Sound too chancy to leave Chrysler? Not to Greenwald, who last week left to head up the union’s UAL buyout group, becoming the third high-level defection from Chrysler in a matter of weeks. His abrupt departure raised the obvious questions: Was the 54-year-old Greenwald growing a bit impatient waiting for his pal Iacocca to make up his mind? Did he see a not-too-rosy future for the troubled No. 3 carmaker? The answer may have combined a bit of both. More important, his prospective new job as top dog of a major corporation clearly holds enormous appeal. If the $4.4 billion buyout of UAL suceeds, Greenwald would head the largest employee-owned company in the nation.
For Chrysler, Greenwald’s leaving was yet another blow to the company’s shaken fortunes. As Iacocca’s right-hand man, Greenwald helped structure the bailout that led Chrysler out of near bankruptcy in the early 1980s. He accomplished the mindboggling task of getting 400 banks to agree to Chrysler financing on a single day. As Chrysler sales climbed in the 1980s, Greenwald’s star continued to rise, and in 1988 he was named vice chairman, a title positioning him as heir apparent. Yet Iaccoca, whose contract expires at the end of 1991, remained vague about his plans. Says auto analyst David Cole of the University of Michigan, “I don’t think Iacocca knows [when he’s retiring]. In fact I have a feeling that he thinks he’s probably going to live forever.”
Corporate jet: The UAL unions began their search for a CEO two months ago, settling on Greenwald about six weeks ago. As rumors spread, Greenwald denied reports he was considering the job. About 10 days ago, spokesmen said he was in California visiting a sister. In fact he had flown to Iacocca’s villa near Siena, Italy, where for a day and a half Iacocca tried to talk him out of the job. I Iacocca didn’t say the magic words: when he would step down. Greenwald and Iacocca flew back to Detroit on a Chrysler corporate jet. Greenwald later said he didn’t ask for a retirement date from Iacocca; that issue wasn’t a factor in any case he said. But a source close to the search says, “It was a factor. Iacocca has a contract to ‘91, but Greenwald wasn’t sure he would hang it up at that point.”
Greenwald’s departure also seemed to raise questions about Chrysler’s long-term prospects. After rising from near death to become immensely profitable, the carmaker has faltered badly in the last year. Despite expensive incentive programs and new advertising campaigns, its share of U.S. car and truck sales dropped to 12.4 percent through the first four months from 13.5 percent for all of 1989. While the entire car industry is also sluggish, Chrysler’s market share for cars alone fell to just 7.9 percent in April (although it picked up in May). If sales stay depressed, Chrysler could finish the year in fifth place in car sales-behind not only General Motors and Ford but Japanese-owned Honda and Toyota. Only Chrysler’s brisk-selling Jeeps and minivans–and severe cost cutting–are keeping the company out of a deeper hole. Some analysts think that unless Iacocca can reverse the trend, Chrysler could eventually be ripe for some sort of a merger that would cost it its independence.
In a statement, Greenwald said such concerns weren’t a factor in his leaving, and asserted that Chrysler was poised to rebound. “I’ve been offered an opportunity to lead another great company during a period of major transition,” he said, “and it’s an opportunity I can’t turn down.” Chrysler moved quickly to provide stability, realigning the duties of two high executives. Auto analyst David Healy said Chrysler has plenty of competent managers, adding that the company is in “better shape than its reputation.” Flush with cash, he said, Chrysler is down “but not a basket case.”
No-strike pledge: If Greenwald’s decision was upsetting for Chrysler, it was a boon to UAL’s unions. A group including pilots, machinists and flight attendants bid $201 a share to acquire UAL but is struggling to get financing. By hiring Greenwald, who gained the respect of banks through his Chrysler work, the unions “radically increase the chances” of completing the buyout, says Joseph Blasi, an expert on employee ownership. Greenwald, who will be paid the same as his$1. 1 million Chrysler salary plus get UAL stock, signed a five-year contract, equal to the length of the unions’ no-strike pledge.
Greenwald must still surmount serious obstacles to make the buyout work. Only last October a management-labor bid for the company, at $6.8 billion, collapsed when banks shied away from the highly leveraged deal–sending the stock market into what became known as a mini-crash. Lenders are still wary of big buyouts, particularly one involving a cyclical industry like airlines. Reflecting a mixture of optimism and caution, the stock market last week bid UAL’s stock to $158.50–up about $8 but well below the $201 takeover price. Greenwald has until Aug. 9 to round up the financing. What happens if he doesn’t? As Thomas Neff, the executive recruiter who found Greenwald, put it bluntly, “He’s retired from a short-lived assignment.”
