CIO Of DaimlerChrysler: Sue Unger’s Drive to Diversity

Sue Unger did not have much respect for IT when she was a finance executive. Reactive, insular, tactical and unmotivated are just some of the more printable adjectives she used to criticize IT in those days.

Yet now the 54-year-old former bean counter presides over one of the world’s largest IT groups at one of the world’s largest companies, $157 billion DaimlerChrysler. She has survived two waves of management purges since Germany’s Daimler-Benz purchased Chrysler in 1998—purges that saw the only other two female senior vice presidents there leave the company. Indeed, Unger has gained power since the merger in a company that has swept away Americans at its uppermost levels and replaced them with Germans. She is the rare American who rules on both sides of the Atlantic. But she speaks no German, has always lived in the suburban Detroit town where she grew up and has worked for exactly one company since graduating college in 1972: Chrysler. Worldly she is not. And her understanding of IT remains rooted in the conceptual rather than the technological.

This is atypical to say the least. The vast majority of CIOs remain techies who learn the business rather than businesspeople who learn technology. CIO’s “State of the CIO 2003” survey found, for example, that just 14 percent of more than 500 IT leaders had any relevant experience in finance before becoming CIO. Other core business functions, like manufacturing and sales, had even lower percentages, while engineering was slightly better, at 20 percent. In the auto industry, the breakdown is no different. The last businessman to be CIO at a Big Three company, Ford’s Jim Yost, who came from finance like Unger, lasted just a year before stepping aside for a techie. It should come as no surprise that Unger is also the first and only woman to be a Big Three CIO.Unger’s startling success makes her a walking case study on leadership and what it takes for a woman and a technology outsider to become the boss of IT in one of the most competitive, macho industries in the world. How has she defied the odds? Several ways: excellent analytical and people skills honed by her years in finance, and a determination to learn every important aspect of the car business by taking assignments in every major area of Chrysler.

“She broke a lot of barriers by moving around a lot and not being afraid to take on assignments in different functional areas of the company,” says Unger’s mentor, Gary Valade, Chrysler’s executive vice president of global procurement and supply. “No matter what the assignment was, she was always able to break it down to its essential elements and deal with those, and not get distracted by a lot of peripheral stuff.”

But for Unger and her company, the biggest challenges may lie ahead. Chrysler, perennially third behind GM and Ford, is continuing to lose market share as competitors eat away at the categories that Chrysler’s innovative designers made famous, such as the minivan and SUV. And Mercedes and Chrysler finished below average on J.D. Power and Associates’ 2003 initial quality survey. (In 2003 tests, Consumer Reports’ readers put Mercedes’ reliability in third place of worst-of-all car brands.) Analysts question whether DaimlerChrysler’s quest to shore up a failing Chrysler has caused its chairman of the board of management, Jurgen Schrempp, to lose sight of what made his German gem great.

Indeed, one of the first questions a German journalist asked Schrempp at the company’s annual press conference last fall was whether he was considering selling Chrysler. Schrempp responded with a stern “No!” but the question—and larger issue of the merger’s success—lingers on.

Driver’s Ed

Unger comes from the second most powerful constituency in the car business: the money guys (and at the highest levels, they are still nearly all guys). The car guys (usually engineers) are the most powerful group, and they usually get the CEO jobs, but when you veer off the road into a financial ditch as often as the auto industry does, the money guys are as powerful as bean counters get. Finance in the auto industry has a breadth and depth that few other industries can match. For decades, Chrysler’s promising finance people have been rotated through different areas of the company at roughly two-year intervals, creating executives who understand every facet of the business.

Unger served in several functional areas, from sales and marketing to engineering to warranty, before assuming her IT role. But adaptability was a strength long before she ever came to Chrysler. Growing up, she had wanted to be a civil engineer like her father and grandfather. Her parents helped build her confidence by giving her lots of household responsibility and treating her the same as her brother. “My father expected no more or less of me because I was a girl,” she says. But he did not encourage her dream. “He said I could do [engineering], but that I wouldn’t advance very far and I’d be treated badly,” Unger recalls. “Women did one of three things in those days. They became nurses, teachers, or they got married.”

In her first college computer engineering course in 1968, Unger, the only woman out of 400, was repeatedly humiliated in front of the class by her male professor. The experience drove her out of engineering and into the business school, where the humiliation was less severe and she was still the only woman in most of her classes.

Her sense of isolation continued at Chrysler, where she was one of three women management trainees in 1972’s crop of 50. There were no women in Chrysler’s management at the time either. But Unger viewed the challenge at Chrysler, perhaps a bit naively, as a game she could win.

The game quickly got serious. After a few years of working for finance in the sales and marketing function, Unger pushed to be assigned to the Jefferson North Assembly Plant, one of Chrysler’s oldest, in downtown Detroit in 1977. Her colleagues in finance thought she was crazy to leave the padded carpet of headquarters for the grease and oil of the assembly plant. But Unger wanted to know how cars were built. “I thought it was important to learn everything about the auto industry,” she recalls.

But no management woman had ever set foot in the plant (though women worked on the assembly line), and the plant manager was determined to keep it that way.

It took a year of lobbying before Unger got her assignment. Then, she got stuck in “body in white,” the section of the plant where, in the days before automated assembly, the biggest, toughest guys muscled the raw, unpainted (hence body in white) panels of sheet metal into place to create the vehicle’s skeleton. Unger’s job was to monitor productivity and help improve the assembly process by meeting with the assembly team and discussing better ways to move materials to the line. Ironically, Unger had an easier time dealing with the tough guys on the line than the managers in the office.

“It wasn’t discrimination so much as they were very worried about having such a refined young lady in such a macho manufacturing environment, and what if someone swore at me—how would I react?!” she says, laughing at the memory. In fact, Unger didn’t care about the swearing—it was the men’s phony, condescending sensitivity that drove her crazy. “In meetings, they’d say, ’I’m sorry to do this in front of a lady, Sue, but expletive, expletive,’” she laughs. “I finally said, ’Look, I’ve heard all this before. What’s humiliating is how you single me out before you say it!’”

The people down on the line didn’t pull any punches with her, Unger says. “I loved the honesty,” she recalls. “Nobody was afraid to say how they felt about things. I just thrive in an environment like that.”

Unger’s higher-ups in finance were admiring the same traits in her—not simply because they’re signs of good character, but because they serve the company’s goals. “In finance, it’s easy to become aligned with someone that you like or who you think is doing good work or has got a great future,” Valade says. “And it’s very easy to take an analysis—say whether to keep a manufacturing plant open or closed—and tailor it to the direction you think the guys or gals would like to see it come out. But to succeed in finance you have to get by that. You have to say, It’s my job to put down the facts as I see them fairly. Not all finance people can do that. Sue has always been able to do it. You could call it integrity.”

Managers at Jefferson North had a hard time noticing Unger’s integrity, however. They were more focused on her sex. The year Unger arrived there, the managers decided to cancel the annual management picnic rather than invite her. Similar roadblocks would follow, but Unger approached them with humor and a bit of cunning. For instance, when Unger came to procurement and supply in 1983, a Chrysler manager, Tom Martin, badgered Unger to manage the group’s softball team, knowing she had no knowledge of or interest in the sport. Unger agreed. But when she showed up at the first game and handed out the team uniforms, Martin got a surprise. The uniforms were bright pink and white, with the name “Martinets” scrawled across the front.

A New Word for IT: Yes

Perhaps the toughest assignment for Unger was when Lee Iacocca trumped the other Big Three during the “warranty wars” of the mid-1980s by upping the coverage to seven years or 70,000 miles. Unger was the finance manager who had to figure out whether Chrysler would lose what was left of its tattered shirt on warranty repairs. This was an assignment Unger didn’t choose herself. Warranty and quality were chaotic backwaters. Engineers used dollies to deliver the stacks of paper that quality analysts needed to pore through to generate their monthly quality reports. “The paper was stacked so high you couldn’t even see the analysts at their desks,” Unger recalls.

She realized then that she had stumbled on a function that could really benefit from IT. Except there was no IT to depend on.

By law, Chrysler has to keep warranty and quality information on every part and every vehicle going back 15 years. But getting at the information about a part that failed last week was as difficult as finding one that blew up 10 years ago. Unger realized that if warranty and quality data went online, the engineers would be able to fix the quality problems much quicker. Her na¿t¿bout technology may have been a blessing in disguise. “IT said it was impossible to put this much information in a database, much less analyze it,” Unger recalls. “So I got a PowerPoint presentation together and said, ’This is what I want.’”

She was asking a lot. Not only did the database need to store vast quantities of information, but Unger herself specced out complex statistical analyses, which required vast amounts of computing power to generate comparative quality reports. As she recounts the story in her big corner office at Chrysler’s headquarters, her annoyance is still fresh. Her foot starts to jiggle with nervous energy.

It’s easy to imagine that foot kicking poor Paul Hsu out of her office—three times, to be exact. Hsu was the IT messenger assigned to tell Unger that her database could not be built. “With all the suppliers out there, you can’t tell me there isn’t someone who has tackled this problem,” Unger recalls telling him. “Go figure it out. That’s what I’m paying you guys for.”

After IT told Hsu to tell Unger no for the fourth time, he declined the assignment. Instead, Hsu called IBM and pleaded for help. “And that’s when they told him about the new database they were developing,” Unger recalls.

Eighteen months later, they had the database installed. Instead of a handful of quality analysts looking at mountains of paper, the new database opened the information up to all of Chrysler’s engineers, as well as those at key suppliers. Quality problems were resolved 75 percent faster, according to Unger, with an overall cost reduction of 25 percent.

IT’s Ambassador

Unger had built a reputation for fixing problem financial processes and repairing bad relationships with business partners, but she had never fixed those problems with IT before. She thought fixing IT’s image might be her biggest challenge yet. So when the department’s top job opened up in 1993, she applied for and got it.

When Unger arrived, she became IT’s front end, its CRM system. In many of the areas where IT built systems—from the shop floor to the showroom—Unger had direct managerial experience, process knowledge and, perhaps most important, contacts. “You can’t underestimate the advantage of knowing people in the various organizations,” says Valade. “So if you’ve worked inside the Jefferson plant, you can call the controller and supervisor and just talk to them because you know what their business issues are. You’ve been there. You realize how everything fits together. If someone calls up and says they need something in 24 hours, you know whether they really need it in 24 hours.”

IT managers were in awe of Unger’s access. “They’d say, ’You mean we’re going to meet with so-and-so? We’ve never spoken with him before,’” she laughs.

What Unger did not have was a solid grounding in technology. For any nontechnology CIO, this gap in understanding can create a gulf of resentment with the techies in the group—especially those who dream of being CIO one day. Asserting her leadership without alienating her technology lieutenants is the tightrope Unger has walked since taking over IT at Chrysler. She maintains her balance by meeting the techies halfway. They provide her with advice and manage direct relationships with their business customers while she focuses on overseeing the overall strategy, maintaining relations with top management and building metrics for managing the overall IT group.

“Her finance background gives her the ability to see technology from a business payback view, which is absolutely necessary not only for her success but our success as a company,” says one of her lieutenants, CTO Vince Morrotti. She is also famously impatient with the progress of projects. “It can be a challenge for her staff, but it allows them to accomplish more than they may have thought was possible,” he says.

Merger Mania

In 1998, the possible was stretched to span the Atlantic. Daimler’s acquisition of Chrysler brought together two IT departments that could not have been more different. Chrysler’s single market emphasis— mass-market cars and pickups—along with its constant financial hardships and heavy geographic concentration in the Detroit area generated an emphasis on IT centralization and standardization. Daimler, on the other hand, was a highly distributed, multinational company with a number of different business units serving very distinct markets. Those units all had their own IT leaders and, in more typical European style, no overall chief. Each unit was free to do as it wished.

The press focused on nationality conflicts after the acquisition was announced, but in fact the biggest difference was the culture of the companies themselves. Mercedes is all about luxury and consistency while Chrysler has rarely ventured above the middle market and has survived by being idiosyncratic—throwing out designs every few years and carving out new categories like the minivan and SUV.

Supporters of the merger call the two companies complementary, for their different market emphasis and styles, but critics say there is little opportunity for the two companies to save costs because they lack common ground. It has taken five years for a truly codeveloped product, the Crossfire sports car, to emerge. It combines one of Chrysler’s typically radical, love-it-or-loathe-it designs with Daimler’s more refined hardware under the hood. But the car, with its high price tag—$34,495 for a six-speed manual—and limited production run, is more a symbol of cooperation than a demonstration of value that has resulted from combining the two companies.

Even so, Unger’s success in centralizing Chrysler IT was a template for what Chairman Schrempp wanted to see across the company. So in 1998, Unger got the nod for the top job. And there was immediate resistance to her vision, mostly from the German side, which was highly decentralized and heavily outsourced. “The Daimler IT organization was a bunch of contract managers managing contracts with IT outsourcers,” says AMR Research Director Kevin Prouty.

But Unger quickly demonstrated that she was willing to delegate technology leadership on projects to her German lieutenants, just as she had done in the United States. For example, technology projects running at Mercedes before she took over were left in the hands of the German technologists on the condition that they cooperate with their American colleagues to bring them to Chrysler, if the applications didn’t already exist here. She insisted that IT be run globally in just one area, infrastructure, which is owned by Morrotti, an American who used to be CIO of Mercedes-Benz USA.

So far, the only global infrastructure win has been e-mail: down to a single system from 16. Morrotti faces a much more difficult challenge in trying to standardize infrastructure across the oceans—not just the Atlantic but the Pacific too, as the combined company is in 200 countries. He is creating four central data centers around the world to serve both companies, which will help eliminate some redundancy. But the heavily localized infrastructure of Daimler-Benz—each plant has its own regional data center—is simply too difficult a nut to crack, for now.

In the meantime, Unger has focused most of her globalization effort not on systems but on people. She built a standard performance measurement system for both sides of the Atlantic based on the popular Balanced Scorecard concept. She instituted a global awards program to recognize individual achievement, another move that ran counter to the German tradition of focusing on group recognition. And in the most controversial move of all, Unger demanded that 20 percent of her entire staff rotate inside or outside of IT each year. But Mercedes’ IT had a long history of specialization and resisted. In the end, Unger and the Germans compromised and agreed to rotate 18 percent of the global staff each year.

Unger acknowledges that it has been grindingly difficult bringing both sides together, but her people skills and experience have proved invaluable. “The fact that she listens to people, evaluates what they have to say and takes a position that is not political is what got her through it,” Valade says.

The Contest Ahead

Sitting with her lieutenants in a conference room at Chrysler’s giant corporate center, Unger never lets anyone forget that she is the most experienced businessperson in the room. Partly it’s her delivery. She hits the table with her fist, she gets excited and passionate, she laughs (a delightful cackle of a laugh). She can hold the room. Her lieutenants don’t have the same polish and command.

She also spends a lot of time cheerleading. Despite spouting enough rah-rah corporate platitudes to make even the most seasoned PR handler blush, Unger sounds like she really means them. “We have such a great team here in IT!” she chants over and over.

Though Unger likes for her employees to seem like an inseparable part of the groups they serve, she doesn’t want her full-time staff—which now numbers 4,400 on both sides of the Atlantic—ever reporting to anyone but her, another legacy of her days in finance. “There always has to be a solid line back to IT,” she says. “If you let it become a dotted line, you start to have a division between corporate IT and business unit IT.”

Unger’s biggest contest may lie ahead. She continues to face resistance from Germany in her efforts to consolidate infrastructure and apps. She spends a grueling two weeks out of every month in Stuttgart trying to influence the man she reports to, Schrempp. He is an intimidating character, an engineer by training. At best, he is described as tough but fair. At worst, he is described as an arrogant bully who lacks faith in Chrysler’s American managers. In a tough economy, where Chrysler has lost market share since the merger, Unger has to prove herself each month when she gets on the private corporate plane to go to Stuttgart.

After the merger, Schrempp decreed that three functional areas of the two companies—finance, procurement and supply, and IT—should become truly integrated and global. Valade, who presides over the global procurement and supply effort, says Unger has the most difficult challenge of the three. “The finance people knew they needed one chain of command, and the procurement people quickly recognized that we could save a lot by doing global purchasing,” says Valade. “But there is a lot more resistance within IT.”

Unger, in other words, has her work cut out for her. But if anyone can do it, her former mentor implies, she can.