It’s been said that just like the proverbial cat, Chrysler has led nine lives. The carmaker surely gave up a few of them in the 1960-62 debacle.
On April 28, 1960, Lester L. “Tex” Colbert stepped down as president of the Chrysler Corporation to take the honored position of chairman of the board. His 10-year run as president had apparently been a successful one. Accomplishments under his leadership included the development of three advanced hemi V8 engine families for Chrysler, Desoto, and Dodge, the Torqueflite transmission, the launch of the compact Valiant, and the transition to Unibody construction. For his successor as president, Colbert hand-picked his longtime lieutenant, friend, and Bloomfield Hills neighbor, William C. Newberg. And then barely days later, hell broke loose.
William C. Newberg (left) and L.L. “Tex” Colbert
The fact was a number of customers, dealers, and shareholders weren’t at all happy with conditions at Chrysler. They were increasingly disturbed by the poor build quality and runaway rust on recent products, the curiously high operating costs, the erratic sales results, the declining profits. The most strident of them was Sol A. Dann, a prominent Detroit lawyer, civil rights activist, and shareholder advocate whose previoius targets included Studebaker-Packard and American Motors. A tireless combatant, Dann was the attorney who managed to win a reversal of the death penalty for Jack Ruby, the killer of Lee Harvey Oswald.
At the annual shareholders’ meeting in 1960, Dann once again stood up and battered Colbert and Chrysler management with a litany of accusations, this time for more than an hour. As the owner of 51,000 Chrysler shares, reportedly twice as many as Colbert, he would not be silenced. Dann declared that the company was, quote, a hive of “nepotism, favoritism, payola, reckless disregard for the rights of shareholders, bribery, misconduct, perpetuation of themselves in office, creating a Pearl Harbor that would lead Chrysler to the same fate as Packard.”
1961 Valiant V-200 Hardtop Coupe
One influential Chrysler board member, Pittsburgh coal magnate George H. Love, was curious enough about the continuing accusations to press for an independent audit of the company. The audit, conducted by Touche, Ross & Co., almost immediately uncovered an alarming conflict of interest: Newberg and his wife owned a 50 percent interest in two Chrysler parts suppliers, Press Products, Inc. and the Bonan Company. Suddenly the high parts costs and poor quality had a plausible explanation. On June 30, Newberg was forced to resign after just 64 days as president. As part of his separation agreement, Newberg agreed to repay $455,000 in profits he received from his outside companies for their contract work with Chrysler.
But soon Newberg was protesting this arrangement, charging that he had been set up to be the fall guy by his former friend Colbert to cover up years of corruption and incompetent decisions. Colbert, now president again as well as chairman, had promised to pull strings and arrange for Newberg to become chairman at Studebaker, Newberg alleged, but then reneged on this promise and others. In one unverified story, Newberg confronted Colbert at a local country club and punched him in the face. In January of 1961, Newberg filed a $5.25 million lawsuit against Chrysler and Colbert, which wasn’t settled until 1970 with an out-of-court agreement.
Meanwhile, the removal of Newberg did nothing to placate the dissident shareholders. Dann and his allies unleashed a flurry of legal actions that included asking a court to place Chrysler under receivership. Another asked for the board to be removed and replaced. It was disclosed that Colbert’s wife owned shares in Dura Corporation, a Chrysler trim supplier, and syndicated Washington columnist Drew Pearson reported that Colbert kept $200,000 (nearly $2 million today) in bearer bonds, presumably from kickbacks, stashed in his office safe in Highland Park. Colbert, too, was forced to resign as president and chairman on July 27, 1961, though he was allowed to take a position as head of Chrysler of Canada to qualify for his pension.
1961 Dodge Polara Hardtop Sedan
While the executive offices were erupting in chaos, engineering, production, and sales were wracked with turmoil as well. It was Newberg who reportedly made the abrupt decision in mid-1960 that the 1962 Plymouth and Dodge had to be radically downsized, and the engineering and styling staffs struggled to meet the sudddenly tight deadlines.
The proposed full-sized Dodge and Plymouth designs for ’62 were hastily shrunk down to fit on a stretched Valiant platform, and no one was happy with the result. In a now-famous phrase, Chrysler design vice-president Virgil Exner called the awkwardly styled cars “plucked chickens.” As one story goes, Newberg made the downsizing decision after mishearing some party gossip about Chevrolet’s plans for the 1962 Chevy II, which he took to mean the carmaker’s full-sized line.
1962 Plymouth Fury Sedan
The automaker’s dealer network was already disgruntled by the sudden, secretive decision to kill off DeSoto in November 1960, and by the Chrysler brand’s undercutting of Dodge on pricing. They may have been disappointed with the dated styling of the 1961 models, but they were crushed by the homely ’62 line. Buyers were equally turned off and in 1961, Plymouth gave up its traditional third place in sales, trailing only Ford and Chevrolet, as Rambler took away the spot. In 1962, Plymouth fell all the way to eighth, behind Buick, Oldsmobile, and even Mercury. Ford and Chevrolet were now far off in the distance, and Chrysler’s market share had tumbled to 8.2 percent
With the company’s sales and revenue slipping away, George Love, the coal man who triggered the audit, was elected chairman to replace Colbert, and he appointed financial specialist (and former Touche, Ross & Co. executive) Lynn Townsend to run the company. Townsend immediately slashed payroll and overhead, and deciding that Chrysler styling needed a fresh start, he replaced Exner with Elwood Engel from Ford as head of design. Chrysler survived, just as it would weather through its 1979 government bailout and its 2009 bankruptcy. But in the 1960-62 disaster, the company fell too far behind General Motors and Ford to play the game at quite the same level. While Chrysler continued to build interesting cars, for the next several decades it remained the runt of the Detroit three.
1962 Dodge Polara Hardtop Coupe 
Wow what a story. Who knew. I’ve read a little about it but never knew it went that far.
Well, it was Rambler/AMC that was the runt, but at least we were ahead of Studebaker. Chrysler sure has had it’s ups and downs. Seems one extreme to the other. I saw an interview with Lee Iacocca after the 2nd bailout. The man interviewing Mr. Iacocca, asked if he would consider coming back to help Chrysler again. His response was priceless. He said, in so many words, “these crybaby executives and CEOs with their 5 mansions, need to focus on what people want, not what they want”. He went on to say, in ’79, he didn’t take a dime out of Chrysler until the K car and minivan were well established. “These morons don’t know how to run a car company,” and he was right. I swear, THAT guy should have been president of the USA.
Iacocca was a genius car guy. But, as we have learned, a President isn’t a CEO who can just demand what he wants and fire anyone who won’t toe the line. Congress and the Courts don’t work for the President. The job requires the ability to negotiate, not to dictate. It is a different skill set than a CEO and the idea of running the government like a business is silly.
Wow, I have heard snippets of this story over the years, but had no idea that the corporate drama and scandal was so significant
Great book–“GOING FOR BROKE: The Chrysler Story” by Michael Moritz & Barrett Seaman
This is a well-written article since many of the anecdotes aren’t represented as facts, such as the often repeated story about Newberg’s 1962 crash downsizing being the result of an overheard comment at a party.
One thing is for certain: Colbert’s leadership at Chrysler was a mixed bag, at best. While he was responsible for bringing in Exner and giving Chrysler a much-needed, bold new styling direction, culminating with the 1957 ‘Forward Look’ cars. It was a mixed blessing since the cars were in such demand that quality took a back seat to production with Chrysler gaining a horrible reputation that endures to this day, and that’s all Colbert’s fault.
Hear, hear. The “garden party” fable was too convenient and too ridiculous to be true – but made such a good story the real scandal always gets lost in the telling. Good observation, good article.
McG here. I don’t know, I wasn’t there, but to me the story sounds more like something made up to discredit Newberg once he was on the outs. It doesn’t seem like the act of an experienced auto exec. It seems doubtful he would have that authority completely on his own. Also, I noticed that Jeff Godshall didn’t repeat the story in his articles, and he knew as much about the company and people as anyone. In these articles, I try to stick with the established facts, and if it’s only a story, I call it that.
It is much appreciated! If only the rest of the internet had such restraint… 🙂
Great story! As a teenager back then, I was a subscriber and avid reader of Motor Trend, Car Life, and Motor Life magazines and all three magazines managed to dance over the issue of “chaos at Chrysler”. One great thing was the downsized “413” Plymouths with torqueflite. They were brutal at the strip and the police used them for chase cars.
Chrysler’s marketing program at the time was a circular firing squad. They had the same number of lines as GM (Imperial, Chrysler, DeSoto, Dodge and Plymouth) but they blurred the lines between the lines so badly that the public could never keep the lineup straight. Plymouths were sold in Chrysler dealerships and Dodge sold trucks. Any wonder why the public thought Dodge was the opening price brand?
Even today, large publicly-held companies appear to succeed in spite of their boards and corporate officers. And there is NOT ONE CEO today worth $1 million per year.
It could be interesting to imagine what if Chrysler had gone into receivenship in the early 1960s? Or what if Newberg didn’t care about the GM rumors?
Part of me thinks that if Newberg had ignored the rumors – or whatever it was that caused him to order the downsizing – Plymouths and Dodges for 1962 still would have been bizarre in appearance (my apologies to the fans of these early ‘60s Chrysler Corporation vehicles). Exner’s designs in the ‘50s were brilliant, particularly the ‘57s, but as time marched on it seemed as though the styling staff was trying too hard to top their previous successes. In the process, some of the designs went from sleek and forward-looking, to downright weird and ugly.
I don’t want to imagine what if Exner died when he got his first heart attack while supervising the 1959-60-61 designs who could replaced him? Some rumors mentioned Cliff Voss who once eyed Exner’s job but there might be others. Don Kopka who taked a more conservative approach with his 1962 DeSoto proposal where the roofline reminds me of the 1965 Chrysler Newport and Dodge 880 4-door 6 window sedan and the front end looking like a 1963-64 full-size Mercury (and by a twisting irony Kopka worked later at Ford) might have been more successeful. I wonder if Elwood Engel saw some pictures of this proposed DeSoto as a source of inspiration for the 1965 C-bodies besides the Lincoln Continental.
Is not a talented CEO worth something similar to a sports or movie personality that pulls in $20mil or more a year?
Agree, especially when some CEOs are at the helm of companies that consistently earn tens of billions of dollars per year for shareholders. Talented leaders are like anything else – you usually get what you pay for.
I don’t think sports and entertainers are worth that kind of money either. If whoever pays them can afford that much, they also aren’t worth what they are paid, and the end customer is the one who ends up paying the big bill.
Lawyer, and activist. All I need to know
Lawyer/activist Sol A. Dann (and reporter Drew Pearson) were 100% correct: they simply uncovered the damage to Chrysler Corporation that a corrupt, inept leadership had already done. Let’s just say Dann hadn’t ‘opened up’ the nepotism scandal: Chrysler Corp and its shareholders had already been undone by Colbert and Newberg’s ineptitude.
As the article infers, Colbert all but “murdered” DeSoto by allowing the Divisions to increasingly become internal competitors on the price scale… Authorizing brand-creeping models like the ’60-61 Plymouth-based ‘Dodge Dart’ and the initial de contented ’61 Chrysler Newport… I’ll add to that the inept handling of the 1955 launch of Imperial luxury division, allowing the new Chrysler 300 to “borrow” the grille from their just-launched luxury car, undercutting its distinction from the get-go (…insignificant? Imagine if GM had allowed Buick to ‘borrow’ a Cadillac grille for a 1955 Buick Skylark… Madness).
As a hobbyist, I’m a life long Mopar Man, but Chrysler Management in the 1950’s was a sizzling-hot mess. If Dann hadn’t exposed the ‘cancer’ when he did, Colbert and Newberg’s mismanagement still would have blown up certainly by the advent of the 1962 downsizing debacle.
Colbert had brought Chrysler Corporation short-term gains, at the price of forever loosing Mopar’s once-sterling reputation for superior engineering and anvil-like build-quality: their reputation so badly damaged that most collectors today can’t even fathom that Chrysler Corporation had been America’s Number TWO automaker from 1936 to 1949… the year before Colbert became president. Colbert (and Newberg) did the damage: Dann just ‘delivered the telegram.’