Business Adventures

by John Brooks

  Wallace’s sputnik theory provides an answer to Doyle’s question about why people weren’t in the mood, and, furthermore, it is sufficiently cosmic to befit a semi-Brain Truster. It also leaves Wallace free to defend the validity of his motivational-research studies as of the time when they were conducted. “I don’t think we yet know the depths of the psychological effect that that first orbiting had on us all,” he says. “Somebody had beaten us to an important gain in technology, and immediately people started writing articles about how crummy Detroit products were, particularly the heavily ornamented and status-symbolic medium-priced cars. In 1958, when none of the small cars were out except the Rambler, Chevy almost ran away with the market, because it had the simplest car. The American people had put themselves on a self-imposed austerity program. Not buying Edsels was their hair shirt.”

  TO any relics of the sink-or-swim nineteenth-century days of American industry, it must seem strange that Wallace can afford to puff on his pipe and analyze the holocaust so amiably. The obvious point of the Edsel’s story is the defeat of a giant motor company, but what is just as surprising is that the giant did not come apart, or even get seriously hurt in the fall, and neither did the majority of the people who went down with him. Owing largely to the success of four of its other cars—the Ford, the Thunderbird, and, later on the small Falcon and Comet and then the Mustang—the Ford Company, as an investment, survived gloriously. True, it had a bad time of it in 1958, when, partly because of the Edsel, net income per share of its stock fell from $5.40 to $2.12, dividends per share from $2.40 to $2.00, and the market price of its stock from a 1957 high of about $60 to a 1958 low of under $40. But all these losses were more than recouped in 1959, when net income per share was $8.24, dividends per share were $2.80, and the price of the stock reached a high of around $90. In 1960 and 1961, things went even better. So the 280,000 Ford stockholders listed on the books in 1957 had had little to complain about unless they had sold at the height of the panic. On the other hand, six thousand white-collar workers were squeezed out of their jobs as a result of the Mercury-Edsel-Lincoln consolidation, and the average number of Ford employees fell from 191,759 in 1957 to 142,076 the following year, climbing back to only 159,541 in 1959. And, of course, dealers who gave up profitable franchises in other makes and then went broke trying to sell Edsels weren’t likely to be very cheerful about the experience. Under the terms of the consolidation of the Lincoln-Mercury and Edsel Divisions, most of the agencies for the three makes were consolidated, too. In the consolidation, some Edsel dealers were squeezed out, and it can have been small comfort to those of them who went bankrupt to learn later that when the Ford Company finally discontinued making the car, it agreed to pay those of their former colleagues who had weathered the crisis one-half of the original cost of their Edsel signs, and was granting them substantial rebates on all Edsels in stock at the time of discontinuance. Still, automobile dealers, some of whom work on credit margins as slim as those of Miami hotel operators, occasionally go broke with even the most popular cars. And among those who earn their living in the rough-and-tumble world of automobile salesrooms, where Detroit is not always spoken of with affection, many will concede that the Ford Company, once it had found itself stuck with a lemon, did as much as it reasonably could to bolster dealers who had cast their lot with Edsel. A spokesman for the National Automobile Dealers Association has since stated, “So far as we know, the Edsel dealers were generally satisfied with the way they were treated.”

  Foote, Cone & Belding also ended up losing money on the Edsel account, since its advertising commissions did not entirely compensate for the extraordinary expense it had gone to of hiring sixty new people and opening up a posh office in Detroit. But its losses were hardly irreparable; the minute there were no more Edsels to advertise, it was hired to advertise Lincolns, and although that arrangement did not last very long, the firm has happily survived to sing the praises of such clients as General Foods, Lever Brothers, and Trans World Airways. A rather touching symbol of the loyalty that the agency’s employees have for its former client is the fact that for several years after 1959, on every workday its private parking lot in Chicago was still dotted with Edsels. These faithful drivers, incidentally, are not unique. If Edsel owners have not found the means to a dream fulfillment, and if some of them for a while had to put up with harrowing mechanical disorders, many of them more than a decade later cherish their cars as if they were Confederate bills, and on Used Car Row the Edsel is a high-premium item, with few cars being offered.

  By and large, the former Edsel executives did not just land on their feet, they landed in clover. Certainly no one can accuse the Ford Company of giving vent to its chagrin in the old-fashioned way, by vulgarly causing heads to roll. Krafve was assigned to assist Robert S. McNamara, at that time a Ford divisional vice-president (and later, of course, Secretary of Defense), for a couple of months, and then he moved to a staff job in company headquarters, stayed there for about a year, and left to become a vice-president of the Raytheon Company, of Waltham, Massachusetts, a leading electronics firm. In April, 1960, he was made its president. In the middle sixties he left to become a high-priced management consultant on the West Coast. Doyle, too, was offered a staff job with Ford, but after taking a trip abroad to think it over he decided to retire. “It was a question of my relationship to my dealers,” he explains. “I had assured them that the company was fully behind the Edsel for keeps, and I didn’t feel that I was the fellow to tell them now that it wasn’t.” After his retirement, Doyle remained about as busy as ever, keeping an eye on various businesses in which he has set up various friends and relatives, and conducting a consulting business of his own in Detroit. About a month before Edsel’s consolidation with Mercury and Lincoln, Warnock, the publicity man, left the division to become director of news services for the International Telephone & Telegraph Corp., in New York—a position he left in June, 1960, to become vice-president of Communications Counselors, the public-relations arm of McCann-Erickson. From there he went back to Ford, as Eastern promotion chief for Lincoln-Mercury—a case of a head that had not rolled but had instead been anointed. Brown, the embattled stylist, stayed on in Detroit for a while as chief stylist of Ford commercial vehicles and then went with the Ford Motor Company, Ltd., of England, where, again as chief stylist, he was assigned to direct the design of Consuls, Anglias, trucks, and tractors. He insisted that this post didn’t represent the Ford version of Siberia. “I have found it to be a most satisfying experience, and one of the best steps I have ever taken in my … career,” he stated firmly in a letter from England. “We are building a styling office and a styling team second to none in Europe.” Wallace, the semi-Brain Truster, was asked to continue semi-Brain Trusting for Ford, and, since he still didn’t like living in Detroit, or near it, was permitted to move to New York and to spend only two days a week at headquarters. (“They didn’t seem to care any more where I operated from,” he says modestly.) At the end of 1958, he left Ford, and he has since finally achieved his heart’s desire—to become a full-time scholar and teacher. He set about getting a doctorate in sociology at Columbia, writing his thesis on social change in Westport, Connecticut, which he investigated by busily quizzing its inhabitants; meanwhile, he taught a course on “The Dynamics of Social Behavior” at the New School for Social Research, in Greenwich Village. “I’m through with industry,” he was heard to declare one day, with evident satisfaction, as he boarded a train for Westport, a bundle of questionnaires under his arm. Early in 1962, he became Dr. Wallace.

  The subsequent euphoria of these former Edsel men did not stem entirely from the fact of their economic survival; they appear to have been enriched spiritually. They are inclined to speak of their Edsel experience—except for those still with Ford, who are inclined to speak of it as little as possible—with the verve and garrulity of old comrades-in-arms hashing over their most thrilling campaign. Doyle is perhaps the most passionate reminiscer in the group. “It was more
fun than I’ve ever had before or since,” he told a caller in 1960. “I suppose that’s because I worked the hardest ever. We all did. It was a good crew. The people who came with Edsel knew they were taking a chance, and I like people who’ll take chances. Yes, it was a wonderful experience, in spite of the unfortunate thing that happened. And we were on the right track, too! When I went to Europe just before retiring, I saw how it is there—nothing but compact cars, yet they’ve still got traffic jams over there, they’ve still got parking problems, they’ve still got accidents. Just try getting in and out of those low taxicabs without hitting your head, or try not to get clipped while you’re walking around the Arc de Triomphe. This small-car thing won’t last forever. I can’t see American drivers being satisfied for long with manual gear-shifting and limited performance. The pendulum will swing back.”

  Warnock, like many a public-relations man before him, claims that his job gave him an ulcer—his second. “But I got over it,” he says. “That great Edsel team—I’d just like to see what it could have done if it had had the right product at the right time. It could have made millions, that’s what! The whole thing was two years out of my life that I’ll never forget. It was history in the making. Doesn’t it all tell you something about America in the fifties—high hopes, and less than complete fulfillment of them?”

  Krafve, the boss of the great team manqué, is entirely prepared to testify that there is more to his former subordinates’ talk than just the romantic vaporings of old soldiers. “It was a wonderful group to work with,” he said not long ago. “They really put their hearts and guts into the job. I’m interested in a crew that’s strongly motivated, and that one was. When things went bad, the Edsel boys could have cried about how they’d given up wonderful opportunities to come with us, but if anybody did, I never heard about it. I’m not surprised that they’ve mostly come out all right. In industry, you take a bump now and then, but you bounce back as long as you don’t get defeated inside. I like to get together with somebody once in a while—Gayle Warnock or one of the others—and go over the humorous incidents, the tragic incidents.…”

  Whether the nostalgia of the Edsel boys for the Edsel runs to the humorous or to the tragic, it is a thought-provoking phenomenon. Maybe it means merely that they miss the limelight they first basked in and later squirmed in, or maybe it means that a time has come when—as in Elizabethan drama but seldom before in American business—failure can have a certain grandeur that success never knows.

  * The word “styling” is a weed deeply embedded in the garden of automobilia. In its preferred sense, the verb “to style” means to name; thus the Special Products Division’s epic efforts to choose a name for the E-Car, which will be chronicled presently, were really the styling program, and what Brown and his associates were up to was something else again. In its second sense, says Webster, “to style” means “to fashion in … the accepted style”; this was just what Brown, who hoped to achieve originality, was trying not to do, so Brown’s must have been the antistyling program.

  * For details on this product of the national creativity, see Chapter 3.

  3

  The Federal Income Tax

  I

  BEYOND A DOUBT, many prosperous and ostensibly intelligent Americans have in recent years done things that to a naïve observer might appear outlandish, if not actually lunatic. Men of inherited wealth, some of them given to the denunciation of government in all its forms and manifestations, have shown themselves to be passionately interested in the financing of state and municipal governments, and have contributed huge sums to this end. Weddings between persons with very high incomes and persons with not so high incomes have tended to take place most often near the end of December and least often during January. Some exceptionally successful people, especially in the arts, have been abruptly and urgently instructed by their financial advisers to do no more gainful work under any circumstances for the rest of the current calendar year, and have followed this advice, even though it sometimes came as early as May or June. Actors and other people with high incomes from personal services have again and again become the proprietors of sand-and-gravel businesses, bowling alleys, and telephone-answering services, doubtless adding a certain élan to the conduct of those humdrum establishments. Motion-picture people, as if fulfilling a clockwork schedule of renunciation and reconciliation, have repeatedly abjured their native soil in favor of foreign countries for periods of eighteen months—only to embrace it again in the nineteenth. Petroleum investors have peppered the earth of Texas with speculative oil wells, taking risks far beyond what would be dictated by normal business judgment. Businessmen travelling on planes, riding in taxis, or dining in restaurants have again and again been seen compulsively making entries in little notebooks that, if they were questioned, they would describe as “diaries;” however, far from being spiritual descendants of Samuel Pepys or Philip Hone, they were writing down only what everything cost. And owners and part owners of businesses have arranged to share their ownership with minor children, no matter how young; indeed, in at least one case of partnership agreement has been delayed pending the birth of one partner.

  As hardly anyone needs to be told, all these odd actions are directly traceable to various provisions of the federal income-tax law. Since they deal with birth, marriage, work, and styles and places of living, they give some idea of the scope of the law’s social effects, but since they are confined to the affairs of the well-to-do, they give no idea of the breadth of its economic impact. Inasmuch as almost sixty-three million individual returns were filed in a typical recent year—1964—it is not surprising that the income-tax law is often spoken of as the law of the land that most directly affects the most individuals, and inasmuch as income-tax collections account for almost three-quarters of our government’s gross receipts, it is understandable that it is considered our most important single fiscal measure. (Out of a gross from all sources of a hundred and twelve billion dollars for the fiscal year that ended June 30th, 1964, roughly fifty-four and a half billion came from individual income taxes and twenty-three and a third billion from corporation income taxes.) “In the popular mind, it is THE TAX,” the economics professors William J. Shultz and C. Lowell Harriss declare in their book “American Public Finance,” and the writer David T. Bazelon has suggested that the economic effect of the tax has been so sweeping as to create two quite separate kinds of United States currency—before-tax money and after-tax money. At any rate, no corporation is ever formed, nor are any corporation’s affairs conducted for as much as a single day, without the lavishing of earnest consideration upon the income tax, and hardly anyone in any income group can get by without thinking of it occasionally, while some people, of course, have had their fortunes or their reputations, or both, ruined as a result of their failure to comply with it. As far afield as Venice, an American visitor a few years ago was jolted to find on a brass plaque affixed to a coin box for contributions to the maintenance fund of the Basilica of San Marco the words “Deductible for U.S. Income-Tax Purposes.”

  A good deal of the attention given to the income tax is based on the proposition that the tax is neither logical nor equitable. Probably the broadest and most serious charge is that the law has close to its heart something very much like a lie; that is, it provides for taxing incomes at steeply progressive rates, and then goes on to supply an array of escape hatches so convenient that hardly anyone, no matter how rich, need pay the top rates or anything like them. For 1960, taxpayers with reportable incomes of between two hundred thousand and five hundred thousand dollars paid, on the average, about 44 per cent, and even those few who reported incomes of over a million dollars paid well under 50 per cent—which happened to be just about the percentage that a single taxpayer was supposed to pay, and often did pay, if his income was forty-two thousand dollars. Another frequently heard charge is that the income tax is a serpent in the American Garden of Eden, offering such tempting opportunities for petty evasion that it induces a
national fall from grace every April. Still another school of critics contends that because of its labyrinthine quality (the basic statute, the Internal Revenue Code of 1954, runs to more than a thousand pages, and the court rulings and Internal Revenue Service regulations that elaborate it come to seventeen thousand) the income tax not only results in such idiocies as gravel-producing actors and unborn partners but is in fact that anomaly, a law that a citizen may be unable to comply with by himself. This situation, the critics declare, leads to an undemocratic state of affairs, for only the rich can afford the expensive professional advice necessary to minimize their taxes legally.

  The income-tax law in toto has virtually no defenders, even though most fair-minded students of the subject agree that its effect over the half century that it has been in force has been to bring about a huge and healthy redistribution of wealth. When it comes to the income tax, we almost all want reform. As reformers, however, we are largely powerless, the chief reasons being the staggering complexity of the whole subject, which causes many people’s minds to go blank at the very mention of it, and the specific, knowledgeable, and energetic advocacy by small groups of the particular provisions they benefit from. Like any tax law, ours had a kind of immunity to reform; the very riches that people accumulate through the use of tax-avoidance devices can be—and constantly are—applied to fighting the elimination of those devices. Such influences, combined with the fierce demands made on the Treasury by defense spending and other rising costs of government (even leaving aside hot wars like the one in Vietnam), have brought about two tendencies so marked that they have assumed the shape of a natural political law: In the United States it is comparatively easy to raise tax rates and to introduce tax-avoidance devices, and it is comparatively hard to lower tax rates and to eliminate tax-avoidance devices. Or so it seemed until 1964, when half of this natural law was spectacularly challenged by legislation, originally proposed by President Kennedy and pushed forward by President Johnson, that reduced the basic rates on individuals in two stages from a bottom of 20 per cent to a bottom of 14 per cent and from a top of 91 per cent to a top of 70 per cent, and reduced the top tax on corporations from 52 per cent to 48 per cent—all in all, by far the largest tax cut in our history. Meanwhile, however, the other half of the natural law remains immaculate. To be sure, the proposed tax changes advanced by President Kennedy included a program of substantial reforms to eliminate tax-avoidance devices, but so great was the outcry against the reforms that Kennedy himself soon abandoned most of them, and virtually none of them were enacted; on the contrary, the new law actually extended or enlarged one or two of the devices.