Reckoning

by David Halberstam

  Shortly after that, everyone in Detroit seemed to know that Iacocca was thinking of leaving. Suddenly all sorts of people in the middle levels of Ford began to get nervous and look for jobs. Headhunters were swarming all over the place. Most of the job hunting seemed to be routed through Tex Thornton, who had once led the Whiz Kids at Ford and now headed Litton Industries, and who had little love for the Ford Motor Company. A few people actually left. The entire place was upset.

  Unbeknownst to Bunkie Knudsen, he had one additional opponent within the Ford ranks. That was Ed Lundy. Most people when they thought of Knudsen’s appointment thought of it in terms of what it did to Iacocca’s future. Few thought of the fact that in the process Arjay Miller, who had been serving as president of Ford, had been kicked upstairs and given the title of vice-chairman. Among the very few who had been shattered by that was Ed Lundy. Miller was his best friend, and he idolized Miller. In any real sense the Miller family was his family. That the company he loved treated his closest friend so cavalierly was immensely painful to him. Lundy had seemed for a brief time almost physically affected by the news. If he had been fired himself, it could hardly have been more traumatic. Thus he never helped Bunkie Knudsen out. His attitude during the Knudsen period, Iacocca thought, was one of benign neglect, as if waiting it out. Iacocca, watching the financial people, felt they were holding back information as they had not under Miller. He also sensed that Lundy, in a subtle way, was reaching out to him more, confiding more, more willing than in the past to form an alliance.

  Everyone knew something had to be done soon. The company was being torn apart. Soon it was clear that one of the two men, Bunkie or Lee, had to leave. The uncertainty was hurting the company. Those who knew Ed Lundy well believed that he cast the deciding vote. Knudsen had no support at all within the infrastructure, and Iacocca did. If Lundy did not exactly like Iacocca, he knew him and knew he could work with him. If Iacocca was forced out, the company would be ripped to pieces. If Bunkie went, it would merely damage one man’s career. Insiders believed that Ed Lundy very carefully let Henry Ford know that Bunkie probably had to go. The corporate body was rejecting the new organism, not the old.

  The company, Henry Ford realized, needed Iacocca. About that time an old friend ran into Ford and thought he seemed depressed. What’s wrong? the friend asked. “All of my top people tell me I’ve got to let Bunkie go,” Ford said.

  On Friday of the Labor Day weekend in 1969, Henry Ford dropped by Bunkie Knudsen’s office, and they talked casually about their holiday plans. Knudsen told Ford that his kids were coming in from different parts of the country. They would spend the weekend together as a family. “That sounds nice,” Ford said. “Have a nice weekend.”

  At six-thirty on Monday morning, Labor Day itself, Knudsen got a call from Ted Mecke, who was Ford’s personal public-relations man. He said he wanted to talk with Knudsen, and an hour later he showed up at his door. “I just want to tell you,” he told Bunkie, “that you’re no longer with the Ford Motor Company, and that tomorrow that’s what you’ll be told.” Knudsen, puzzled, asked him why he had come to tell him that. “As a friend,” Mecke said.

  What does he mean, he’s here as a friend? Florence Knudsen thought. She had not particularly wanted her husband to leave General Motors, where he was comfortable, for a company that was said to have so many dangerous eddies. She had never been at ease with Henry Ford; he could flick his charm switch much too easily. He played with people without any real regard for the impact of his deeds on their lives. At the funeral of Ford’s old Wall Street adviser Sidney Weinberg, a month earlier, Florence Knudsen had happened to look over and catch a glimpse of Henry Ford staring at her husband. His gaze was so steely, his face so grim, that she had known something terrible was going to happen.

  The day after Mecke’s visit, Bunkie Knudsen, as usual, went to work at the Ford Motor Company. There Henry Ford told him that he had to leave the company. Knudsen asked Ford if there was any reason. “It just didn’t work out,” Ford answered. He told Knudsen to get together with Mecke to work out the details. “You can keep the [Ford] car,” he said.

  “I don’t want the car,” Knudsen replied.

  Mecke promptly arrived with a statement saying that Knudsen had resigned to pursue other interests. No way, said Knudsen. He quickly typed up a release saying he had been fired and called a friend at a wire service and read it to him.

  Shortly thereafter Henry Ford called a press conference and announced that he was naming Lee Iacocca as one of three unit vice-presidents. Iacocca spent the entire press conference trying, with limited success, not to seem to be gloating. When a reporter asked him how he felt about the news, he said, “I’ve never said ‘no comment’ before but I am today.” Lee Iacocca, being in a rush, had taken out Semon E. Knudsen in only nineteen months. It had not been a pleasant spectacle. “There was no need for him to see me as a threat,” Knudsen said of Iacocca fifteen years later. “I was twelve years older than he was, and he could have worked with me for a few years and maybe even learned a few things and then taken over the company.” Thus did Bunkie Knudsen in 1984 show that he had still learned nothing about Lee Iacocca.

  Lee Iacocca was the victor. A little over a year later Henry Ford named him president. It was as if the Knudsen interregnum had never existed. It often seemed now that it had not. Iacocca was delighted to get the job he had always wanted. But something in the chemistry of the two men had been permanently altered. Henry Ford might have righted what was in Iacocca’s view a bad decision, but he had made a fatal mistake, he had proved he was, deep down, a snobbish Wasp. That would not be readily forgiven. In the meantime, it was Iacocca’s company. He was the power within. Nothing could be pushed through the ever-tightening control system of the finance people without his support. That meant that not only the cadre of Lee’s own people but anyone else in the company who wanted to do anything creative had to go through him.

  In those days Iacocca was pushing bigger and flashier cars. The Mustang, once slim and sporty and relatively simple, had grown bigger and heavier, until its earlier enthusiasts could no longer recognize it. It had become, as increments of weight were added and increments of profit achieved, a big ugly car. (In his book Iacocca blamed Knudsen for doing that, but the memory of almost everyone else who worked there in those years is different. It was Lee who kept adding weight to the Mustang.) Iacocca, like Henry Ford, adopted the formula of GM, which kept producing bigger and more expensive cars for its customers as they presumably became richer and more important. For there was not much difference in the cost of making a Chevrolet and a Cadillac, but the difference in profit was immense. In the decade of the seventies, that was where Ford intended to close the gap, not just in the Ford division but in the upper levels, particularly with the Lincoln Continental. The larger profit was in the bigger cars.

  Iacocca gradually became the spokesman for Detroit. The GM people were too gray; the GM organization demanded anonymity and produced few colorful characters. Chrysler was too weak. And Henry Ford seemed increasingly involved in other matters. Lee loved being the public figure of the Ford Motor Company, and he was good at it, always available, always quotable. He was the new, confident, pugnacious figure of the auto industry. The industry was healthy and going to become healthier. Cars were big and going to become bigger. He pushed racing: “Race ’em on Sunday and sell ’em on Monday.” He was openly contemptuous of the earlier Ford efforts at safety. When the subject of clean air came up, he said, “We’ve got to pause and ask ourselves: How much clean air do we need?” When reporters mentioned something called front-wheel drive, which in the early seventies was just coming into vogue in Europe, he was again condescending. Customers, he said, couldn’t see it. “I say give ’em leather. They can smell it.” He disdained small cars. Though the company’s own research showed with considerable finality that the people who drove small imported cars were an important new part of the market—college-educated (indeed often second-generation
college-educated), upper-middle-class people who took their social definition not from expensive cars, which they could readily afford, but from other things, records, wine, travel—he resisted. Iacocca, like most of Detroit, adopted a policy of nonrecognition of this profound social change. All the warnings that this new American class was likely to get larger, and that indeed it often set taste standards for others, made no dent on Detroit. Its rules were the ones that still pertained in suburban Detroit: As you made more money, you bought a bigger car and a bigger house and joined a better country club. Status was fixed there as it had been in the past but as it was no longer fixed on either of the coasts. When Iacocca spoke of small cars, he spoke as Detroit spoke of them, as a kind of charitable obligation to the less fortunate, cars for those who could not afford the cars they truly wanted, a sort of social welfare of manufacturing.

  Fifteen months after Bunkie Knudsen’s departure, Iacocca was named president of the Ford Motor Company. Ten years after that, Florence Knudsen was at a supermarket in Bloomfield Hills when a woman whom she barely recognized came over to her. The woman said something, and Mrs. Knudsen continued to look puzzled. The woman, she thought seemed so fragile, so vulnerable.

  “I’m Mary Iacocca, Florence,” she said.

  This was about a month after Lee Iacocca had been fired by Henry Ford, and Florence Knudsen, a woman of great kindness, whose own life had been changed so drastically by the whim of Henry Ford, reached out and said, “Oh, Mary, I’m so sorry.”

  “Now I know,” said Mary Iacocca. “Now I know.”

  PART SEVEN

  22. THE STATUE

  AS NISSAN APPROACHED THE year 1960, it slowly and systematically became stronger. Its tempestuous labor problems were in the past. What money it was making—and more, much more—was being spent on new machinery, and its debt had grown awesome. The strain on the entire company was enormous. Yet although it was happening in the most painful way, Nissan was evolving into a real industrial force.

  Kinichi Tamura, one of the Nissan design engineers, remembered 1960 and the years just before and after as a frenzied time. New plants were being planned and old ones expanded while at the same time the company tried desperately to keep production on schedule. On the factory floor, men tried to work at their stations as all around them construction workers tore the old lines apart, while other men kept pleading for even greater production. It was a madhouse, Tamura thought. He would visit a section to see whether the new machines that had just arrived were being installed, find that they had been, and then watch as a construction crane swept over and knocked them down. Tamura and his colleagues would spend a day marking off on the floor the exact location for the installation of new equipment, and some construction crew would come and accidentally tear the area up—and it would all have to be done over. Tamura could never remember a time like it. Normally he went home at seven in the evening, but in those years he seemed to stay at work until midnight, riding the train home for an hour and a half in the early morning, trying not to fall asleep and miss his stop. He barely saw his family. It was a strange feeling, of total exhilaration and, simultaneously, total exhaustion. For all of his problems, his excitement was almost overwhelming. For he was helping create the modern Nissan, building new wings of factories and installing new machines. He was touching the future. This was going to be a great company, and he was one of its architects. He could hardly believe his good luck.

  One of Tamura’s glorious moments came when he helped develop and install Nissan’s first transfer machine. Transfer machines were basic to the work of Detroit, but Nissan had never had one. The transfer machine brought automation to the old process in which workers at station after station each performed one small task on a given piece such as an engine block. Some thirty yards long, the machine incorporated the work of as many as thirty stations, greatly speeding up the line and reducing manpower at the same time. Such machines could be ordered from America, but they were very expensive, perhaps several million dollars each. Do you think it would be possible, some senior Nissan executives asked their manufacturing engineers, to make our own?

  At first it seemed impossible, a dream. Surely engineers and designers whose own accomplishments were so primitive could not make anything that complicated. But Tamura and his colleagues went to work on it. They took all the information brought back from America by the traveling productivity teams, all the photos and sketches, and pieced them together into a rough design for a transfer machine. Month after month went by—precious months to a company under such ferocious pressure—and at times Tamura wondered if they had bitten off more than they could chew. There were, Tamura remembered, some thirty design meetings, and midway through them, he suddenly had a sense that he had been wrong, it was possible—as long as they thought of the great task in small increments. The others had come to the same insight, and it gave them confidence. When their design was complete, they took it to a local machine shop. The owner looked at it a long time. “It’s the biggest thing I’ve ever seen,” he said. The more he looked at it, the more excited he became. Yes, he said, he wanted to do it, he wanted to do it very badly. Not only was it a wondrous engineering and manufacturing challenge, but if he pulled it off, he might get many orders and become a considerably richer man. He began the job in 1960 and finished it a little less than a year later. The designers and engineers were astonished at how well he had done in creating the machine they wanted.

  The installation was a great moment. Everyone in the factory wanted to see the new machine. Work throughout the plant came to a halt. Somehow a party began, and it went on for two days. Years later Tamura regarded that moment, the coming of the first transfer machine, as the dividing line between the old Nissan Motors Company and the new.

  The decision to plunge Nissan into frantic expansion had been terrifying for its president, Katsuji Kawamata, the financial man who had come over from the Industrial Bank. Never had the men around him, particularly the engineers, been so frustrated by him as in the period starting in 1958 when the Japanese domestic market began to explode. This was the most important moment in the company’s history, a mass market was finally opening up, and Kawamata was completely immobilized. He seemed alternately afraid to move and afraid not to move. He could see the future—he did not argue with the judgments of the professionals working for him who were suddenly so excited by the prospects of soaring sales on low-cost cars—but he was horrified by the size of the debt required for any serious growth. The top product men wanted to pour as much resource as possible into the company’s overloaded production lines; they feared the consequences if Nissan did not seize the moment. Kawamata feared the consequences if it did. Those close to him in that period sometimes wondered whether he was going to come apart under the strain of conflicting pressure within the company. When the product people argued in meetings that Nissan had no choice but to expand its production capacity and expand it quickly, he would sometimes seem to agree with them, and only later would they find out that they had not moved him at all.

  “How is he today?” one of the engineers asked a colleague who dealt with Kawamata daily.

  “Oh, much better,” said the insider. “He’s much more Yes-No today than yesterday, when he was No-Yes. Of course, I cannot promise you anything for tomorrow.”

  That Nissan had to thrust ahead was hardly a question. Everyone knew that there was no choice, especially since Toyota was already making plans to do so. As early as 1956, Toyota had bought an old airplane factory and begun to convert it into its newest assembly plant, called Motomachi. That confirmed to everyone at Nissan that the stakes were going up quickly, and that Toyota was preparing for the day when the new market would be carved up. Toyota was finalizing its deal for Motomachi when the Nissan production engineers were only starting to look for a plant site. The problem was that Nissan was hardly the sole Japanese company getting ready for the surge of the new consumer economy. In the dense, overcrowded Tokyo-Yokohama corridor, all property, incl
uding industrial property, was expensive and becoming more so all the time. There were no bargains. The early attempts to find land around Yokohoma were all failures; no matter what Nissan’s scouts came up with, Kawamata would somehow manage to turn it down—it would be too small, too distant, but mostly too expensive. That Kawamata would continue to delay even as Toyota was actually starting to build its factory increased the tension at Nissan. There was a growing apprehension among the senior product people that the boat was going to leave without them.

  Then Soichi Kawazoe, a former Nissan employee who was now working for Fuji Motors, tipped off Nissan that a huge site which once had belonged to Fuji, located at Oppama, near Yokosuka, about twelve miles south of Yokohama, was available. The price was considered surprisingly cheap, and it seemed the perfect location for Nissan. Still, Kawamata procrastinated; he began to talk about expanding the existing Yokohama plant, an idea that had long ago been discarded, or finding another location. His production people seethed. Kawazoe took the top Nissan executives around the site in the fall of 1958. The product men were thrilled. But Kawamata delayed. Ten months passed before Nissan finally made a bid to the Ministry of Finance, which was handling the sale. By then other companies were trying to buy the same land, but the ministry gave it to Nissan. Construction did not begin until February 1961, a year and a half after Toyota had opened its new plant. Nissan, at this crucial moment in the struggle for domestic share, was three years behind Toyota.