Reckoning

by David Halberstam

  As the American operation became increasingly successful, more and more bright young men began to arrive from Tokyo to help him out. Katayama was extremely wary of some of them. “This one,” he might say, “is here to spy on me. Watch out for him. Tell him nothing.” At first some of Katayama’s American associates thought he was being a little paranoid; later, as they learned more of the complexity of the politics of the company, they were not so sure. When Kawamata or Ishihara or Okuma showed up in America, they seemed cold and disapproving, and Katayama, in turn, usually so exuberant, became reserved. The Americans in the office thought Katayama was doing a brilliant job, and they found it odd that when they took these visiting officials out to some appointment and, making small talk, mentioned something about how well Mr. K, as they called him, was doing, the visitors never responded, never said a kind word about him. For Katayama had been much too visible in America, had taken too much pleasure in what he had done, had not played the role of the modest Japanese businessman who owes all to his superiors. They would not lightly forgive him for that.

  Katayama himself knew that from their point of view, there had been too many articles in American newspapers and magazines about this wonderful entrepreneurial Japanese businessman in Los Angeles who had made Nissan such a success, and who had become so Americanized, and who was, it seemed, an honorary sheriff in half the counties in Texas. Too many people had said that it was Katayama’s company and that the 510 was Katayama’s car. All that, he knew, would hurt in Tokyo, but he did not care. He knew that they thought he had gone too American, that his clothes were considered too sporty and his manner too informal, and that every request he made to modify the car, no matter how valid, and no matter that Tokyo followed up on it, would eventually help to undo him back home. There he was seen as a spokesman for America against Japan, a man who had been implicitly critical of the existing Datsuns. He had had no illusion about his position from the start. “Everything I do right here,” he told his closest American associates, “will be considered something I did wrong by Tokyo.”

  When he bought a house in Palos Verdes, he knew it would be held against him, that he would be charged with high living. He knew he would never be able to make Tokyo understand that whereas in Japan—because housing was so bad and perhaps because women were not a part of the business world—businessmen entertained by taking one another out for extravagantly expensive nights on the Ginza, in the United States, with its wonderful housing, Americans entertained in their homes. He paid a mere $25,000 for the house, and he loved entertaining there, barbecuing steak like an American but serving sushi beforehand. By American standards the house was very nice, but by Japanese standards it was extraordinarily grand, far grander than those in which his superiors lived at home. The house was always a sticking point. Tokyo never really accepted the idea of the house. A steady stream of high Nissan executives passed through California, looked at the house, and held it against him, concluding that if Katayama had a house this splendid, he was in some way ripping the company off. When Katayama retired, his successor sold the house at a profit of about $50,000 (and was much applauded for being a good conservative Japanese), and if he had held on a few years more, it would have been worth more than $1 million.

  The end for him began when Hiroshi Majima showed up in 1975. He became president and Katayama became chairman. There had been Japanese executives who had arrived in the past, but Katayama had always been able to deal with them. Majima was different. He was Ishihara’s man, a vice-president back in Tokyo, an executive with clout and connections. It was clear from the start that he was there to replace Katayama, and that his coming signaled the close of the era. There were two main offices in the Nissan headquarters, Katayama’s office and another one that was used mostly for ceremonial occasions. Majima moved into the ceremonial office. It was an uncomfortable time for everyone. Katayama, of course, knew a lot more about America and doing business there, and Majima, just as clearly, outranked Katayama by light-years and was under orders to take the company back from him. Majima did not speak English, and to the Americans at headquarters his manner seemed chilly and evasive. It was hard to get a quick and clear answer from him. He was not comfortable with Americans, only with other Japanese, and he brought more and more of them into the Los Angeles office. For some of the Americans it was their first real recognition that they were working for a Japanese company.

  Katayama knew his time was running out. He had stayed on in America past retirement anyway, and now Tokyo was catching up. In early 1977 he received a cable summoning him home, without explanation. It was as if he had suddenly disappeared. On arrival in Tokyo he was informed that he had retired a few days earlier. His friends back in Los Angeles did not know what was happening, but feared the worst. Mayfield Marshall, who did the advertising and was probably Katayama’s closest friend in the company, cabled him in Tokyo. “Hope they give you more than a gold watch,” he said. A few weeks later Katayama returned. He looked at Marshall and held up his wrist. On it was a gold watch. It was about the only thing they gave him.

  He did not particularly want to return to Japan and for a time considered staying on in America in a different business. But he returned home, and in Tokyo Nissan wanted to hide him. It was almost as if he had come home in disgrace. There was no reward for the job he had done; Nissan was not about to honor him. He was not put on the board, though normally the executive who had held his job and done it so well would have been on it. He did not make vice-president. He was given a minor job in an advertising subsidiary. “I was farmed out,” he wrote his friends in America. “At least I am beyond the reach of the union.” Nissan tried to minimize any publicity in Japan about the role he had played. When American writers wanting to talk about the American operation showed up, the Nissan public-relations people would come up with a short list of names, and though Kawazoe’s was on the list, Katayama’s was notable by its absence.

  Not everyone ignored him; in April of 1977 Katayama was awarded a blue ribbon by MITI for his work in behalf of Japanese trade in America. That was a particularly high honor, and it pleased some of his friends back in America, for to them it was as if he had won it in spite of Nissan. But he took little pleasure in the award; to him it had a slightly bitter taste. He sensed that the Nissan people, embarrassed by his success in America and their own failure to recognize it by putting him on the board, had gotten MITI to do their work for them. It was partly a scam, he thought, and he felt oddly detached on the day of the award. Later he could not even remember whether or not he had celebrated with a few friends that night. A few months later there was a party in his honor given by about 150 of his friends and colleagues; they had had to pay for the party themselves he noted acidly.

  In America, Nissan moved quickly against those who had been his nearest associates. Within a few months it got rid of John Parker, who had been in charge of the advertising. (Tokyo had always hated how much Parker made.) But in a way Katayama got his revenge. For in America he had become not just popular, not just admired, but mythic. In 1983, Car and Driver, lamenting that Nissan products, though still durable, had become boring (“Nissan remains innovative only in financial matters,” the magazine noted), published a special tribute to Katayama as a human being and as a car man. By dint of a rare human vision, he had helped make a small, incompetent Japanese company an exciting one, pushing it relentlessly to produce its best. What Nissan needed most now, Car and Driver asserted, was another such man. The title of the article said it all: “Where Have You Gone, Yutaka Katayama?”

  32. THE STRUGGLE AT THE TOP

  THERE WERE CLEAR SIGNS in the early seventies that the domestic market was changing. Some of the more iconoclastic people at Ford and GM had been bothered by Volkswagen’s success with the Beetle in America, not so much by the sales numbers as by the fact that comparatively affluent and sophisticated people were buying it. There were other signs of alienation. In California by 1970 the Japanese cars were beginning to sell vig
orously in the lower echelons of the market. The cars were relatively inexpensive and were winning an enviable reputation for quality and economical gas mileage. Franklin Murphy, who was on the Ford board and who was the head of the Los Angeles Times, would mention the Japanese invasion to his fellow board members when he came to Detroit for meetings, but they would always put him down. It was serious, he insisted; the Japanese were doing very well in California, a state that tended to signal trends to the rest of the country, and doing well with an educated, young, expanding part of the market. But his colleagues seemed to feel that if the people of California were buying Japanese cars, then it was because California was an unreliable place, filled with health faddists who did not eat meat, worshiped strange gods, and preferred to play in the sun rather than work all day at a real job. The people who bought Japanese cars, one Ford executive said, probably all lived in communes. It was simply very hard for Americans to take the Japanese seriously. If the Japanese were doing well, the feeling seemed to be, it was only because the Americans had never really paid much attention to that segment of the market.

  Iacocca embodied that feeling. In 1971 when his friend Carroll Shelby, the race driver, called and said that he had been offered a big Toyota dealership in Houston, Iacocca laughed and told Shelby, “Let me give you the best advice you’ll ever get. Don’t take it.”

  “Why not?” Shelby asked.

  “Because we’re going to kick their asses back into the Pacific Ocean,” Iacocca answered.

  Shelby listened and turned down the dealership. Later he decided it was the worst business decision he had ever made, one that in the decade that followed cost him roughly $10 million.

  It was at this time, starting in 1971, that the Ford Motor Company faced a decision that would have profound long-range consequences. It was the question of whether or not to go into small, fuel-efficient front-wheel-drive cars. In the past Detroit’s attempts to produce small cars had generally been halfhearted. The cars were afterthoughts, chopped-down editions of bigger cars, almost always underpowered and disappointing. But the Europeans were beginning to move toward cars that though small were fun to drive. The world was changing, and the company had to think about designing a radically new small car, a costly step. The issue cut to the very existence of the company, for Ford, with its existing salary scales, both for management and the union, was all but locked into an untenable dynamic. Because it paid out so much, it had to show constantly bigger profits, and bigger profits meant bigger cars. Without anyone realizing it, the wage scale, from the top down, had become geared to big cars and premised on an absence of real foreign competition. The profits that big cars generated had become addictive.

  This crucial decision had to be made in the worst of contexts, an all-out power struggle between the company’s two top executives, Henry Ford and Lee Iacocca. The struggle was already bitterly personal, and now it was to become economic and philosophical as well, with all three aspects interwoven. It began with Iacocca’s attempt to make Hal Sperlich head of Ford in Europe. He had failed at that. So now, in 1971, he sent Sperlich there on special assignment. Iacocca believed that Ford was weak in the lower half of the European market. He also regarded the continent as alien territory. Except for Italy, he felt uncomfortable there, and he felt none of the principal Ford people there were loyal to him. He sent Sperlich to Europe with instructions to sniff around for six or seven months and learn everything he could and try to come up with a small car. It was a delicate assignment, for Sperlich, an indelicate man, would be working behind the lines in territory belonging to Philip Caldwell.

  Sperlich’s mission occurred just as the Europeans were bringing out their new front-wheel-drive cars. Sperlich immediately fell in love with them. Soon after he arrived he test-drove a Fiat 127, and he was stunned by the sheer pleasure of handling it. It was the smallest and yet the best-handling car he had driven in years. The word that came to mind was nimble. Driving it was pure fun. He then knew that these front-wheel-drive cars were about to happen. The customers would want them. This was progress, and it could not be held back. The only question was how well and how quickly the American companies would respond.

  Sperlich was a good friend of David E. Davis of Car and Driver. Soon Davis’s magazine referred to Sperlich as a born-again car lover. For Sperlich had regained the purer automotive faith that he had lost during fifteen years in Detroit. He was above all else an engineer, with the engineer’s passion for efficiency. Now he had an epiphany, which was that Detroit was a crippling place for engineers because it was deliberately inefficient. Slowly, without even realizing it, he had become subverted by that philosophy. He remembered how excited he had been fifteen years before when he had first seen the VW Beetle. It was so different from anything he had known before; it had the qualities that engineers worshiped. It was simple, and it was efficient. It used a minimum of resources and produced maximum results. But the world of Detroit, the world of power and size for their own sake, had pulled him away from the elemental truths that the Beetle represented, and before long he had found himself regarding the German import contemptuously. He wondered now whether Detroit’s ethic was one of intentional excess because that was the American ethic, or whether Detroit led the country. It was as if for twenty years the Detroit companies had competed to see which could be the most wasteful. In Detroit everything had to be bigger than last year. The cause of it all, Sperlich realized, was cheap gasoline. As long as gas was 30 cents a gallon, there was no incentive for good cars and good engineering.

  The small cars that Detroit had produced, he believed, had been bad ones, reluctant efforts at best. If anything the companies had brought out inferior, unappealing small cars to prove their own thesis that small cars were in fact inferior and unpopular. The cars were not very good, were weak and underpowered, and the companies had not pushed them, and that had proved, the industry argued, that Americans did not like small cars. When the market for big cars finally went sour in the late seventies, during the energy crisis, the Detroit people argued that it was not their fault, for they had produced small cars in the past and their customers had turned away. That was true, Sperlich believed, but it was far from the whole truth, which was that the industry had never given its customers good small cars. Rather, he was convinced, Detroit had produced its small cars in precisely the wrong way, not as a labor of love but as a defensive necessity, to fend off at least momentarily the European invasion. It had been done by men whose hearts had never been in it.

  The technology for small front-wheel-drive cars had been available for years, and though various innovators had tried courageously to push the idea through various Detroit bureaucracies, their efforts had gained them reputations as eccentrics, dreamers, to be indulged but not listened to. At GM a gifted engineer named Frank Winchell had from time to time over twelve years trotted out plans for a front-wheel-drive car and been scoffed at. At Ford in the fifties there had been an old-line engineer named Fred Hooven who had had a similar reception. Hooven, an outrageous, talented man, had been something of a godfather to the engineering people. He had come from outside the company and had always belittled the Ford bureaucracy, which in turn had no idea what to make of him, especially when the company’s senior executives learned he had even voted for Adlai Stevenson when virtually every other good son of the company had voted for Dwight Eisenhower. When at one point he had invented a better steering system, the finance people lost no time in asserting that it was too expensive to be put into use. (Hooven felt that anything that was better always justified itself.) That was the way it went for Hooven at Ford. He was an early proponent of front-wheel drive for the Thunderbird, and was disregarded. Nonetheless he continued to push the concept without fear for his own career. Ideas died quickly at Ford, Hooven knew. Once, frustrated by the refusal of his superiors to listen to him on the subject of front-wheel drive, he wrote a satirical letter in which he reversed the issues. In the letter, Hooven wrote as if the industry were already using fr
ont-wheel drive and he was proposing switching to rear-wheel drive. He enumerated all the advantages of rear-wheel drive: It was heavier, more cumbersome, more costly, and used far more energy. The letter created a minor sensation at Ford, not least among the finance people, who at first took it seriously and spent several days trying to figure out how to reply. The letter made a deep impact on the young Hal Sperlich, because it had taken the existing world, turned it upside down, and made it look ridiculous. Hooven eventually left the company for a professorship at Dartmouth College. From there he continued to amuse his friends (and confirm the Ford Motor Company’s view of him) by winning a national paper-airplane contest, taking a single sheet of paper and folding it simply but with such ingenuity that, launched, it seemed to stay aloft forever.

  The issue of the front-wheel-drive car therefore was an old and smoldering one. The closest the product people had come to it was the Cardinal, which McNamara had approved and which Iacocca had killed in 1961 because he thought it would sell poorly and produce tiny profits per piece. (Years later he absolved himself of responsibility for killing the car by noting that the Cardinal was ahead of its time.) The arguments he raised against the Cardinal then came back to haunt the company now, voiced by the finance people. The corporate arguments against the small front-wheel-drive car were powerful. A small car was likely to make less profit, but more important, they stressed, going to front-wheel-drive involved more than just some minor adjustment to the production line. It meant an entirely new car and power train. So it was a wildly expensive proposition.