Reckoning

by David Halberstam

  Runyon knew it was impossible to prove that quality suffered in situations like that, but of course he and every other man who ran a plant knew that it did. It was impossible to prove that if they took a couple of hours off to maintain the machines, it was better for the company in the long run. In a situation like that, quality, above all, suffered. Runyon liked Ed Lundy and thought him a decent man. Whenever something was so important to Runyon that he was willing to invest his own personal credibility, put his own neck on the block, then Lundy would almost surely accommodate him. The trouble was, it had to be a matter of life or death to get to Lundy. On anything less than that, Lundy’s system prevailed, and the system was dominated by endless concentric circles of bright young finance men who placed the manufacturing men perpetually on the defensive. During the sixties it became more and more difficult for the manufacturing men to get money for their plants, and the situation steadily became worse. Hard in the sixties, Runyon thought, even harder in the seventies.

  Nothing reflected this—the low priority of manufacturing within the company, the lip service paid to quality—more than the struggle during the sixties and seventies to get a process called E-coat into the plants. E-coat was a technique that the Ford manufacturing-development people themselves had invented in 1958 to improve the quality of the paint jobs, particularly the rustproofing of the underbellies of the cars and trucks. It was an ingenious process. In the past the manufacturing people had tried all kinds of gimmicks to get paint to reach the nooks and crannies of the cars, but it had always been a hit-or-miss proposition, and the cars remained vulnerable to rust. E-coat could remedy that. In effect it was like painting a car the way metalworkers plated metal with silver or chrome. In the process, the car body was completely submerged in a tank of paint and given an electrical charge; the paint received the opposite charge. Thus the paint, electrically attracted to the car, was pulled into the tiniest, hardest-to-reach crannies of the body. From the first the process was a stunning success. No one had ever dreamed of paint coverage like that before, and Ford was first with it. Very soon it became the industry standard. Ford of Europe, being in an extremely competitive market, quickly installed it in all of its facilities. General Motors picked it up, paying a royalty to Ford based on the amount of paint it used. The Japanese also went to it. Nothing embittered the men of Detroit more than the knowledge that an invention as precious as this—which they had developed—was given to Ford of Europe and withheld from Ford North America. To them it was the ultimate proof of the arrogance of their superiors toward their customers.

  Ford itself moved very slowly in installing the process in its American plants. It was an expensive technique, to be sure, requiring a huge dip tank and supporting paint ovens. Nonetheless the reluctance of the company to adopt a technique so clearly superior and so critical to basic soundness symbolized for many in manufacturing Ford’s indifference to quality. E-coat was moved into the Wixom plant immediately, in 1961, for that was the company’s prestige plant, where its expensive Lincolns and Thunderbirds were being manufactured. But getting it into the other plants was much more of a struggle than anyone had expected. Even in those pre-inflation days of the early sixties it would cost about $4 or $5 million a plant. Since there were twenty plants, the total figure was large, just under $100 million. The men who had developed E-coat and the plant men who pushed for it considered it the key to a great increase in quality. Unfortunately, there was no way to quantify that improvement in terms of sales. That it was a much better process no one doubted. But when the manufacturing and product men pointed to its virtues, the finance men would point to the price. Somehow the manufacturing men would be unable to prove that E-coat would make a $4 million difference. How, after all, asked one of its proponents, did one put a price on a happy customer? It took four years to get it into the next plant, which was St. Thomas, a brand-new one. Runyon, urged on by other manufacturing men, asked that it be put in every factory. He would keep saying that it was incomparably better, and the finance men would say, oh it was better, no doubt of that, finance would take his word for that, but was it really that much better, was it worth all those millions, could he prove the benefits? No, of course he could not. At those meetings he always ended up, like others before him, on the defensive; he would go in confident of what he intended to say, and when it was over he had somehow failed. In 1973 he was in a styling meeting with Iacocca when suddenly Iacocca exploded in rage over the quality of the cars they were making, especially the way the cars were rusting. The kickback Ford was having to make on their warranties was getting alarming. “Goddammit,” Iacocca yelled, “when are we going to do something about this damn problem? We’ve just got to fix these goddam plants.” Runyon talked to him after the meeting, and they decided they would try to get E-coat into a few more factories if they could. But the experience that day left Runyon shaking his head. Iacocca, he thought, is the president of this whole operation, and yet he’s as much a prisoner of the system as I am.

  By 1975, E-coat was in only half the Ford plants. Only then, as the competition from the Japanese mounted and as it became increasingly clear that one of their assets was superior quality, including fine steel and excellent paint jobs, was there a real drive to get E-coat into more plants. In 1984, more than twenty-five years after Ford had invented it, the company got it into its last two plants, one in Norfolk and the other a truck factory in Kansas City. The failure to move on something like E-coat, Runyon thought, was as sure a sign of a monopoly mentality within the industry as anything he could think of.

  The Ford system, he decided later, was not just an imbalanced one—in which finance and marketing were the favored divisions—but one with clearly delineated class lines. The manufacturing people were, he decided, politically and economically disenfranchised within the company. The finance people had their careers laid out for them: They never had to go out in the field and actually deal with the reality of making cars; instead, they found sponsors and they went right up through the ranks. If they were good, the company did not want to lose them, and within a short span they would be at grade 16, where the executives’ list started. By comparison a young manufacturing man would encounter a subcurrent of condescension and disrespect. If he had spent twice as long in the field and excelled at what he did, he would move very slowly into the grade 13–15 range and remain there for a long time. At grade 15 in the early seventies, a relatively prosperous time for the industry, a manufacturing man might make a salary of $40,000 with a limited bonus. Someone in finance who was the same age and performing equivalently would more than likely be several levels above him in grade and drawing much larger bonuses; the total package might be three or four times as much.

  The men in the factories were under constant stress; there was always too much to do and too little to do it with. The plant managers, unlike the finance men, were caught in the brutal contradictions of the modern-day Ford Motor Company—high volume, diminished resource from Detroit, diminished leverage in dealing with workers. The plants, more than any other place in the company, were where men burned out. In the old days under the original Henry Ford and Charley Sorensen, the plant men had talked of the Ford Stomach, which was inevitably ulcerated. It was said of the manufacturing men that retirement benefits were unnecessary because few of them lived to retire; heart attacks and serious abdominal illness struck them down in their fifties and sixties. It was not surprising that by the mid-sixties the level of alienation among the men who ran the plants was exceptionally high. When they got together away from work they spoke bitterly about Detroit—not about product, not about their mission, which they loved, but of the frustrations of dealing with people who seemed so removed from the reality of their daily dilemma, and who treated them so badly. Even the best of them had little chance of making vice-president. They were men of Ford, it was true, but their autonomy had been whittled down every year for almost twenty years, and they felt themselves second-class citizens within the company.


  It was widely believed in Ford manufacturing that the two ablest plant men in the late 1960s were Marvin Runyon and Don Lennox. At that time Xerox, upgrading its management and looking for a new head of manufacturing, became interested in both men. It finally offered the job to Runyon. Restless at Ford, discouraged about the lack of opportunity it offered, fed up with the frustrations of his work, excited by the Xerox offer—he would immediately become a vice-president—Runyon accepted it. The deal was done, but later Runyon had a feeling that Xerox was softening the terms, and he pulled back. Xerox then offered the post to Lennox, who eagerly took it.

  The message of the incident was sobering to those who bothered to consider it: The two most talented young plant men at Ford could be lured away, something that would not have been possible in another era. Runyon stayed on at Ford, eventually becoming a vice-president. But ten years later, his frustrations as great as ever, he finally left. Much to the annoyance of many of his superiors, Runyon did not go to another American company (Xerox had been bad enough) but took a job—a much-coveted job, actually—as the head of the first Nissan plant in America.

  The first thing Runyon noticed about working for a Japanese company was the much greater autonomy of a plant manager. The second thing he noticed was the much greater prestige of manufacturing men within the company. The board of directors of Nissan, in direct contrast to Ford’s, was filled with men who had spent a great deal of time running plants.

  31. DATSUN SAVES

  IF THE FIRST OIL shock, after the Yom Kippur War in 1973, enraged and discomfited the Americans, who suddenly had to pay more for gasoline, then it truly frightened the Japanese. For it was not some temporary inconvenience; it was a crisis imperiling their modern society. Their economy was entirely built upon oil, of which they, unlike the United States, had no domestic supplies. What followed was pure panic. There was immediate hoarding of nearly everything, stores were mobbed, and the government had to promise that there would be enough toilet paper for everyone. A quickie book entitled The Oil Is Cut instantly became a best-seller. A great debate commenced on the future of the Japanese economy. Some intellectuals argued for a foreign policy more sympathetic to the Arab nations and less supportive of Israel. Others favored a more primitive economy less dependent upon foreign oil; Japan, they argued, could go back to its old traditions, and live once again as it had in the past, around the kotatsu, which was the brazier where the entire family gathered, sitting with quilts over them so that they could catch the heat from the fire. Companies decreed emergency measures to conserve energy; the paint ovens at most of the auto factories, for example, were redesigned so that they needed less heat. Steel production was cut back because of the lack of energy. Throughout the world of business, faucets in the lavatories produced only cold water. During the shock a visiting American executive touring the headquarters of one major company sensed the supreme irony of modern Japan: lights off in the halls, passageways so darkened that visitors could not see the Chagalls and Picassos mounted in the halls.

  The entire experience confirmed to the Japanese how vulnerable and how isolated they were as a nation. Soon another book became a best-seller—Japan Sinks, in which a geological catastrophe causes Japan to begin to sink into the Pacific Ocean. The plot focuses on the matter of which countries agree to accept allotments of Japanese as the island goes under. (It is a fascinating study in national paranoia on the part of a nation that has been almost unique in its unwillingness to take refugees from other countries, most notably Vietnam.) The debate over what Japan should do in its new energy-deprived circumstances continued endlessly. One of the first things the Japanese did was tilt their foreign policy away from Israel to greater support of the Arabs.

  The recovery came slowly. Eventually the effect of the shock was to enhance Japan’s position in the international economy (because it was more disciplined, less wasteful, and thus better prepared for harder times), but in the beginning it was probably harder on the average Japanese worker than on workers elsewhere. There was a flurry of small bankruptcies. Many people were laid off, others went to shorter hours. Soon, however, it became clear that Japan was going to be the beneficiary of this crisis. Some Nissan executives claimed it was actually a blessing, because it had badly shaken the younger workers who had taken the company’s success for granted and had become arrogant and spoiled, and it had made them properly grateful for their jobs. It was not just that there was now a greater need for smaller, gas-efficient cars. It was also that the yen fell. As the yen fell, exporting became easier.

  In the summer of 1973, a few months before the first oil shock, Nissan was about to mount a major upscale advertising campaign on behalf of its new and, for a Japanese car company, luxurious model, the 610. The 610, which had more standard equipment than any predecessor, was the first attempt by Nissan to emulate GM and move up with its customers as they became more affluent. The campaign was agreed upon and the theme, “Datsun Originals,” approved. The campaign featured original pieces of art by Peter Hurd, Peter Max, Robert Rauschenberg, and Salvador Dali. (An approach had even been made to Pablo Picasso, but he had little interest in doing a poster to help a Japanese company sell cars in America.) Katayama, an avid amateur painter, loved the campaign, but the dealers, when consulted, were underwhelmed by it; to them it was about status and snobbery—the company was going to advertise itself instead of its cars. Then, just as the campaign began, the world started to change. In October 1973 the Yom Kippur War took place. No one in Nissan America knew what the impact of that war would be, but it was obvious that it would affect the price of gas. At virtually the same time, in November 1973, the people at Nissan found out that the U.S. Department of Transportation had completed its first mileage test and that the Datsun 1200, the company’s smallest car, one that had been around for several years and that the executives were anxious to phase out, had scored the best mileage. Mayfield Marshall, Katayama’s friend who worked in advertising, took a crew and started filming the 1200 going across the country, from Palos Verdes to Maine, where it finally drove up to a lobsterman standing amid a pile of lobster pots. A team of independent authorities went along to check how much gas the 1200 used. The Department of Transportation study had rated it at thirty-three miles to the gallon; the independent officials certified that on this trip the 1200 had gotten forty. The last line of the commercial was simply: “Datsun Saves.”

  Then the Arabs, furious over Israel’s victory, imposed their oil embargo. Originally Nissan’s ad was planned to be only a small part of its overall campaign. Katayama immediately called a meeting of Nissan’s advertising people. Marshall showed the film, which was quite striking. “This will be our campaign,” Katayama declared.

  Even if there were few 1200s left to sell, Datsun was able to push its low-cost replacement, the 210. Fifteen years of hard work and of constant upgrading of both performance and quality now paid off. This was the moment at which the Japanese consolidated their position. The Germans, because they had stayed with the Beetle, were unable to exploit the new opportunities. The boycott ran until March 1, 1974.

  For the American auto companies, 1974 was beginning as a terrible year, what with the trauma of the embargo, the uncertainty over how long it would last, and the pending fateful question of whether the future belonged to big cars or small. Production was down 23 percent. The Japanese had trouble too, in finding the oil to keep their factories going, coping with depleted steel production, and shipping the cars they were making. But in due course the Japanese began to adjust to the crisis. The real benefits came in 1975. That was an important year for them, the year Toyota passed Volkswagen as the leading import car.

  In 1973, VW had still been selling almost as many cars as the two Japanese companies combined. By 1975, however, Volkswagen was competing against cars in the same price range that had higher performance. In addition, the Germans were having exchange-rate problems with a strong deutsche mark, which made VW prices steeper in America. VW fell behind Toyota (2
83,000 to 268,000) and was only 20,000 units ahead of Nissan. (In fact, Nissan was some 67,000 vehicles ahead of VW if truck production was included.) Even more significant, imported passenger cars went to 18.3 percent of the market in 1975, and half of those cars were Japanese.

  Yutaka Katayama watched this startling success and knew that it marked the end of his freedom. As long as Nissan America was small, profitable, and making progress (but not too much progress), he was relatively safe in his job. If he had been very unsuccessful, Tokyo would have paid attention, and now that he had become very successful, Tokyo, he realized, would pay a great deal more attention. If anything his growing accomplishment and the considerable publicity he was receiving were reminders back home that he was getting out of control and accepting credit for things that were not, it was felt, rightly his to take credit for. He had no sponsor in Tokyo, no one to speak up for him. Over the years as he had begun to do well in America, friends had begged him to go see Shioji during his visits to Tokyo and pay homage. The phrase they used, for in the old days the labor office was right across the river from the old Nissan headquarters, was “go across the bridge.” Shioji was susceptible to courtship, they said; the relationship could still be patched up. But Katayama stubbornly refused to try. Kawazoe, his opposite number on America’s East Coast, who was not doing as well in sales, had maintained his strong connection to Shioji and thus was still well-thought-of. Kawazoe, Katayama once said, had always had a gift for playing poker with the right people. Finally, somewhat reluctantly, on one trip home Katayama went across the bridge to see Shioji. Shioji was an hour late for the meeting. In a country where people are extremely prompt, there was no doubt of the lesson Shioji was teaching Katayama.