Reckoning

by David Halberstam

  It was relatively easy to design big powerful cars, and considerably more difficult to design smaller ones. That was where the craft of engineering became important, and that was what challenged the engineers. Few understood how different a front-wheel-drive car was. It was not just a car with the drive wheels in the front. It was a completely different car in terms of its basic design. Not only the engine but the entire power train and the transaxle were in front. Because it was all in front, there was no large, humped tunnel running through to the rear axle, taking up space and adding weight. That meant that the cars could be smaller and lighter. Because the car itself was now physically smaller, the engine could also be smaller, and because the engine was smaller, there was still less weight to pull. Everything was smaller, and everything could be reduced in scale. Smallness begot smallness. As David E. Davis, Jr., put it, “Lower mass is its own reward.” Sperlich thought of it as the classic engineering triumph, the better mousetrap.

  Sperlich had always been interested in front-wheel drive, but in the past he had believed it was for eccentrics. Now, based in Europe, he remembered all his earlier studies of it. It was the pure mathematical superiority of front-wheel drive that obsessed him. He was for it simply because it was better. The fact that the era of cheap energy was about to end in America had not occurred to him. Like most auto executives he had a general belief that the prophets of gloom on energy were wrong and would continue to be wrong. But he did know that front-wheel-drive cars were superior, and if America did not move quickly to build them, it would be out of business in Europe in a very short time. Ford was doing well in the medium-sized market in Europe, which meant the northern and more industrialized half of the continent; but in the less industrialized southern tier, where people were poorer, Ford was barely in the market. There a front-wheel-drive car might do very well.

  In his first seven months in Europe Hal Sperlich lived like a gypsy. He never rented a house. He simply kept moving, from factory to factory, designer to designer, talking, studying, and sketching. In those seven months, with the help of some others, he designed a small front-wheel-drive car—precisely the kind of car men like Hooven and Winchell had been talking about years earlier. It was completely new. Sperlich felt himself under pressure all the time he was working on it; he knew that Volkswagen was about to come out with a comparable car, which would be known in Europe as the Golfe and in America as the Rabbit, and VW was already a formidable competitor. He was pleased with his early designs, as was Iacocca, and when the people in consumer research ran tests on them in Europe, they tested unusually well. The studies showed that not only did customers respond well but they thought the car would be a good deal more expensive than was actually projected.

  Sperlich’s position reflected the mounting divisions within the company. He was Iacocca’s favorite, and he had gone on a special Iacocca mission into the alien world of Europe. He was clearly under orders to force something through there. But in truth he had only partial clout in a divided company, and the creation of his car did not go easily. The head of Ford of Europe was Phil Caldwell. Caldwell was not a finance man in the strict sense, but the others in the company considered him as true a reflection of the finance mentality as anyone around. He had been to the Harvard Business School, and he was a man of systems, orderly, thoughtful, extremely careful when making a decision. His advocates, like Henry Ford, thought him an intelligent, fastidious man with a broad understanding of the world, but many of the people who worked with him thought he was more pedantic than careful, and that much of his tidiness and orderliness bespoke an essential unwillingness to make a decision. He did not really seem a man of the auto industry. He seemed worldly and sophisticated compared to many of the men of Detroit, more eager to talk of European politics than of the company. He appeared to be the exact opposite of Iacocca. Iacocca seemed to be all instinct, the gunslinger as executive (though he was actually careful in business). Iacocca, said one colleague, looked at the design of a new car and thought of its possibilities; Caldwell looked at the same design and thought of all the risks. Iacocca was willfully profane, and Caldwell was consciously urbane. Of the perks that the company offered, Iacocca loved the private plane and the dining at good restaurants and the drinking of good wine; Caldwell—like the founder of the company but few of his descendants—was a teetotaler. This greatly annoyed the Ford of Europe people; there was always the possibility that the annual Ford Christmas party might not have alcohol at it, and some Ford executives tended to drink somewhat heavily before they arrived at Caldwell’s house as if to arm themselves. Caldwell preferred Catawba grape juice, and he liked bottled water, favoring one brand in particular. Whenever he traveled for the company, his staff was obliged to be sure he was well provisioned with that brand of water. It was part of Ford lore that coinciding with one Caldwell trip to a Ford plant overseas there had been a strike at the bottling works, and in desperation the local Ford people simply used another bottled water but poured it into empty containers of the favored brand; according to the story, the deception went unnoticed.

  Caldwell did not smoke either and made it very clear to those around him, especially subordinates, that he did not want them smoking in his presence. Once a few years later, when he was vice-chairman, he called Bill Bourke and Ben Bidwell, two of the company’s top executives, to his office for a meeting. Just then he was summoned to Henry Ford’s office. He excused himself. Bourke and Bidwell, both smokers, looked at each other and, taking strength from numbers, lit up. After a few puffs they looked for an ashtray in which to put their cigarettes out. The office was filled with beautiful antiques, but it had not a single ashtray. In desperation they put the cigarettes out in a very expensive-looking bowl. Caldwell returned. He smelled the smoke. His eyes went to the bowl, and his face twitched with anger, but he said nothing. Great self-control, thought Bidwell. It was just like Caldwell, he also noted, to have a very expensive ashtray.

  Antiques were Caldwell’s mania. He was a serious collector, and his purchases in New York were often transported to Detroit aboard a company plane. Iacocca liked to tell of a memo (which he said he planned to use in his next book) that Caldwell had sent to Henry Ford asking if he could spend $1.25 million to redecorate his office; his memo came back from him with a note in Ford’s handwriting: “Make do with three quarters of a million.”

  To many of his critics, he embodied the problem of the modern Ford company as created by the men of the Harvard Business School: too much information, too many options, too little feeling about the cars. “The trouble with you, Phil,” Iacocca once told him, “is that you went to Harvard, where they told you not to take any action until you’ve got all of the facts. You’ve got ninety-five percent of them, but it’s going to take you another six months to get that last five percent. And by the time you do, your facts will be out of date because the market has moved on you.” When he had headed the Ford truck division, he had insisted that he be given not just three or four different models from which to choose, but countless ones. He always wanted additional information, and each meeting seemed to end not with a decision but a call for yet another meeting, where there could be even more information and more options. Working with him was exhausting. Even after all the questions had been asked and all the answers had been given, the decision-making process would go on and on. After months of this his product people would go to what they had been led to believe was the final meeting only to hear Caldwell say, “Well, gentlemen, I have a lot of reservations about this. There are certainly a lot of questions still unanswered, and I have to say that I don’t feel you’ve done anywhere near the proper amount of homework on it.”

  The worst thing about dealing with him, Sperlich’s aide, a product man named Erick Reickert, thought, was that there was no aesthetic sense there, no feel. That made it nearly impossible for the best product men to deal with him. He could not explain to them what he wanted because he did not know, and as they offered him possibilities, they felt the chill
of his discipline. “We’d go in, pleased and excited by something we had come up with,” Reickert remembered, “and Caldwell simply would not respond. There was no way we could generate excitement in him. We wanted enthusiasm, and what we got was constant negative energy.” To Reickert it was a deadening environment. (When finally, after designing two of Ford’s best cars of the early eighties, Reickert quit in frustration to go to Chrysler, Caldwell, upset that he had left, said fittingly enough, “What went wrong with the system that we could lose a man like that?”) Another Ford product man, Tom Feaheny, once characterized Caldwell as someone who liked to go to bed at night still thinking he had not made his first mistake.

  To men like Iacocca and Sperlich, confident of their taste and judgment, Caldwell was the prototype of the Ford system, a man both created by it and protected by it. Iacocca regarded him, with thinly veiled contempt, as a man who could not make a decision. But Iacocca’s disdain was nothing compared to that of Sperlich, who, when he had succeeded Caldwell in trucks, had gone around quite publicly complaining how little he had found on the drawing board or in any sort of planning stage. “An empty cupboard,” Sperlich had called it. Caldwell, he said, had fought against or slowed down every major product in trucking, and then, when some of these same products had eventually materialized and been successful, had taken credit for them—had in fact gone around masquerading, in Sperlich’s phrase, as “Mr. Truck.” Sperlich, as was his manner, had been very candid about how demoralized he had found the truck people, and how little in the way of planning there was. This had not gone unnoticed. Sperlich had made a serious enemy. Those who had watched Caldwell and Sperlich together after that had seen something that had apparently eluded Sperlich, which was that when he was talking, a look that was close to hatred sometimes passed over Philip Caldwell’s normally expressionless face. Now Sperlich was pushing for a new product line for a region where Caldwell was his superior, and Caldwell was wary of both the man and his car.

  Sperlich had no trouble selling the car to Iacocca. Iacocca was a big-car man, but he understood Sperlich’s passion, and Sperlich was his man. Furthermore, he believed that there was a need for the car, in Europe, and that it might eventually be brought over to America. Henry Ford was not so easily moved. A completely new car like this was expensive; some of the estimates for producing it ran up to $700 million. The finance people projected a meager return. The issue began to go back and forth within the company. Both Iacocca and Sperlich argued that the finance people were wrong, that the car would bring a larger return. But they were also arguing something else: that the car was good, that it was the wave of the future, and that it had to be done, despite any assessment of costs, because their competitors were bringing out comparable models. To falter now, to leave Ford out of so dramatic a breakthrough in small-car engineering, was to concede not just a slice of the market but perhaps the market itself. Ford might also miss crucial lessons in applying new technology, since what was learned on this car would be vital to the manufacture of future cars not only in Europe but also in the United States. If you were in the car business, Iacocca declared, you had to produce the best cars possible, and you could not simply doll up last year’s model if your competitors were breaking new ground. Certainly GM had been as conservative about moving to small cars and front-wheel drive as Ford, but if the Europeans were leaping ahead, then the Japanese would follow, and the American companies would inevitably be forced to act.

  In the end the argument carried, and the Ford Motor Company went ahead with Sperlich’s car for the European market—the Fiesta, which was perhaps the best small car Ford or any other American company had ever made. But it was a surprisingly close call. Probably, Sperlich thought, if the Fiesta had been judged on its own merits, they would have lost the car. Only two somewhat extraneous factors helped carry the day. One was that Henry Ford wanted to get into Spain and produce cars there for what was seen as an expanding market, using Spain’s relatively cheap labor. Instead of the expensive retooling of an old factory, then, they could build a new factory in Spain designed to produce the Fiesta. The other factor was a shift in West German currency that added considerably to the cost of the Rabbit, which in turn allowed Ford to charge a little more for the Fiesta and make a larger profit.

  Thus Sperlich was free to go ahead. He felt that Caldwell had fought him all the way, and fought him brilliantly in that he had never been able to catch him in the act. There had never been any tangible evidence of Caldwell’s opposition—no fingerprints, as Sperlich later put it—but nonetheless he clearly felt Caldwell was slowing him down at every juncture, demanding more information, postponing decisions, making decisions more rather than less complicated. His aide, Reickert, felt there were all these obstacles to the Fiesta, but they were never quite tangible; there was an undercurrent pulling against the car, but no one could quite locate it. It was as if they were fighting an invisible enemy. Whenever Reickert made a presentation at a meeting, he found himself being chopped up by the Ford of Europe people. What did he know about Europe, they kept asking, or about the European market? It was clear to both Reickert and Sperlich that this was not routine challenging, that everything had been worked out in advance, that it was carefully orchestrated. It was all very deft, Sperlich thought, the presentation of endless obstacles rather than opposition itself. If Caldwell was for the car, Sperlich thought, it was the best-kept secret in Europe that year. It became so bad at one point that Iacocca pulled Sperlich back to America and told him, “Screw those sons of bitches in Europe. If you can’t do it there, then we’ll do it in America first.”

  But they were also slowed down by Henry Ford. He was not their ally on this car. Certainly the finance people were making Ford nervous with their estimates of the cost of the car and their projections of its dubious profitability. But even more influential upon Ford was the fact that by the time the debate over the car took place, the struggle between him and Iacocca had become intense. What Lee Iacocca wanted, Henry Ford was no longer sure he wanted. In the next six years, as the market changed dramatically, the company faced a series of historic decisions on small cars versus big cars. In those decisions it grew harder and harder to separate philosophical difference from personal animosity.

  In 1974 the paths of the two men finally and irreversibly parted. The personal tensions had been bad enough, but now they were exacerbated by the aftereffects of the first oil shock. In October 1973, on the eve of the holiest of Jewish religious observances, the Arabs had attacked Israel, starting the Yom Kippur War, which Israel won. The subsequent economic fallout was devastating to an unprepared West. Oil at that moment was very underpriced. The Yom Kippur War drove the Arab nations together against Israel and its Western supporters and provoked the first oil embargo. That event had a traumatic effect upon Henry Ford; it was as if his own nightmare had come true. Big cars had become a liability jeopardizing the entire future of his company. Conservative and somewhat tired, he chose the most dangerous of options, to save his way out of the crisis. He quickly took $2 billion out of the new-product development program. For Iacocca that was a crushing blow. He had accommodated in the past to what Ford and Lundy wanted, surrendered again and again on vital product issues, but this was an unacceptable withdrawal. He neither liked nor respected the man he worked for, and now he saw him as afraid of the present and future, ill equipped to do business in a period of hardship. The result was a dramatic escalation in enmity. Some of the scenes were quite ugly. In early 1974 the top Ford people went to New York for a meeting with the auto analysts from the investment houses. It was not something Henry Ford liked to do. He had inherited some of his grandfather’s feelings about Wall Street, and he was not comfortable going before a group of young analysts and pushing his own stock. In the past Sidney Weinberg at Goldman Sachs had told him he didn’t need to do this, that by his deeds and the success of the company he would be known. But Gus Levy, who now headed the firm, said that times had changed, that it was harder for an auto compa
ny to compete for capital, that the new breed of analysts were different from the old, and that the Ford Company would have to adjust its attitude. New York, in fact, was just the first stop on a tour of three cities, and in company with Henry Ford were Ed Lundy and Iacocca.

  The first session in New York was to be a dinner at the University Club. Henry Ford started drinking heavily before dinner, and when the dinner started it was clear he was in bad shape. We’re headed nowhere, he told the assembled analysts, we’re going to die. At the head table Lundy leaned toward Iacocca and said, “I don’t know how you do it, but you’d better save us.” Iacocca did speak, doing the best he could. The next day, Henry Ford, cold sober, canceled the two remaining cities on the tour. “You’re talking to too many people outside,” he told Iacocca. Less visibility was clearly preferable. Walter Murphy, Iacocca’s public-relations man, dated his decline within the company from that day.

  Now more and more it was not so much a professional critique that Henry Ford was making of Iacocca but a personal one. He spoke of him now in uglier and uglier terms. Iacocca became “that goddam wop.” That goddam wop was not going to take over Henry Ford’s company. Iacocca in turn became more and more blatant with his close friends in his expressions of contempt for Henry Ford. Ford became “that dumb spoiled bastard.” Part of it was class. Henry Ford did not really like Iacocca, he did not like his manner, the way he dressed, his friends, or the way he talked. It was all right for Ford himself to use rough language; it was not all right for anyone else to do it. (“They were never friends,” one of Henry Ford’s PR men said later of Iacocca. “Mr. Ford always regarded Mr. Iacocca as a rather vulgar Italian.”) The only thing they had in common was appreciation of Iacocca’s ability to make profits at the Ford Motor Company. Iacocca had his soaring ambition, he wanted to have it all; but Henry Ford saw him as merely a hired hand, a skilled and very highly paid hired hand, to be sure, but nothing more. He was simply too crude. (Henry Ford, Gene Bordinat once said, forgot that before the Italians were the hod carriers in this country, that job had been held by the Irish.) Indeed, the one time Henry Ford had ever dined at Iacocca’s house, it had only dramatized their social differences: Henry and Cristina had joined Iacocca’s parents, and they all had sat and watched home movies in Europe.