Reckoning

by David Halberstam

  Krandall had suspected a short, testy answer, but instead Ford looked at him and agreed. “It may not be long,” he said, “before we’re selling not just cars but apples.”

  So much for industrial giants. Collapsing economies are hard even on the titans. Henry Ford was still a king in Detroit, though—Hank the Deuce, as he was popularly known—and the city’s media still chronicled him as they might royalty. He bore the city’s most famous name, he was a man of the present who was linked to the past, he always had something colorful to say, and his marital escapades, curricular and extracurricular, had brought a little excitement to the world of heavy industry, something that the gray men of GM rarely provided. Still, he was clearly phasing himself out. Fortunately for the city, there was a new media star, Iacocca, by then the sworn enemy of Henry Ford. Iacocca had always displayed a particular genius for focusing attention on himself. Now he appeared on the verge of becoming something of a national hero while standing in the ashes of a dying company. The worse Detroit’s condition became, the more quotable he became, phrases issuing from his lips, as David E. Davis put it, as if a Xerox machine were always at the ready.

  But it was a city in decline, and cities in decline do not easily create heroes. Where once Detroit had spawned hard men of brute strength and unlimited confidence both in themselves and in the industry, now it produced a more pallid generation of leaders, men who began not as tinkerers in converted garages but as calculators in accounting offices, disciples of the bottom line. They gave off no feel for product. It was hard to imagine them fooling with an engine or even changing a tire. They gave off little sense of power, either. They had made it up the executive ladder by playing it safe, and once they had arrived at the top that caution was palpable in their personalities.

  The old Detroit had had a certain swagger to it. Its leaders thought of themselves as big men doing a big job, and they dealt on a scale that dwarfed all other enterprise in America. When, in the immediate postwar era, someone at Chrysler had designed a smaller, low-slung car, K. T. Keller, the company’s top executive, had mocked it. “Chrysler builds cars to sit in,” he said, “not to piss over.” It had been a city filled with men whose strength was that they could always hear the truth in their own voices. They were passionate men, who loved what they did, loved the process of making things. “There is in manufacturing,” Walter Chrysler, one of the city’s great industrialists, once wrote, “a creative job that only poets are supposed to know. Someday I’d like to show a poet how it feels to design and build a railroad locomotive.”

  They were a product of a singularly successful era. They looked down not only on the government and on foreign companies but on other American businesses as well. They believed that if other businessmen were as true to their calling as the auto men were to theirs, then they would be just as prosperous. They had the special confidence of men who had been successful for so long, whose success was measured in such large sums, and whose product was so important that beside them all else paled. In the years after World War II, as America became the world’s first great middle-class society, the auto became the litmus test of middle-class status. These men saw this success not as something larger than themselves, something societal of which they had been among the principal beneficiaries, but rather as something they themselves had wrought. Once, in the early Eisenhower years, C. D. Jackson, the former publisher of Fortune then on loan to the Eisenhower circle, had returned to New York to lunch with his former colleagues. One editor asked him about Charles Wilson—“Engine Charley”—the General Motors president who had become the administration’s Defense Secretary and who was thought to have said that what was good for GM was good for the country. What he really said was that what was good for the country was good for GM, and vice versa.

  C. D. Jackson replied, “There is a certain special stupidity and narrowness that exists in many of the more successful businessmen in this country, more so in the Midwest than other places, and nowhere else so much as in Detroit, and Charley Wilson is a perfect example. He knows one thing, and that one thing has worked quite well for him, and because it has worked he thinks he knows everything else, and then you meet him and he knows so little about anything else that you begin to wonder whether in fact he knows anything at all about the one subject he’s supposed to know so much about.”

  That arrogance and confidence was long gone from Detroit. The city, now on hard times, felt betrayed, as if fellow Americans, instead of appreciating its labors and sympathizing with it for the overnight failure of its truths, were now blaming it for everything that had gone wrong in the economy. Detroit dinner parties at the highest level were no longer what they used to be. Before, when the very powerful had congregated, these parties had been performances where rich, egocentric men, enjoying their might, had regally patronized those around them. In those days men like GM’s Ed Cole would hold forth for an entire evening on their favorite topic—in Cole’s case an invention called the flying wing, an airplane he was designing, which would move an entire combat division to a battle station. Who, at the end of one of Ed Cole’s loving descriptions of his coming military breakthrough, would dare disagree and say that it would never see battle?

  Henry Ford II had dominated many a dinner, although he was more sedate and careful in Detroit than he was in New York. Other guests would watch him, sometimes made uneasy by how quiet he seemed, in contrast to his reputation, though he could, late in the evening, restless and finally ready to assert his presence, turn to some intruder who had drawn his anger and say, “You’re full of shit,” ending all argument. There was also Lynn Townsend of Chrysler, perhaps having had one drink more than prescribed, going around the table and taking pleasure in describing in detail the deficiencies of his guests, both physical and mental. All of this was done in great good humor, of course, so that no matter what Lynn said, everyone laughed, and no one got up to describe Lynn’s physical or intellectual limitations.

  Slowly, as the industry had changed, the social atmosphere had changed too. The new titans were men who could read a complicated financial statement, deal with government, and handle the company’s lawyers. Men like that did not swagger. Dinner parties in the early eighties were still done the old way, highly stratified according to level and company, with little cross-pollination; Ford ate with Ford, Chrysler with Chrysler, GM with GM. A dinner party would still include at least one person from a level above the host and one from the level below, a requirement of Detroit’s special caste system. (Experts believed they could read the pecking order of the men without knowing their titles, just by gauging the level of supplication at which the wives operated; they were as involved in the caste system as the men.) Those dinner parties had never been about food or social mixing in the old-fashioned sense; they had always been about career, about stroking and being stroked.

  But now they were less fun. The men from the peripheral businesses, the suppliers, for example, whose presence at the parties had barely been tolerated, no longer were so eager to attend, for there was less pleasure in going. There was a growing anger, and the evenings were more likely than not to go sour. The car men intoned a lament: They had been forsaken by their customers, who had no sense of loyalty; betrayed by their government, from which they felt alienated; undercut by the Japanese, whose skills few of them still would accept, claiming that the Japanese were good only at fit-and-finish (tight doors and good paint jobs). The lament swelled: the Arabs, the workers, Ralph Nader. They were like men of true faith whose god had suddenly failed them.

  Despite the defiant talk, arrogance was harder to carry off. In 1982 a man named Arvid Jouppi, a leading analyst in Detroit, a man who tried to explain Wall Street to auto men and auto men to Wall Street, went to the Country Club of Detroit in Grosse Pointe where he spotted one of the top advertising executives in town, a man who dealt almost exclusively with the auto industry. Jouppi asked him how things were going.

  “Never better, Arvid,” the executive had answered, “n
ever better.”

  “That’s amazing,” Jouppi said. “It’s so hard on everyone else.”

  “Oh, it’s hard on me too. Economically, very hard,” the man had answered. “But it’s wonderful too. Wonderful psychologically, I’d say. For the first time in my life, I go in to meet with these car people, and they don’t treat me like crap.”

  Throughout the city were men who had been staggered by so abrupt an end to so successful an era. Some in the upper and middle managerial levels had held on to their jobs but for the moment at least had lost something almost as precious, their bonuses, which had often been twice the size of their regular salaries and upon which they had counted for the lavish style of living to which they had become accustomed. Others, however, had lost their jobs, something that would have been almost unthinkable in the Detroit of the past. They had been fired in one of the drastic house-cleanings that all of the companies now had to go through. The term for what was happening was “cutting back fixed costs.” At Ford, for example, $4 billion a year was cut from fixed costs, most of it from closing plants and laying off workers, some of it in management salaries. These executives, soon departed, became statistics that other executives would point to with pride during labor negotiations as proof that they were being tough not only with labor but with their very own, with white-collar workers.

  For a time those who had been severed went to their usual haunts, the Dearborn Country Club, the Birmingham Country Club. They accepted dinner invitations from old friends just as they had in the past. But it was awkward now at social gatherings, as if they embarrassed everyone by their presence. They soon sensed it would be better if they simply disappeared. They stopped going to the country clubs. They began to turn down dinner invitations, which was not hard, because there were fewer and fewer invitations anyway. They tried putting their houses up for sale, but the market, they promptly learned, was very soft. The houses did not move. There were not a lot of middle-level executives moving to Detroit and buying expensive houses.

  It was now a city of men, whether fired or not, who had lost their confidence. Their world had once been founded on certitudes. The ethic had been simple and straightforward enough: All they had to do was wait their turn, as those before them had waited theirs, succeed as those before them had succeeded, and they too would be duly rewarded. Sometimes when they talked among themselves now, they acknowledged that during the good times, those wonderful, bountiful years from the early fifties to the first oil embargo, they had never really known how good they had had it. In those days, for example, Ford had faced only two problems—labor and GM. Labor had not been that hard. After an ugly strike or two, the postwar managements of the different companies had evolved a policy of bringing labor in, making it in effect a junior partner, granting much of its wage demands and passing on the additional labor costs to the customer.

  Ford’s General Motors problem had seemed more difficult. In an industry where scale of operation was ever more important, where bigger meant cheaper, which in turn meant greater profits, GM was the new American industrial colossus. If it decided to keep prices down, even though this meant minimizing profits, then Ford and Chrysler were immediately in jeopardy. GM had cast a huge shadow over its competitors. One of Ralph Nader’s young staff people had once asked Henry Ford II what it was like competing against General Motors, and Ford had answered, “Like trying to screw an elephant.” But even the power of GM was limited; the Justice Department had always been there, hovering off to the side, making sure that GM did not put Ford or Chrysler out of business. GM certainly could have cut its prices in those years, and the burden would not have been on itself but rather on Ford and Chrysler, but it did not, and so it grew ever more prosperous, and Ford and Chrysler survived.

  That was the era now viewed as a golden time. America was rich, the first truly middle-class society in the world, and the rest of the world was still poor. Everyone seemed hungry for cars. There was virtually no foreign competition. The auto industry had been in effect an American industry, a protected industry (too expensive for would-be domestic competitors to enter), in the wealthiest country in the world. There had been warnings about the danger of monopoly, mostly from liberal academics, but one of the more telling had come from the head of the smallest competitor, George Romney, the president of American Motors. Romney was a maverick in American business. Because of the shakiness of his own company, Romney had an early glimpse of what GM’s power was doing to the rest of the industry. Because it was so large and so strong, it could afford to sign handsome contracts with the United Auto Workers, contracts that seemed good for both GM and the union. Perhaps GM’s margin of profit would go down a little, but it was still doing so much volume that the new labor contracts, in the short run at least, were worth it. The real burden of these contracts fell not on GM but on the weaker companies, which were eventually forced to accept the same terms and were soon working on ever narrower margins.

  Clearly, Romney at American Motors was the most vulnerable, but he visualized a day when Chrysler and perhaps even mighty Ford would have problems as their margin of profit continued to decline. The entire industry, he believed, was unconsciously becoming more monopolistic and, as such, less competitive and innovative, for in a monopoly there is no pressure to innovate.

  In the late fifties Romney had been a forceful advocate of breaking up GM. That, he believed, would make everyone leaner and more competitive. In 1957 he went before the Kefauver Senate committee on monopolies. Before he testified he was summoned to the Ford headquarters by Henry Ford and Ernie Breech, the chairman of the company, who were nervous about what he was going to say and wanted to get some idea of his thrust. Romney explained what he wanted: the breaking up of GM and perhaps even Ford.

  “But that would just make the competition tougher,” Ford had said. “If you broke up GM the rest of us would suffer.”

  “That’s exactly what I mean,” Romney had said.

  “Listen, I think it’s tough enough the way it is—it’s a damn hard dollar,” Ford had answered.

  From there Romney had gone to see Harlow Curtice, the head of GM.

  “Why don’t you split up GM?” Romney had suggested.

  “Who the hell would that help?” Curtice had asked.

  “Everyone but you, Harlow,” Romney had said, “but you’d be one hell of a hero.”

  Curtice declined the chance to be a hero of that particular order. Romney soon became a pariah among his peers, and GM became bigger than ever. But in those days of the fifties and sixties no one complained very much, because everyone seemed to be benefiting. The weaknesses of the system, the inherent dangers of being a part of a domestic monopoly in an industry open to other countries, had not yet revealed themselves. So, while other areas of the American economy remained competitive, no one challenged the auto industry until the full-scale assault of the Japanese in the seventies. When it finally came, the extent of American vulnerability surprised even those who had been critical. Years later, Hal Sperlich, possibly the most talented product man of his generation in Detroit, said that the earlier era was marked by what was virtually an illusion of competition and hard work but in truth was a competition within a protected zone, finally more about the changing of hemlines than anything else. He compared the old days to being the best tennis players in a pleasant suburban country club, aware that everyone else in the club watched their fast, smooth Sunday game. “And then one day,” he said, speaking of the arrival of the Japanese, “Bjorn Borg and John McEnroe walked on the court.”

  Soon it became clear that a basic theorem held true: The larger the American industry (steel, auto), the less prepared it was for economic rivalry. American workers had not realized that as the highest-paid workers in the world, they might be at a disadvantage in competing with workers in other nations who were hungrier, more grateful for their jobs, more willing to accept authority and to work longer hours for much lower pay. To American labor, Japanese unions often seemed to be extensions
of management. What Japanese working people expected and considered themselves entitled to as a life-style—a term that had only recently entered the American vocabulary—was strikingly limited, resembling more closely the expectations of American workers in the thirties than those of present-day Americans. Of the simplicity of the Japanese worker’s life, of his willingness to work hard and save much of what he made, Paul McCracken, the University of Michigan economist, had said, “If John Calvin came back to earth, the nation he would feel most comfortable in would be Japan, that is where his real children would be.”