Bob Lutz is no klutz in the auto business

Bob Lutz sounds like the mad heretic from Detroit, not a man who spent the past few years as a captain in one of America's most conservative industries.

He may have just retired as president and vice chairman of one of America's biggest car companies, Chrysler Corp., but when he talks about business and management, he uses phrases like "the Dilbert Principle."

He credits the Japanese with making Chrysler profitable, acknowledging that for 20 years they simply built better cars.

He publicly discounts J.D. Power's all-important automobile quality ratings. He cites the US Marine Corps as the paragon of leadership. He didn't graduate from high school until he was 22 or college until he was 30. He calls creativity and intuition the keys to leadership but spurns the modern creative trend toward casual workplace attire.

Mr. Lutz sometimes commutes at the controls of his own helicopter and makes nighttime sorties in his Czech-built Albatross military fighter plane.

But he also masterminded Chrysler's final turnaround from the brink of bankruptcy and made it the most profitable car company in the world.

He dismantled Detroit's traditional hierarchical "chimney" management structure at Chrysler and replaced it with horizontal, cross-functional product teams. And he led the way away from the company's dull recycled K-car product line to a new batch of ground-breaking automobiles - starting with the Dodge Viper, the large Intrepid sedan and its siblings, and a new generation of minivans.

But he doesn't take the credit: "It wasn't us that saved the Chrysler Corporation," he says. "It was Honda and Toyota that saved ... Chrysler" by forcing Chrysler to develop strong leadership to stay competitive.

Lutz focuses these days on sharing his vision of leadership - a quality in short supply in corporations today, he says. His philosophy boils down to common sense and discipline.

Lutz grew up the rebellious son of a Swiss banker and transferred several times between schools in Switzerland and the US, taking an extra four years to emerge with diploma in hand.

His father knew a candidate for the Marine Corps when he saw one and encourage his son to sign up, an experience that, Lutz says, taught him self-discipline.

But the passion for rebellion stayed with him - and may have saved Chrysler.

One day as he was blasting around Michigan back roads in his high powered sports car, he dreamed up the Viper to bestow the exciting image of the venomous sports car on stodgy Chrysler.

As soon as the show car appeared, customers lined up. Chrysler's own bankers sent in deposits. The car restored the public's faith in the corporation.

Intuitive thinking of the kind that hatched Viper is the hallmark of good leadership, Lutz says.

Leadership requires "the ability to ... make leaps of the imagination where you see things that other people are not yet imagining," Lutz said recently, while touring to promote his book: "Guts: The Seven Laws of Business That Made Chrysler The World's Hottest Car Company" (Wiley, $24.95). (See list above.)

Lutz's first law says that "The customer is not always right." Customers, he says, can only react to product trends. The job of business leaders is to expand the product, innovate, and anticipate the market.

Many of today's cars are so heavily researched that they lack design initiative, Lutz says. "You now have 10 or 15 four-door sedans which all have the soft, flowing shape. They all have the same backlights, taillights, headlights, and the same little grille. Every one of the designs comes down to the same common denominator - lackluster, noncontroversial, dead boring," he says.

The culprit, Lutz says, is management without leadership.

Endless market research provides an easy out for managers unwilling to pick a design that might be controversial.

Many of Chrysler's designs in recent years have sparked controversy for their styling or function.

Lutz compares automaking to the movie industry. "They're both psychological commodities," he says. "Movies are not about sitting in a darkened room ... watching flickering colored images and sound for two hours...."

And automobiles "have long since grown way beyond their function of transporting us from point 'A' to point 'B.' "

People buy "excitement, style, fun, admiration of their neighbors."

That leads to another of Lutz's laws - the one that often set Chrysler Chairman Robert Eaton on edge: Too much quality can ruin you.

Corporate America has allowed quality to be defined as a lack of defects.

"The whole, far bigger, piece of quality, which is presence of positives, never gets mentioned," Lutz says.

That's why he says only two Japanese brands - Honda and Toyota - still sell well.

Now that most makers have reduced defects to less than one per car, Lutz says, other Japanese car companies that neglected performance and styling in their products lack a strong selling point.

Another of Lutz's laws: When everybody else is doing it, don't! - whether it's building ultra-expensive luxury cars or an overemphasis on employee teamwork. Teams work only if they have strong leadership, and a specific goal and deadline, Lutz says.

Summing up, Lutz says, "My capstone law: Leadership is all about common sense, which unfortunately is not all that common."

His leadership model comes from the US Marine Corps and involves equal parts of empowerment, teamwork, and following orders - empowerment when the organization has the luxury of time, authoritarianism when it doesn't.

Such leadership is scarce in many American corporations for three reasons, Lutz says: the poor state of US public education, American's tolerance for sloppiness, and the Dilbert Principle: that business systematically promotes the least effective workers to positions where they can do the least damage - namely management.

Culture also works against American leaders, he says. "We're taught to be tolerant. We're also tolerant of imperfection, which is not so good."

And Lutz knows a little bit about the education system: Every time he transferred back to school in Switzerland after a stint in the US, he was flunked a grade.

"It's the first time in American history that we're producing generations of kids who know less, write worse, spell worse, and are less adept at dealing with numbers than the generation before it," he worries.

Ultimately he expects American creativity, or ingenuity - that hallmark of Chrysler - to energize new leaders.


1. The customer is not always right. Often customers don't know what they want, and it's the job of business to provide options and anticipate market needs. At best, polls can tell business leaders customers' tastes today. But the customers can't say they like or dislike features they've never heard of.

2. The primary purpose of business is not to make money. Many companies confuse their mission - building cars, for instance - with the reward, money.

3. When everyone else is doing it, DON'T! Business fads may not prove successful. And setting trends is more fruitful than following them.

4. Too much quality can ruin you. Quality has become defined as an absence of defects, but that ignores a product's positive attributes. Reducing defects is important, but positive attributes are more distinguishing.

5. Financial controls are bad. Taken to extremes, they stifle initiative and waste time, energy, and even money.

6. Disruptive people are an asset. Change agents are crucial to keeping an organization moving forward.

7. Teamwork isn't always good. Teams without clear goals and deadlines rarely make concrete decisions.

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