Reckoning

by David Halberstam

  But the larger part was loyalty. The social transgressions might have been forgivable had Iacocca been less ambitious. For Iacocca was able—there was no doubt that he was the ablest man within the company—but Henry Ford had come to think that Iacocca was not content with that, that he sought more, that he wanted not just to run the company but to make it his. This conviction was particularly troubling for Ford because it raised an important internal issue. For this company above all else was a family company, and yet the difference between Henry Ford’s age and his son Edsel’s age was considerable, some thirty-one years, Ford’s own health was shaky, and there was no way he would be able to hand the company over directly to Edsel.

  There were ways of ensuring continuity even if Henry Ford died, means of guaranteeing that a Ford, perhaps Edsel, perhaps William Clay Ford’s son Billy, would head it. Still, Iacocca was too strong, and his loyalties to the Ford family seemed questionable to the chairman; his true loyalty was to himself. Because of his age and health, Henry Ford thought, he would have an ever diminishing ability to control Iacocca. The man was becoming more influential within the company all the time, even with the board, and, unlike the shier, more grateful young man often years earlier, he showed little willingness to be controlled. Ford could see more and more signs that Iacocca was not content with his present position. Clearly he wanted grander things, things that no one other than a member of the family should even think of.

  As before, the tensions between them were likelier to flare up in Europe than in the United States. In the spring of 1975 there was a meeting in West Germany. All the top people from Ford of Germany were there, as well as the Iacocca coterie. As the dinner was about to start, the Iacocca people sat down at one table. At the other tables were scattered Americans from Ford of Europe and the Germans. As the evening wore on, Ford’s face seemed to darken, and he began to drink. Earlier he had told his aides that he would not speak that night, and when dessert was being served, Bill Bourke, the number-two man in Ford of Europe, got up and said that although Ford did not feel like speaking on this occasion, he wanted everyone to feel welcome. Just as Bourke finished, a rather angry Henry Ford got to his feet and began to talk. He was, he said, goddam well tired of those Americans who came over to Ford of Germany and wouldn’t socialize with the Germans, and as far as he was concerned he’d like to goddam well put them all on one plane and send their asses back to Detroit and let the Germans run their business their own way. It was a terribly embarrassing moment, but it was more than that: It was the most public display so far of the split at the top of the company.

  For the sight of Iacocca and his buddies gathered on occasions like this always raised in Henry Ford’s mind the question of loyalty, the one question that was never even supposed to come up. Were these men loyal to the Ford Motor Company, or were they loyal to Lee Iacocca? And if they were loyal to Lee Iacocca, was he in turn loyal to Henry Ford? Did Iacocca think of it as the Ford Motor Company or as the Iacocca Motor Company? Shortly after that, Henry Ford attended a meeting of top-level European executives where Iacocca and his group were also present. Afterward, Ford was driven back to his hotel. With him were Bourke and one other executive. Henry Ford was very quiet during much of the ride home. Suddenly he turned to Bourke and asked, “Bill, do you have any doubt in your mind who is the boss of the Ford Motor Company?” Bourke assured him he did not. Then Ford turned to the other executive and asked him the same thing, and the man said, no, he had no doubt either. “Well, I’m glad to hear that,” Henry Ford said. It was a question that Ford had never asked before; that it was now being posed was as much an answer as a question.

  Even the 727 became something of a sore point. It was essentially Iacocca’s plane in terms of the company and Cristina’s plane in terms of family, and gradually Henry Ford was becoming less fond of both of them. It had been outfitted to make transatlantic flights, but Henry Ford wanted no part of it. He had once left Kennedy on a big plane on which two of the engines had caught fire—the jet had quickly turned around and come back to the airport—and from then on he wanted to make his transoceanic flights only on 747s, planes with four engines. The 727 had cost $5 million and then it had taken an additional $250,000 to style it, and it represented one of the few times that the finance people had played a little loose with cash. Anything over $5 million was supposed to go to the board, but in this case it had been decided to put it in as two smaller authorizations, so that it did not need to go to the board. Iacocca loved the plane. Though later he wrote bitterly of Henry Ford’s exploitation of company privilege, no one liked having his own customized jet more than he did. Iacocca could always find business in Rome, and though Bologna was not one of the automotive centers of the world, there was usually a stop in Bologna, for lunch and for the purchase of some shoes, on the way from Rome to a meeting in Germany. Henry Ford became unhappy about Iacocca’s use of the plane, but within the company it was generally believed that what sealed its fate was his increasing irritation with Cristina and her travels and her relationship with Imelda Marcos. Finally, in 1974, Henry Ford decided to sell the plane. The Shah of Iran seemed the most likely buyer. A top Ford executive named Will Scott was dispatched with the plane to Teheran with orders, which had come down from a very irate Henry Ford, not to come back until he had a check for, $5 million in his pocket; otherwise he was to sit on the runway and wait. That ended one of Lee Iacocca’s prize perks and signaled to those who watched closely just how badly things were faring in Henry Ford’s second marriage.

  Shortly after that, in the summer of 1975, Iacocca had a painful demonstration of how badly his relationship with Henry Ford had deteriorated. He learned that Henry Ford was conducting a legal audit of him and particularly of his friendship with a man named Bill Fugazy. Fugazy was in effect Iacocca’s man in New York. He was in the travel business, and he was well known as a friend of celebrities, someone who introduced the famous to the other famous. He gloried in his associations: He had known Cardinal Spellman and knew Cardinal Cooke, as well as Bob Hope and Frank Sinatra and Roy Cohn. He seemed to specialize in the art of being known and being seen and of doing favors large or small without seeming to ask anything in return. He was likable and irrepressible, and among his other skills was an ability to charm the secretaries of all the people he wanted to deal with; thus he knew their schedules and when they were coming to New York and where they were staying. When they arrived, there would be a call—could Billy get them tickets for a show or a sporting event? The Catholic Church leaders in New York liked him, because, among other things, when there was a fund-raising drive, Billy was brilliant at getting large donations from people not always perceived of as charitable. His church connections extended well beyond New York, all the way to the Vatican. In 1964 when Pope Paul VI had come to New York and had driven triumphantly through the city’s potholed streets, he had done it in a Lincoln Continental, a great coup for Ford within the auto industry, arranged by Billy Fugazy. When Iacocca had gone to Rome there had been an audience with the Pope, again the work of Fugazy. Fugazy’s world—of first-name relationships with the famous, dinners with celebrities, and entrée at the city’s most glittering nightclubs—was immensely attractive to Iacocca, who wanted not just industrial and business success, which Detroit could give him, but something larger that Detroit could not bestow: the recognition that went with success. The news magazine cover stories had given him some of that, and now Billy Fugazy was giving it to him as well. Iacocca was grateful. When he was in Billy’s hands, he had fun, and he was around stars. There were those in the Iacocca circle who worried about the friendship with Fugazy and who thought that Iacocca’s gratitude was misplaced—that when Lee had first started coming to New York he had underestimated his own drawing power as a star. Rather than Fugazy opening doors for Lee, they believed, Billy was piggybacking on Iacocca’s own rising fame, while giving the impression that he, Fugazy, had created this environment for Iacocca. For whatever reason, however, the friendship was cl
ose. When Iacocca checked into New York, he checked in with Billy Fugazy.

  Once in the early seventies Iacocca flew into New York on company business, and he took with him Sperlich and Bordinat. They planned to have dinner at Romeo Salta, which was Lee’s favorite restaurant in New York. As a rule when Lee and his buddies went on the town, they did certain prescribed things; they went to the same restaurant, and they took the same post-meal walk (the route chosen by Iacocca) to work off the same number of calories. On this occasion they were all looking forward to eating at Romeo Salta, but Fugazy said no, it would not be Romeo Salta this time, they would eat at the Christopher Columbus Club, which was an association of prominent New Yorkers of Italian extraction. There was a small groan from some of the group, for the food surely would not be as good. Worse, it turned out that this was the annual dinner for the club, which meant that the evening was likely to be long and tedious. Someone surely would be named man of the year, and there would be speeches hailing him. The speeches would be long.

  In all this they were not disappointed, but midway in the evening Iacocca was introduced, and he immediately became the star of the affair. After the dinner was over everyone there seemed to want to line up to meet him, and many of them, as they shook his hand, showed him the keys to their cars, which were Fords. It was clear that Iacocca meant something special to those men, meant more to some of them than even Frank Sinatra. Sinatra had triumphed on a grand scale, but in the world of entertainment, where many other Italians had triumphed and where the prejudices against Italians were less formidable. Iacocca, however, had triumphed in the mainstream of American industry and in the most American of companies, against what they all knew were great odds, and he had done it without giving up a part of himself. Thus the line to shake his hand was a kind of homage, one of his companions thought. The others with Iacocca were bored to tears by the evening, but they noticed that Lee loved every minute of it.

  Over the years, Fugazy had done a great deal of business with Ford. Like most big companies, Ford offered a series of incentive programs for successful dealers—trips to Hawaii or the Caribbean. This was very big business for the travel industry, and the competition for these contracts was intense. As far back as the late sixties under Bunkie Knudsen, other travel agencies had lodged serious complaints with the Ford company against Fugazy. They complained that the Fugazy company had the habit of coming in at the last minute with a bid just under the lowest bidder. The Ford finance people, too, had reported that it was harder to do the Fugazy accounts than those of other companies. Some of the complaints had gone to Henry Ford directly.

  Several of Iacocca’s own friends were uneasy about the Fugazy liaison. Sometimes, among themselves when Lee was not present, they would talk about it. Fugazy always seemed to know so much about the company, too much—or at least, if he did not really know that much, he had a way of making them think he knew a lot. Perhaps that was his real skill, to appear a little closer to the throne than he actually was. Henry Ford did not like the idea of Billy Fugazy’s being associated with his company; indeed, he did not like anything he heard about him. Fugazy at one point had been in the boxing business, and to Ford that was a sure sign of dark forces at work. He often complained about that. Nor did he like Fugazy’s friendship with Roy Cohn. (There had been a complicated federal trial in the early sixties during which Fugazy had testified that in an earlier trial he had perjured himself on Cohn’s behalf in a case that involved a major Las Vegas gambler, Moe Dalitz.) Ford was seeing Kathy DuRoss by that time, and he was convinced that Fugazy was talking about her and her past in New York in terms less than admiring, and that enraged him. But once again the real issue was loyalty. Was Iacocca more loyal to a buddy like Fugazy than he was to the Ford Motor Company? That was the kind of question that bothered Henry Ford about Iacocca.

  Early on, Ford had tried to warn Iacocca off the Fugazy friendship, but Iacocca had been curiously adamant. He was damn well going to choose his own friends, and Henry Ford was not going to dictate who those friends would be, he told those around him. When it became clear that this was not some small problem with Henry but a genuine sticking point, some of Iacocca’s friends, men who took his side almost every time, urged him to listen to his superior and to put some distance between himself and Fugazy. But that made him more intractable than ever. His friends were surprised; some of them thought Ford’s concern legitimate. They were puzzled that Lee, who had been willing to jettison people in the past, was taking such a hard line; after all, the gambit designed to bluff Henry into dumping Knudsen had depended on other men leaving the company. They finally decided it was a sign of Lee’s growing contempt for Henry Ford, and of his own mounting resentment at his status as a hired hand rather than a proprietor.

  The audit at Ford, however it was presented, was clearly aimed first and foremost at Iacocca. It went on for several months and cost more than $1 million. Nothing against Iacocca was ever proved (“I’m clean,” he told friends), and indeed it was said that the audit inadvertently found more expense-account indiscretions on the part of Henry Ford than of Iacocca. But Ford was never completely satisfied with the audit and its lack of results. Iacocca was ordered to sever all of Fugazy’s connections to the company. The audit had been a terrifying experience for those caught up in it. One rather junior Ford executive, loyal to Henry Ford but also fond of Lee Iacocca, had found himself summoned to the office of the chairman. “I’m going to ask you a lot of questions,” Henry Ford had told him, “and if I don’t get the answers I want, I’m going to throw you to the lions.”

  What the audit did reveal was that Henry Ford wanted Lee Iacocca out of the company but did not feel strong enough to dislodge him by himself. Iacocca now had too much power for him to be fired without true cause. The audit had been a search for the cause. If a cause could not be found, then at the very least the audit would weaken Iacocca by showing others in the company that his power was about to be curtailed.

  In that sense it was a successful move, for it seriously wounded Iacocca. Everyone in the company knew what had happened and knew that the chairman was out to get the president. Iacocca’s great strength in the past had been his reputation as an enabler, a man who could force a car through the bureaucracy and who had the confidence of Henry Ford himself. But now that the estrangement was public he was a marked man. He did not have the backing or the ear of the chairman. He was the chairman’s enemy. Soon after the audit there was a meeting in which Henry Ford bitterly criticized the company’s performance. Iacocca was never mentioned, but everyone in the room, including Iacocca, knew that the assault was directed at him. It was as if some great, all-powerful, and often unseen being had declared that it was open season on Iacocca. There was always, in a highly politicized place like Ford, fighting among the factions. Now Iacocca was more vulnerable than ever. His opponents in finance now felt free to attack him, though the attacks must be deft. One line went like this: How long can the company expect to live on the success of the Mustang? The Mustang was more than ten years ago. Or, and this was a particularly telling one: Yes, Iacocca is good, there is no doubt about that—there always had to be the disclaimer; it was much more effective if the disclaimer was there, if the person made it appear he was on Iacocca’s side—but if he is so good, why does Ford’s share of the market never go up, why does it seem locked in at 23 percent? The worst time for Iacocca was always right after the ten-day reports came out. They never seemed to go up very much—they just held the existing territory—and that fact was seized on with no small amount of glee.

  In all of this Iacocca remained silent. The Lundy men were cutting him up, and he rarely responded. Once by chance he got hold of one of the backup books that finance had produced to prepare Lundy for a crucial meeting; for finance, that in itself was a major security leak, for while it was all right to give the opposition the drift of finance’s intended positions, the books themselves were tightly held. At that meeting, when Lundy pressed him on point after point, Iaco
cca said, “Look, Ed, I’ve got all your questions here, and if you want, I’ll just read you the answers that your own people have prepared. That might save us some time.” It was a rare moment of victory, short-lived but sweet. Iacocca believed passionately that the company was not investing enough in its cars, that the oil shock had traumatized Henry Ford, and that the company was trying to save its way out of his problems. But he kept it to himself. He knew the rules of the game: If he went after finance openly, he was going after Henry Ford’s support system. So he held back, becoming increasingly withdrawn. It was a bad time for him, and for his friends a silent Iacocca was unnerving. When he was himself, they could calibrate the noise. Shouting and cursing and general belligerence were essentially the signs of his good health. That was just Lee letting off steam, Lee being Lee. But it was harder to calibrate the silence. That was scary.

  All this might not have mattered—simply a normal factional struggle—except for the timing. The impact of the first oil shock upon the company would have been overwhelming. The company was flagrantly unready, with fuel efficiency the farthest thing from its mind. In fact, it had been preoccupied with catching GM in the big-car range. Inroads against GM’s Cadillac had always come slowly. The Lincoln Mercury division always lost money. Finally, in 1968, the company had come up with a hot car, the Mark III, a sporty model in the luxury class which young people could buy without looking like premature retirees. It used a Thunderbird base and a grill derivative of the Rolls. It had a long hood and a short rear deck. It was an immediate success. The car promptly outsold the Cadillac Eldorado. Ford made a profit of $2000 per unit, and Iacocca liked to boast that in one year the Lincoln division made a profit of almost $1 billion. It was a tantalizing kind of success, and Ford was thus looking one way as the market was about to go the other. In the phrase of Ben Bidwell, one of Ford’s senior marketing men, Ford had learned to do the dance just as the music ended.