Reckoning

by David Halberstam

  That evening seemed to symbolize Detroit’s attitude toward these interlopers, who had made ships, not autos. When the spare tire of one of the early Kaiser cars was mounted on the left side of the car, there was soon a joke going around the Detroit Club: Said a Kaiser manufacturing men to the designer, “You’ve got it all wrong—you’ve got the life preserver on the port instead of the starboard.” Yet if anyone had a chance of cracking what was virtually a closed industry, it was Kaiser. There was a certain frontier fearlessness to him; he had spent his life conquering the unconquerable, achieving the impossible. He and his men had performed brilliantly as manufacturers during the war; Bedford, his manufacturing chief, had once built thirty-seven ships in one month. Their timing was good, too. During the war the number of cars on the American road had dropped from twenty-nine to twenty-two million, and the country was starved for cars.

  In a way Henry Kaiser surprised his critics. He had to put aside his dreams of an aluminum car and a front-wheel-drive car, but he and Frazer were in production by the fall of 1946, within a year of their first handshake. That was astounding. The quality of the engineering in their cars impressed Detroit old-timers. The compression in the engines, Clay Bedford thought, might have been better, but in general their cars won high marks for beginners. The problem was always money. There was simply never enough. The company was always undercapitalized. It would have taken ten years, some members of the company realized later, to build up a reputation and a small tradition and a good dealer network. The $53 million was start-up money, nothing more. It cost $15 million just for a line to produce the engine blocks; it cost $10 million more for a line to build bumpers. The expenditures were so immense that the Kaiser people were overwhelmed. “Henry never understood the scale,” Bedford said later. “He knew how to deal with challenge—he could build Grand Coulee Dam. He knew cement and sand and steel. But he didn’t understand the complexity of scale in auto. I’m not sure anyone does. At one point I tried to explain it to him. ‘Henry,’ I said, ‘they’ve got an entire engineering room over at General Motors where the only thing they do is try to figure out how to take one tenth of one cent off of each floor mat.’”

  Completely unprepared for what he had taken on, Kaiser soon discovered that his partner, Joe Frazer, who was supposed to know the business, was primarily a salesman—he knew less about what really took place in a factory than the Kaiser people did. “We hit the bottom of the pot so quickly,” said Clay Bedford. The company could afford to buy only those tools that would pay for themselves within sixty days. It was always a company on short rations. In 1947 Kaiser-Frazer had to borrow $12 million from the Bank of America. Soon Kaiser and Frazer decided to float a third common-stock issue. But the underwriting company backed out even as the stock was supposed to be sold. Nothing could have been more damaging. That killed a new line of cars scheduled for 1949. Meanwhile the other auto companies, slowly returning to production after the war, were bringing out full lines and squeezing Kaiser’s territory. In 1949, Frazer broke with the Kaisers and became only a sales adviser. The strings on the company were getting shorter. The financial pressure kept mounting; the hurdles were getting higher and there were shorter intervals between them. The 1949 model did not sell. Desperate, Kaiser’s son Edgar went to the Bank of America for more money. “I’ll lend you money on anything,” Fred Feroggiaro replied, “except Kaiser-Frazer.”

  The end was nearing. For the first five years of its life, Kaiser-Frazer had a net loss of $34 million, and its creditors had a larger share in the company than its stockholders. In 1949 it made 58,000 cars and lost $39 million on its operation. The next year was better, but even then, when it sold 151,000 cars, it lost $13 million. That year Packard made $5 million on sales of 72,000. In 1951, with the Korean War at its height, Henry Kaiser remained ebullient, despite his automotive problems. Willow Run was producing planes for defense again. “Do you think I’m worried?” he said. “How could I be when I see well over five hundred million dollars in defense backlogs? As for earnings, I can’t be bothered to worry about accounting mechanics—pushing figures back and forth. Why, after this trouble [the Korean War], I see ribbons of cargo planes in the sky.” In 1953, Kaiser-Frazer merged its remnants into Willys-Overland, its brief history a case study of how hard it was to get into the auto industry with only one white chip. “I knew it would be hard and I knew we might not make it,” Henry Kaiser said later on, “but I never thought we’d put so much in and it would disappear without a ripple.”

  There was no better industrialist in America, and he had failed in Detroit, and failed during an auto boom. The fact of that failure closed off the auto industry from normal capitalism, made it immune to challenge from new competitors. Prospective industrialists, pondering the possibility of going into the auto business, always had the case of Henry Kaiser to consider. The ideal circumstance for capitalism in America in the late seventies, a knowledgeable venture capitalist named Bill Hambrecht once said, came when the price of entry was between $5 million and $20 million. In that area the new high-technology companies would flourish; a talented man with a good scientific background and the right idea could raise that kind of money, and it would be enough money to start his company the right way. Below $5 million, he said, too many people tended to enter the field. It was what he called a hotdog-stand price: Soon there would be too many hotdog stands. At the other extreme was heavy industry—wildly expensive. There the ticket was so high that most would-be entrepreneurs were scared off. Thus the existing companies went unchallenged and a de facto monopoly was created.

  If the price in the auto industry was $300 million in 1945, then it was infinitely higher three decades later. Certainly by the late seventies, said one Detroit expert, $2 billion was conservative.

  In 1950, as the handwriting on the wall became ever more legible to him, Henry Kaiser asked his manufacturing boss, Clay Bedford, and Bedford’s wife, along with Edgar Kaiser, to dinner at the Book Cadillac, one of the best hotels in Detroit. Bedford had been the one who had told Kaiser the hard news that the $32 million gained from the first stock sale was a mere fraction of what was needed. “Clay was right and I was absolutely wrong,” Kaiser said to Mrs. Bedford. “We were always completely undercapitalized. Everything that went wrong was my mistake.”

  19. THE ORGANIZER

  IN THE MIDST OF one of the periodic struggles in the fifties between Ford and GM in which Ford, seeing GM raise its price, immediately raised its own, Walter Reuther, head of the United Auto Workers, had scoffed at the Ford people. “This is the first time in the history of free enterprise,” he said, “where a company raised the price of its products in order to be competitive.” No one had a better sense of the weaknesses of the auto companies than Reuther; no one could tweak them better, and anticipate and counter their moves even before they knew they were going to make them. He towered over other labor leaders of his generation, idealistic and pragmatic, visionary and shrewd, the only man in America, Murray Kempton once wrote, who could reminisce about the future.

  He was not much afflicted by self-doubt, and it never occurred to him that the men running the companies might be his spiritual or intellectual equals. Once Charles E. “Engine Charley” Wilson, the head of General Motors, turned to Peter Drucker, the business historian, and told him that Walter Reuther was a remarkable man, perhaps the ablest man in the entire auto business, and that if he had only been able to finish college, why he might be sitting right where Wilson was, as the head of GM. Drucker, mistakenly thinking the story flattering, repeated it to Reuther, who was terribly offended by Wilson’s suggestion. “It would never have taken me that long to become head of General Motors,” he said.

  He was a man of considerable social conscience, who railed against the power of the Big Three but who would not admit that the union might have gotten too powerful as well. When his friend George Romney would argue with him about this, suggesting that the union had in effect joined the companies as part of the monopoly, Reuthe
r would answer that there was no problem, since the union’s power would be well and positively used, and he, Walter Reuther, was the guarantor of that. Romney, fond as he was of Walter Reuther, was not so sure. He was not at all convinced that even the most benevolent of men could handle unchecked power. Reuther was stung to the heart that he could be accused of even potentially abusing power. As far as he was concerned, his life was about restraining power, not abusing it.

  He came from a German immigrant family in which the only thing rivaling the Lutheran religion in importance was socialist politics. It was not surprising that he was the ultimate puritan. He was legendary in the world of union leaders for his lack of personal indulgence. Other labor leaders wore expensively tailored suits and large, flashy rings; Reuther wore suits off the rack and no jewelry. Other labor leaders flaunted the elegance of their vices, drinking only the best brands of liquor and smoking the finest cigars; Reuther did not smoke and barely drank. The puritanism was natural to him, but it was also an extension of his idealism. He hated the annual AFL-CIO conventions, which always seemed to be held in Florida; to him the conspicuous consumption that took place at them mimicked the least attractive habits of management, men fattening themselves on the labor of ordinary workers. He went, but he went under a kind of personal protest; he brought along his own orange-juice squeezer and bought his own oranges so that he would not have to pay exorbitant hotel prices for fresh orange juice. When the other labor leaders went on union-sponsored trips to the racetrack, Walter and May Reuther went along, but only to tour the stables and look at the horses; they never went to the races. When he and the other UAW leaders went out to dinner, they did not, as most other comparable officials in America did, simply sign for the check. Reuther made them all pay from their own pockets, and each person paid exactly according to what he had eaten.

  He deliberately paid himself a low salary in order to keep down the style of living of the other UAW executives. In 1945 his salary was $7000 a year, and Charley Wilson’s was $459,000, a disparity that seemed to comfort Reuther, for it justified his cause. During the Eisenhower years, there was a congressional investigation of the union’s finances. “Do you really mean to tell me,” one of the investigators, who had just checked Reuther’s hotel bills, asked a union official, “that Walter Reuther pays for his own dry cleaning when he stays in a hotel?” Yes, said the official; in fact Reuther had once handed in an expense account that included a charge for $1.50 for dry cleaning, and Emil Mazey, another union official, had bounced it. Reuther was as careful with his own money as he was with the union’s. His personal investments were not exactly daring. In 1948 he put $1000 into Nash Kelvinator stock, and some eight years later sold it for $1001.26. When that transaction was made public at a congressional hearing, one Detroit reporter at the press table sent a note to another: “Reuther—the fox of Wall Street.”

  His life was not about material things. The constant success of the union was reward enough. In his lifetime and under his leadership he had watched the United Auto Workers grow from a small, badly fragmented group of scared, disenfranchised workers to one of the most powerful and proudest social-industrial organizations in the world. Even men who were critical of most unions spoke of the UAW as special, a union that was about something more than just annual raises, a union with a larger purpose. Indeed, some of the auto executives paid it the highest compliment of all. They sometimes wished, they said, that they were dealing with the Teamsters, which was a corrupt and undemocratic union, rather than the UAW, because with the Teamsters you could cut a deal and bypass the rank-and-file.

  If there was a certain nobility of purpose—a vision of a better and more just society—that drove the union, then much of that came from Walter Reuther. Certainly part of the reason as well was the era; he had been the right man at the right time, coming along at the beginning of the New Deal when Detroit’s huge, beleaguered, angry work force, embittered by the Depression and full of nascent energy, was not only willing to stand up to management but, for the first time in the century, receiving some governmental protection. Reuther believed in the union, believed in what he had done. Some thought there was an innocence to his conviction about the attainability of a better society, but he had already seen it happen.

  Some found him single-minded, and they were right. He had almost no other interests, the union was his life, and he was unable to relax and become involved in anything else. Everything to him was serious. Even the annual Christmas-carol sing at Walter Reuther’s house, one friend noted, was a serious Christmas-carol sing. In all things other than work, one close friend noted, he was something of a bore, possibly the only native-born, working-class, adult male in all Detroit, a great blue-collar city, who had no interest in the Detroit Tigers. Small talk around him was virtually impossible. If his buddies persuaded him to go out with them for an evening and have some fun, suddenly, in the middle of dinner, there would be Reuther, pushing the others back to business. “We aren’t getting any workers organized sitting here and talking,” he would say. It was said that if you asked Walter Reuther what time it was, he would tell you not only how to make a watch but how much to pay the workers. His speeches were always long; often they went on for two or three hours and were delivered in an oddly strident voice. To people not in the union they could seem dull and interminable. To the workers they were spellbinding. His passion always showed through, and it profoundly affected them.

  He was never really one of the boys. That was the first obstacle he overcame. Many of the best of the labor leaders of his generation had a certain earthiness to them; they were good natural politicians, gifted storytellers who had worked their way up through the ranks by dint of shrewdness and gab, friends of everyone, fixers of problems, men more of charm than of vision. Reuther, fairly humorless and, thanks to his mother, the product of a stern Lutheran upbringing, was different. He went to meetings to achieve goals, not to pal around. The essential rites of a labor union eluded him. Valentine Reuther, his father, once boasted, “I can drink more than all four of my sons put together.”

  The other obstacle was that in the earlier years, at least, he was much farther to the left than the average worker. He was a true socialist, his real aims reaching well beyond the primal needs of the membership. But his devotion to their cause was so complete, he was so clean and straight and unbuyable, that workers who might not be at ease with him personally gave him their absolute professional trust. His beliefs were the product of an almost unique kind of upbringing. As the sons of Joseph Kennedy had been raised to run for public office, preferably the presidency, so the sons of Val Reuther had been raised to bring social justice to an industrialized world that most demonstrably lacked it. Theirs was a home immersed in socialist principles. Jacob Reuther, Walter’s grandfather, was a socialist and a pacifist who, fearing the rising tide of Prussian militarism, came to the United States in 1892 rather than have his sons conscripted into the German army. The family lived a spare, harsh existence; years later Walter Reuther’s younger brother Victor remembered the starkness of his grandfather’s house in Effingham, Illinois, a log cabin whose only heat was from the kitchen stove, and whose only light, well into this century, came from lanterns. Jacob Reuther was a religious dissident, and as a young man he had often complained about the kind of clergymen who neglected the human needs of the ordinary members of his flock while ministering only to the whims of the wealthy. In Jacob Reuther’s house the children were not entertained with folklore and myth; he did not want his children to believe in the righteousness of kings, who, as far as he was concerned, were simply highwaymen who had used force to attain power. Life, he lectured his children, was filled with economic injustice. He liked to tell them the story of an election in his hometown in Germany, how a man named Dr. Gross, a major employer and public official, had run for reelection with a banner that said, “He who does not vote for Dr. Gross will find himself, on the day after, out of work.” He was a pious man who refused for religious reasons
to slaughter animals; his wife, knowing the family needed meat and poultry, finally did it. Frustrated by the bland preaching in the local Lutheran church, he decided to hold his own services at home.

  Valentine Reuther was very much his father’s son. He had remained a good Lutheran in the new world, but as a young man when he heard his pastor attack labor unions, he stood up in front of the congregation, denounced the pastor, and left the church for good. He was a part of the wave of immigration, he told his sons, of men who made 15 cents an hour in America instead of 25 cents a day in the old country. That made things only a little bit better, but there was more hope in America, more promise of change. He was an early American socialist, and Eugene Debs, the great socialist leader in the early part of the century, was his idol. Val Reuther organized West Virginia three times for Debs, in 1904, 1908, and 1912. He even ran for Congress once on the Socialist ticket. The one time that Victor Reuther ever saw his father cry was after they had visited Debs in a federal prison in West Virginia, where he was serving time for pacifist activities during World War I. “How can they put a man so good in prison?” the father said to his son.

  Val Reuther drove a brewery wagon, was paid $1.50 a day, and spent his years trying to organize his fellow workers in the brewery. His was a completely politicized home, finely tuned to any sort of public injustice. When Victor Reuther, as a young boy who loved comic strips, by chance brought home a copy of a Hearst newspaper, he was beaten by his father for his sin. It was also a home filled with raw immigrant idealism and with the passion to achieve in this new, freer world what had been denied in the old one. When Andrew Carnegie, in the process of bestowing libraries upon thousands of towns in America, made the mistake of trying to give one to Wheeling, he ran into Val Reuther. Earlier there had been a strike of local steelworkers which Carnegie and his men had put down by force. Val Reuther led a successful fight to reject the gift and to have the city build its own library. He had opinions on everything. (In 1946, at the convention that elected Walter Reuther head of the UAW, Walter had brought his parents up to the rostrum and introduced them to the delegates and had called his father “an old soap boxer, an old rabble rouser...I advise you not to yell for a speech when I introduce this fellow because he may make one.”)