Instead of reaping synergies, in fact, Chrysler was experiencing an alarming increase in costs. One reason: since winning Company of the Year honors from Forbes magazine in 1996, Chrysler’s top engineering and manufacturing executives—including Bob Lutz, the guru behind Chrysler’s string of product hits—had departed. Without the A-team, Chrysler had lost much of its cost-control expertise, and the new executives were preoccupied with jockeying for position in the newly merged company. In addition, customer rebates were rising to levels that the Germans couldn’t comprehend.
Rebates weren’t how Mercedes cars were sold. But rebates were critical in the lower end of the market where Chrysler competed, especially because the company was encountering tough new competition in both the minivan and SUV markets, which it once had dominated. Having missed the truck boom entirely during the prior decade, the Japanese were getting into the game. The new Honda Odyssey minivan had a convenient third-row seat that could be folded flat into the floor—a feature that the new Chrysler minivans to debut in the fall of 2000 conspicuously lacked.
The Germans might have been more sympathetic to Holden if the entire U.S. auto industry were hitting a slump, but in 2000 U.S. car and truck sales would hit a record 17.3 million vehicles. Honda’s sales jumped 34 percent in the third quarter while GM and Ford were doing well too; only Chrysler was the outlier, with a 14 percent sales drop in the same period. On October 26 DaimlerChrysler reported its third-quarter earnings had plunged 92 percent because Chrysler had managed to lose an astounding $532 million during one of the biggest U.S. car sales booms in history.
The pressure on Jim Holden was immense, and it would multiply four days later when Schrempp acknowledged in an interview with London’s Financial Times what everyone already knew: that the whole “merger of equals” business had been a ruse. “It had to be done for psychological reasons,” Schrempp said. “If I had said Chrysler would be a division, everybody on their side would have said, ‘There is no way we’ll do a deal.’ But it’s precisely what I wanted to do.”
Now Holden went ballistic, but his feelings about Schrempp’s impolitic remarks, or anything else, didn’t matter anymore. On Sunday, November 12, he flew from Detroit to Stuttgart for a private meeting with Schrempp, who confided that he had to take decisive action. That action, of course, would be to fire Jim Holden, which came as no surprise to the young Detroiter. In the two years since the merger—um, acquisition—Chrysler had gone through two presidents, not to mention Bob Eaton and a slew of other senior executives. By then Schrempp wasn’t about to trust yet another American to run Chrysler.
He sent in a German, a Daimler veteran with a slim build and a walrus mustache named Dieter Zetsche, with orders to clean up the mess in Auburn Hills. Zetsche’s number two would be a German as well. Any pretense of German-American partnership was being wiped away. This was a conquest, pure and simple, even though the vanquished had been made rich and the victors were struggling with their new prize. Journalists started calling the company “Occupied Chrysler.”
Zetsche quickly closed plants and slashed production—moves that would save costs in the long run but meanwhile produced a jarring $1.3 billion loss at Chrysler for the fourth quarter of 2000. He further cleaned house in the executive suite, disposing of Chrysler veterans and luring outsiders. His new marketing chief promised to reduce Chrysler’s reliance on rebates by enticing shoppers to take test drives, a strategy he termed “getting butts into seats.” Well, that was appropriate. As the year came to a close, there were a lot of butts sitting in hot seats at DaimlerChrysler.
In contrast to the German-American clash within DaimlerChrysler, the infighting occurring at Ford around the same time was an old-fashioned sort of power struggle. Ever since Henry Ford II retired in 1980, the Ford family had wanted to restore one of its own to the helm of Ford Motor. The family’s favorite was the young and well-liked William Clay Ford, Jr., a board member and nephew of Henry II who had been educated at Princeton and MIT. But in the mid-1990s Ford Motor was being led, and successfully so, by British-born Alex Trotman, a self-made man who had started in the purchasing department at a Ford factory in England before climbing the corporate ladder.
The blunt-spoken Trotman regarded the Fords as rich dilettantes ill equipped to meddle with one of the world’s largest companies, even if their name was on the building. Trotman had managed Ford operations in every part of the world, while young Bill had held only midlevel management positions (e.g., managing director of Ford of Switzerland) with lofty titles but far less real responsibility. He did help run the Detroit Lions, which his father had bought in 1957—the year Bill was born—but they were pro football’s perennial doormats.
Nonetheless, the Fords controlled the company with their super-voting shares that gave the family 40 percent of the votes. What’s more, Bill Jr. found a formidable ally in Trotman’s ambitious second in command, Jacques Nasser. Nasser, who went by “Jac” and pronounced it “Jack,” was a Lebanese-born Australian whose cost-cutting prowess had earned him the nickname “Jack the Knife” within Ford.
While Bill Jr. lacked the experience to be CEO and Nasser lacked the genes to be a Ford, together they had all the right stuff. In mid-1998 the two men concluded months of private discussions by reaching an entente cordiale to share power. Once the impolitic Trotman was shown the door, they would split his titles and duties, with young Bill becoming chairman of the board and Nasser becoming president and chief executive officer.
Ford’s board approved the succession plan in September 1998, even though Trotman’s scheduled retirement was still fifteen months away. The quiet coup continued a tradition of executive suite ousters that had begun with the whims of Henry I and continued through the firing of Lee Iacocca by Henry II, but it caught Trotman by surprise anyway. The deposed CEO turned to the forty-one-year-old Bill Jr. and snapped in his crisp Scottish brogue: “So now you have your monarchy back, Prince William.” The latest palace intrigue at Ford, however, was just getting started.
When Nasser took the helm at Ford on January 1, 1999, he took the company by storm. He immediately announced plans to shake up the hidebound culture and remake Ford as a “consumer company” instead of just a car company. He replaced executives, shuffled managers, and imported from General Electric the Six Sigma program, a sort of samurai business regimen that taught managers to attack problems with rigorous analysis.
He hired an “executive coach” for himself and brought in business professors to teach Ford’s managers to think like entrepeneurs. Once, when Nasser was preparing to address a gathering of the top four hundred people at Ford, his coach fired him up beforehand with films showing speeches by Jack Welch, the legendary CEO of General Electric. Jac wanted to be like Jack, his business hero.
And he wanted Ford to be like GE or even—of all companies—Enron, whose shenanigans hadn’t yet been uncovered. Enron seemingly had transformed its mundane business model by shedding fixed assets—natural gas pipelines, in its case—and becoming a trading firm. So Nasser commissioned an internal Ford study to explore selling Ford’s fixed assets, the car factories, and leasing them back. Nasser wanted to reengineer Ford’s structure as opposed to Ford’s cars, but fortunately he was dissuaded from the factory sale maneuver.
Ford also considered dropping cars entirely and switching solely to trucks and SUVs, which was where the money was, after all. An internal bar chart of the company’s profits from each region of the country showed Texas and the Southwest—America’s pickup-truck capital—protruding up like a phallic symbol, because Ford’s profits there were enormous compared to the other regions. Ford did keep making cars, as it turned out, but its heavy focus on trucks caused the Taurus and other models to slip further and further behind the Japanese.
Nasser also overhauled employee performance reviews to grade managers on a curve and began one speech by saying: “I see too many white male faces out there.” Predictably, a couple of class action lawsuits from passed-over white males soon f
ollowed. The silver lining was that Ford’s relationship with the UAW remained relatively calm, partly because Nasser was too busy fighting his own managers to upset the union.
Amid the cultural revolution Nasser tapped Ford’s $23 billion cash kitty for a corporate shopping spree. Within a month of becoming CEO he spent $6.5 billion to buy Sweden’s Volvo, where amenities for workers included tanning beds and a hot tub for soaking away the aches of the assembly line. But Volvo at least was a car company. In April Nasser spent another $1.6 billion to buy Kwik-Fit, a chain of car repair shops based in England. Then he acquired a big junkyard company in Florida, which he envisioned as a base for entering the automotive-recycling business.
A year later, in May 2000, Ford spent $2.9 billion to buy Land Rover, the English maker of landed-gentry SUVs. The pace of Nasser’s purchases was frenetic, just like his management style. He also removed the giant blue-oval Ford logo from the top of company headquarters and replaced it with script lettering that said Ford Motor Company, which he deemed more appropriate. The logo remained on virtually every Ford car worldwide, but Nasser even tinkered with that. He ordered that a little more blue tint be added to produce a darker shade, which some Ford staffers dubbed “Australian blue” in honor of the boss.
In Nasser’s headlong rush to reshape Ford, the fundamentals of car quality and factory productivity were taking a backseat, though that wasn’t yet apparent. His hyperactivity reflected an activist, even combative bent that Nasser had displayed since boyhood. Growing up as an ethnic outsider in 1950s Melbourne, young Jac and his brother would “be in a fight almost every day. And if we weren’t, we’d … start to look for one,” he recalled years later.
Nasser and Bill Ford were the proverbial odd couple. Jac reveled in the trappings of success and power, from his collection of expensive watches to the entourage that accompanied his travels. He was such a workaholic that on U.S. holidays he often would take a company jet to Europe to work for the day, then hop back to Dearborn for the next American workday.
Blue-blooded Bill, in contrast, tried to be one of the boys and dispensed with stuffed-shirt formality, sometimes dramatically so. A month after he and Nasser took their new posts, an incident occurred that brought out the best in his character. An explosion blasted through Ford’s Rouge manufacturing complex a couple miles from Ford headquarters, killing six workers. The young scion tossed on a windbreaker and rushed to the scene to console families, then spent the night visiting hospitals to call on the wounded. It was a genuine and powerful gesture—all the more so because his ever-protective underlings had tried to dissuade him from going.
The differences between the two men became readily apparent at the company’s annual shareholders’ meeting in May 2000. Bill quoted the Sierra Club’s description of the Excursion SUV as “a gas-guzzling monument to environmental destruction.” A few minutes later Nasser took the podium to declare that Ford would keep building the vehicles anyway because “our customers love them.” The two men’s power-sharing marriage of convenience was soon to be tested.
Three months after that yin-yang performance, disaster struck. On August 9, Ford announced the recall of 6.5 million Firestone tires on its Explorer SUVs. The recall was big by any standard, but there were added complexities.
Ford and Firestone had a hundred-year-old relationship that was built on family as well as business ties. While Bill Jr.’s paternal great-grandfather was Henry Ford, his great-grandfather on his mother’s side was Harvey Firestone—and one of Henry’s closest friends. The Firestone company had passed from family hands when it was acquired by Japan’s Bridgestone in 1988, but the dynastic ties to Bill’s branch of the Ford family still ran deep.
Even worse, Ford’s recall was prompted by government reports of forty-two deaths linked to Explorer rollovers. The treads of the tires had suddenly ripped off while the SUV was traveling at highway speeds. To reassure the public, Ford decided to run television commercials in which Nasser would address the issue head-on. In the first one, which aired during a preseason NFL football game, Nasser offered his “personal guarantee that no one at Ford will rest” until the problem was solved.
The CEO’s stiff manner and thick Australian accent made him seem “a cross between Al Gore and Crocodile Dundee,” Fortune declared, referring to the Democratic candidate for president that year and the Australian hero of the popular film. There was no doubt, though, that Nasser was sincere. He ordered three Ford factories shut down, at huge cost, so their tire stockpiles could be used for the recall. Nor did Nasser flinch at testifying at congressional hearings on the recall. A high-powered Washington consultant prepped him, counseling that the congressmen would be convivial over coffee before the hearings began but would snarl like attack dogs when the cameras started rolling.
That’s exactly what happened, and Nasser fought back—not just at the congressmen but especially at Firestone, which he painted as desperate to save its corporate hide instead of protecting the public. “We virtually pried the claims data from Firestone’s hands and analyzed it,” Nasser testified during a grueling seven and a half hours of hearings on September 6.
Firestone fired back that Ford had recommended a low tire-inflation pressure that, while providing a comfortable ride, caused undue heat buildup that shredded the tires in hot weather. Indeed, most of the Explorer accidents had occurred in southern states or in hot-climate countries such as Venezuela and Saudi Arabia.
The mutual finger-pointing confused the car-buying public and annoyed the congressmen. “It’s like tying two cats by the tails and throwing them over the clothesline and letting them claw each other,” snapped Senator Fritz Hollings. By mid-September reports of deaths linked to the accidents had more than doubled, to 101. Surveys showed that both Ford and Firestone were suffering big black eyes in public opinion.
Nonetheless, Bill Ford publicly stood by his CEO. At an employee meeting in September, Bill said that “nobody could have done a better job than Jac Nasser” in addressing the crisis, and led four hundred employees in a standing ovation for their boss. In fact, Nasser had been unduly combative against Firestone, but that was his style on almost everything.
The man and the car that changed the world: Henry Ford and his Model T, in 1919. The Model T’s modest price and durability made it the first “people’s car.” Ford used the car to pioneer the moving assembly line, mass production, and the five-dollar day, all of which revolutionized American society. (FORD MOTOR ARCHIVES)
The twentieth century’s premier corporate manager, GM chairman and CEO Alfred P. Sloan, Jr. (left), shown with his predecessor and chief sponsor, GM board member Pierre S. DuPont, in 1933. Sloan devised a brand hierarchy that allowed GM to surpass Ford as America’s largest car company. (ASSOCIATED PRESS)
Ford Thunderbird, 1955. The original Thunderbird was a two-seater that seemed destined for head-to-head battle with the Chevrolet Corvette, but Ford added a rear seat to the 1958 model to broaden the car’s appeal. It worked, but at the expense of abandoning the American sports-car market to Chevy. (FORD MOTOR ARCHIVES)
Edsel Citation, 1958. There were four Edsel models in all, including the top-of-the-line Citation. All four shared an ungainly design with a large, oval-shaped front grille that helped make the Edsel the most celebrated new-car flop ever. (FORD MOTOR ARCHIVES)
GM’s 1959 Cadillac Eldorado, which sported the largest tail fins ever. Note the red tail light, two of which were mounted on each fin, and were nicknamed “gonads.” After 1959 tail fins were gradually downsized, disappearing for good in 1964. (GENERAL MOTORS ARCHIVES)
1960 Chevrolet Corvair. This GM publicity photo shows five different views of the car, including two with an elegantly dressed model. The Corvair’s rear-mounted engine put extra weight in the back of the car—a design harshly criticized by Ralph Nader in his 1965 book Unsafe at Any Speed. (GENERAL MOTORS ARCHIVES)
GM’s 1964 Pontiac GTO, which launched the “muscle car” era of oversized engines in relatively small cars. Musc
le cars began to fade in 1970, thanks to environmental regulations, rising gas prices, and changing social mores. (GENERAL MOTORS ARCHIVES)
Ford Mustang convertible, 1965. The car captured the youth culture of the 1960s and caught GM off guard, but Ford remained well behind GM in overall sales. (FORD MOTOR ARCHIVES)
UAW president Walter Reuther testifying before Congress in 1966. Reuther won the union’s presidency in 1946 and provided the social vision combined with hard-nosed political leadership that led the UAW to win increasingly generous contracts from Detroit’s Big Three. He died in a plane crash in 1970, just before the Japanese invasion of the U.S. car market accelerated. (ASSOCIATED PRESS)
Henry Ford II. The grandson of Ford Motor’s founder took control of the ailing family empire in 1945, brought in a new professional management team, and called the shots at Ford Motor for the next forty years. This photo was taken in late 1969 or early 1970. (FORD MOTOR ARCHIVES)
The first Jeep Cherokee sport-utility vehicle, made in 1974, looks clunky and ungainly, which it was. But a decade later a streamlined version with four doors began to increase the Cherokee’s popularity. By 1990, America was developing a love affair with the SUV (CHRYSLER ARCHIVES)
UAW president Leonard Woodcock at a press conference in 1976. Woodcock succeeded Reuther in 1970 and four months later led a landmark sixty-seven-day strike against GM that won unionists the right to retire with full benefits after thirty years on the job, which would come to haunt the Big Three and the UAW. (ASSOCIATED PRESS)
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