Thursday, June 04, 2009

A Flash of Stupidity

It would be unfair to say that Chrysler management always has been stupid. After all, the founders outperformed many domestic auto competitors to become one of the “Big Three.” And, when things went awry in the 1970s, Lee Iacocca rode in on his white horse to save the day with timely product redesigns, “straight talk” advertising featuring himself, and the ability to persuade federal authorities to guarantee massive loans.

Since then, however, Chrysler leaders have committed more errors than a Little League team in its first practice game. Perhaps the residents of the executive suites were too busy counting their multi-million-dollar compensation packages to make a fumbling attempt at good management.

When I worked at The West Bend Company in 1964 as Sales Promotion Manager for the Direct Sales Division, I was privy to enough details of a Chrysler business decision to be confident that someone in the automaker’s top management had a flash of stupidity similar to some of the recent blunders.

West Bend was prosperous at the time. It was the world’s leading manufacturer of coffee makers, and near the top in various other types of cookware and small kitchen appliances. The company also was among the top five outboard motor manufacturers in the U.S. West Bend outboards were not well known because most were made for Sears and sold under the Sears name. West Bend didn’t emphasize sales under its own brand in the U.S., but sold small outboards successfully in other countries, especially Canada.

Unfortunately for West Bend, Sears’ execs decided the company had to have big outboards. Despite spirited resistance, West Bend was forced to retool its Hartford plant at heavy expense to get 80- and 100-horsepower outboards rolling off the assembly line or lose its largest customer. The deal allowed West Bend to sell the big motors under its own name, but they did not sell well. They did not sell well under the Sears name, either.

West Bend was stuck with an expensive, unprofitable plant. Company leaders started quietly looking around for a buyer for the outboard motor division. Chances of it continuing as a viable business were very low. Potential buyers expressed little interest, until Chrysler suddenly came forward.

As a department head, although mine was a very small department, I sat in on monthly marketing meetings conducted by Vice President Bob Lockman. Lockman was a tyrant when it came to meetings. He started exactly at the scheduled time. He once told a manager to get out and shut the door behind him after the unfortunate fellow arrived at 10:01 for one of the 10 a.m. marketing meetings.

Thus, it was surprising when Lockman was not at the podium at 10 a.m. on a monthly meeting day. We all waited, of course, and the wait extended to about 20 minutes. Then Lockman breezed in smiling broadly between puffs on a giant cigar.

“Guess what guys,” he said. “A Chrysler vice president just phoned and threatened me. He said if we wouldn’t sell them our outboard motor division, they were going to build their own plant and drive us out of the business.”

After a long drag on the cigar, Lockman chuckled. “I told him the offer was highway robbery, but since Chrysler had put our backs to the wall we had no choice but to accept.”

Lockman emerged from another cloud of cigar smoke with a laugh. “That Chrysler exec really was a tough negotiator. He forced us to take about double what our division is worth.”


Anonymous said...

A good story well told, Dick.

I believe the VP whose name you recollect as Lockwood was actually Lockman. There was a George Lockwood also, but he wasn't a VP.

--Roger Siemers

Dick Klade said...

Thanks, Rog. I've made the correction. Your memory of ancient events was better than mine!

Regards, Dick

(For those who don't know, Roger Siemers became Sales Promotion Manager of the Direct Sales Division at West Bend a few years after I left that position.)