Eckrodt, Rolf 1942–
Former president and chief executive officer, Mitsubishi Motors Corporation
Born: June 25, 1942, in Gronau, Westphalia, Germany.
Education: University of Bochum, ME, 1966.
Family: Married; children: two.
Career: Daimler-Benz, 1966–1968, member of quality assurance for passenger cars; 1968–1981, manager in Passenger Car Division; 1981–1983, leader of production components for passenger cars; 1983–1986, vice president of axle production for passenger cars; Mercedes-Benz (subsidiary of Daimler-Benz), 1986–1987, executive assistant to president of Passenger Car Division; Daimler-Benz, 1987–1989, director of planning and production for passenger cars and components; Mercedes-Benz, 1990–1992, director of worldwide marketing for passenger cars; Mercedes-Benz do Brasil (subsidiary of Mercedes-Benz), 1992–1996, president; Adtranz (subsidiary of Daimler-Benz and ABB Daimler-Benz Transportation), 1996–1998, deputy chief executive officer and chairman of the board; Adtranz (to become Adtranz-DaimlerChrysler Rail Systems in 1999), 1998–2000, president and chief executive officer; Mitsubishi Motors Corporation, 2001–2002, executive vice president and chief operating officer; 2002–2004, president and chief executive officer.
■ Rolf Eckrodt was the epitome of the company man, someone who devoted his life to the prosperity of his corporation. His reputation was built on turning failing subsidiaries of Daimler-Benz (eventually DaimlerChrysler) into profitable companies. He did so through his emphasis on innovation, budget cuts, analysis of the market for products, and effective sales strategies. With infectious enthusiasm, he motivated employees and attracted buyers. He favored what Europeans called the "American style" of corporate leadership, meaning leadership that focused on profits rather than on stability.
MERCEDES-BENZ DO BRASIL
Eckrodt began as an engineer at Mercedes-Benz and slowly gained broader responsibilities as he demonstrated his skills. His early work in quality assurance seems to have influenced his business decisions throughout his career because wherever he went, he made quality a high priority. As director of planning and production for passenger cars and components, 1987–1990, he showed a capacity for organizing complex lines of products. His buoyant personality and thorough knowledge of Mercedes-Benz automobiles made him a good choice for director of worldwide marketing for Mercedes-Benz passenger cars. The most enduring legacy of his years at Mercedes-Benz in Germany was his shift in focus from reliance on the company's reputation for great engineering to aggressive sales tactics to sell cars.
Edzard Reuter, then CEO of Daimler-Benz (owner of Mercedes-Benz), tapped Eckrodt to salvage the fortunes of the foreign subsidiary Mercedes-Benz do Brasil. Mercedes-Benz had a long history in Brazil, going back to 1914, when Daimler automobiles were first marketed there. Mercedes-Benz's long-term strength in Brazil had been its heavy trucks.
When Eckrodt arrived in Sāo Paulo, Brazil, both the nation and the company were in hard times. What Eckrodt found at Mercedes-Benz do Brasil was overcapacity—the company was paying too much in overhead to maintain facilities that were not producing because the market for their products was too small. Eckrodt began by closing a manufacturing plant and cutting 1,800 workers, mostly through attrition. He then created the Centro de Desenvolvimento Tecnológico (Center of Technological Development), making it the biggest automobile research and development facility in Latin America. One quick payoff from this investment was a new truck cabin with high headroom and improved visibility of the road, achieved by elevating the driver's seat and windows. This innovation was the first of several changes in design to three lines of heavy trucks that would prove popular in Brazil.
In 1993 Eckrodt was elected vice president of the Germany-Brazil Chamber of Commerce, a post he held until 1996. During this period, Eckrodt not only directed the improvement of heavy trucks but also led an expansion into the manufacture of buses. In addition, he helped develop a complex interrelationship among a components plant in Argentina, manufacturing plants in Germany, and plants in Brazil to produce cars and trucks that shared components with Mercedes-Benz vehicles manufactured elsewhere in the world, even while developing automobiles unique to South America, based on what he and his employees had learned about what local customers wanted. His use of market studies probably influenced the creation of a state-of-the-art plant in Juiz de Fora; the plant cost $400 million and was completed after he left in 1996. In 1996 Mercedes-Benz do Brasil accounted for 20 percent of Mercedes-Benz's global sales.
Given a chance to spread his wings while in Brazil, Eckrodt displayed some of the passions that would become hallmarks of his leadership: aerodynamic designs for vehicles, fuel-efficient vehicles, and the exploitation of such alternative fuels as natural gas, which was introduced in Mercedes-Benz do Brasil's buses. He also preferred streamlined management in which new ideas did not have to percolate through several layers of executives but could be proposed, approved, and developed quickly.
In 1996 Eckrodt was offered a new challenge: Adtranz (short for ABB Daimler-Benz Transportation). Adtranz was a manufacturer of railroad equipment and had been created when the Swedish manufacturer Asea Brown Boveri and Daimler-Benz formed a fifty-fifty partnership between their railroad manufacturing divisions. Adtranz's primary concern was the building of "rolling stock," that is, railroad cars and engines. During Eckrodt's tenure at Adtranz, rolling stock would be expanded to include people movers, such as buslike vehicles. For instance, in 1999 Adtranz would introduce the Innovia people mover, a rubber-tired vehicle that would follow prescribed electronic pathways, moving people around large areas, such as airports. The Innovia was aerodynamic and used the Flexiblok electronic guidance system that integrated vehicle manufacture, electronics, and software.
Eckrodt initially held the post of deputy to the CEO and chairman of the board of Adtranz; his experience with juggling international sources of supply while in Brazil may have helped him in his awkward new position, which involved satisfying two different corporate owners. In that same year, Jürgen Schrempp became CEO of Daimler-Benz, and he did not tolerate partnerships well. He pushed to have Daimler-Benz control Adtranz, a move that resulted in Eckrodt's becoming president and CEO of Adtranz in 1998.
Upon taking his new positions, Eckrodt immediately began reshaping Adtranz. For instance, he reorganized its manufacturing structure, creating seven distinct product lines. One line was that of the Innovia, which used composite bodies and featured a modular design. Another line was Crusaris, based on Adtranz Flexliner railroad passenger cars. The Crusaris line produced heavy electrical and diesel-powered trains for intercity travel and quickly became popular in the United States, with sales in Pennsylvania, Texas, and Washington State. The Incentro line consisted of light-rail trains and featured low floors for easy boarding and disembarking; the Itino line filled the gap between Incentro's light-rail and Crusaris's heavy cars, marketed for local and regional transportation; the Movia line produced high-capacity cars; and the Octeon line produced electric locomotives. The Blue Tiger line united Adtranz in partnership with General Electric to produce diesel locomotives.
These lines consisted of about 80 percent standard designs that could be modified by a host of accessories. The idea was to cut costs by minimizing the kinds of body shapes through standardization while allowing customers to specify components that suited their particular needs. This strategy, coupled with vigorous sales tactics, enabled Adtranz to expand into new markets, the most important of which may have been China, which ordered hundreds of cars for its Canton subway system. Adtranz called this a "market-driven" plan, with Adtranz manufacturing in response to consumer needs. The reorganization of Adtranz, with the standardization of car bodies, resulted in a 30 percent reduction in manufacturing costs over the first 18 months. A portion of the savings was passed on to customers, making Adtranz more cost competitive.
Even so, Adtranz continued to lose money; it lost $111 million in 1997. Asea Brown Boveri set a deadline of 1999 for Adtranz to make a profit, and even though the company's revenues increased, surpassing $3.7 billion in 1998, managers at Asea Brown Boveri were not satisfied. Under Eckrodt's leadership, Adtranz said that it expected to turn a profit in 2000, but this was not soon enough. Adtranz's financial situation, coupled with Schrempp's wish for total control of Adtranz, resulted in Asea Brown Boveri's selling its 50 percent share of Adtranz to Daimler-Benz in 1999 for $472 million. That very year, Daimler-Benz merged with the Chrysler Corporation in America, becoming DaimlerChrysler, resulting in Adtranz's being renamed Adtranz-DaimlerChrysler Rail Systems. By then Eckrodt's stature was such that he was elected chairman of the Union of European Railway Industries, a position he held until 2001.
Asea Brown Boveri may have made a wise move, because Adtranz's revenues declined to $3.2 billion in 2000. That year Eckrodt sold Adtranz's electrical business to Balfour Beatty, a construction company in the United Kingdom, moving about 1,400 employees to Balfour Beatty. Greenbrier Companies, which owned the Polish company WagonySwidnica, a manufacturer and exporter of railcars, purchased Adtranz's Freight Wagon Division and formed a partnership with Adtranz's Customer Support Division to maintain and market railcars. Eckrodt shopped around Adtranz's signaling technology but found no buyers. Meanwhile, he made a purchase, buying the British company Railcare from Babcock International (which had owned 60 percent of Railcare) and Siemens Transportation Systems (which had owned 40 percent).
Adtranz was then the second-largest manufacturer of locomotives and railcars in the world, with about 20,000 employees and a projected gross of $7.2 billion for 2000. Yet it was still losing money, if less than in 1996. Bombardier of Canada offered to buy Adtranz from DaimlerChrysler. Bombardier was a manufacturing giant, already the world's third-largest producer of airliners as well as a major manufacturer of railroad equipment. The purchase of Adtranz would make it the world's largest manufacturer of railroad gear. Despite Adtranz's losses, Eckrodt made the purchase tempting: Bombardier could sell a couple of divisions and make back its investment; in addition, Adtranz had $14.5 billion in outstanding orders, offering hope for future profits. Bombardier bought Adtranz for $771 million, considered a bargain at the time. A year later Bombardier would file a grievance with the International Chamber of Commerce, asking that DaimlerChrysler be required to pay Bombardier over $900 million for misleading the company about Adtranz's financial problems.
By then Eckrodt had been posted to another financially troubled company, Mitsubishi Motors Corporation. With the purchase of Chrysler to form DaimlerChrysler, Schrempp had added the manufacturer of medium-priced cars to the Daimler empire and had created a strong presence in the United States as well. As part of his vision of creating a global company, he wanted to establish a strong presence in Southeast Asia and to add the manufacture of small, low-priced cars to his company. Mitsubishi, the fourth-largest automobile manufacturer in Japan, was ripe for purchase.
The company had just gone through a very embarrassing period during which it was forced to reveal that since the 1970s it had covered up design flaws that had caused many of its automobiles to malfunction. It had used intimidation to silence people who complained about accidents that had resulted from the flaws. Sales dropped dramatically in Japan because of a loss of consumer confidence in Mitsubishi products. The company was forced to recall over two million vehicles in Japan alone. DaimlerChrysler bought 37.4 percent of Mitsubishi Motors for about $2 billion, with the option to buy all of Mitsubishi after three years, and sent Eckrodt to oversee the company's return to profitability.
Eckrodt was named executive vice president and COO of Mitsubishi Motors Corporation, and he would be responsible for overseeing the company's marketing, production quality, research and development, and supply system. The leader of Mitsubishi's American operations, Takashi Sonobe, was named president and CEO; his success at keeping Mitsubishi's American operations profitable while the rest of Mitsubishi declined offered hope that he could lead the manufacturer to a recovery at home. Eckrodt and Sonobe faced a daunting task: Mitsubishi had accounted for 11.4 percent of Japan's automobile market in 1995, but that share had declined to 8 percent. In 2000 Mitsubishi lost $750 million on sales of $31 billion and was on its way to losing between $2.21 billion and $2.5 billion for 2000 and 2001 combined.
Eckrodt quickly set about cutting costs. When he first arrived, he gave chunks of the Berlin wall to each of the top 25 Mitsubishi executives, with each rock labeled "Leave no stone unturned" as a reminder of the company's need to seek out every possible way to cut expenses. One way was to cut the number of employees, and 12 of the top 38 executives were let go, including 11 of the top 25. Eckrodt set goals of cutting costs by 15 percent and trimming jobs by 9,500 in three years. Mitsubishi surpassed both, reducing costs by 16 percent and jobs by 12,000 through early retirement and attrition.
One of Eckrodt's most difficult tasks was to straighten out Mitsubishi's keiretsu, a complex system of interrelated suppliers that were partly owned by Mitsubishi and that, in turn, partly owned Mitsubishi. It was an arcane system built up over several decades, reflecting the Japanese custom of close relationships among major corporations and small companies as well as the tradition of diffusion of manufacturing throughout the society rather than centralization. Eckrodt managed to carve out direct lines of supply, a ruthless process that left some members of the keiretsu without a buyer for their products, Mitsubishi having been their only customer. The bulk of the savings realized by Eckrodt came from streamlining lines of supply.
Mitsubishi suffered from overcapacity: it could manufacture far more automobiles than it had customers. Whereas a manufacturer of large vehicles could weather a period of low demand because its profit margins were big, Mitsubishi manufactured mostly small cars, which had slim margins of profit, and the overhead required to maintain underutilized plants ate deeply into the company's revenues. Eckrodt closed one Japanese manufacturing plant and cut others to reduce Mitsubishi's production capacity by 20 percent.
While cutting these costs, Eckrodt doubled Mitsubishi's outlay for research and development. He brought in Olivier Boulay to head Mitsubishi's design team. In a 2003 article in BusinessWeek, Boulay explained his approach: "We're trying to be serious but fun" (February 10, 2003). Market research showed that Mitsubishi had an edge among young consumers, so cars were designed to appeal to them. Eckrodt wanted to gain a greater share of the urban market, so he sent his designers to Tokyo to experience firsthand what people in Tokyo wanted from their cars. Others brought in by Eckrodt included the research and development leader Ulrich Walker and the finance expert Joachim Coers. The Mitsubishi board of directors was expanded from 10 members to 11, four of whom were from DaimlerChrysler, including Eckrodt.
By the end of 2001 most of the bloodletting was over, with 6,400 jobs already cut. Eckrodt and Sonobe had engineered a remarkable turnaround for Mitsubishi; for the 2001–2002 fiscal year, Mitsubishi had for the first time in three years realized a profit, $93.8 million. Most of this profit came from the United States; sales in Japan still lagged. Matters in Japan were still tough in 2002. In March, Mitsubishi recalled 340,000 buses and trucks to repair flawed parts. Nine models of automobile were recalled during the year. In March, Eckrodt was named president of Mitsubishi, and he brought in Eiji Iwakuni to become the senior vice president of marketing; Iwakuni was hired away from the Japanese unit of Ford Motor Company. The hiring of a Japanese marketing expert was somewhat unexpected, because DaimlerChrysler had a history of heavy-handedly replacing executives of the companies it bought with German managers, but Eckrodt explained, "Japanese integration is necessary. There are a few expatriates here but they cannot run the company" (Detroit News, May 22, 2002).
On June 24, 2002, the Japanese shareholders approved the elevation of Eckrodt to CEO, and on June 25 he officially replaced Sonobe, who became the chairman of the board. Sonobe had seemed to be doing an excellent job, but his move first from the presidency and then from the CEO position may be explained by his death in October 2003—he may already have been in failing health. Eckrodt stated that he planned a three-year tenure as CEO of Mitsubishi. One of his first moves as CEO was to eliminate Mitsubishi's traditional system of promotion, which was based on seniority. In its place he installed a system of rewards for good performance.
For the fiscal year 2002–2003 Mitsubishi realized $28.3 billion in sales and a $316.7 million profit, but much of this profit came from strong sales in the United States, and 2003 would prove to be a disaster for Mitsubishi's American operations. Not all was gloomy, however; Mitsubishi's sport-utility vehicle, launched in March 2003, was a hit in the United States. In February the Colt subcompact was launched in Japan to much fanfare, with Eckrodt taking a public role as the genial salesperson reaching out to Mitsubishi's loyal customers who had been put off by the company's fiascoes of the 1990s. Iwakuni created an advertising campaign that promoted the "German-Japanese" roots of the Mitsubishi lineup.
Still, American sales were down 20 percent overall for 2003. In the United States, Mitsubishi had created a popular "0, 0, 0" credit program: zero money down, zero payments for one year, and zero interest for one year. This offer attracted young buyers; 16.4 percent of American buyers of Mitsubishi vehicles in 2003 were under 25 years old. Disaster threatened to overwhelm Mitsubishi's American operations when buyers, especially young ones, defaulted on these generous loans. This meant not only that Mitsubishi had received no money for a year on cars that it had sold, but also that it had a host of used vehicles that were not worth the cost of manufacturing them. On August 31, 2003, Eckrodt hired Finbarr O'Neill away from Hyundai Motor America to take charge of American operations and repair the damage to what had been Mitsubishi's best market.
For the fiscal year 2003–2004, Mitsubishi lost between $650 and $946.8 million (sources are uncertain as to the exact amount), between $375 million and $420 million of this loss in bad American loans. In 2004 rumors were rife that Eckrodt would resign because of the 2003 disaster, but he said that he would leave his positions only if Mitsubishi's shareholders asked him to do so. There were rumors that Schrempp would dispatch a replacement for Eckrodt from Germany, placing all the blame for the losses of 2003 on Eckrodt. Yet the American loan fiasco was a onetime problem, not to be repeated, and it did not reflect any lasting problems for Eckrodt's innovations in Mitsubishi.
Indeed, in 2003 and 2004 Eckrodt continued to pursue new markets and new ways of making profits for Mitsubishi. He retained ties to Brazil and in 2003 arranged for Mitsubishi to collaborate with Mercedes-Benz do Brasil on the design and manufacture of automobiles for the South American market. There was the prospect of building a new factory in the United States because sales of the Endeavor were very strong there. Mitsubishi and DaimlerChrysler finalized plans for building a joint factory in Holland, where they would manufacture a compact automobile.
In February 2004 DaimlerChrysler gave Mitsubishi $490 million to stabilize it after its American losses from defaulted loans, and Eckrodt negotiated for another $1.8 billion investment in Mitsubishi. However, DaimlerChrysler surprised him in April 2004 by declaring that it would give Mitsubishi no more financial support. As a consequence, Eckrodt abruptly resigned on April 26, 2004. Mitsubishi was $6.4 billion in debt and looking for a bailout from the Japanese government.
PROSPERITY THROUGH INNOVATION
A consistent hallmark of Eckrodt's leadership was innovation. In Germany, he changed the way Mercedes-Benz marketed its automobiles. In Brazil he turned a subsidiary into a creator of its own line of vehicles. In Japan his recipe for recovery included not only cost-cutting strategies and creative marketing but also the independent development of new automobiles, based on careful market research. He was willing to take chances, not all of which were successful, but his ability to coordinate large groups of resources into coherent wholes made Mitsubishi Motors into a fundamentally sound corporation.
See also entries on DaimlerChrysler AG, Daimler-Benz A.G., and Mitsubishi Motors Corporation in International Directory of Company Histories.
sources for further information
"Bombardier Gets Adtranz for a 'Bargain,'" Railway Age, September 2000, p. 36.
Dawson, Chester, and Katie Kerwin, "Mitsubishi Moves into High Gear: Eckrodt's Sales Savvy Is Sparking a Turnaround," BusinessWeek, February 10, 2003, p. 16.
Dawson, Chester, et al., "Mr. Fix-It?" BusinessWeek, May 14, 2001, pp. 22–24.
Gibbs, Edwina, "Mitsubishi Motors Reports First Profit in 3 Years," Reuters, May 13, 2002.
Whipp, Lindsay, and Kae Inoue, "Mitsubishi's Eckrodt Plans Three-year Tenure," Detroit News, May 22, 2002, http://www.detnews.com/2002/autosinsider/0205/22/index.htm.
—Kirk H. Beetz