Iacocca's Tightrope Act

By Alexander L. Taylor III.

Frank Sinatra. John Houseman. Joe Garagiola. Ricardo Montalban. Chrysler Corp. has hired all of them to tout its cars on television. But the company's premier pitchman is a slightly paunchy, slightly balding 58-year-old who happens to be on the permanent payroll: Chairman Lido Anthony ("Lee") lacocca. "You can go with Chrysler," he booms into the camera, "or you can go with someone else--and take your chances."

lacocca, the son of Italian immigrants, is fighting for his corporation's life, and growing numbers of viewers seem to be buying his act. Says Abe Gurewitz, 54, a Brooklyn cab driver: "I saw him on TV and I like the guy. He's turning around a company that was down the drain. He has guts." Nor has lacocca's commercial charisma escaped notice by Wall Street's savviest auto analyst, Maryann Keller of Paine Webber Mitchell Hutchins. Says she: "I wouldn't doubt that people have bought Chrysler cars just because they wanted Lee lacocca to make it."

Incredibly, it is beginning to look as if he might. Five years ago, lacocca was president of Ford Motor Co., and Chrysler's profits were about to careen off a cliff. In November 1978, four months after he got the ax at Ford, lacocca joined Chrysler as president. From that year through 1981, the company lost nearly $3.5 billion, easily the biggest bloodbath by any American company in history. In 1979, the company was so close to bankruptcy that only an act of Congress saved it, and despite the bailout, Chrysler has almost collapsed several times since. It is therefore something of a modern management miracle that last month lacocca was able to announce that his company had actually made a profit in 1982.

True, it was a small profit, only $170 million on sales of $10 billion, and it came mostly from the sale of the tank division, not from making cars. Yet no one denies that Chrysler's progress has been prodigious. Had not a debilitating five-week strike last fall in highly profitable Canadian plants crippled operations, Chrysler would have eked out a profit in the auto business. More astonishing, the once cash-starved company now has a cash hoard of $900 million. Wall Street has halted its death watch: last year Chrysler's shares more than quintupled in price, from 3% to 17%. It was the second best 1982 showing of any stock on the New York Stock Exchange, surpassed only by Coleco Industries' rise from 6% to 36%.

Chrysler's recovery is largely lacocca's doing, a triumph of brains, bluster and bravado. When the company needed money and the banks dithered, he threatened to go into bankruptcy. When he needed pay cuts and the union protested, he warned that he would shut plants. When Chrysler could not pay its bills, he persuaded suppliers to be patient. It now seems a plausible bet--not yet even money but not 100 to 1 either--that lacocca's company will survive as No. 3 against its behemoth competitors, General Motors and Ford, and occasionally even threaten them. Of course, the tougher battle is the one that all U.S. carmakers are in together: turning back the competition from Japanese and other foreign automobile companies, who drove off with a record 28% of the market last year.

lacocca blames this miserable state of affairs in part on past failures by the U.S. industry's leaders, including himself, and with characteristic brashness he predicts that Chrysler, though possibly not its U.S. competitors, will conquer. He proclaims, "I was arrogant, but GM made a science of goddam arrogance. I think the Townsends of this world,*the Henry Ford Us and some of the GM chairmen wrecked this industry. That arrogance should be gone now. We got our comeuppance. If GM and Ford keep thinking that way, we'll run over them. If they had been on the ball, I don't think we'd have made it. So who wants to wake them up?"

Although lacocca's company is only one-sixth the size of GM in terms of revenue and less than a third as big as Ford, that kind of talk has made him easily the auto industry's best-known figure. A Gallup poll of heads of small-and medium-size businesses earlier this year found lacocca the U.S. business executive they respected most. He got 27 times the number of votes of the runner-up, Frank Gary, who retired last month as chairman of International Business Machines Corp.

A few red-white-and-blue bumper stickers have even sprouted declaring IACOCCA FOR PRESIDENT. Preposterous? Yes, preposterous. lacocca greatly enjoys the sound of his own voice and often pontificates on political and economic matters, especially as they affect Chrysler. But friends say he does not have the patience for politics, and he concurs. "I'm not interested," he says, and then, as if to explain how the stories start: "If you only talk cars, people say you're a provincial son of a bitch. If you're outspoken, then they say you are running for office." Quips Publisher Keith Crane of Automotive News: "Hell, Lee doesn't want to be President; he wants to be appointed Pope."

It is easy to dismiss lacocca as just another supersalesman because he is so good at it. He exudes confidence and conviction: well-tailored clothes, big cigar, self-satisfied smile. But lacocca has proved he is a remarkable manager as well. He has a knack for getting the most out of people, for making them do more than they think they can. Says St. Louis Plant Manager John Burkart: "All of us at Chrysler believe in the man. I worship the guy." Vince Williams, a Portland, Ore., auto salesman, says he decided to open a Dodge dealership rather than a Pontiac outlet just because of lacocca.

The boss is by turns charming and demanding. Extremely demanding. His edict to top managers: "I don't need a $100 million mistake. Try to make it a $5 million mistake if you have to make one." Investment Banker Felix Rohatyn, who helped rescue New York City from insolvency in 1975, sums it up: "Lee is a man who can instill leadership in a crisis. He knows his business from front bumpers to back ends. He is the right man at the right time."

Keeping Chrysler alive has been a wrenching process. lacocca has effectively cut the company almost in half. Of its 52 plants, he has closed 16. Overseas operations and unrelated businesses were auctioned off to raise cash. Five years ago, Chrysler had 157,000 employees; today there are 74,700. In the past three years its costs for wages and salaries have been slashed from $2.1 billion to $1.5 billion. Once the world's sixth largest automaker, Chrysler now ranks twelfth.*In Detroit, where the man in charge was briefly known as "Ayatullah" lacocca, there are dozens of eerily silent rooms with long rows of empty desks at company headquarters.

The smaller, slimmer Chrysler can make a profit selling only 1 .2 null vehicles instead of the 2.3 million required in 1980, a big advantage in tough economic times. But this transmogrification is not without huge risks. The company can no longer compete across the board with GM and Ford by building car models in every size and price category. It remains burdened by $2 billion in long-term debt. If it should falter ever so slightly, it could again be plunged into a financial abyss. Says GM Chairman Roger Smith: "The jury is still out on Chrysler. It all depends on the product they introduce and whether they can sell it."

Nothing would derail Chrysler's recovery more effectively than a continuation of the disease that has afflicted Detroit for three years: sickly sales. Last year U.S. manufacturers sold only 5.8 million cars, the fewest in 21 years; Chrysler sold 794,000, but its share of the American market inched up, to 10%. So far this year the industry is doing only slightly better. Through February, sales were running at an annual rate of 6 million cars. All of the Big Three are offering customers cut-rate financing of 11.9% in an effort to spur sales. Chrysler's decision last month to cut prices by offering rebates of $300 to $ 1,000 to cash buyers is expected to set off another round of price competition, one that manufacturers say they can ill afford.

U.S. sales of Japanese-made cars were 1.8 million last year, and are not increasing, thanks to Tokyo's recent acceptance of a third year of "voluntary" import restrictions. Although Detroit is at last beginning to approach the Japanese on quality, evidence suggests that an extra twelve months will enable U.S. carmakers to become significantly more competitive on price. After ten years of mostly futile trying, Detroit continues to watch the small-car market slip away to the Japanese, who are now training their sights on the midsize and luxury end of the market as well.

The international competition that challenges the U.S. auto industry today was unknown when lacocca began his career. His father Nicola immigrated to the U.S. from southern Italy in 1902 and eventually built a small auto-rental business in Allentown, Pa., with 33 cars, mostly Fords. Surrounded by Model A's, Son Lido always wanted to work for Ford. After graduating from Lehigh and getting a master's in engineering at Princeton, he joined the company as an engineer in 1946, then quickly switched to a district sales job. By 1970, he had risen so far that only Henry Ford H, grandson of the founder, outranked him.

lacocca succeeded by indulging the passionate American love affair with the automobile. He combined a knowledge of an automobile's innards with a shrewd, almost intuitive sense of what car buyers wanted. He stripped the plain-Jane body off Ford's dowdy Falcon and replaced it with a long-hood, short-rear-deck configuration called the Mustang that in 1964 set a record for automobile sales by a first-year model (418,000). Four years later he reached into Ford's spare-parts bin again and launched the limousine-like Continental Mark III on a Thunderbird chassis.

lacocca personified Detroit braggadocio, the longer, lower, wider mentality that economy-and quality-conscious buyers would eventually find objectionable. He was a used-car dealer writ large. At Ford, where the real power flowed like sap from the family tree, lacocca managed to tap in through the sheer force of personality. A cadre of lacocca subordinates grew up who owed their fealty to him, not to the boss whose name was on the cars. One of lacocca's weapons was a black book he carried, itemizing each manager's quarterly goals, a tradition he transferred to Chrysler. Those who did not live up to their targets rarely forgot it. Says William Fugazy, the New York travel and limousine owner who has known lacocca for 25 years: "I've seen him just ream guys out for not getting the job done. He'll turn to one of his top people and say, 'I told you what I wanted done. It hasn't been done. Now do it, and I don't want any crap.' He never wants any crap. It's one of his favorite expressions."

Inevitably, President lacocca and the equally strong-willed Henry Ford II clashed. On July 13, 1978, the chairman called lacocca into his office and fired him. At the time a story made the rounds that Ford, by way of explanation, offered this: "Let's just say I don't like you." lacocca insists that is apocryphal, but says he is keeping the real story for an autobiography he is writing. Whatever was said, it was apparently enough to last a lifetime. Neither man has spoken to the other since lacocca walked out of Ford's office.

lacocca was evicted from Ford world headquarters in Dearborn and given an obscure office several miles across town to serve out the four months until he could collect his retirement benefits. Already a millionaire, he might have ended his business career then; there are few successful second acts in the automotive industry. But lacocca loves a challenge. On Oct. 30, 1978, lacocca was officially through at Ford. On Nov. 2, Chrysler made two announcements: 1) the company had just lost a record $158.5 million in the third quarter, and 2) lacocca would become Chrysler's president.

Joining Chrysler presented lacocca with the chance to be his own boss at last and to put his unmistakable stamp on the industry. While the top jobs at GM and Ford had passed on to drab managerial types, Chrysler remained a company where a single, forceful personality could make a difference. It had, in fact, had a succession of strong-willed leaders, beginning with a brilliant entrepreneur named Walter Chrysler, who founded the company in 1925,22 years after Ford, 17 after GM.

For a time in the late '40s, Chrysler (whose product line included Plymouth, Dodge and De Soto) surpassed Ford as the No. 2 U.S. automaker. But then began two decades of losing ground. A costly international expansion program drained resources and diverted executives' attention. Strapped for cash, Chrysler shunned small cars for larger, rather stodgy models that it sold to mostly lower-income buyers. Thus it was ill prepared for the surge in gas prices that began in 1973. Even its reputation for quality began to slide. The company's market share, as high as 26% in 1946, slipped to 12% by 1977.

By 1979, Chrysler Chairman John Riccardo had begun making regular trips to Washington to drum up support for tax credits and relief from regulatory restrictions. He told anyone who would listen that Chrysler's future was threatened unless it could get financial help to transform its aging, oversize fleet into economical front- wheel-drive cars. It took losses of $1 billion, plus all of lacocca's lobbying during his first year at Chrysler, to ram the mes sage through.

After Congress's approval in December 1979 of loan guarantees covering $1.5 billion of Chrysler's borrowings--money it would need to survive--lacocca's hard est task began. Congress made the guarantees contingent on Chrysler's winning about $2 billion of concessions on its own: from the United Auto Workers, suppliers, state and local governments and 446 lenders. Those negotiations took six months and were concluded just as the company was days away from declaring formal bankruptcy.

But money alone could not solve Chrysler's problems. When lacocca arrived, he found management in disarray. Executive responsibilities were ill defined, and there were few of the sophisticated financial tools needed to keep track of operations. The quickest fix lacocca knew was to hire people who understood the same system he did: other Ford executives. Some were called out of retirement, others were wooed away and enlisted with lacocca for the challenge of engineering a turnaround. Today the four top officers are Ford alumni: lacocca; Vice Chairman Gerald Greenwald; Harold Sperlich, president of North American automotive operations; and Executive Vice President of Finance Robert S. Miller. Of the 28 highest-ranking Chrysler executives, only four remain from pre-Iacocca days. Says Survivor Stephan Sharf, 62, executive vice president of manufacturing: "As the newest vice president when lacocca arrived, I followed a tradition and sat next to the chairman at meetings. Now I'm nearly at the end of the table."

As he swept out the old management, lacocca also axed some bad business practices. The most insidious was a device known as the sales bank. Unlike other automakers, which build few cars except those ordered by dealers either for customers or showroom stock, Chrysler turned out a lot of cars that simply sat in inventory. Although theoretically this meant that production lines could be kept running efficiently, the sales bank became a tool to hide mistakes. Managers ordered tens of thousands of cars built so that they could boost production figures, as well as their bonuses. Most of the vehicles were eventually sold to dealers at cut-rate prices, often after months of outdoor storage had taken their toll. lacocca's cure for Chrysler's peculiar addiction to production mandates was to kill the sales bank. The company took some heavy losses to sell off its backlog of inventory, but once the last car was gone, Chrysler stopped making cars on speculation.

lacocca's next task was to convince car buyers that Chrysler was indeed alive, even if it was not exactly well. Again he turned to his old employer and wooed away Kenyon & Eckhardt, the New York City advertising agency that had represented Ford for 34 years. lacocca's carrot was a $140 million account, the second largest (after Chevrolet) in the auto industry. The agency decided the most sensible way to spend the money was to market the chairman himself.

Kenyon Chief Leo Kelmenson began to find himself on the phone with lacocca at all hours: designing ads, plotting strategy, evaluating results. He recalls: "Lee used to phone late at night, and then I'd hear from him first thing in the morning. Two days later, the advertising would be on the air. It was fast paced all the time, and it went on for months and months." lacocca inherited the design of the front-wheel-drive K-cars. Though they were not brought out until the fall of 1980, they had been practically ready to go into production when he arrived two years earlier. (He still could not resist tinkering with the grille and adding louvers to the windows shortly before the designs were locked up.) Chrysler had botched the launch of the luxury New Yorker series in 1978, and the memory haunted lacocca. Now, with buyers clamoring for fuel-efficient cars and Chrysler short of cash, a trouble-free K-car rollout was critical.

It turned out to be a near miss. Problems with advanced robotic welders and material handlers slowed initial production so that only 10,000 cars, less than a third the number needed, were in showrooms on the official introduction date, Oct. 2, 1980. Chrysler flubbed in other ways as well. lacocca sent the earliest models out with high-profit options like velour upholstery and electric window lifts that pushed the sticker price from $6,000 up to $9,000. But buyers did not want the extras. Until the production imbalance was corrected, sales did not really take off.

Ever the optimist, lacocca had predicted before Congress that Chrysler would lose only $482 million in 1980. Instead, the losses ran to $1.7 billion, much higher than 1979's record $1.1 billion deficit. The company was hemorrhaging cash. Just in time, the K-car caught on; in its first year, it won more than 20% of the compact-car market. Despite this, Chrysler's survival continued to be a week-by-week proposition throughout 1981. The losses were lower, if still unspeakably high: "only" $475.6 million. lacocca and other executives periodically braced themselves for "drop-dead dates," deadlines when, the accountants calculated, accumulated expenses would overwhelm the amount of cash that was trickling in. lacocca found himself one Friday night in November 1981 with just $1 million left in the bank, a pittance for a company that was spending $5 million per working hour. Only by delaying payments to suppliers and strong-arming dealers into buying cars during this period was he able to keep out of bankruptcy. The crisis somehow passed, and Chrysler was still in business. With its break-even point now halved, new management in place and its share of the U.S. auto market back up to almost 10%, from a low of 8.8%, the company was slowly edging away from the financial precipice.

A Japanese colleague, Tomio Kubo, chairman of Mitsubishi Motors Corp., which builds two small-car models for Chrysler, pays lacocca a compliment. Says he: "In the person of Mr. lacocca we have developed a sense of security about the corporation and its future." He explains that lacocca "shows signs of Oriental wisdom." Perhaps Mitsubishi's boss has noticed that in rebuilding Chrysler, lacocca has turned from American role models and is looking to the Japanese. While he has tried to appropriate the expensive, high-gloss image of European automobiles for his more modest creations, lacocca has borrowed heavily | from the successful management and manufacturing techniques of Japan.

The Japanese have cut inventory costs by building parts plants next to assembly plants and using the same part on several car models. Now Chrysler, instead of shipping big batches of transaxles by rail from its Kokomo, Ind., plant to Belvidere, Ill., for assembly, moves smaller loads by truck, gaining at least 24 hours. Total saving on inventory from such measures: $450 million a year. Chrysler has cut the number of different parts it uses to 40,000, from 70,000. That means, for instance, that van buyers can choose only one kind of tinted glass, not two. Total savings: about $300 million annually.

A far greater challenge involves changing a basic tenet of the U.S. auto industry that was laid down in 1921 by Alfred P. Sloan, creator of the modern GM: produce a separate and distinct automobile for every price category. Since Chrysler can no longer afford the $1 billion it costs to build an entirely new model, it will eventually have to use its basic model, the K-car, as the building block for each of its four car sizes: subcompact, compact, intermediate and full size. Thus buyers have to be re-educated not to mind that their luxurious Chrysler may have started out as a lowly Plymouth.

It is a strategy that some automakers have quietly used for many years, particularly Japanese companies. But Chrysler has taken the approach one risky step further. Americans who pay extra for an intermediate-or full-size car want to be convinced that they are getting additional value, not just a knock-off of an existing model. Bigger and better-heeled automakers can still afford to crank up entirely new designs when they are needed. Admits lacocca: "We have to say, 'Do you want vanilla or chocolate?' GM says, 'Do you want vanilla, chocolate or strawberry?' " Later this year, for example, Ford will roll out its replacement for the rear-wheel-drive Ford Fairmont/Mercury Zephyr, known as the Tempo/Topaz. The totally new designs will have front-wheel drive and aerodynamic styling for greater fuel economy, advances that would have been impossible with Ford's old models.

At Ford, lacocca dazzled buyers with the elan of a three-card monte dealer by spinning off the Mustang and Continental Mark series from existing chassis combinations. Now he is trying to do the same thing with virtually an entire line of cars. The $5,900 Dodge and Plymouth 1981-model K-cars begat the $8,100 1982 Chrysler LeBaron and Dodge 400, the $12,300 Chrysler LeBaron convertible (see box) and the 1983 Chrysler E Class and Dodge 600, which sell for $9,000 to $12,000. By stretching the K-car, he produced the luxury Chrysler New Yorker ($12,800). In the fall of '83 will come the Dodge Daytona and Chrysler Laser, sleek sports cars also using K-car components, which are receiving raves in the automotive press. They will sell for $10,000 to $14,000.

To keep the buying public bedazzled, Chrysler is developing vehicles for special market segments, known in Detroit as "niche" cars. These are expected to confer some luster on the rest of the car line as well as to reach relatively small but profitable markets where other carmakers are not competing. Later this year Chrysler will introduce the ultimate in elongated K-cars, the roomy five-passenger Chrysler Executive Sedan and a seven-passenger limousine. lacocca has also ordered up a blatant knock-off of the $40,000 two-seat Mercedes-Benz 380 SL that Chrysler has code-named the SL and will sell for about half the price. He is wagering an enormous amount, $700 million, that he can rekindle buyer interest in vans (see box). Chrysler claims the hybrid minivan will be as revolutionary as the Mustang.

While he has been restructuring the corporation, lacocca has never stopped scrutinizing new model designs. A little while ago, he took one look at a mock-up of a 1986 subcompact, then curtly told the stylists that the front grille and bumper made them look like "Dodg'em cars." The lights burned late in the styling studios for weeks thereafter. lacocca is unrepentant. Says he: "The guys who have it tough in this company are the product guy and the marketing guy because I grew up in those areas and think that I know more than they'll ever know."

Even with the skillful scavenging of existing models, the cars Chrysler brings to market between 1982 and 1986 will cost $6.6 billion before they roll off the production line. For a company still struggling to stay out of the red, the sum is staggering. But almost anyone in Chrysler's finance department can tick off where the money will come from. Part of the total, some $823 million, was spent last year, and another $2.5 billion or so is in annual budgets through 1986. A large chunk is in hand in lacocca's $900 million cash kitty. And he is counting on generating the rest from profits and cash flow over the next four years. It is not a scenario that can withstand unpleasant surprises. Says Alan Webber, a former transportation-department aide who is now a senior research associate at Harvard: "One false step and they are off the tightrope."

To sell the new models, lacocca has greatly strengthened another weak link: Chrysler's dealer base. After losing about 1,000 outlets out of 4,800 during 1979 and 1980, he succeeded in signing up roughly 300 new showrooms last year alone. Equally important, more of the dealers are making a profit: 80% in 1982, in contrast to only 52% in 1980.

Over the long run, and in that big battle for the international market, Chrysler will need help from other automakers to survive. lacocca talks of plans for a new corporate entity he calls Global Motors. Rather than a megacorporation formed from actual mergers between car companies in different parts of the world, he envisions a setup in which Chrysler would undertake joint ventures with foreign manufacturers to get economies of scale or low-cost labor or design or technological expertise. The combines he talks about do not sound so different from the one GM and Toyota announced last month, a collaboration in California on the manufacture of a subcompact car. However, lacocca rails against that one because GM and Toyota are so enormous and powerful already.

Back in the 1970s, Chrysler was moving in that new direction. It acquired 15% of Mitsubishi in 1971 and 15% of France's Peugeot in 1978. The ideal combination, says lacocca, would be a top Japanese producer at the low end, a high-tech European company for the luxury segment and an American company for the middle of the market. As lacocca sees it, "That would be Mitsubishi, Peugeot and Chrysler or maybe Nissan, Volkswagen and Chrysler."

If lacocca worries much about Chrysler's survival these days, he shows little sign of it in public. He delights in twitting skeptics who doubt Chrysler's recovery. And in giving Government officials, including President Reagan, advice about how to manage the economy. Reagan appears to like it; hoping to get some ideas for his speech, he invited lacocca to a small dinner at the White House nine days before the State of the Union message. Not long after that, lacocca spent a few hours hobnobbing with the President at Chrysler's St. Louis assembly plant.

For several years, lacocca has been lobbying for a 25-c--per-gal. increase in the federal gasoline tax. Most proponents of the idea see it as a way to discourage consumption, but lacocca knows it would help Chrysler sell its new cars, which have been designed to go farther on less gas than their U.S. competitors. Chrysler's fleet averages 27.5 m.p.g., vs. 24.3 for Ford and 24.1 for GM. If falling oil prices spur a demand for old-fashioned big cars, Chrysler will hurt the worst. Says lacocca: "What's happening with gasoline is wacko. It's crazy. We needed to slap at least a quarter on the pump so that people didn't get into dirty habits and start buying those rear-wheel-drive New Yorkers like they were going out of style."

For all the outspoken rhetoric, lacocca is basically a shy, even awkward man. Says J. Paul Bergmoser, a friend from Ford days who served as Chrysler's president for 20 months: "Believe it or not, he doesn't like to walk into a room alone. At parties, he is not for giving all the women a kiss, the way some people do." While lacocca is often seen in public with the likes of Sinatra, Singer Vic Damone and Yankees Owner George Steinbrenner, he seems most comfortable in the company of his own family.

His wife Mary, whom he married in 1956, is the daughter of an Irish Catholic plumber. She was a receptionist at a Ford sales office in Chester, Pa., when the couple met at a Ford conference in Philadelphia in 1948. They have two daughters, Lia, 18, a student at a Michigan college, and Kathi, 23, a recent Middlebury (Vt.) College graduate who is a Washington public relations account executive. lacocca and his daughters are close; he usually stays in Kathi's guest bedroom during his frequent trips to the capital.

Lee and Mary have lived in the same Bloomfield Hills, Mich., house for 20 years. Unassuming by neighborhood standards, it nevertheless comes with swimming pool and tennis court. The couple tend to stick close to home, partly because Mary is a diabetic who has been hospitalized in the past few years for both heart problems and a stroke. They spend their time watching television or reading bestsellers (a recent favorite: Indecent Exposure).

Job pressures have killed off one family institution, a weekly low-stakes card game with a group of friends known as the Friday Night Poker Society that frequently met in a game room dubbed Lido's Lounge. lacocca does still find time to indulge a predilection for preparing his own Italian sauces. During a father-and-daughter European trip, he even induced an Italian hotel-owning friend in Modena to let him spend several hours observing the kitchen chef. Says he: "I cook on weekends mostly. Mary says it's O.K. as long as I have three guys follow along behind me to clean up."

For exercise, lacocca jogs 15 to 20 minutes on a treadmill, plays a relaxed game of tennis and walks around a nearby lake, always carrying his "anti-goose" stick to ward off aggressive waterfowl. In darker moments, he imagines that the geese were hired by Henry Ford II.

lacocca has forsaken the much publicized $ 1 -a-year salary that he drew temporarily while steering the loan guarantee through Congress; last year he earned $365,676. His Chrysler stock is worth only $16,625, but he has stock options that would net him $4.9 million pretax if he exercised them. His enjoyment of the trappings of the corporate life has prompted his enemies at Ford to dub him "the Queen of Sheba." In 1981, the Government Loan Guarantee Board ordered Chrysler to give up its corporate jets, including lacocca's favored Gulfstream II, to save money. lacocca stalled until he was caught redhanded: Treasury Secretary Donald Regan saw a newspaper picture of him sitting in the New York Yankees dugout in Florida during spring training and figured that he had not gone there in a Plymouth subcompact. Chrysler now leases a jet, but lacocca is irked that he must obtain the permission of the Loan Guarantee Board every time he wants to travel in it.

So far, neither the Treasury nor the taxpayers have lost or lent a cent in connection with the loan guarantee. Indeed, the Government actually nets about $11 million a year from payments Chrysler is required to make. (The money borrowed under the guarantee was raised in the public markets.) All the loans come due in 1990; Chrysler may be strong enough to repay some of them this year.

But Chrysler's long-term survival remains shaky. After giving up $965 million in wage increases and paid holidays, its 65,000 U.A.W. workers make $2 an hour less than industry counterparts, and they hope to make up the difference when their contract expires in January 1984. They could have a powerful ally then in Douglas Fraser, who retires as president of the U.A.W. in May but will stay on the Chrysler board, where he has been since 1980. Chrysler owes the union pension fund $477 million, and has an overhang of $2 billion in unfunded pension liabilities.

For a long time, people did not believe lacocca when he declared that Chrysler was just the leading edge of the problems of the U.S. auto industry. Now they do. Despite the gains that U.S. automakers have made, their higher labor and manufacturing costs still give Japan a $1,000-per-vehicle advantage. When currency and tax differences are figured in, the Japanese advantage is closer to $2,000. Even if import restrictions are kept next year, as they are likely to be, U.S. automakers still face an uphill battle.

Chrysler executives as well as its creditors are worried that lacocca will leave this problem to his successors and decide to retire in a year and a half when he reaches 60. Vice Chairman Greenwald, 47, who was president of Ford's Venezuelan operations, is the heir apparent. A polished Princetonian, Greenwald is articulate, decisive and as dextrous at debit financing as they come; he may not have lacocca's compelling flair for salesmanship, but then who does?

lacocca insists he has no plans to quit, observing that he has seen too many contemporaries retire and then "die in six months." At the same time, he admits that he is tired. Having suffered rheumatic fever as a youth, he worries about his health and tends to tire easily. During the turmoil of congressional hearings in 1979, he nearly passed out in a Capitol Hill restaurant, though he makes light of the incident now. Says Mary lacocca: "Lee's been through hell. He didn't realize how bad it was at Chrysler, or he would never have gone."

Taking a look back at his 37 years in the automobile business, lacocca reflected not long ago: "I don't know what the hell I rushed for. It's a long race. I was trying to sprint all the time. Maybe if I had to do it again I'd slow down a little." The thought is so outlandish that not even Lee lacocca can sell it.

--By Alexander L. Taylor III. Reported by Michael Moritz and Paul A. Witteman/ Detroit and Barrett Seaman/Washington

-Lynn Townsend was Chrysler chairman from 1967 to 1975. - Ranked by cars and trucks produced in 1981, the 15 largest vehicle manufacturers in the world are: GM, 6,240,380; Ford, 3,730,319; Toyota, 3,220,418; Nissan, 3,100,968; Volkswagen-Audi, 2,210,666; Renault, 1,810,365; Peugeot-Citroen-Talbot, 1,593,943; Fiat, 1,209,819; Toyo Kogyo (Mazda), 1,176,608; Mitsubishi, 1,094,793; Honda, 1,008,927; Chrysler, 1,002,464; Lada (U.S.S.R.), 830,000; Daimler-Benz, 712,315; Suzuki, 578,876.

With reporting by Michael Moritz and Paul A. Witteman/ Detroit and Barrett Seaman/Washington This file is automatically generated by a robot program, so viewer discretion is required.