(FORTUNE Magazine) – IN A CROWD of auto moguls, Chrysler Motors' executive vice president of manufacturing stands out like a bulging Imperial among K cars. An ex-Big Ten football player, Richard E. ''Dick'' Dauch pumps iron, does 100 finger-tip push-ups every morning, and squeezes a grip exerciser throughout the day. He only recently cut back his milk consumption from nearly a gallon a day to a pint. You will not hear any maxims about friendly Japanese management from Dauch. His role model is Vince Lombardi: Inspire 'em with speeches, but if they do not produce -- kick tail and take names. Dauch (pronounced dowck), 44, has been the muscle man in a remarkable smokestack renaissance. No U.S. industry was more menaced by foreign competition at the start of the 1980s, and no auto company was in worse shape to meet the threat than Chrysler. As recently as 1982 the company had the highest costs in the auto industry and abysmal quality. Now it is the low-cost producer and near the top in reliability, durability, and fit-and-finish. An analysis in April by Chilton's Automotive Industries, a trade monthly, ranked Chrysler as the top-performing domestic automaker for the second consecutive year, based on such measures as return on sales and productivity. According to Chilton's, the company made a profit per vehicle of $1,057 in 1986, vs. $847 for Ford and only $157 for GM. Significantly, even leaving aside the help it got from the stronger yen, Chrysler has also been growing ever more competitive with Japanese automakers. The company's turnaround is thus a powerful demonstration of how American business can regain international stature if it has the commitment to overhaul itself. Dauch's signal achievement has been to turn Chrysler's manufacturing around on a shoestring and in an extraordinarily short time. He can rebuild old plants, iron out the bugs in new machinery, and ready a new car model for launching all at the same time, a feat he pulled off three times in 1986 and will do twice more this year. That's akin to the ventriloquist's trick of drinking a glass of water while he makes the dummy talk. More than that, Dauch can get an assembly line running at full speed in as little as 18 weeks after he starts to build it. He has launched five new Chrysler car lines on schedule since 1983 -- the best record of the Big Three. Ford reportedly needed four extra months of preproduction time to get out the Taurus/ Sable in 1985, and GM took a year to accelerate to full production speed at the Hamtramck, Michigan, assembly plant where it builds front-wheel- drive luxury cars. Observes Detroit consultant Jim Harbour: ''Chrysler is the best at executing a major model change.'' To be sure, Dauch's job has been made easier by Chairman Lee Iacocca's gift for spinning attractive new models out of old designs (see box, page 39). That knack, among others, helped Iacocca take home $20.6 million in salary, bonus, and stock profits last year. Nonetheless, while getting plants up and running is unglamorous compared with product design or advertising and marketing, it is the linchpin of automotive success. An assembly plant can generate $10 million in revenue daily when it is operating, but not a dime if it is down for repairs. General Motors, long the factory leader, lost its edge in the early 1980s while it struggled with organizational changes and technology snafus. Now Japanese manufacturers, notably Toyota and Honda, have the lead. Nowhere is efficient manufacturing more important than at Chrysler, which has the fewest plants of the Big Three and thus the greatest need to keep them purring on schedule. Eighteen years younger than Iacocca, Dauch could someday get a shot at one of Chrysler's top jobs. Says Stephan Sharf, Dauch's predecessor as head of manufacturing and now a consultant: ''I don't see anybody in his age group who is his equal in knowledge. The good thing about Dick is his willingness to stick his neck out. A finance guy can only count.'' Until Dauch arrived, Chrysler's plants were relics of a past automotive age. Take Dodge Main, where the company assembled Dodge Aspens and Plymouth Volares. Eight stories tall, it was built in 1910. The assembly line snaked tortuously from floor to floor. Parts were stacked to the ceiling and frequently got lost. Workers had to clamber over vehicles or stand in shoulder-deep pits underneath them to make welds and fasten bolts. Half- assembled automobiles were stashed along plant walls until they could be repaired or cannibalized for spare parts. And at the end of the line was a parking lot overflowing with brand-new cars awaiting repairs. Dodge Main, now gone, was Chrysler's worst -- but not by much. Short of cash, Chrysler was pushing cars out of all its plants at a breakneck pace, heedless of quality. The shorthand description for the manufacturing process was ''Heat it, beat it, and ship it.'' Recruited away from Volkswagen by Iacocca in 1980, Dauch won a promise that he could modernize each plant when a new model was launched. The money available for the job was not much by industry standards. Chrysler spent $6 billion between 1983 and 1985 and $3.2 billion in 1986. By comparison, GM spent an estimated $7 billion preparing to launch a single model line, the GM- 10 series of midsize cars that will make its debut this fall with the Buick Regal coupe. To get the highest and quickest return, Dauch put the money where the customer would see the results. His first goal was to eliminate the rattles and squeaks that drove Chrysler owners bonkers. That meant automating the plants so that cars could be built to specifications and accurately checked for quality. Since 1982 the number of robots at Chrysler plants has exploded from 300 to 1,242, and the computers that control them and perform inspection functions now number 5,980, compared with 1,825. Merely adding robots does not necessarily improve productivity, as GM and Ford have found to their distress. Dauch started by insisting that before he took delivery, all the robots run 50 consecutive hours without breaking down. Some 25% flunked the test, though lately the failure rate has been cut to 15%. Dauch also knew when not to automate. Older-model pickup trucks proved too complicated for robots to cope with, so he stuck with manual welding. To get the most out of new technology, Dauch transformed the assembly line itself. Scrambling is out, and pits have been eliminated; the line brings the cars to the workers instead. Chrysler used to divert faulty bodies into a half dozen repair bays, a process that was both costly and inefficient. Now, except in the most extreme cases, the cars must stay on the line for their two-day, ten-mile trips. The process, called in-line sequencing, forces workers to build cars right the first time and eliminates repair bays. It also makes possible the just-in-time inventory system, under which parts arrive only as they are needed, packaged in the order in which they will be used. Just-in- time has dramatically cut the amount of inventory Chrysler must hold and is saving the company $20 million annually in carrying costs. Chrysler turned inventories 22 times in 1986, vs. 19 times the year before and only 6.3 times in 1978. Ford's inventory turnover rate was 13.8 last year, and GM's only 11.7, according to Chilton's. At Chrysler's three stamping plants, the size of the steel stockpile has shrunk from a 32.6-day supply to six days.

Chrysler paint shops used to be infernos of heat and dust, and the company retained enamel paint long after GM switched to more attractive lacquer. Chrysler cars often displayed an ''orange peel'' finish because the paint was applied so unevenly. To date Dauch has invested $1.2 billion in new paint shops. As clean as surgical theaters, they are decorated with fountains and greenery for dramatic effect. Some have pans of water along the aisles to collect atmospheric dust. Ostrich feathers, mounted on rotating wheels, whisk away the dust before the paint is applied. Chrysler also led Detroit in the application of a clear final coat that gives more depth and gloss to the finish. Better bodies and better paint have paid off in better products. In the past at some plants the number of fully assembled cars awaiting repairs at the end of a day equaled as much as two days' production. Now the number is down to not more than 20% of a day's output, and Dauch constantly keeps tabs on the amount. Seldom guilty of understatement, Dauch claims: ''Our cars are as good as BMWs in body structure, better in showroom appearance, and cost $10,000 to $15,000 less.'' Hyperbole aside, there has been a substantial reduction in the number of glitches that result in a warranty claim or that a customer would notice. Chrysler says defects per 100 vehicles have decreased 42% since 1980. Even Dauch can fumble a new car launch. The introduction of the Dodge Daytona and Chrysler Laser four-seat sports coupes in the fall of 1983 ''was a flaming disaster,'' says Ronald L. Stewart, who runs Chrysler's assembly plants. High-strength galvanized steel, which offers improved rust protection, was used for the first time and required troublesome new dies and manufacturing processes. To make sure the mistakes were not repeated, Dauch's people knocked heads with steel suppliers. THE DEMANDING life of the factory floor is nothing new for Dauch. The youngest of eight children, he grew up on a dairy farm in Ohio where he arose at 4:30 every morning to help milk 50 Holsteins. As a student he enjoyed chemistry and math, ''but not English so much.'' He still occasionally confuses the agreement of nouns and verbs, and his speeches will not win him any points in an elocution contest, though they are long on enthusiasm. He told a group of computer engineers in April that ''although we have come a long way, there is a lot more to go.'' A young giant who could run the 100-yard dash in ten seconds, Dauch received 44 full-ride college scholarship offers. He chose Purdue, where he played fullback and linebacker on its nationally ranked 1961 team and got a degree in industrial management. Football metaphors still dot his speech, and a Boilermakers poster hangs in his office. After graduation, Dauch, who was already married with two children, went to work at Chevrolet's Flint, Michigan, assembly plant. He held a variety of factory supervisory jobs until he was made head of a spring and bumper plant in Livonia, Michigan -- at 33, one of the youngest plant managers in GM's history. In 1976 he followed James W. McLernon, then head of Chevrolet manufacturing, to Volkswagen of America, where they refurbished VW's Westmoreland assembly plant in Pennsylvania. By 1980 Dauch had little further to go at the German-owned company and was wooed away by Iacocca. Now the highest-ranking non-board member at Chrysler, Dauch still has not lost his rapport with the factory floor. Esprit de corps among the manufacturing workers resembles the pre-1987 Marines. ''Dick is a leader -- that's the key,'' says Jim McLernon, who is now executive vice president of Creative Industries, a Detroit engineering development firm. ''If he has to go down on the line and show the workers how to do something, he's not afraid to do it.'' If Dauch isn't there his slogans are, decorating the gleaming white walls of his spotless plants along with worker-painted murals. The latest: ''Building together to be the best.'' Some others: ''We have to be agile, mobile, flexible, and versatile,'' and the mnemonic ''The four M's: manpower, methods, materials, and machinery lead to a fifth: manufacturing efficiencies.'' Through arduous recruiting, Dauch has boosted the quality of his subordinates. When he arrived, less than 1% of Chrysler's foremen were college educated. Now 18% are. Dauch says that by the end of 1988, 45% of salaried manufacturing personnel will have degrees, compared with 11% a few years ago. He has also honed the skills of Chrysler's 49,700 hourly workers. With an average age of about 43, they are the industry's most experienced. Yet every worker at a new plant gets 40 hours of training; some, such as machine operators, get over 100. Dauch campaigned energetically to raise consciousness about quality, making more than 100 joint appearances with United Auto Workers Vice President Marc Stepp. At four of Chrysler's seven U.S. assembly plants, he helped negotiate modern work agreements that slashed the number of job classifications -- from 93 to ten, for example, at the Jefferson Avenue assembly plant. Workers get more say about overtime and vacations. In return the company gets added flexibility in assignments. Time clocks have been banished; instead, workers are logged in by computer with a plastic card. Says Stepp: ''Dauch is tough but fair.'' The payoff has been a productivity boom. Chrysler builds 8,000 cars and trucks a day, vs. 4,500 in 1981. The number of man-hours it takes to build a vehicle has shrunk from 175 to 102. Absenteeism is down sharply, along with friction. Only 7,000 hours were lost to work stoppages last year out of 97 million man-hours worked. Nail tough and supercompetitive, Dauch believes Americans can build products as well as anyone in the world. Says he: ''The Japanese are far overrated. You have to sift out the propaganda from the pearls.'' Yet he is not shy about borrowing the pearls, such as just-in-time inventory control and quality circles, which he renamed Product Quality Improvement groups. Chrysler has eliminated one level of foremen from plants and, over time, will change the job title to ''supervisor.'' So far, however, it has not gone as far as GM in allowing workers to stop the assembly line by pushing a button at their work stations. DAUCH is equally skeptical about the supposed benefits of outsourcing, another industry totem. As he notes, when Chrysler bought 70% of its parts from outside suppliers, it was the least efficient manufacturer. Today it buys the same proportion from outside but is the lowest-cost producer among the Big Three. In fact, Dauch thinks Chrysler can do better than some of its suppliers, and expects to save $50 million by moving a few of its body sheet metal parts in-house by 1990. More important, he says, is establishing strong relationships with suppliers. Like GM and Ford, Chrysler is weeding out weaker vendors. It has cut the number of parts and material suppliers from 2,700 in 1985 to 2,424 and expects to have fewer than 1,500 by 1991. Chrysler used to have six suppliers of top-coat paint for its U.S.-built cars, but it now has only three. Suppliers that keep Chrysler's business have to meet new specifications for quality, cost, and delivery. Some 70% of the company's parts arrive just in time, which means they are delivered within ten days of notification, vs. 46% in 1985. Contractors as far away as Juarez, Mexico, and Huntsville, Alabama, comply. Such policies have helped raise the quality of parts from suppliers by 69% over the past two years. The ever restless Dauch has more goals stretched out before him. After Chrysler's deal to buy American Motors is concluded in August, he will have to integrate AMC's four plants into the Chrysler system. One of these, a spanking-new factory at Bramalea, Ontario, built by AMC Canada, is as modern as any in the world. But two are museum quality: the Jeep plant in Toledo, Ohio, and the Kenosha, Wisconsin, plant where the modern machinery that builds Alliances is tucked into rambling turn-of-the-century buildings. Even before the acquisition was announced, however, AMC had begun production of the Chrysler Fifth Avenue, Plymouth Gran Fury, and Dodge Diplomat at Kenosha, and was trying to work out a way to build the Omni/Horizon America there too. Chrysler is expected to use the two old plants for incremental production until they can be replaced. Dauch's biggest goals are to cut production costs by another 30% over the next four years, bringing them down by $2,500 per vehicle, and to shorten the time it takes to develop a new model from four years to three. How will he do it? There will be more process-driven design, a procedure Dauch began applying in 1984, which takes manufacturing problems into account during the planning stages of a new car. ''A design is worthless unless it is manufacturable,'' says Dauch. ''I worship the ground a designer walks on unless his design can't be manufactured. Then I want a new designer.'' Simpler car designs can also save money. Chrysler's $5,500 Omni/Horizon America models, introduced in 1986, sold for $710 less than their predecessors partly because Chrysler cut out a profusion of customer options. Instead of an incredible 19 million, including all possible combinations of color, trim, and accessories, the buyer now has but 42 options. Dauch estimates that this streamlined manufacturing cut $100 from the cost of the car. Not all cars can be simplified as much as the America, but by grouping options into clusters, manufacturers can reduce complexity and still offer customers plenty of choices. ANOTHER cost-cutting and productivity tool is flexible manufacturing. Chrysler's version is called Simflex. It is designed to reduce hard automation such as welding presses -- huge assemblages of welding machines designed to turn out long runs of a specific car -- and replace them with reprogrammable robots. That will speed welding and make model changeovers faster. Increased use of Simflex will boost Chrysler's robot population to 2,225 by 1990 at a cost of $500 million. Process-driven design and Simflex will help push Chrysler toward Japanese standards of productivity and quality. Toyota, for instance, made 60 cars per year per worker in 1985, three times as many as Chrysler. Dauch also wants to reduce defects by another 56% by 1991. By then, he hopes, quality will no longer be an issue. If production defects could be eliminated entirely, he estimates, Chrysler would save $4 billion annually. ''Every day there are problems in manufacturing,'' says Steve Sharf, Dauch's former boss. ''You must have enough stomach for it. Most people lose the drive after a certain point. Dick has the drive.'' He will need it. The Japanese are working hard too, and American competitors -- including slow-moving GM -- are striving to get their own costs down. Dauch will have to be in overdrive just to stay in the race.