Reckoning

by David Halberstam

  He also knew he needed self-confidence. A shy young man, he took Dale Carnegie courses and forced himself to become assertive. As success followed, he became genuinely confident. Soon he began to make a reputation within the company. The 1956 Ford was a weak car and was moving slowly, and Iacocca, by then the assistant district sales manager in Philadelphia, devised a way of speeding up sales. The cars were dull, he thought, so to make them a little racier he added some flashy side molding and repainted them two-tone. Then he cut the price. If a buyer put down 20 percent of the purchase price of a new Ford, he decreed, all he then had to pay was $56 a month for the next thirty-six months. That was the slogan, “56 for ’56.” It pulled Philadelphia from last place among Ford’s thirty-three sales districts to first. Even better, the Iacocca slogan was picked up and used by Ford dealers throughout the country. McNamara, then general manager of the Ford division, later declared that Iacocca’s idea had allowed Ford to sell an additional seventy-two thousand cars that year. It seemed typical of the new people at Ford that they might not know how to sell cars themselves, but once the cars were sold, they were able to specify exactly how many extra had been bought because of a slogan.

  That was the making of Iacocca at Ford. McNamara was impressed by him. Iacocca could sell, which was fortunate, but unlike the other supersalesmen he was also smart, modern, and well educated. He knew not just when to talk but when not to talk. Where most of his colleagues were content to know all they could about their own area, Iacocca wanted to know everything about the entire company. He knew that it was the way to power. He knew especially that if he was to contend with the financial people, he had to be as smart about numbers as they were. He soon became, with the possible exception of Don Frey, the only nonfinance man knowledgeable and disciplined enough to take on the financial people on their own territory. Even as a young man in the fifties it was clear that he was different; when he walked into a meeting he was in complete control. The reason was that he had often been up the night before not just studying the subject matter but planning what he would say, readying rejoinders to points his opponents might make. What seemed so facile the next day in the meeting was hardly facile at all. It was the result of exceptional preparation.

  He was absolutely driven. He constantly made lists of things he had to know. In his early years at Ford he had set goals for himself—how much money he would make by a certain age, what level of advancement he would attain by which birthday. He intended to make vice-president by the time he was thirty-five. He was very upset when he did not. A year later, however, he became vice-president and general manager of the Ford division, the best job in the company. For someone whose start in the company had been slow and difficult, it was a remarkable ascent. He had created every break for himself; he was acutely aware of that. He had been good at selling cars because it was the most natural extension of what he was best at, selling himself.

  His strength came not just from his exceptional intelligence and the ability to focus that intelligence in the most practical of ways, but from his intensity of purpose. His own career was paramount. Anyone working for him who did not come up to standards was failing not only, in some vague indirect way, the Ford Motor Company; he was jeopardizing in the most direct way the career of Lee Iacocca. He never lost sight of that. In a company that was so big and so successful that it was easy for middle managers to become tolerant of ordinary work on the part of their subordinates, he was different. Other executives might be more relaxed with their subordinates because they had been produced by more comfortable circumstances, but Iacocca’s zeal was fueled by the rage of the outsider. Those underneath him were allowed to disappoint him once, never twice. It was not so much a corporate matter, for the Ford Motor Company was going to prosper anyway. It was personal. In his single-minded drive he could be caustic, even scathing, to those who worked under him. For those who were part of his group, that was no problem; they were aware that the anger meant little, that as soon as the words were spoken it was over and the mood had passed, and that Iacocca’s anger was as much with himself as with them. For others, not members of his inner circle, the words echoed louder and longer.

  When McNamara left for Washington and Iacocca emerged as the most powerful man in the Ford division, he immediately set out to take apart what McNamara had done. He had liked McNamara as a man and respected him as a pure businessman—an efficiency expert—but he had never respected him as a car man. He had particularly disdained McNamara’s last car, the Falcon. It was the ultimate utilitarian car, and it offended his sense of style, his sense of profit, and his sense of purpose. (“McNamara,” said Hal Sperlich, Iacocca’s deputy, referring to McNamara’s deliberately austere manner, “made a car that looked like him—he had those granny glasses and he made a granny car.”) Iacocca always believed that McNamara did not understand the true nature of the business. People did not just want to go from one place to another, he said; they wanted to be seen going from one place to another. The designs of the early models of the Falcon, which were derivative from the Thunderbird, were far sportier, and he had watched McNamara tear them up and gradually force the design into this square, functional car. “I felt like crying,” he said later. He considered the Falcon an anticar. He thought it served the puritan bias of the man who made it more than the needs of the customers or the company. Now, as general manager of the Ford division, he set out to change things.

  Almost the first move he made was to ask Frey if he could transform the Falcon into a convertible. Frey said he could, though the result would be one of dubious charm. They went ahead, and Frey proved right; it was an imperfect car. But Frey later realized it was Iacocca’s first attempt to catch what obsessed him—the growing youth market.

  At the same time a small car called the Cardinal was in an advanced stage of design at Ford in Germany, and McNamara had committed the company to it. The Cardinal was small and fuel-efficient and had front-wheel drive; $35 million had already been spent on it. Iacocca, flying over to Germany to look at it for the first time, hated it on sight. It was cramped and ugly, he thought, and it lacked a trunk. He was sure it would never sell the 300,000 pieces it was programmed for. He flew back to Detroit and told Henry Ford that it was a loser and would bring back memories of the Edsel debacle. No other curse could kill a car faster. The Cardinal was dead, the $35 million was written off. Years later Iacocca was sure he had unconsciously scored a vast number of points with Henry Ford by killing a car Ford never wanted and by being decisive enough to do it even after so much money had been committed to the project.

  McNamara had taken Ford out of racing, and Iacocca wanted it back in. McNamara, somewhat ahead of his time, had tried to push safety on an unwilling Detroit and a somewhat ungrateful nation, and Iacocca hated that, too. His passion was for style and size, not really for safety at all. Safety, he said quite publicly, did not sell. His regime was going to be about selling, he made clear, and so it was. He knew the market as his predecessor did not, and it was not surprising that the company that Iacocca ran was not only flashier and gaudier than McNamara’s but more profitable.

  The symbol of the Iacocca years, the car that made his reputation not just at Ford but in the nation as well, was the Mustang. It came out in 1964, at what would prove to be the high water mark of the American century, when the country was rich, the dollar strong, and inflation low. In the middle class even the young had money. It was almost twenty years since the end of World War II, and it was more than a decade since the end of the Korean War. The Vietnam War was still a guerrilla action involving relatively small numbers of American advisers. The bitter and costly part of that war, which was to take more than fifty-one thousand lives, divide the country, start a runaway inflation, and completely divert the nation’s attention, was still ahead. The economy was expanding. Though many of the forces that would afflict American industry were already beginning to form, they were not yet visible, and the domestic economy had never seemed so strong.

 
Politically the center not only still held, it was triumphant. Lyndon Johnson, picking up John Kennedy’s torch, was brilliantly using Kennedy’s murder as a means of pushing social programs through the Congress. He spoke of a Great Society and of a war on the last pockets of poverty in the nation. The nation was that confident and that generous. The industrial era that Franklin Roosevelt had helped usher in some thirty years before was in full flood, and Barry Goldwater, as a conservative candidate from the Southwest, running against that industrial power, seemed oddly isolated. That year Lyndon Johnson, campaigning for the presidency, stood in Cadillac Square with Walter Reuther and Henry Ford II; it was the sign of a nation that believed it had found a common ground and was erasing class lines. There was enough for everyone; the country was enjoying unparalleled prosperity, and the pie was bigger than ever. The pie would turn out to have its limits after all, but at that halcyon moment, the future seemed unbounded. Many of the protests that were just beginning to show up that year on the political radar screen, like the Berkeley free speech movement and Ralph Nader’s embryonic consumer movement, were produced by middle-class affluence as much as by underclass hardship. They were about the quality, not the quantity, of life. It was against that background that the Mustang’s success—and the success of Lee Iacocca—was achieved.

  Because the Mustang did so well, making so much profit on so little investment, the question of whose car it actually was, who deserved the credit for it, would be debated within the auto industry for years to come. Outside the industry, Iacocca, who controlled the publicity for the car, was always considered the father of the Mustang; from the moment he became general manager he had been looking for a youth car, something that might tap what he sensed was the growing affluence and independence among young Americans. Within Ford, however, Don Frey, the product manager, was seen as the brain behind it. It was Frey who had the specific idea for the car itself, an inexpensive sports model for the young, and did much of the original design. Iacocca took Frey’s idea, made it acceptable to the reluctant finance people, and finally brought around the rest of the company, including a dubious Henry Ford II.

  Iacocca and Frey were of the same generation at Ford, Frey junior in position but a year older. By Detroit’s standards, Frey was more a car guy than Iacocca. Lee, said a Ford product man named Ray Geddes, who worked with both of them, would look at a car and think immediately of whether he could sell it and then what he could add on in the way of options; Don, he said, would look at a car and wonder what it felt like and how it responded to the touch and what could be done to improve its performance. For Iacocca, Geddes added, a car was a means to an end, which was big sales and the power derived therefrom; for Frey a car was an end in itself. Within Ford, Iacocca was considered the far better businessman, Frey the better car man. They were an odd couple, both ambitious, Iacocca totally political, Frey so absorbed by product that by comparison he seemed almost innocent. Iacocca, mutual friends thought, circled Frey admiringly and warily in those years, seeing him as a potential rival and never underestimating Frey’s drive toward his own goals, but he also respected Frey’s considerable strengths.

  Frey’s love of cars was famous at Ford. He was always at his desk late at night, working on some design problem. When he finished his desk work, he would go over to the test track just to drive a car. Ray Geddes, knowing that Frey loved hot cars, once took a Ford racing car, put it in the British design shop, and had a few changes made—one was the addition of a muffler—which had the effect of disguising the racer as a street car. Geddes said nothing about what he was doing. He had the car secretly shipped to Detroit. Then quite casually one night he told Frey that there was a Ford GT out in the parking lot which Frey could drive home. Frey raced out of his office to the lot, jumped into the car, and roared away. He took off in such a hurry that Geddes didn’t have time to tell him how to turn on the electric fuel pump. The carburetor, of course, ran dry in about two blocks, and they had to tow Frey back. The story, Geddes thought, was typical; Frey might be a cerebral man, almost deliberately so, but around his machines he was like a kid with new toys.

  At Ford he was the house egghead. His colleagues would find not only the New York papers on his desk but British ones as well, the Manchester Guardian and the Economist. There were always books there too, and he was considered to be almost as bad as McNamara in wanting to talk about a book he had just read; even more annoying, many of these books were not about business, let alone the auto industry. “The trouble with Frey is that he’s too goddam smart for his own good,” Henry Ford once said of him, and he did not exactly mean it as a compliment. “Maybe,” Ford added, “he’s a genius. Maybe not. But he’s certainly a pain in the ass.” Those were not things you wanted said about you by Henry Ford II.

  Frey had taught at the University of Michigan before going to Ford, and he was a true sophisticate, but he was also in his heart a tinkerer of the kind that existed in America in the thirties and forties. For he had grown up in eastern Iowa, and his father farmed and worked as a tractor engineer with John Deere. In those days farmers had to be able to repair their own equipment; the nearest repairman might be forty miles away. Most farmers turned a corner of their barn into a makeshift tool shop; they could cut a needed part and grind it down a little, and it would work. Frey’s father loved machinery; when Frey went off to college in the forties he found to his surprise that other kids talked about football and baseball with their fathers; he and his father had always talked about machines and the engineering sciences. To the young Frey, as to the first Henry Ford, machinery had a mystique that farming lacked. He loved the idea of taking things apart and putting them back together. When he was given his first bicycle at the age of twelve, he quickly took it apart. He couldn’t get the coaster brake back together properly the first three times he tried; some forty-five years later he could still draw a diagram of the brake. Earlier, his father, who had gone to Europe on a business trip, brought home a large, old-fashioned Voightlander plate camera. He also brought back some color film, which at that time was still rare; there was no place nearby that could process it. One day young Frey photographed some of his mother’s roses. Then he improvised a darkroom, and working all night, processed the film himself. The next morning he handed his mother one enlarged color photo of her own roses. She, a disciplined woman of careful emotions, looked at the photograph and then turned to him and said, “Hurry, you’ll be late for school.”

  When he went off to college, first to Michigan State and then the University of Michigan, he loved the protected environment of academia. It was the most comfortable place he had ever been, and he stayed on to teach. In 1951, as an assistant professor of engineering doing purely theoretical work in metallurgy, he received a call from a man named Andrew Kucher who had been hired by Ernie Breech to create a scientific lab at Ford. Kucher offered him a job, and Frey turned him down. He was making $3300 at Michigan, and he was absolutely happy. But Kucher called again, and Frey eventually lunched with Breech. Breech asked what it would take to bring him to Ford. Frey thought for a moment and came up with the grandest sum he could imagine.

  “Ten thousand a year,” he said.

  “Fine,” said Breech.

  So Frey went to work for Ford. He excitedly called his father to tell him the news. “That’s a tough outfit, son,” his father said. “You’d better leave your Ph.D. at the gate there.” Gradually Frey moved from the theoretical part of the business toward the more practical engineering part. Soon he was going to high-level meetings with his superior, Hans Matthias, the chief engineer. On one occasion Matthias was questioned closely by McNamara about the status of a particular car. He seemed unable to comprehend McNamara’s questions; McNamara in turn seemed equally unable to understand Matthias’s engineer-speak. Finally Frey intervened. “Mr. McNamara,” he said, “what Mr. Matthias is saying is that a part on the car broke in testing and we have to fix it.”

  “Well, for God’s sake,” replied McNamara, “why does
n’t he just say so?”

  After that occasion, McNamara, as he had reached down for Iacocca to deal with the boisterous world of dealers, now reached down to Frey to deal with the arcane world of engineers.

  Frey, it turned out, liked the world of Ford even more than the world of Ann Arbor. It was, he believed, far more challenging, in large measure because cars were so complicated. A car in his view was the ultimate piece of machinery, an immensely complex series of assemblages that had to come together in perfect harmony to furnish power. Yet the car, unlike other machines, also had to be attractive, function and aesthetics serving each other. Producing a car, he believed, was even more difficult than producing an airplane, or at least more challenging for the engineers. For the auto engineer had to persuade not just a handful of large airlines but hundreds of thousands of customers to buy, and he had to do it every year. Thus he was testing himself daily, not just against some abstract standard of perfection but against the marketplace.

  Iacocca and Frey talked frequently about a car that would reach the expanding youth market. They were both aware that something was happening out there, that America’s demographics were changing, and that television was the perfect medium to sell a sporty car. Frey came up with the idea of a sporty little car to go up against the GM Corvette but which would cost less. It was a two-seater. But the Ford research people kept reporting that the car’s appeal was too limited; too much money would be spent for a car that would capture too small a share of the market. Taking the figures from research, the finance people projected that perhaps only thirty-five thousand people would buy a two-seater. So Iacocca took the plans and reworked them, suggesting options and additions; gradually the figure for projected sales reached fifty thousand.

  But the finance people were formidable foes. The McNamara years had solidified their position more than anyone had yet realized, and they were now showing their power in this struggle over the Mustang. The Mustang, they now declared, would diminish standard volume. Standard volume had become the sacrosanct figure within the company, the base sale from the previous year, in effect what Ford was already guaranteed without spending an additional penny. That choosing this figure as their base was an enormously limiting concept, locking them more and more into the past, seemed not to matter. For them it was the ideal number, for it guaranteed profit without risk. The finance people even had a label for any change that might add cost to the company’s budget without necessarily guaranteeing sales. Such a change was decrements. Translated into English, this meant that since the company already had its share, any change might diminish it. The Mustang, then, was held to be decremental.