Reckoning

by David Halberstam

  If McNamara had held power in no small part by intimidating Henry Ford, by assaulting him with an overwhelming array of facts and statistics and making the auto business seem more complicated than it was, then Iacocca held power at least in part by making the business seem simpler, describing choices in the most basic terms, words any car man could understand. There were no underlying tensions in these early years of Iacocca’s reign at the Ford division, as there had been in the McNamara years, when McNamara covertly always wanted smaller cars; Iacocca, like his boss, wanted big, creamy, plush cars. Ford appreciated all this, and in those early days there was almost no limit to his praise of Iacocca. He was simply the smartest man he had ever seen in the car business. Lee, he said, understood the numbers as well as McNamara, but unlike McNamara he had a feel for cars and he liked to sell them. Lee, he would add, likes the business, and that too was a slap at McNamara, for Henry Ford had never entirely forgiven his former president for his disdain for the business.

  So for a time Iacocca could do little wrong. Old friends of Henry’s were made nervous by the totality of his endorsement of Lee. One of them was John Bugas, who had helped Henry take the company back from Harry Bennett and had subsequently been in and out of Ford’s favor several times. “He falls in and out of love with both men and women,” Bugas warned friends, when Ford became so close to Iacocca. “Usually it lasts a few years. Never more than six. For a time they can do no wrong. And then comes the time when they can do no right.”

  After the triumph of the Mustang, Iacocca was viewed by many in the company as the enabler, the one man in an increasingly bureaucratic operation who could make a car happen. Thus the best of the design and engineering people, even more frustrated by the bureaucracy around them, wanting to push product through the system, turned inevitably to him. That led to subtle and not so subtle divisions within the company. There were the Ford employees, and then there were Lee’s people—Iacocca’s Mafia, his men were called. “He’s like a Medici prince,” one Ford executive said. “He’s created his own city-state.” His demand on his staff for loyalty was implicit, but he could also be quite overt about it. “I need you, Gene,” he once told Bordinat, the designer, “but don’t ever forget that you need me more.” A potential rival to Iacocca became not just Lee’s enemy but their enemy as well. They would almost unconsciously cut him off. When one senior executive, Bill Bourke, came back after several years in Europe, Iacocca, fearing his closeness to Henry Ford, shunned him, professionally and socially, and Lee’s people followed suit. Sometimes one could tell who was in and who was out with him—and who was a threat—from the way Mary Iacocca treated their wives. When the Bourkes first returned, she snubbed Elizabeth Bourke; later at an auto convention she went over to Mrs. Bourke and said, quite angrily, “I’m Mary Iacocca, and I want you to know it, so that the next time we’re in a room together, you can come over and speak to me.”

  Through the mid-sixties Iacocca was the rising star of a prosperous industrial giant .Then, in February 1968, Henry Ford stunned the auto world in general and Lee Iacocca in particular by reaching over to General Motors to hire Semon E. Knudsen and make him president of Ford. No one, least of all Bunkie Knudsen or Lee Iacocca, was ever sure why Ford had done it. Ford had just been married for the second time, and his new wife, Cristina, a European jet-setter, most decidedly did not like Detroit. She was talking more and more about how much fun it would be to move to Washington, which, she said, unlike Detroit, was a cosmopolitan city with an international tone. Lyndon Johnson had won handily in 1964, he and Henry Ford were friends, and there was talk that Henry Ford might take an important post in Washington. At that time Iacocca was only forty-three, and apparently Ford thought him too young to run the whole company.

  There had been small signs of Ford’s disillusion—the jibes about personal publicity—but Ford was rarely as churlish with Iacocca as he was with others. Once, just before the Knudsen appointment, when Iacocca was pushing for a particular product, Ford snapped at him, “Oh, come on, Lee, you don’t really believe that shit, do you?” It was the first time Henry Ford had ever lashed out at Iacocca, and so it had surprised everyone at the meeting. It was Lee’s first public setback, and for a moment some wondered whether Lee’s star might now begin to fade. But the incident passed and Ford returned to his normal manner. For most, then, the Knudsen appointment was a shocker. More than likely, some of Iacocca’s friends thought, it was an almost unconscious question of class. It was all right for Iacocca to work for Ford and to make the company look good, but it was not all right for him to be the president of it, at least not yet. Iacocca dressed a bit flashier than the Ivy League style prevailing in the Ford executive suite, lapels a little wider, suits a little sharper, ties a little louder. His home, one friend noted, was decorated in a rather gaudy style, far different from the look of a Grosse Pointe home.

  Iacocca was devastated by Knudsen’s appointment. He had thought himself without a rival in the company. (Only Don Frey was a potential rival, an able man nearly the same age, but Frey was not a particularly good politician or bureaucrat, and his power seemed derivative of Iacocca’s.) His job remained exactly the same, and it was a powerful position indeed, yet he felt something had been snatched away from him. It was as if Henry Ford had considered him and then rejected him. Worse, the post had been handed to an unsuspected rival, an executive from the almighty General Motors, a man who bore a name esteemed in Detroit. The Knudsens belonged to the city’s aristocracy as the Iacoccas most decidedly did not.

  Bunkie Knudsen had done well at General Motors, a division vice-president at Pontiac at forty-four, the youngest man ever to hold so high a post at GM. Pontiac had been weak, and Knudsen had turned it around. He had been shrewd and self-confident enough to sponsor the talented and ambitious young John DeLorean, instead of being threatened by him. But eventually Knudsen was passed over for the job of head of General Motors. Henry Ford, sensing that he might be disaffected, had driven over to his house (using a Chevy, not a Ford, so no one would notice) and offered him the presidency of Ford.

  Almost as much as Henry Ford, Bunkie Knudsen was a scion of Detroit. His father was Big Bill Knudsen, the Danish immigrant who had been one of the most powerful figures in designing the early Ford assembly lines. Unlike most of the top men at Ford in those days, who had been hated by the workingmen, Bill Knudsen had been regarded as a figure of great strength and exceptional human decency. He had broken with Ford in 1921 and gone over to GM and asked for a job.

  “How much do you want?” Alfred P. Sloan had asked him.

  “Anything you like,” Knudsen replied.

  “How much did Mr. Ford pay you?” Sloan continued.

  “Fifty thousand dollars,” Knudsen said.

  So it was that Alfred P. Sloan, never one to get carried away, started Big Bill Knudsen at $6000, although a few months later, when he was sent over to run Chevy, his salary was raised to $30,000. If any man other than Sloan and Charley Kettering was responsible for the boom at Chevy, it was Knudsen. He made the Chevrolet technologically superior to the Model T, and gave it a lead over the Ford that it never really relinquished. Knudsen loved cars and loved the machinery that made them. During the prolonged strike of 1937, out of which came recognition of the UAW, of all the GM executives he had been the most anxious to settle the strike. He was more sympathetic to the workers than were most of his colleagues, but it was not just that; according to Lee Pressman, a lawyer for the UAW, the idea of his machines sitting there idle, not making cars, left Knudsen in pain.

  When Bunkie Knudsen was fourteen his father had given him his first car. He had simply taken all the pieces for a car and left them on a table in the garage. It was Bunkie’s job to assemble the car, which he did. The father encouraged his son to buy old wrecks for $25 or $30, repair them, and sell them at a profit. The son was being taught that the most important thing he could do with his life was make something. Often Bill Knudsen took Bunkie to one construction site or anothe
r, where they could look at what was going on. These men were not just earning money, Bill Knudsen emphasized, they were creating something. Later Bill Knudsen, on a trip to the West with his family, took Bunkie to the Bay Bridge in San Francisco and talked about its builders. “There was nothing here before they did this. What these men did will be here forever,” he had said with a certain awe, “and it will make people’s lives better.”

  Bunkie Knudsen never had a chance at Ford. It was not that he lacked the skill to handle the job; indeed, that was something that almost never came up. It was that Ford was so different from GM. He was a product of the GM system, and the system worked, and it protected those who had mastered it. General Motors was a gray place and in comparison with Ford a somewhat boring place. Decisions on people’s futures seemed to have been made some twenty years before they actually were announced. By contrast, Ford, reflecting the influence of the two family figures who had led the company, was a highly political place, filled with cliques and feuds and constant infighting, all under the eye, if not the actual instigation, of the two Henry Fords. Knudsen thought the organizational structure would work loyally for him because he was president, and that having the title of president was quite enough. At GM the organization was, above all else, loyal. He did not bring over many of his own people from GM. (He tried to bring DeLorean, already a star at GM, and he failed; had he succeeded his tenure at Ford might have been different.) Indeed, he brought just enough people to unsettle the Iacocca loyalists but not enough to take command of the company.

  To Iacocca, Knudsen represented two things. The first was confirmation of his father’s counsel that he could trust no one, that the world in which he competed was filled with men less gifted than he who were either richer or better connected. The other thing Bunkie Knudsen represented from the day he arrived at Ford was a threat. Who knew how long he would stay as president? Who knew if he might establish some other successor—like Don Frey, with whom he seemed so close? Iacocca complained to his friends from the very first day about Bunkie, that he was stupid and knew little about the business. What the hell had he ever accomplished at GM, anyway? he asked. The Mustang had been more successful than any car Bunkie had ever made. If there was a meeting and Knudsen was about to make a mistake, about to cross Henry Ford or the finance people without knowing it, the kind of mistake Iacocca knew how to avoid, he would simply sit back and remain silent, and that very small smile would cross his face. For those who knew Lee Iacocca, his temper and his shouting, the idea of a silent Lee was more disquieting than an angry one. He understood as Knudsen did not that though Henry Ford had made him president, he was only partly president, that Henry Ford had not gone to Washington and it was still his company. Henry Ford had issued the same my-door-is-always-open invitation to Knudsen, and Bunkie, not understanding how the Ford company worked, had taken it at face value, which did not displease Iacocca.

  The two men fought constantly over the design center. It was the center of Lee’s world, but Knudsen was equally interested in it. Each day, as he had all his life at GM, he started the day in the design center. He was there every morning at seven tinkering with what Iacocca, who liked to come to work much later, considered his cars. That was the most personal kind of assault on Iacocca. More, it was coming from an executive who, while not nearly as good a marketing man, had an enviable reputation as a car man. The design people were caught in the crossfire. In the morning Bunkie would go in, look at the lines of a fender, and suggest that the designers change it.

  “We like it,” the chief designer would say, “and Lee likes it.”

  “Change it,” Knudsen would say.

  Later that day, after it had been changed, Lee would seem puzzled. “What happened to the fender?” he would ask the designer.

  “Bunkie wanted...” the designer would begin.

  “Tell Bunkie to bag his ass,” Lee would reply.

  It was a civil war in which one man was on wartime footing and the other was still at peace. For others in the company it was an extremely difficult period. There was no place to hide. Don Frey remembered it as the worst time in his professional life. Because he and Knudsen were members of the same engineering association and had served on committees together, Frey had known Knudsen before he arrived at Ford. Frey’s father had been an admirer of the elder Knudsen, and Bunkie decided that Frey was a natural ally. At the first reception he attended at Ford, Knudsen spotted Frey, the only familiar face in a sea of alien and rather cool Ford men, and grabbed him like a long-lost friend. Knudsen wrapped an arm around Frey and kept him next to him for a very long time. Frey later dated some of his own mounting problems with Iacocca to that moment. Bunkie’s embrace was not forgotten or forgiven. From then on Frey was caught between the two men. Praise from Knudsen, of which there was a good deal (“Frey here is the only man in the shop who understands cars”), was poison. Once when Ford was finishing up a new car, Knudsen decided to add a bit of trim to it. Iacocca, who did not want the trim, accepted the order. But Frey met with Knudsen afterward and talked him out of it. Later that day Knudsen, in front of several people, announced, “Frey argued me out of that—he says it’s no good and he’s right, so I’ve changed my mind.” That remark, Frey came to realize, was unfortunate, for it had shown Iacocca that Frey was close enough to Knudsen to change the latter’s mind, and thus that Frey might be on Bunkie’s side.

  Frey knew in some ways he was failing tests, not with the company or with Henry Ford but with Iacocca. One day in the summer of 1968, Ford, Frey, and Iacocca went to the styling room to take a look at the designs for a small Lincoln. It was a car that Iacocca wanted very badly; he hoped it would help the company in the upper levels of the car market, where Ford had always been weak. Iacocca asked Frey what he thought, and Frey answered that he thought the car, which would weigh over five thousand pounds, was too heavy. Henry Ford quickly agreed. Even before the words were out of Frey’s mouth he realized he had made a serious error. The only answer in this case was the one Lee wanted. Frey knew Iacocca felt Frey had forgotten his place in the pecking order, had let his ambition get out of hand. After that, Frey began to find himself isolated by Lee’s people. His mistakes, mild enough, had been fatal. He was being told that as long as Lee was powerful, his own future was meager. He went to Henry Ford and told him he was tired of being the meat in the sandwich between Iacocca and Knudsen. He was getting out.

  He soon learned that Iacocca did not lightly forgive those whom he judged guilty of disloyalty. First Frey was told that he would not be paid his final bonus, which was to have been approximately $90,000; Frey believed that was an Iacocca decision. Later he read something that Iacocca had said to the Wall Street Journal. One of the good things about working in a company as big as Ford, he’d said, was that you never had to fire anyone, you could always find them a good job somewhere else. That stung Frey, because it seemed so personal; no names were mentioned, and yet anyone who counted would know. The remark was particularly painful because Frey admired Iacocca and thought of him as by far the ablest and strongest man in the company, and they had shared a great accomplishment, the Mustang. Machiavelli lives, he decided; I can no longer do anything for him, and now he is paying me back. For some time he was puzzled as to why Lee had been so vengeful. Then he realized that he had seen Iacocca act this way with a great many other people who had gotten in his path, and that the only difference this time was that he had watched it happen to himself.

  Iacocca was still resentful of the Knudsen appointment. It had interrupted his own carefully planned timetable, and, he told friends, he was sure that it had something to do with prejudice, as if somehow he were not quite elegant enough to run the Ford company. He had been depressed by it at first, but gradually, seeing the difficulties Knudsen was having in adjusting to Ford, he became confident that he could ride it out and beat Knudsen. A man named Herb Segal, who ran Chris Craft, contacted him and offered him a handsome job, a huge bonus for joining, and a chance to move into the
aircraft business. Segal and Iacocca met several times over the next year. Why did they pass you over? Segal asked Iacocca, and Iacocca answered that Ford thought he was too young. “Look,” said Segal, “it’s a new age, they’ve got thirty-five-year-old kids running hundred-million-dollar companies, and if you ask them about their qualifications they tell you to go screw yourself.” Segal, as he listened to Iacocca, became convinced that class was critical to Henry Ford’s decision. Lee was the brilliant Italian kid who was good enough to make them a lot of money but whose manner was nonetheless a little too rough and whose clothes were a little too loud to head the company. Segal picked this up from Lee to some degree, but he got it from Mary Iacocca even more strongly. In her mind she had always been snubbed in Detroit. No matter what their contributions and successes, she felt, she and Lee would always be outsiders there. She obviously wanted her husband to get out of Ford and out of Detroit.

  “Lee,” said Segal, “you’ll never be any hotter. You’ve got two hot cars [the Mustang and the Maverick], but you’re the Italian kid who scares them. All these big industrial companies want someone who looks like Walter Pidgeon and who doesn’t take any chances to be in charge. You’re never going to look like Walter Pidgeon,” he warned Iacocca.

  “But that’s my life—Ford, the auto industry,” Iacocca said.

  “Some industry,” Segal answered. “One day you’re the head of GM and everyone in the city kisses your ass, and the next day you’re out and you can’t even get a golf game at the Bloomfield Hills Country Club.”

  But the more they talked, the more Segal realized that though he could probably get Iacocca, Lee’s heart was in Detroit. It was not the money. Segal was offering him $3 million, cash in the bank, just to come over. It was the prestige—he wanted, Segal was sure, to be the Italian kid who had beaten the system in Detroit. “You really want to wear the epaulets, don’t you?” Segal said. So he advised Iacocca to use the Chris Craft offer to squeeze Knudsen out. He would have to play it to the hilt, leak word of the offer in certain circles. “You’ll have to be tough about it,” Segal said, “and if it backfires, I guess you go to work for me.”