Crash Course
Page 34
At least the speed with which Chrysler and GM went through Chapter 11 banished the fear that nobody would buy a car from a company that declared bankruptcy. Everybody at Bessey Motor Sales, including Benner himself, had made sacrifices. But Chrysler was still in business, and they were still employed.
Soon after GM emerged from bankruptcy, Steve Rattner and Harry Wilson left the task force to return to private life. Rattner came under investigation for possibly using improper payments to secure public pension-fund business for his Wall Street firm. His chances for a permanent role in the Obama administration evaporated. Wilson, in contrast, sought a new role in public life, campaigning as a Republican for comptroller of New York State.
Ron Bloom stayed in Washington as senior adviser to President Obama for manufacturing policy, a job that included handling the Auto Task Force’s clean-up work. A year after the bailout he was pleased with Detroit’s fledgling recovery. Bloom also tried, with mixed success, to fend off congressmen who tried to reverse the closings of factories and dealerships in their districts. Among them, predictably, were some of the same congressmen who had railed against Detroit’s bloated cost structure. Their attitude toward Detroit’s cutbacks was a classic case of NIMBY—Not In My Back Yard.
Dozens of dealers who had been terminated did get reinstated, although most didn’t. Likewise, most factories scheduled for closure didn’t survive, although a few got lucky. The GM-Toyota assembly plant in California was bought by Tesla, a new-age car company in Silicon Valley that makes battery-powered hot rods costing more than $100,000. Another shuttered GM plant in Delaware was sold to Fisker, a high-tech car company developing high-priced hybrid sports cars. In the aftermath of the automotive bailout, death and new life were occurring simultaneously.
• • •
Because it hadn’t taken the financial purgative of bankruptcy, Ford ended 2009 with some $32 billion of debt, nearly twice as much as GM. But the company enjoyed a compensating benefit: it gained public approval for forgoing a government bailout when Chrysler and GM—derided as “Government Motors”—had succumbed, and it posted steady gains in market share.
Ford was poised to challenge GM for the distinction of being the largest U.S. car company, more than eighty years after the first Henry Ford had relinquished that crown. In the first half of 2010, the company earned a healthy $4.7 billion and plowed some of the cash into reducing its debt. Ford’s survival and success stood as reminders that the collapses at GM and Chrysler need not have happened.
Meanwhile Toyota was providing another reminder—that hubris and complacency have no national boundaries. The company’s shocking financial setbacks of early 2009 soon were supplanted by a full-fledged corporate crisis.
In August that year a California family driving a Lexus on the freeway couldn’t stop the car after it accelerated out of control, and perished in a fiery crash. Tapes of the doomed family’s frantic calls for help quickly careened around the Internet. Regulators rushed in and accused the company of hiding reports that its cars had defects that could cause them to accelerate out of control.
As public pressure mounted, the company blamed ill-fitting floor mats and sticky accelerator pedals. Toyota recalled millions of cars and even suspended the sale of some models. Congress grilled Toyota executives, including CEO Akio Toyoda, a scion of the founding family. Criminal investigations began. Lawyers launched class-action lawsuits. And then regulators delved into the data recorders on Toyota cars that had been in accidents—and found that many drivers had stepped accidentally on the accelerator when they had intended to hit the brake.
By mid-2010 the line between unintended acceleration and unintended hysteria had blurred. But one issue wasn’t in doubt: Toyota’s once-legendary quality had been slipping for years. In 2005 the company had recalled 2.38 million cars in America, more than it had sold here that year. A few years later Toyota pickup trucks built in Texas suffered from rusty frames, an inexcusable defect that seemed like something from Detroit in the 1970s.
When the occasional news reports on these problems appeared, Toyota officials, instead of rushing to address the problems, had complained to editors about unfair coverage. That, too, was a page out of Detroit’s past. Just as GM executives couldn’t comprehend that their company could go broke, Toyota’s bosses initially couldn’t accept that their quality had declined. By mid-2010 they were chastened and contrite, but repairing their cars and Toyota’s corporate reputation would cost billions.
As Toyota’s troubles showed, a country’s automobile industry is filled with symbolic and financial importance. A nation’s pride can be reflected in its cars, sometimes rationally, sometimes not.
In 2009 China overtook the United States as the world’s largest auto market. In 2010 a Chinese car company called Geely bought Volvo from Ford. That summer the Italian-American Chrysler, without a hint of irony, started airing television commercials showing British redcoats being routed by American patriots—mounting their attack in flag-waving Dodge Chargers.
Amid the uncertainty and upheaval, it was clear that America’s automotive bailout had changed the shape of its auto industry forever. No future car company will ever be like the GM of yore, with half the market to itself while others were left to divide the rest.
Instead, five or six different car companies each will have between 10 and 20 percent of the market; the Big Three will yield to a Medium Six. The likeliest candidates are GM, Ford, Toyota, Honda, Fiat-Chrysler, and Nissan. But Volkswagen and Hyundai could elbow their way into the group, and perhaps, a few years on, a Chinese or an Indian car company will join as well.
Whatever their national origin, all automakers will have to keep abreast of rapid technological change. They will have to make more gas-electric hybrids and perhaps eventually build cars powered by hydrogen fuel cells and other wonders.
Amid all this upheaval, however, one thing is certain. Americans will still love their cars—be they Hondas or hybrids, Fords or Ferraris, GMs or Jeeps—as they have for more than a century.
That much will not change.
Acknowledgments
I have many people to thank for their help and encouragement with this book—many more, in fact, than it is practical to name. Moreover, some of those who helped the most requested anonymity, and of course I will honor their wish. Of those I can name, Scott Moyers and Andrew Wylie of the Wylie Agency deserve heartfelt thanks, along with my terrific editors at Random House—Susan Mercandetti, Millicent Bennett, and their capable assistant, Ben Steinberg. Thank you to Mit Spears, also. Many dear friends in Detroit opened their homes and hearts during my regular research visits: Logan and Edrie Robinson, Joe and Jan McMillan, Gary and Leslie Miller, Al and Cathy Rutledge, and others. Susan Insley and Scott Whitlock provided invaluable perspective on Honda’s critical early years in the U.S. Jim Fitzpatrick and his wife, Jan, provided keen insight—and appropriate critiques of my thinking—from Jim’s years at General Motors. Fred and Gene Young in Belvidere, Illinois, and Gene Benner in South Paris, Maine, provided ground-level views of Detroit’s drama of 2008–2009.
I owe much thanks for friendship and encouragement to two fellow authors, James B. Stewart and Jonathan Knee. And special appreciation goes to a host of friends and former colleagues from The Wall Street Journal and Dow Jones, including John Stoll, Joe White, Peter Kann, Irv Hockaday, Leslie Hill, Tunku Varadarajan, Neal Lipshutz, Howard Dickman, Rob Pollock, and Paul Gigot. Many good friends at the Morris County Golf Club in New Jersey provided welcome company when I needed to breathe some fresh air, hit something (hopefully 220 yards and straight), and take a break from writing.
Most valued was the support from my family, including my wife, Susie, our three dear sons, and my brother, Larry, the business editor of The New York Times—truly the top journalistic talent in our family.
Notes
One: Where the Weak Are Killed and Eaten
“We have done all we can do”: Kevin Krolicki and Soyoung Kim, “SUVs at Altar,”
Reuters, December 7, 2008.
recommended that new bulletin boards be installed: GM Bulletin Board Study Committee, memo, November 23, 1988.
“Maybe instead of getting mad”: Retired GM executive, interview by author, March 2009.
“We didn’t undergo fundamental change”: Robert A. Lutz, Guts: 8 Laws of Business from One of the Most Innovative Business Leaders of Our Time (1998; New York: John Wiley & Sons, 2003), emphasis in original.
The cycle reached its peak: Jeffrey McCracken et al., “Delphi Bankruptcy Filing Expected,” The Wall Street Journal, October 8, 2005.
Two: Dynasty and Destiny
“I will build a car for the great”: David L. Lewis, The Public Image of Henry Ford
(Detroit: Wayne State University Press, 1987).
“the extra pay went only for better”: “Labor: Model T Tycoon,” Time (cover story), March 17, 1941. 17 “has in his social endeavor committed”: Editorial, The Wall Street Journal, January 7, 1914.
“If an employer does not share prosperity”: Henry Ford and Samuel Crowther, Today and Tomorrow (Garden City, N.Y.: Doubleday Page & Co., 1926).
“There won’t be any trouble”: Bernard A. Weisberger, The Dream Maker (Boston: Little, Brown, 1979).
“dressed just as he did in New York City”: David Farber, Sloan Rules (Chicago: University of Chicago Press, 2002).
“served a new demand on GM”: International News Service, December 31, 1936.
“Mr. Ford, I don’t think what”: Arthur Railton, The Beetle: A Most Unlikely Story (Verlagsgesellschaft Eurotax AG, 1985).
Three: Glory Days of Ponies and Goats
“If Ford makes success”: Zora Arkus-Duntov memo to Chevrolet management, National Corvette Museum, Bowling Green, Kentucky.
“to settle for no more than”: “First Among Equals,” Time, January 2, 1956.
“If you stand still”: Ibid.
cars should provide “visual entertainment”: “The Design History of General Motors,” GM press release, May 2006.
“like putting falsies on grandma”: Lee Iacocca and William Novak, Iacocca (New York: Bantam Dell, 2007).
Four: Crummy Cars and CAFE Society
“was thus by definition inflationary”: Jerry Flint, “General Motors and Union Reach Terms for Pact,” The New York Times, November 12, 1970.
happened to fall on Ash Wednesday: General Motors executive, interview by author, May 13, 2009.
“I frankly don’t see how”: Jerry Flint, “Henry Ford Pessimistic on Foreign Autos; Doubts Detroit Can Compete,” The New York Times, May 14, 1971.
“holding the industry’s feet”: Ibid.
Chairman James M. Roche: J. Patrick Wright, On a Clear Day You Can See General Motors (London: Sidgwick & Jackson, 1979).
Meanwhile the Vega failed to meet: Ibid.
“Autos regularly roll off”: “Labor Sabotage at Lordstown?” Time, February 17, 1972.
“I Would Have Rather Bought”: Deborah Arnesen, interview by author, February 2009.
By 1975 GM’s pension costs for UAW members: Roger Lowenstein, While America Aged (New York: Penguin Press, 2008).
“Pension costs have substantially exceeded”: Ibid.
“We were aware that the trend”: Raymond Boryczka, Archives of Labor and Urban Affairs: A UAW Chronology, 1935–1990, Reuther Labor Library, Wayne State University.
“Our members have the best contract”: Jeff Bickerstaff, assistant to marketing executive Buzz Hammer, interview by author, April 2009; Bickerstaff recalled this conversation between Woodcock and Hammer in the fall of 1978.
Between 1971 and 1974 the price of a typical Vega: Robert Spinello, “Complete Vega History 1970–1977 Including Yearly Changes, Virtues & Vices, Cosworth, ‘71 Press,” online at http://H-body.org.
The Olds owner complained to the Illinois: “End of the Great Engine Flap,” Time, January 2, 1978.
“It was like a large napalm bomb”: “Fire Came from Fuel Tank Area,” Associated Press article in The Globe and Mail, January 18, 1980.
“the tube leading to the gas-tank cap”: Mark Dowie, “Pinto Madness,” Mother Jones, September/October 1977.
“Burning Pintos have become”: Ibid.
mainstream publications: “Ford Pinto Scored in Coast Magazine on Peril from Fire,” Associated Press article in The New York Times, August 11, 1977.
Ford won a $19.2 million federal contract: Dow Jones News Service, May 6, 1980.
“The conventional case for a bailout”: The Washington Post, August 2, 1979.
Five: Honda Comes to the Cornfields
But when the Americans asked for detailed: Shige Yoshida, retired Honda executive, interview by author, January 8, 2009. “is going to have a Jap engine”: Op. cit. Iacocca with Novak, Iacocca.
“just a four-wheeled motorcycle”: Masaaki Sato, The Honda Myth (New York: Vertical, 2006).
Improbably, a Japanese boy: Yoshida interview.
“Hippies,” he said. “Blue jeans”: Ibid.
“We’re going tomorrow”: Jim Duerk, interview by author, November 5, 2008.
The entire trip lasted just four and a half days: Ibid.
One of the first to apply: Al Kinzer, interview by author, March 2009.
Kinzer protested that Honda was ignoring: Ibid.
“I thought I had made a mistake”: Brad Alty, Honda worker and later manager, interview by author, October 2008.
“It was all about speed, crazy speed”: Toshi Amino, interview by author, October 2008.
“Where is the airport in Columbus”: Yoshida interview.
The union viewed the nonunion plant in Marysville: Rev. Peter Laarman, former director of public affairs, United Auto Workers, interview by author, January 9, 2009.
Certainly they expected Honda’s “associates”: Ed Buker, former Honda factory manager, interview by author, January 14, 2009.
“I think we fight”: Chan Cochran, Honda consultant, interview by author, October 2008.
Yoshida, who bore the brunt: Yoshida interview.
Six: Repentance, Rebirth, and Relapse
No one dared reveal: Op. cit. Iacocca with Novak, Iacocca.
“birthday parties, benefits and bar mitzvahs”: Urban C. Lehner, The Wall Street Journal, January 4, 1985.
“Are you saying we’ve been fucked”: Retired Chrysler executive, interview by author, 2009.
“identified over 400 of the best”: Ford sales brochure, 1986, National Automotive History Collection, Detroit Public Library.
“more secure than ever in history”: Jeffrey McCracken, “Idle Hands,” The Wall Street Journal, March 1, 2006.
CEO of the Year: Financial World, April 1985.
“cherubic chairman of General Motors”: William J. Hampton and Marilyn Edid, BusinessWeek, June 17, 1985.
“Chrysler is diversifying”: Lee Iacocca, chairman’s letter, Chrysler annual report, 1985, National Automotive History Collection, Detroit Public Library.
Other automation-software malfunctions: Amal Nag, “Auto Makers Discover ‘Factory of Future’ Is Headache Just Now,” The Wall Street Journal, May 13, 1986.
“Roger Smith works on everything”: H. Ross Perot, interview by Doron Levin and Paul Ingrassia, Dallas, May 1986.
“The first EDSer who sees a snake”: “Ross Perot’s Crusade,” BusinessWeek, October 6, 1986.
“What’s Plan B?”: Former GM executive, interview by author, 2009.
It was all perfectly legal: Gary Hector, “Cute Tricks on the Bottom Line,” Fortune, April 24, 1989.
“reflect the company’s renewed commitment:” Lee Iacocca, letter to shareholders, Chrysler Annual Report, 1989, National Automotive History Collection, Detroit Public Library.
“I see it’s three against one”: Robert Stempel, interview by author, 1990.
“We realize the urgency of change”: John F. Smith, Jr., letter to shareholders, General Motors Annual Report, 1992, National Automotive History Collection, Detroit Public Library.
Seven: “Ca
r Jesus” and the Rise of the SUV
Honda executives told each other: Former Honda executive, interview by author, 2009.
“has given Jeep’s renowned Cherokee”: Dennis Cauchon et al., “What’s Hot, What’s Not,” USA Today, December 24, 1990.
“People from Ford prefer Chevy trucks”: Joane Lipman, “Feud Revs Up Over Chevy’s ‘Ford’ Ads,” The Wall Street Journal, January 11, 1990.
“Nobody really loves you but your momma”: Lindsay Chappell, “Billmyer Sentence Satisfied Ex-Dealer,” Automotive News, October 9, 1995.
He threw Billmyer out: Ibid.
“kissing the ring”: United States v. John W. Billmyer, U.S. Court of Appeals, First Circuit, No. 95–2147.
“Rolex conventions”: Holman Jenkins, “‘Tis the Season of Sin at Honda,” The Wall Street Journal Europe, December 18, 1996.
“Car Jesus”: Scott Higham, “Bribe Case Steers Honda to Court,” Baltimore Sun, July 21, 1996.
Cardiges made it happen: Ibid.
Another dealer who contributed: Bill Krueger, “Auto Tycoon Hendrick Indicted,” Raleigh (NC) News and Observer, December 5, 1996.
One New England dealer: Jenkins, “‘Tis the Season.”
“mutual agreement”: United States v. John W. Billmyer.
“could well be accused of being negligent”: James Bennett, “Four Former Honda Employees Sentenced in Kickback Case,” The New York Times, August 26, 1995.
“It’s a case of damage limitation”: Seth Sutel, “Japan Carmakers Losing U.S. Sales,” Seattle Post-Intelligencer, March 17, 1994.
The new Ram pickup: Keith Bradsher, High and Mighty: The Dangerous Rise of the SUV (New York: Public Affairs, 2004).