clear in my interview that I was a hard core Chrysler guy and had good grades in school. I also interviewed at Ford just in case I couldn't get into Chrysler, but I eventually turned down an offer from Ford.

I got a rapid flavor of how some of engineering was in my first assignment, as my immediate reaction was that the company was incredibly cheap when looking at cost of components. They would scrap a door handle design if it cost just 3 cents more to make than a comparable but less robust design. I was shocked at the choices that were made, when just a couple more cents in the part would have made it substantially better (like window regulators, door handles, and so much more). So I got a quick introduction to how desperate the times were financially.

But somehow, the desperate situation in the Board Room apparently was not that well felt in other parts of the company, such as engine and transmission design departments, the suspension department, and many more. But while at my Proving Ground assignment, I saw firsthand how cheap Chrysler was in giving extra margin in radiator cooling capacity and the robustness of the air conditioning components. They just didn't have much margin and the a/c systems were remarkably unreliable. And AutoTemp was a disaster.

What strikes me most about this article is that at the time, I thought the C bodies were well received, and for me they were the most outstanding designs of any company, and I salivated to get a 1970 Chrysler 300 for some time before being able to afford a used one that I bought in 1972 from a Chrysler Dealer. I still have it. And it is still my most favorite car, and I even got 205K miles out of the 440 Standard engine before I had to rebuild it due to a failed piston ring finally. I never even had to do a valve job in all that time. The transmission never quit in all that time, but I rebuilt it just in case when I rebuilt the engine. And a lot of engineers in the company wanted to get one of the C body cars as well in the 1969 - 73 model years although the B and E body guys were well represented too. I remember even our Holley Representative, Gary Conden, who was stationed in our Highland Park fuel system department was really excited to get his first assigned car which was a 1971 Chrysler 300 two door that was Tahitian Walnut Metallic with a matching color vinyl roof and an all brown bucket seat interior. It looked great, and I enjoyed going to lunch with him many times that year in that car. I thought it was just stunning in appearance and I really liked how it rode and drove. I really did not detect anything but excitement throughout the company with its offerings in the 1969 - 1973 years, and did not ever realize that the public wasn't liking the styling of the C bodies in particular? I guess I was just too close to the company to realize that the C bodies were dragging the company down as much as this article states. I still think the fuselage designs are almost on par to the excellece of design and out of the norm styling of the Forward Look cars. So this article surprises me quite a bit. But then, I was young and impressionable I guess when I started with the company, and didn't realize what was going on in the Executive Office and the dealerships. I guess that is a case of "ignorance is bliss" for me. After all, I had my dream job and I loved it!

But by 1974 and later, I could clearly see there was big trouble ahead........
 
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Safeforward. I remember dad telling me about a handful of " high-impact" color 300s running around Highland Park in 70/71. One night he needed a loaner and among his choices were a Lemon Twist, Hemi Orange or Limelight 300. He just couldn't see driving a 300 in those colors and grabbed a 383 cuda in Silver instead.
 
This was the first line that made me think...

. "The question at the time was not whether we would have too many C bodies, but whether we had enough."

I ask myself this every damn day.
 
This one too...... I still live by this thought....

American mini-car would not be sufficiently profitable, and that U.S. consumers eventually would revert to cars that were more comfortable, and more suitable for superhighways.


I still don't understand any other way of thinking
 
Seems like Chrysler spent a fair amount of time trying to go backwards. It's too bad they retained poor management for periods of time just long enough to do permanent damage to the brand.
 
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