It is hardly advisable
to steer a course forward by looking in the rear-view mirror, yet it
is inevitable that yesteryear's words of wisdom, or at least
descriptions of historical experiences, should rightly or wrongly
have a level of influence for auto-sector leaders, whether from their
formative youth, or in latter years.
Looking Back -
In recognition, this
web-log offers a synopsis of Lee Iacocca's autobiography; viewed in
the late 1970s and early 1980s as “saving Chrysler”. Though it
should also be recognised that America has always had a tendency to
deify its industrial leaders as all-conquering heroes, with little
objective countenance.
So at this juncture,
although in real terms belated for the US – and of little true use
to current Chrysler head Sergio Marchionne (who is more than aware
given his near identical Italian-Canadian background), and should be
well known by auto-sector sell-side and buy-side analysts, the
autobiographical recount of a previous era's 'Detroit Doyen' may
offer a degree of insight for a new generation of BRIC and broad EM
auto-sector participants, whether managing or investing.
Far more pertinent for
China's auto sector leaders, especially relative to SOEs, who
themselves whilst presently gaining from their lower pricing
strategies – vis a vis foreign brands - now face a new era of
quality improvement, process rationalisation, marketing improvement
and ultimately improved domestic and export competitiveness as the
PRC government inevitably slowly loosens indirect control and the
firms are formed eventually into autonomous free-market entities.
Today, Iacocca has
become engrained in American automotive heritage, itself a major
strand of its national culture; a culture now very much media-driven,
expanded, and very well 'curated' by the likes of Jay Leno.
(An interesting youtube
link: Jay Leno's Garage...“50 years of Mustang: Lee Iacocca).
Auto sector investors
would do well to immerse themselves in that which industry executives
should already know 'by heart': the story of the Ford Mustang's
development and the turnaround of Chrysler after the 'Japanese
Invasion', industry watersheds born from 'boom' and 'bust' contrasts
in national fortune.
Lee Iacocca -
Now very much a member
of America's 20th century's “hall of fame”, Iacocca, sits
alongside names such as: Henry Ford, Walter P. Chrysler, Alfred
Sloane, Harley Earl, the “Whiz-Kids” of McNamara and Thornton,
Virgil Exner, Bill Mitchell and John De Lorean.
To deploy Warren
Buffet's saying: these men “were fortunate enough to win the life
lottery”, being born into the heartland of America's 20th
century industrial and cultural hegonomy, its reach across the world.
But sat mid-point of that century, Iacocca also viewed the initial
stumbling of domestic automotive might in the face geo-political
shifts, questions about energy security and a reduction of US import
tariffs which mustered better consumer competition. Unlike his 'hall
of fame' forebears, he watched as the innate national 'feel-good
factor' declined, and what seemed an unassailable nation, for a
while, much blighted.
The time-line of
Iacocca's career was fortuitous, he rode the good times as a younger
man, making an taking opportunities, and was informed and mature
enough to not only endure, but help re-orientate the later bad times.
Published in 1984
'Iacocca, An Autobiography' arrived within the context of a
sociologically battered but re-emerging USA. During the Reagan era it
became a type of invigorating touchstone for all kinds of readers;
from industrialists to students. Thirty years on from its publication
it may still serve.
The PR 'Blurb' -
The Amazon book sales
website pronounces the following:
...He’s an American
legend, a straight-shooting businessman who brought Chrysler back
from the brink and in the process became a media celebrity,
news-maker, and a man many had urged to run for president.
The
son of Italian immigrants, Lee Iacocca rose spectacularly through the
ranks of Ford Motor Company to become its president, only to be
toppled eight years later in a power play that should have shattered
him. But Lee Iacocca didn’t get mad, he got even. He led a battle
for Chrysler’s survival that made his name a symbol of integrity,
know-how, and guts for millions of Americans.
In his classic
hard-hitting style, he tells us how he changed the automobile
industry in the 1960s by creating the phenomenal Mustang. He goes
behind the scenes for a look at Henry Ford’s reign of intimidation
and manipulation. He recounts the miraculous rebirth of Chrysler from
near bankruptcy to repayment of its $1.2 billion government loan so
early that Washington didn’t know how to cash the check.
Synopsis -
This is offered by the
publishers Compact Classics within volume one of its humorously
titled compendium 'Passing Time in the Loo':
[NB For counter-point
balance independent comment from investment-auto-motives is provided
as deemed necessary].
….Lee Iacocca, the
tough businessman who brought Chrysler back from the brink of
collapse, offers his own story here – along with his opinions on
safety belts, Japanese self-interest, mandatory retirement, worker
entitlements, and how to make America great again.
Nicola Iacocca sailed
into New York harbour in 1902, a poor solitary 12 year old. For him
America was a land where you were free to become anything you wanted
to be. This philosophy he later infused into his daughter, Delma, and
his son, Lido (Lee). The children were made to feel important and
loved. “My father may have been busy with a dozen other things but
he always had time for us”.
Nicola became the
owner and promoter of several movie houses and advertised special
offers for Saturday matinees: “people still talk about the day he
announced that the ten kids with the dirtiest faces would get in for
free”. Then the Depression hit. Lee was only six or seven at the
time but he still remembers the anxiety he felt about the future. The
backbone of the family was his mother, Antoinette. She ensured they
had enough to eat by sewing shirts for hire. His father's favourite
theme during those years was that life has its ups and downs: “you'll
never know what happiness is unless you have something to compare it
to”.
Even in a restaurant,
Lee's father demanded top performance. If the waitress was rude, he'd
call her over to give her a real tip: “why are you unhappy in this
job? Is anyone forcing you to be a waitress? If you really want to
be one then be the best damn waitress in the world. Otherwise do
something else”.
[NB Although this was
hardly an option for many during the harsh economic times of
post-Great Depression America, especially for those with little
formal education]
In predominantly Dutch
Allentown, Pennsylvania, being Italian was something you tried to
hide. Bigotry left its mark.
[NB It must be noted
that this difference is not only nationalistic but stems from the
historically engrained cultures of conservative Protestant northern
European perspective (work ethic, frugality etc necessary in a cold
climate) vs the historical Catholic southern European orientation
(greater lethargy because of the heat, the innate power-base of the
Church, and (ironically) a less strict moral code. Critically, the
Protestant Dutch were historically typically distrustful of Jews, and
thus the American emigree Dutch were wary of the close relationship
Jews created and other migrants such as new American-Italians].
In school Lee
discovered what was to become his most important lesson – how to
communicate.
After engineering
degrees from Lehigh University and Princeton he began working for
Ford Motor Company as a student engineer. On the assembly line he
learnt about every stage of manufacturing. However, he was eager to
be where the action was in marketing or sales. Though awkward and
bashful Lee was a willing learner and liked working with people.
“Learning the skills
of a salesman takes time and effort. Not all young people understand
that. They see a successful businessman and they don't stop to look
at all the mistakes he might have made along the way. Mistakes are
part of life, you can't avoid them. All you can hope is that they
won't be too expensive and that you don't make the same mistake
twice”.
[NB This then a
seemingly overtly relaxed very 'American' and 'salesman-like'
perspective (reflective in the book's cover photo of Iacocca) Very
different to highly analytical, risk-averse, and typically very
responsible attitudes of Northern Europeans and most corporate EM
mindsets].
At Ford, he met
Charlie Beacham, “a southerner, a warm and brilliant man and the
closest thing I ever got to a mentor”. Charlie taught Lee to face
up to his own failings and mistakes. He also advised in matters of
communication and public relations, and so before Lee's first trip to
the southern states Beacham highlighted that he spoke to fast, and
that should swap around his Christian name and Surname. ('Lee' was
the revered name of General Lee, the Confederate leader, whilst
Iacocca audibly sounds much like 'Coca-Cola', the nation's favourite
soft drink).
[NB It is perhaps no
surprise then that latterly in the late 1970s Iacocca sought to
rejuvenated Chrysler's fortunes with the help of a television series
which starred a Dodge Charger named the 'General Lee'. This fictional
car's licence plate was “CNH 320”, perhaps an early indication of
FIAT's concurrent ownership of both Chrysler-Dodge and the CNH
Industrial division (with renewed focus upon US agriculture)].
With sales slumping at
Ford, Iacocca suggested a new sales campaign: offering a new 1956 car
for a modest down-payment, followed by three years of payments at $56 per month. The “56 for '56” took off like a rocket, “after 10
years of preparation I became an overnight success”.
He was promoted to
become the Washington DC district manager. Thereafter, twice more he
was promoted. First in Ford's domestic Trucks marketing section. Then
onto lead marketing for Cars.
Robert McNamara was
his new boss, a good businessman who believed in producing a
utilitarian car, and so came out with the extremely popular and
inexpensive Ford Falcon. But its profit margin was limited.
[NB As one of Henry
Ford II's original 'Whiz-Kids', brought into save Ford after WW2, it
was McNamara background in military planning, his use of statistical
sciences, dogmatic efficiency seeking and reporting that saved Ford.
As cold rationalist who viewed the 'snake-oil' ways of salesmen as
beneath contempt, he and Iacocca were not kinsmen, but Iacocca was
respected by his boss for his ability to comprehend the process
science, engineering and talk to those at the coal-face.
Despite the book's
description, Falcon was not an overtly utilitarian car, simply the
corporate answer to a natural market development for a lighter,
smaller, fuel-efficient, affordable 'compact' entry-level vehicle,
which did come with, if not an array, buyer relevant trims and
options. Importantly, right product, right time after the 1957
recession and painful loss of mid-size sales, and failure of directly
targeted Edsel. It vied against the likes of VW Beetle and Nash
Rambler and later Chrysler Valiant and Chevy Corvair, and grabbed and
grew segment share.
Interestingly, it was
born not from an engineering ideal or “back of a napkin”, but
from a set of MacNamara's target statistics (volume, weight, cost).
Per unit margins were indeed limited because of the very nature of
the car, as the cheapest of the range and use of a new expensively
developed platform. However, to McNamara's credit, this was well
recognised in the original business model and ROI was intentionally
based upon the high volume sales of the North America, South America,
Australia and elsewhere. In McNamara's view the car would sell
itself...and it did...even if it did not reach the ambitiously set
600k plan].
So [in reaction to
“utlitarian” Falcon and planned later 'Cardinal' model (which
became the European Taunus P4)] Iacocca set out first to 'dress-up'
Falcon to gain margins in variants and trim decoration]...then to
develop his own car [based on “power, price and style”]. “One
that would be popular and also make us a lot of money. He brought
together a team of “creative young guys” with a goal of creating
a car that would appeal to a million post-war baby-boomers who
Iacocca knew would be screaming for the right product. One with with
great styling, strong performance and low price” With time running
out and 18 clay models, none of which was quite right, the company
staged a competition. An engineer named Dave Ash submitted a model
that to Iacocca looked like it was moving. From the names: Bronco,
Puma, Cheetah, Colt, Cougar and Mustang the latter was chosen.
[NB The fact is that
Mustang was only achievable as a pertinent affordable offering
because it relied heavily on the already much amortised Falcon
platform; hence its low production cost. In technical reality it was
largely slightly altered in engineering hard-points, a total re-skin,
expanded engine choice and new interior. That was however more than
enough to market it as a wholly new vehicle. The prime carry-over
parts philosophy then provided an immediate ex-factory profit base,
which was boosted yet again by the high buyer uptake of a wide choice
of options and accessories, so as to better personalise the car].
At this time Iacocca
had his first confrontation with Henry Ford II, about the topic of
rear seat passenger legroom, Ford demanding an extra inch in the
wheelbase so impacting the project's engineering and styling
development, time and costs and adding additional material costs.
Even so at launch in March 1964 dealerships were mobbed to view and
drive the new Mustang.
[NB Management must
recognise that there may be confidential and highly
strategic/tactical reasons' for what seem odd (seemingly personal)
demands from company leaders. Thus specific timing and cost targets
set-out in the planning phase become subservient to, and reactionary
to, higher 'big picture' corporate aims. These may span from the
immediacy of 'bad news' negatively impacting short-term share-price
dynamics if it is felt the share-price has over-heated, through to
ongoing alliance discussions with a prospect of future platform
sharing, requiring aligned product dimensions].
Iacocca was in line to
become the next President, however Henry Ford II instead chose the
highly regards product man Bunkie Knudsen from cross-town rival
General Motors. Knudsen immediately required that the next generation
of Mustangs and Thunderbirds be bigger, which took convincing (given
the macro-trend for smaller) but it was the habit of Knudsen walking
into Ford's office unannounced and without knocking that set his fete
at FMC. “He tried to get palsy-walsy with Henry and that was a big
mistake”...”Give Henry a wide berth” as Beacham frequently
advised, “Remember, he has 'blue blood', your's is only red”.
In 1970 Iacocca
finally became President, located next to Ford in the 'Glass House'
and given 'royal class' service and accommodation. The new boss
inaugurated a programme to cut operating costs by $50 million in four
areas: timing foul-ups (to limit machinery and worker down-time),
product complexity, design costs and outmoded business practices. He
revised Ford's shipping procedures and rid the corporation of dozens
of operations that either lost money or made minimal profits. Now
without the stamina of the Mustang years and increased
responsibilities he took on a driver and protected his weekends from
work and so his sanity.
But even as the
business prospered Iacocca worried about the future of the business
under Henry Ford II. “He held the power of life or death over all
of us, he could suddenly say 'off with his head' and often did.
Without a fair hearing one more promising career at Ford would bite
the dust. It was superficial things that counted for Henry, he was a
sucker for appearances, if a guy wore the right clothes and said the
right buzz words Henry was impressed, 'keep your people anxious and
off-balance' was Ford's management philosophy. What made him so
insecure? Maybe because Ford the younger never had to work for
anything in his life...but worried that he might screw things up?”
Once when Iacocca
forged a masterful bargain to use a Honda engine in the Ford Fiesta
Henry promptly vetoed it. “no car with may name on the hood is
going to have a Jap engine!”
[NB the probable
reality behind this was that Henry Ford II recognised the need to
maintain core competence in small car engine design, rather that
simply transplanting a very good externally sourced engine in what
would become a best selling small hatchback model in Europe.
Also, the fact is that
the Ford family – rightly – have always been very concerned about
the firm being intentionally weakened by insiders who might have
external ties to those who would like to see Ford's demise.
This harsh reality was
learned the hard way by the firm's founder Henry (I), when ousted
from the original car company he set-up. That experience, and other
observations, led Henry to have personal concerns about the
'international jew' and “conspiratorial ways”. Iacocca, through
his father and elsewhere, had cordial business connections to
American jews of the period. Thus Henry Ford II would inevitably
always have concerns about Iacocca's true loyalty, even if it was
from Iacocca's viewpoint wholly unquestionable. Ford's beliefs where
no doubt seen to verified when Iacocca ran Chrysler and gave Gerald
Greenwald the Vice-Chairmanship of Chrysler].
With Henry Ford II's
health failing “he began to realise his mortality” and to worry
about “the Italian interloper” taking over the family business.
“Ford conducted a full scale investigation of both my business and
personal life, interrogating executives and suppliers. When the
witch-hunt failed to produce results Ford ordered some of Iacocca's
close company circle fired. Lee finally found out he had been fired.
Henry would give no reason (see above). “I wanted him to know
exactly what he was throwing away...'we've made a billion-eight for
the second year now, you may never see a billion-eight
again....because you never knew how we made it in the first place!”.
“As you go through
life there are thousands of little forks in the road, and there are a
few really big forks – moments of reckoning, moments of truth. This
was mine. I was financially secure and could play golf for the rest
of my life, but it just didn't feel right, I knew I had to pick-up
the pieces and continue. As it turned out I went from the frying pan
into the fire”, Iacocca offered the presidency of troubled Chrysler
Corporation. “Even its top management didn't have a very good idea
of what was going on. They knew Chrysler was bleeding, but didn't
realise it was actually haemorrhaging”
He was hired and his
wife, Mary, though having suffered a heart attack said “Let's give
Henry a shot he'll always remember. The same day Chrysler announced
its worst deficit in history.
“In the end, all
business operations can be reduced to three words: people, products
and profits. People come first, unless you've got a good team you
can't do much with the other two.
“Like Italy of the
1860s, the company consisted of a cluster of little duchies, each run
by a prima donna. There were 31 vice presidents, each with his own
turf. No real committee set-up, no system of meetings. The guy
running engineering was not in constant contact with his counterpart
in manufacturing; these people almost have to be sleeping together;
these guys weren't even flirting”.
Iacocca realised that
cohesion must be created, incompetence abolished and install sound
financial systems. He fired some workers and sought out others who
possessed inner strength, who enjoyed adventure and risk and who
stuck with a task even when it was not fun. “Hal Sperlich was
already at Chrysler when I arrived, having been been fired by Henry
in 1977. Having Hal was like finding a tall, cold beer in the middle
of the desert...thankyou Henry!”
To create new images
for Chrysler's Dodge-Plymouth division, he hired the same PR firm who
came up with the 'Ford has a Better Idea' campaign: Kenyon and
Eckhardt. The first action was to bring back Dodge's ram symbol.
Slowly public perception of Dodge changed to that of durable,
dependable and no-nonsense, able to match Ford and GM. Secondly a
thirty-day, no-quibble, return policy was initiated.
Customer service was
improved, prompted by disgruntled customer letters, with dedicated
dealership seminars held to underscore the need for courteous
customer service. If sales people couldn't at least provide that they
should (in Nicola Iacocca's words) “look for another line”.
And at last, quality
control was highlighted, adopting the Japanese mindset of 'right
first time' and aspects of lean manufacturing.
However, whilst
micro-level issues were being improved, the macro environment
worsened as 1979 saw the world economy stumble. “The Shah was
forced out of Iran, gas prices almost doubled, and the plentiful,
gas-sipping Japanese imports were very much sought after by the
public. All whilst Chrysler's own full-size car plants were working
over-time”
[NB This occurrence
then highlights that Iacocca's turnaround efforts were not wholly
attuned and successful, and whilst he did indeed create a number of
firsts, he also followed the crowd by mimicking the production
schedules of cross-town peers. Even though the smallest of 'the Big
3', and so more nimble, and offering the small Euro-sourced Omni
since 1977, the failure to react quickly compounded operational
problems].
“Detroit got caught
with its pants down. Sure enough as the weakest link Chrysler got hit
first”. Within six months GM and Ford also experienced losses.
There was only one course to take: Iacocca did his homework and then
went and asked the US government for a loan. He was criticized for
asking:
“Predictably the
biggest cry came from the business community, the old cliches got
dusted off. Ours is a profit and loss system....liquidations and
close-downs are healthy...a loan guarantee violates the spirit of
free enterprise. But they were wrong, free enterprise is about
competition, and that loan ensured greater competition since it would
allow the third of Detroit's Big Three to remain. Saving Chrysler
also preserved jobs, 600,000 of them. So Chrysler's closing would
only mean exporting more jobs to Japan!”
But Iacocca's biggest
argument dealt with economics.
“The Treasury
Department estimated that if Chrysler collapsed, it would cost the
country $2.75 billion during the first year alone. It was time for
tough, straight talk: “you guys have no choice. Do you want to pay
the $2.75 billion now... or do you want to provide guarantee loans
for half that amount and have a good chance of getting it all back?”
“Many members of
Congress were ideologically against the loans, but when they
recognised that their states risked job losses and lost revenues it
was farewell ideology”.
In his fight for
survival Iacocca cut his own salary to a dollar a year, and cut pay
at all but the lowest levels...”we left the secretaries alone,
since they deserved every cent they made”. He caught the attention
of the unions...”hey boys I've got a shotgun at your head, I've got
thousands of jobs available at $17 per hour, I've got none at $20!”.
“I discovered that people accept a lot of pain if everyone's going
through the chute together...equality of sacrifice...it was hundreds
of millions of dollars given-up by everybody involved”.
Chrysler cut back the
layers of management and found that running a large company became
easier...”that's a lesson our competitors have yet to learn, I hope
they never do”. An all-American red,white and blue campaign was
initiated to promote the new smaller packaged front-wheel drive
K-car...”yet still roomy enough to hold six Americans”. Sales
improved and by 1982 the company showed a modest profit, by 1983 it
made its largest operating profit ever. Chrysler modernized its
plants, moved to FWD technology across the all car platforms, led in
fuel economy and had a half million strong labour force.
[NB in the technology
realm Chrysler was infact essentially on par with Ford, which had
redeployed its European FWD capabilities – first with (1976)
Fiesta, then (1981) Escort and (1982) Sierra – into the US,
culminating with mid-size (1985) Taurus. Protecting this competence
highlights the true understanding Henry Ford II actually had, even if
disregarded by Iacocca given the proposed Honda deal, FMC latterly
taking a shareholding in Mazda for JV development and production. GM
obviously followed in badge engineering and adopting light FWD
architectures as with the Geo Metro].
“After paying off
one-third of the government loan we made the momentous decision to
repay the entire sum right away, seven years before agreed”....”it
makes the last three miserable years all seem worthwhile”.
“Now we were out of
danger it was time to think of fun again”, and so he had a custom
LeBaron convertible created as a potential 'daily-driver'. The press
and public attention it drew was strong, and so by-passing the usual
routine of preliminary marketing research he ordered the cars into
production. Soon after GM and Ford followed suite and created
personal convertibles of their own.
Though the Minivan was
actually conceived at Ford, it was first produced at Chrysler, where
it became a hit, its low step assisting women in skirts, low
roof-line to fit into a garage and front mounted engine to provide
partial crash space.
[NB the Minivan concept
had been seen originally with the 1955 GM 'window-van-sedan' concept,
then appeared as a working prototype by the Willys-Jeep FC, and later
in the mid to late 1960s with International Harvester's passenger van
concept and Ford's 'CommutaVan' concept. But all these were of a
'forward-control' layout. It was ultimately the pioneering efforts of
Matra in France during the late 1970s (connected to a separate yet
commercially entwined Simca/Chrysler/Rootes Europe) that truly
evolved the Minivan, and influenced Chrysler's Voyager and Renault's
Espace alike].
Iacocca's wife Mary
unfortunately died at the young age of 53, after second and third
heart incidents, demonstrating the emotional and physical load she
carried to support her husband and undertake volunteer work in the
local hospital.
“Mary never got
wrapped-up in the corporate life. For both of us family was supreme.
Yes I've had a wonderful successful career, but next to family, it
really has not mattered at all”.
At one time Iacocca
was aired as a possible candidate for the White House...which he
laughed away...though adding “I do think that our national
leadership consists of too many people that don't have business
backgrounds...I'd like to see a system where we brought in the twenty
top managers to run the business side of the country”
When asked how he
reached his level of achievement, he said:
“I go back to what
my parents taught me. Apply yourself. Get all the education you can,
but then do something. Don't just stand there, make something happen.
It is not easy, but if you keep your nose to the grind-stone and work
at it, it's amazing how you can become as great as you want to be.
And of course be grateful for whatever blessings are bestowed upon
you”.
Upon Reflection -
The story-telling
manner behind of historical content is a central aspect of the
commercialisation and so sales of autobiographies. Such books within
the realms of the business-world, will inevitably typically raise the
importance of the author's industrial and so societal contribution.
The corporate helmsman
battling the mire of hostile real world circumstances and a
fairy-tale ending is what enthuses readers, maintains the fascination
with corporate career ladders, and in many cases – given origins -
simultaneously maintains America's global hegemony.
To this end, Iacocca's
account of his career to 1984 did not simply sell himself, and reward
the publishers, but also operated as a marketing tool for Chrysler,
Dodge and Plymouth sales of the period, under-pinning and
demonstrating the Auto-American rebound.
Yet it must also be
seen that as a prolific salesman Iacocca undertook the dream role of
convincing the public of the very worth of himself.
Even so, reading
between the lines of even this very abridged autobiography, it is
clear that beneath the surface of the ego-driven, publicity seeking
“industrial hero”, he openly recognises, to a degree, that he was
neither perfect nor infallible.
His initial entry into
the auto-industry via Ford was seemingly effectively assured after
attending the Ivy League Princeton University. Unlike the necessarily
bigger, rigid and bureaucratic GM, and the less structured more
chaotically managed Chrysler of the 1950s, thanks to Ford Motor
Company's rock-steady familial roots and the 'turnaround' processes
initiated by the “Whiz-Kid'” senior managers, FMC in the period
proved that it was intimate enough to provide individual familiarity
for a career rises through meritocracy, yet also operationally
efficient enough to ensure that such individual's efforts translated
directly into speedy bottom-line results.
Iacocca then was
arguably in the perfect environment, by far the best of Detroit's
'Big 3'.
However, his refutation
about the low per unit profitability of Falcon, and so its
worthlessness, was wholly incorrect. That car essentially saved Ford
given the massive recession period losses on its big cars and the
simultaneous introduction of the poorly timed new 'near-luxury' Edsel
(sat below Lincoln, but above respectively ranked Ford and Mercury).
Conventionally engineered and cleanly styled it was the the perfect
formula for a down-shifting North America in 1960, mid recession and
wholly aligned to the 'thrifty' driven consumer; at least until
things improved some time later in 1963-4. Had Ford II and MacNamara
allowed Iacocca to expand the variant offerings of Falcon into sporty
and personal realms much earlier as he wanted, it would have only
served as a loss-making exercise on the car, as proven by the poor
sales of the later Mk2 'Sprint' and Convertible variants in 1963 –
one year before Mustang. That 'late' introduction of 'personal'
variants then both reduced losses but critically simultaneously built
a perceptual pathway in customers' minds for the introduction of
Mustang in 1964.
Thus, with the
advantage of distant hindsight and objectivity, the reality of the
Falcon experience situation does not directly accord with Iacocca's
re-telling.
With early 1960s
economic improvement, new consumer optimism grew, and as ever the
case people sought to reward themselves for the years of previous
constraint.
Mustang then was an
obvious and expected product, given the market and model environment
of the early and mid 1960's.
Whilst the America's
original “sportscar”, the Chevrolet Corvette, had
remained essentially the same as a 2-seater, Ford's own
direct competitor the Thunderbird had by the Mk2 iteration grown in size and weight
to accommodate 4 people, thereafter available with a hardtop variant
also, hence marketed alternatively as an up-scale lifestyle car. By differentiating
the Ford, and placing it into a separate higher volume territory, the
instigated difference protected each notional 'competitors'
respective market space(s) during the TIV suppressed years between
1958 and 1963.
With the inclusion of
compact cars, the theoretical market space for compact-based spin-off
models grew as a new product type in itself. The engineering base of
a standard model series could spawn something different with greater
style and panache: an affordable smaller 2+2 sporty car, produced in
higher volumes with coupe and convertible variants, as a
semi-mainstream offering. Essentially the little brother to the
bigger Thunderbird; and so the 'Pony Car' was born. This was hardly
revolutionary thinking, as Iacocca might convey, simply commercial
logic that had been deployed for much of the previous sixty years.
Of influence was also
the rumour that Chrysler and possibly GM were contemplating putting
performance power-trains into their smaller cars, so as to create the
first offerings of ex-factory, dealer offered 'hot-rod' trend
inspired variants, latterly known as 'muscle cars'. The post WW2
'hot-rodders' and specifically the corporate men wannabees had
generally good incomes as recognised by the likes of De Lorean and
the Pontiac (Tempest) GTO.
It was only logical
than that Mustang should offer a wide range of appeal, spanning from
faux sportiness through mere appearance, through to true high
performance capability (via Shelby) performance. The true achievement
was less Iacocca's product planning and more Gale Halderman's
inspired styling work and proportions, which managed to merge the
need for relatively slab-sides to allow for as large a cabin space as
possible using the “euro-moderne” style partially seen in Falcon
and more so in the Lincoln Continental; (this cleaner look with
styling accents even used to create a far less known 4-door clay
model variant). This appearance then gave a taught, very different
'muscularity' at a time when sporting cars were traditionally curvaceous (eg Italian, German and British sports-cars).
Ultimately, applause
must be given to all three major participants. Ford II for approving
the project in a timely manner in line with the economic cycle.
Iacocca for recognising the potency of Mustang as a new concept for
broad spectrum customer-base, with vitally its opportunity for strong
profitability, using amortised platform and prompting customer-led mass-customisation with high margin add-ons. Halderman for perfecting the body-style, after what had been a problematic process.
As the savvy
self-promoter, on the back of the Mustang launch, Iacocca started to
appear as a national treasure, on the front-cover of Time Magazine
and other publications. Now with very much raised industrial and
public persona.
This must have
concerned Henry Ford II. Whilst undoubtedly recognising that whilst
such publicity about the capabilities of the company's management was
advantageous in an era when FMC was still a relatively young publicly listed company on the NYSE, it
also posed a possible threat to future family's interests. No matter
how seemingly remote, board members and senior management could
feasibly secretly collude with those with financial means outside of
the company and create through intentional mismanagement a long and
protracted coup: by damaging share price, deliberately devaluing the
market capitalisation of the firm - damaging to the family's
paper-based wealth – deliberately destabilise the balance sheet,
and with resultant low credit rating effectively demand issuance of
new stock, and so dilute the family's holding. All of which could end
with the family's loss of sizeable control.
That possible threat,
no matter how remote, meant that inevitably the useful but
self-promoting Iacocca would be eventually released. The small
'Siberian' office that Henry Ford gave him, from which to use as a
base to seek-out his next post, undoubtedly a ploy to further
irritate him further...possibly ordained from on-high – the
Whitehouse or elsewhere - to anger, steel and ready him for his
eventual next deployment across town.
[NB At this point
Iacocca should have remoulded himself as an independent consultant,
with wide remit and greater overall influence, but it seems his anger
and desire for revenge got the better of him].
His desire to beat
Henry Ford generated the move to the much struggling Chrysler, was
then, an obvious one.
As stated previously -
after the loss of Walter P. Chrysler as authoritarian leader (1925 -
1940) - the company, whilst enjoying the post WW2 boom-time,
experienced greater problems that GM and Ford during the 1958-63
recession, with the failure of De Soto as an increasingly meaningless
marque, poor styling choices (such as the Valiant) and thus fewer
economies of scale by which to ensure its health and was most likely
through the 1960's and 70's to experience a loss of potential sales to
the even weaker American Motors Corporation, especially in compact
cars.
Hence a loss of general
corporate strategy, momentum and profitability. Plymouth too slowly
faded in the popular consciouness as a notionally mid-market badge
engineered version of higher volume Dodges. However, whilst the
functionally respected Dodge nameplate retained favour in the pick-up
truck sector and its cars often sold as essentially functional, thus
demanding greater incentives and so less profit, and to 'shift metal'
were often heavily discounted to police forces, business fleets and
taxi firms. This business decline was only partially saved by
own-brand rebadging of Mitsubishi's Colt/Lancer as a stop-gap, and
the design 'importation' of the small Omni hatchback in 1977 from
Chrysler Europe. The lack of foresight and need to rely upon
fuel-efficient 'imports' demonstrated the poor habits and
mismanagement of Chrysler up until 1977, when Iacocca joined.
Given the threat of
Japan's grown prowess, (in small cars and trucks), the circumstances
he faced regards functional “silo-creation” and internal “empire
building” are astounding to see. Such problems allowed the spiral
of decline and should have been overcome by the early 1970s in
recognition of the increasingly prolific Japanese industrial mindset,
its achievements and the potential threat from Europe's low-cost
car-makers after the success of VW's Beetle.
Yet the highly
combative nature of automotive sector corporate politics of the time
in the USA, UK, though less so Europe, – was somewhat akin to the
'swinging dicks' mentality of Wall Street. That “not invented here”
attitude ostensibly undermined the efficiency and efficacy of western
manufacturers throughout the late 1960s, 1970s and even partially
into the early 1980s. Whilst an intransigent attitude was very
necessary to combat militant trade unionism, ultimately it weakened
internal capability.
As the 'father of
Mustang', it was Iacocca's reputation that Washington sought to
revitalise the #3 car-maker, recognising that whilst AMC was weak
enough to be lost (dissected and sold), the idea of a remaining GM vs
Ford duopoly riled against the notional American spirit of open
competition.
With the loss of AMC,
itself a blow to employment in plants and through the tier 1 and 2
supply-chain, Chrysler was destined to be saved, inevitably through
the offering of government funds. And so Iacocca's role was to
enthuse management, staff unions, suppliers, dealers and customers.
In this regard,
although the “die was set” by circumstance, the fact is that
Iacocca did indeed use the critical thinking he'd learned from
McNamara and importantly combined it with the ability to convincing
'sell' the set of solutions required to all internal and external
stakeholders, from Washington down to the local dealer and to hearts
and minds of past, current and potential Dodge, Plymouth and Chrysler
customers.
Although perhaps viewed
as a little smarmy by some, it was his public self-assurance of the
plan ahead for the company, and its operational and profitability
renaissance, that did indeed allow for all the different bits of the
business model puzzle to come together relatively smoothly. Others
could have achieved the same thing, but it was his ability to
orientate intrinsically important conversations as a subtle and not
so subtle negotiator that quickened the process of corporate
recouperation.
Between the mid 1980s
to late 1990s Chrysler had re-established itself as the most
progressive of Detroit's Big 3 auto-makers, with introduction of the
modern American minivan/MPV in the Caravan/Voyager, conceptually
funky concepts toned down market such like compact Neon, futuristic
'cab-forward' packaging and organic styling in the full size LHS,
greater 'less is more' taste to personal cars such as the Sebring,
and the hugely popular retro-styling of the PT Cruiser and Ram pick-up, and
importantly the revitalisation of the Jeep brand, all providing
enough cashflow and confidence to create 'homages' to home-grown auto-culture with Viper and Prowler.
After Daimler's overtly heady high-priced purchase, the 2000s once again
witnessed a new confidence, with sales of high margin Durango and 300C, creation of blended cars such as the Crossfire, and highly efficient multi-marque platform sharing, even
if perhaps dilutive to historic brand
personas. Yet once again intense competition by the mid 2000s saw
incentives rise, unit margins for most models decline rapidly and
ultimately credit fuelled sales lead to production over-capacity as
ever greater economies were sought...right up until the financial
crisis of 2008.
Thereafter, all is well known, Washington (once again) to the financial rescue, and the phased-in control of FIAT group, leading to
today's FCA Group.
Lee Iacocca, whilst an
undeniable self-proclaimer, then perhaps contributed less toward the
Ford Mustang than history would have us believe. But, whilst perhaps
overly applauded, he re-conjoined the multiple facets of American
industry and commerce to re-boot Chrysler in the early 1980s. And all
too tragically soon after experienced the loss of his very cherished
wife, very possibly as a consequence of the shared stresses endured.
Today, auto-sector's
own dimming memory exists largely through culturally attuned media,
dedicated collections and honorific products such as the Shelby Fords and the
skunk-works inspired 2009 'Iacocca Mustang'. Automotive heritage has
never been so well curated given its cultural and commercial
importance, especially so, and obviously so, in the USA.
Yet critically, looking
forward, Iacocca's story (and those of his counterparts) must act as
newly discovered chapters for the current and future EM-born
automotive executives. And ideally as critically, the ever expanding
band of EM institutional, hedge fund, private equity and even
possibly auto-enamoured retail investors.
All involved should
know of the historical contexts, watershed case studies and
personalities that together underpinned the evolution of today's
global auto-sector.
