Reckoning

by David Halberstam

  What surprised most people about Henry Ford was the degree to which, when he began his retirement, he actually stayed away from the company. It was clear that he was exhausted by his long tenure, relieved to be away from the day-to-day responsibility, and that he could not wait to escape it all and leave Detroit. He was comfortable with what he had done. He had held the company together, as a family company, through very difficult years. He would not be judged by Lee Iacocca (from whom, in truth, he saw himself as having saved the company) but rather by the ghosts of Fords past, principally his grandfather. Not unlike his grandfather, he would turn his back on history even while living it. When two writers who were working on Ford histories checked the Ford archives for certain papers belonging to the first Edsel Ford, they noticed that these and other important papers were missing. They suggested to Henry Ford II that possibly he himself had gone there and taken the files. Ford later called one of his closest aides and repeated their accusation. “It sounds like the kind of thing I would do,” Ford said, “but I don’t think I did it. Do you think I did?” The aide investigated and discovered that indeed Henry Ford—who hated documented history, who warned aides to leave as little behind as they could in letters and memos—had done away with the missing files.

  That he was very much retired did not mean that he did not watch the company closely. It was still the Ford Motor Company, and all things being equal or even a little unequal, he would like it to continue as a family company—in his branch of the Ford family, of course—so he kept a hand on major personnel decisions. Nobody went on the board whom he did not approve of, and the decision to choose Don Petersen as chairman was his, a reflection of a belief that the company needed more energy in product. But he was rarely in Detroit, and rarely around the Glass House now. He loved his country home in England, and he spent a lot of time there, frequently hunting, and when he was not there, he was more often than not in Palm Beach, fixing up a new house. (He lived in Florida, he told friends, because he could not afford to die in Michigan and pay the inheritance taxes there.) Some old friends who had been with him through his previous two marriages found that he was slipping away from them as he was pulled more and more into the orbit of Kathy DuRoss and her young friends. He was occasionally involved in real estate deals with his friend Al Taubman, a major Detroit real estate man, whose wife, Judy, was a friend of Kathy’s. There was a general consensus among those old friends that on his third try he had probably found the wife he had wanted in the first place, one earthy enough to enjoy his world and strong enough to stand up to him. That feeling was bolstered by an incident that took place at, of all things, a fashion show in Detroit in 1982. Halston, the designer, had come to Detroit with a new line of clothes. There was considerable excitement in haute Detroit when it was learned that both Henry and Kathy Ford would attend, and attend they did, which was a conquest of sorts for Halston. It was noted that day that Henry Ford seemed pleased with the show, particularly with one tall, slim model. Although he was talking with a young television executive, he did not seem able to take his eyes off this one model, and he asked the young executive, “Who is that absolutely stunning young woman? Could you please find out who she is?” At that very moment Kathy DuRoss Ford appeared and quite gently and gracefully took him by the hand and said that it was time to leave the party.

  Henry Ford himself had received a variance from the Grosse Pointe municipal authorities allowing him to turn his estate into eighteen single-unit dwellings. It was one more reflection of a stagnant American economy in which it was easier to make money dealing in real estate than producing something. He kept his eye on Grosse Pointe, however. A tour of Grosse Pointe was like a tour of automotive history as well as of Henry Ford’s personal life. There was the house on Lake Shore Drive in which he had grown up and then the grand house, also on Lake Shore Drive, in which he and Anne had lived, and he and Cristina, and which he had turned into the eighteen small houses. Now there was the almost modest house in which he and Kathy lived, on Provencal, Grosse Pointe’s grandest street. There was a house not very far away on Lake Shore Drive which in 1985 had come on the market, and it was reported that Lee Iacocca and Peggy Johnson, his fiancée, looked at it several times, though not together, and that as soon as they did and the word had gotten out, a call had been made (perhaps by Henry Ford himself, more likely by someone on his behalf), and that, in the strange way that these things were done in Grosse Pointe, the house was immediately taken off the market. Eventually it was put back on the market and was bought by Edsel Bryant Ford II. But not long after that another Provencal house (ironically, one owned earlier by the young Henry and Anne Ford and then owned, but never lived in, by Cynthia and Edsel Ford II) came on the market, and the Iacoccas bought it. A cartoon in the Detroit News showed Henry Ford looking out the window, saying “There goes the neighborhood.”

  If Henry Ford took little notice of Lee Iacocca, that was not true of many of his fellow citizens. In part because of Chrysler’s dramatic resurgence, in part because of skillful television commercials, in part because what seemed in hard economic times a compelling need for champions, Lee Iacocca became the new mythological figure of the 1980s, a symbol of American industrial resurgence. He had rescued one of the nation’s great corporations from bankruptcy, and he had become not just an exceptional businessman but a star. In 1983, Time had put him on its cover, with an illustration that suggested the huckster, and then, as Chrysler continued to be successful, it put him on again, this time with a more statesmanlike rendering.

  His new celebrity status was affirmed by the astonishing sales of his book. He had decided to write it because there were, after all, a lot of things on his mind, mostly about Henry Ford. The advance payment from the publisher was nominal; the ghostwriter did not take a percentage of the action, a mistake he would not make again; and the literary agent was his New York barber, who connected him to Bantam Books and who later seemed quite annoyed that the people at Bantam did not see fit to pay him anything.

  In ways that the author did not intend, the book was exceptionally revealing. It was pure Iacocca, and it was completely personal. It was similar not to the memoirs of Detroit industrialists past but rather to those of a new breed of American celebrity in what Christopher Lasch called the culture of narcissism. In tone it was remarkably like the memoirs of Ed Koch, the mayor of New York, and of Howard Cosell, the sports announcer, two other men of talent and insecurity who because of their insecurities had reached constantly for success, had become in time extremely successful, and had become famous through access to television. But the success had not made them more harmonious with themselves; it had made them worse, for it had diminished the need for normal human restraints while at the same time making them far more famous. Each had become a best-selling author because of his success as a telecelebrity. The emotions and the psychic display of each author tended to obscure more serious discussion of issues and in Iacocca’s case his very considerable abilities and achievements. Each book, reduced to its essence, was about being loved and unloved, so that inevitably each book ended up seeming, more than anything else, about getting even. Iacocca’s book was in no small part an assault upon Henry Ford, and within the inner world of Detroit, even among those who had been on his side and thought him essentially right in his struggle with Ford, there was serious, if private, dissent from it. Some people simply believed that he had broken unstated rules, that if Henry Ford was as sinister and distasteful a figure as described, then Iacocca should have left long before, voluntarily.

  He had, after all, been a part of those years, he had been well paid (in his last ten years there he had received in salary and bonus—excluding stock options—some $6.8 million, even though because of the first oil shock there had been no bonuses in 1974 and 1975). In Detroit there had always been a phrase for a situation like this, the lavish payment for a dissatisfied employee or a large severance settlement for a fired executive, designed to guarantee future silence. It was called “stuff
ing his mouth with dollar bills.” Certainly the Ford people thought they had done it in Iacocca’s case; besides the immediate settlement Iacocca was to receive $178,500 a year until he was sixty-five and $175,000 a year hereafter. But in this instance it had not worked. Thus the virulence of his attack upon a former employer bothered some former colleagues.

  For others the fault of the book was merely in the failure, in an industry where teamwork is so vital, to share credit. Neither of those alleged shortcomings, of course, hurt the sales. No one could have predicted the results: The book rose almost immediately to number one on the best-seller lists, and then it stayed there and stayed there. If before publication anyone had suggested to his publishers that the book would sell 200,000 copies, they would have been overjoyed. Instead it sold 500,000, then a million, then 1.5 million, then 2 million, then 2.7 million. It was not so much a book as an event. There were fifty-one printings by February 1985. Only Gone with the Wind and a book about a bird, Jonathan Livingston Seagull, had ever sold better in modern hardcover editions. It stayed on the best-seller list for more than a year. It did so well that another book on him, by an advertising man, which had done poorly on its own, was reissued in paperback. Entitled Iacocca and carried by the thrust of Iacocca’s own book, it went to the top of the paperback list.

  One day when Iacocca spoke to a large audience in Detroit, a close friend from Ford days came by to hear him. Iacocca was at his best, ingratiating, funny, hard but not too hard on the government that had just rescued his company. The audience loved it. “He’s very good, isn’t he?” the friend said to his companion. “Still the same Lee. Look—all that charm, all that bravado, and all that insecurity. Look at his hands shake.” Some of his friends thought that he loved the speculation about his running for office more than he did the idea of actually doing it—that he was by nature too sensitive for the brutalizing world of presidential elections. Lee, one of his best friends said, would not run for fear of failure. If the Democrats could promise a draft, he would be glad to make himself available. Failing that, he would continue to toy with it. If the pain from the firing at Ford was still with him, then he was unlikely, they reasoned, to try so risky a course. He was well rewarded for his success at Chrysler. For 1984 he received $1.6 million in salary and a bonus plus $10.8 million in stock options—which he exercised on stocks bought very low.

  He had become the national political flirt. In a field of relatively colorless candidates he seemed to be the most exciting figure, in no small part because it was assumed that the other candidates would run, whereas with Iacocca that was less readily assumed. He would have to start a whole new career, it was pointed out (although in truth it would be merely an extension of the old one, which had always been his ability to sell himself). The uncertainty of that appealed to political writers, just as the certainty of the ambitions of the other candidates did not appeal to them. The industrialist-as-politician, he seemed to have the best of both worlds. On the one hand he was the man who could claim to have brought back American industry despite the threat of Asian competitors, while on the other hand he was the man who went around telling stock analysts to buy Chrysler stock because his was the least vertically integrated auto company—which meant, of course, that he was freer than the others to sign up with the cheapest suppliers in Asia.

  He had become, as if overnight, America’s supercelebrity, replacing an exhausted Henry Kissinger. Those groups that had once sought Kissinger as their speaker now turned to him only when Iacocca was unavailable. Iacocca became the head of the drive to refurbish the Statue of Liberty.

  Once during one of the early ceremonies involving the Statue of Liberty a group of his aides took a boat over to the island. They arrived to find Iacocca missing.

  “Where’s Lee?” someone asked.

  “He’s walking over,” someone else answered.

  Told of the quip later, he was delighted. “Give that man a raise,” he said. The full measure of his fame was hard to gauge. Not only was his face on countless magazine covers, not only could he, if he wished, give a major speech every night of the year, but in 1986 he attained the ultimate confirmation of modern fame—he was asked to do a small guest appearance on a top-rated television show, Miami Vice, and he accepted, though he mused later that it turned out to be much harder than doing his own commercials, and he kept blowing his lines.

  His friends were intrigued by his transmogrification. He had once complained that Henry Ford spent too much time away from Detroit, but now Iacocca was away more and more, in New York as often as he could be. In the past he had complained that Henry Ford spent no time with people from the auto industry socially and all his time with his social friends; now that Iacocca was the head of Chrysler, old friends pointed out, the gang called Lee’s Buddies had been dissolved and Iacocca spent as little after-hours time as possible with his Chrysler colleagues and as much as possible with his New York non-auto friends, Fugazy, George Steinbrenner, the baseball team owner, and Donald Trump, the builder. He had criticized Henry Ford’s outside interests, and now, it was noted, he spent more and more time on the Statue of Liberty renovation and with people who might one day have political connections. He had faulted Ford for the way he played his top people off against each other, but now there were signs that he was doing the same thing with his own top aides. He had studied, they decided, at the knee of a master.

  By 1984 there was more and more talk of him as a presidential candidate, or failing that, at least as a vice-presidential one. He stayed out of the 1984 campaign, but that did not diminish talk about him for 1988. He hired an expensive speechwriter, and he spoke more and more on public issues. In Detroit those who monitored him carefully thought his speeches seemed more political all the time. A Detroit magazine ran a cover story on his prospects for the presidency, and it published the results, which showed him doing quite well against most potential opponents. A well-known writer had already started working—without any authorization from him—on a book that sounded remarkably like a 1988 campaign tract. In private Iacocca said that the job of bringing back Chrysler had been tougher than that of running the country, and that Ronald Reagan, with his short working hours, was proof of it.

  As the talk of an Iacocca presidential candidacy increased, Russell Baker, the New York Times humorist, wrote a column imploring him not to run. Iacocca, Baker took note, was a first-class car maker, and, because of Parkinson’s Law, there was danger of his running, being elected, and becoming just another second-rate American President. Since the nation, in Baker’s words, needed a first-class auto maker much worse than it needed a second-rate President, the race would be a mistake. Iacocca immediately wrote Baker saying that he was not about to run for the presidency. Baker, wise to the denials of politicians, called a friend, read him the Iacocca letter, and said: “My God—a letter like that—it’s a sure sign he’s running!”

  PART TWELVE

  47. THE RAIDERS

  IT SEEMED AT FIRST the most unlikely of takeover bids. In the fall of 1985, a relatively small supermarket chain called Pantry Pride moved against Revlon, one of America’s great companies. Revlon had brought in $2.4 billion in revenues during the previous year, and its net worth was estimated at some $2 billion while Pantry Pride’s rested at $120 million—a differential of sixteen to one. Pantry Pride was about to pull off what in the eyes of some Wall Street observers was the quintessential hostile take over—that is, Wall Street’s new brand of merger, in which companies were consumed without their consent. A deal like this could never have been attempted under normal circumstances, but Wall Street had conveniently come up with an acceptable form of financing known as junk bonds, which one stock analyst called paper whose worth lay somewhere below cash and above Monopoly money. Of the nearly $2 billion needed to take over Revlon, about $1.5 billion came from junk bonds. Ronald Perelman, the head of Pantry Pride, was one of a deft new breed of corporate raider; he was particularly skilled at exploiting the cash value of a small company to ac
quire a larger, more profitable one. There was even a somewhat specialized signature to his work: Immediately after the conquest, he would strip down the vanquished company and sell off the divisions he did not want in order to pay for the very deal he had just consummated. At the time he moved against Revlon, the Pantry Pride supermarkets were for sale, the resulting profits to be used to pay for the acquisition of Revlon.

  The very idea of it appalled the executives at Revlon. They were not innocents; they knew that no company was safe anymore. But if they were to lose their company, they had hoped it would be to an organization of size and excellence. Instead, it became clear that the unthinkable was about to happen. The canary (in the eyes of those at Revlon, a rather scruffy canary) was about to swallow the most elegant of cats. It was not just the loss of a beloved company that was so painful to the people who ran Revlon, it was the feeling that something must be terribly wrong with American capitalism for this to happen. At one point, Simon Rifkind, a board member, a former federal judge, and the man who, as a young attorney, had helped Charles Revson take the company public, turned to his colleagues and said in a mournful soliloquy, “What is it that we did wrong? We always ran a good company. We never gave our customers inferior products. We always worked to improve every line we sold. We never lived in the past. We never busted any union. We always treated our employees well. What sins have we committed to have this plague visited upon us. What has happened to this country?” In time Perelman won and soon began breaking up Revlon to pay for his efforts to buy it. The conquest of Revlon was the latest in an ever-escalating frenzy of adversarial takeovers that had fascinated Wall Street for a dozen years.