Car czars

June 29, 2012

This piece originally appeared in Reuters Magazine.

Henry Ford had to fight to build the Model T, even within the company that bore his name. The Russian immigrant engineer who saved the Chevy Corvette bucked the General Motors brass to do it. Lee Iacocca and Hal Sperlich built the minivan at Chrysler only after the vehicle—and they—had been rejected at Ford.

Those three cars were not just huge commercial successes—each also placed its stamp on American life, much as the iPad has today. Two were utterly practical while the third was ostentatiously stylish, but what they all had in common is this: The people who created them overcame formidable obstacles to put them on the road. Unblinking determination is a common theme in the biggest American business success stories, such as Ray Kroc’s damn the-odds effort to build McDonalds and Steve Jobs’ audacity in reshaping Apple. Luck and timing are involved too, but they aren’t enough. The special sauce (apologies to Kroc) is a strain of determination that blends self-belief with belief in the commercial potential of a product.

Determination and self-belief sometimes goes awry in the auto industry, as in other arenas. Exhibit A is the Chevrolet Corvair, introduced in 1960 with an innovative air-cooled, rear-mounted engine that produced 29 miles a gallon, more than double most cars of its day. Despite the weight concentrated in the car’s rear, Ed Cole, the Corvair’s creator, stoutly rejected putting a weight-stabilizing bar under the car’s front end. The result was a plethora of accidents and a muckraking 1965 book by an unknown lawyer named Ralph Nader: Unsafe at Any Speed. The Corvair scandal prompted a boom in product-liability litigation that continues to this day.

Then there’s John Z. DeLorean, whose 1970s effort to build an “ethical sports car” in Belfast collapsed amid financial overreach. Most guys would have tried to rescue their company with an IPO or junk bonds, but DeLorean tried selling cocaine. Though he was acquitted at trial when a jury judged that the FBI entrapped him, his career and his company were finished.

But both Cole and DeLorean enjoyed enormous success before their signature failures. Cole created a small-block V8 engine that powered the legendary ’57 Chevies and was a key figure in the success of the Corvette. DeLorean created the Pontiac GTO, which launched the muscle-car craze of the 1960s and still invokes strong emotions among onetime boy racers. A sign on a restored GTO displayed in suburban Chicago a few years ago declared: “This car was built in honor of Almighty God, in memory of my dad, and of my fellow hometown veterans who did not have the chance to live these memories.”

Determination and self-belief have fostered hubris among automotive innovators over the years, sometimes with disastrous results. But history shows that they’re also the critical ingredients behind the most spectacular automotive successes.

The Model T, perhaps the most revolutionary product ever made, was hardly a no-brainer to the people supplying capital to Henry Ford when he proposed it. It was the world’s first “people’s car,” but with an initial sticker price of $850 wasn’t the most affordable car of its day. That distinction went to the $500 Brush Runabout, which had a chassis, axles and wheels made of wood. The Runabout’s detractors quipped: “Wooden axles, wooden wheels and wouldn’ run.” In contrast, reliability made the Model T an overnight success—quite unlike the man who built it.

Henry Ford was the proverbial late bloomer. Raised on a Michigan farm, he left home at 16 to work in Detroit’s machine shops. By 1893, at age 30, he had become chief engineer at the local electric company, but his mind was turning to the newfangled automobile. He started tinkering in his shed (like Steve Jobs in his garage 80 years later) and in 1896 produced his first car. Three years later he got backing from local investors to start the Detroit Automobile Company, but it went broke in less than two years. In 1901, he raised money to start the Henry Ford Company—he was one-sixth owner and chief engineer. But he soon squabbled with his investors and quit. By age 38, Ford had formed two car companies and lost both. He vowed that his days as an employee were over. He assembled another group of backers and on June 16, 1903 formed the Ford Motor Company. Within 10 months it sold more than 650 cars. Finally, Henry Ford was successful, or so it seemed.

In 1906 he wrote to an automotive magazine describing his vision of “a light, low-priced car with an up-to-date engine… capable of carrying its passengers anywhere that a horse-drawn vehicle will go.” But many of his other investors saw more profit potential in big, expensive cars aimed at luxury buyers. As the debate grew intense, Ford and his allies played hardball—they formed their own company, Ford Manufacturing, to make and build parts for Ford cars, and charged outrageously high prices for the parts, plunging Ford Motor into red ink while keeping Ford Manufacturing’s profits for themselves. Had Ford attempted such a scheme a century later he would have found himself making license plates in prison instead of making cars. But the dissident investors capitulated, selling their stock in Ford Motor and leaving Henry Ford with a 58 percent stake.

In October, 1908 Ford Motor introduced the Model T, so named because it followed Models N, R and S. It used a new kind of steel—vanadium—that was lighter and stronger than traditional carbon steel. Other cars of the day had heavy frames to withstand America’s primitive roads, but the agile Model T flexed with the road, a blessing with certain drawbacks. One joke described a man who named his Model T the Teddy Roosevelt because, he explained, it was the “Rough Rider.” Henry Ford preferred another joke, the one about the farmer who asked to be buried in his Model T because it had gotten him out of every hole he’d ever been in.

The car was so popular that Henry Ford started exploring ways to boost production. He found inspiration in the slaughterhouses of Chicago, which were basically big disassembly lines. In 1913 Ford started building on a moving assembly line. The efficiencies were so great that in 1914 the company was paying factory hands $5 for a day’s work, more than double the prevailing wage. In just six years Henry Ford had put America on wheels, invented mass manufacturing and spawned America’s middle class. He continuously increased manufacturing efficiency and passed the savings on to consumers. In 1921 Ford’s market share topped 60 percent.

The Model T’s influence on early 20th century America was pervasive. “Most of the babies of the period were conceived in Model T Fords and not a few were born in them,” author John Steinbeck later wrote. “The theory of the Anglo-Saxon home became so warped that it never quite recovered.” In America, personal mobility became a cornerstone of personal freedom.

But as the Roaring Twenties unfolded, many Americans wanted style and status, not just a low price. “Slowly at first, then more rapidly, people passed up the flivver for more ornamental machines,” lamented the Bismarck Tribune. In May 1927 Henry Ford conceded that his car had fallen behind the times, and the Model T was discontinued. Pretension trumped practicality, and “more ornamental” automobiles lay in America’s future.

Nineteen fifty-three was a pivotal year in America. The Korean War ended. Elvis Presley started recording music. Hugh Hefner started Playboy. A real-life playboy, John F. Kennedy, went to the U.S. Senate, prompting a Saturday Evening Post headline: “Jack Kennedy—The Senate’s Gay Young Bachelor.”

Americans who had been raised through the Depression and a few wars were finally letting loose. It was the perfect year, then, for Chevrolet to launch America’s first true sports car, the Corvette. There was just one problem: The Corvette looked great, but it wasn’t a great car. Its anemic six-cylinder engine accelerated with more hope than horsepower, and the indifferent two-speed automatic transmission didn’t help. The convertible top leaked, so some early owners drilled holes in the floor to let rainwater drain out.

By late 1954 the Corvette’s sales had stalled, and General Motors was contemplating killing the car. Rumors of its impending demise reached Zora Arkus-Duntov, a middle-aged, middle-management engineer at Chevy. His journey to that job at GM had been adventuresome.

Duntov was born in 1909 to Russian Jewish parents and raised a Bolshevik in St. Petersburg, where he learned to struggle early in life. As a boy he once brandished a pistol to threaten a doctor who was refusing to come treat his ailing mother. The doctor changed his mind.

By the mid-1930s Duntov’s parents had been posted to Berlin as Soviet trade attachés. Later in the decade he moved to Paris, where he married Elfi Wolff, a Folies Bergère dancer from a well-heeled German Jewish family. When the Germans overran Paris in 1940, the couple fled across France and Spain to Portugal, where they caught a boat for New York. He started a small engineering company, specializing in components for high-speed roadsters.

In January 1953 Duntov visited GM’s Motorama display at the Waldorf-Astoria Hotel, where the company unveiled the Corvette. He was so enthralled with the car that he got a job at GM, starting in Detroit on May 1. Four months later he gave a speech that would define his life’s work. “In our age… the average person is a cogwheel who gets pushed in the subways, elevators, department stores, cafeterias, [and] lives in the same house as the next fellow,” he told the Society of Automotive Engineers. “The ownership of a different car provides the means to ascertain his individuality.” In his own awkward way, Duntov had expressed the vast potential of the Corvette.

Nonetheless, European sports cars were clearly superior to the Corvette, and critics wrote withering reviews. “The Austin-Healy will eat it alive and so will the Jaguar,” wrote one, adding that the Corvette was mainly suited “to impress the hillbillies.” By the fall of 1954 more than 1,000 Corvettes, one-third of those made, languished unsold on dealers’ lots, like orphan puppies waiting for an owner.

When word spread that the Corvette would be discontinued, Duntov bypassed GM’s rigid chain of command and penned a memo to Chevrolet chief Ed Cole. He warned that with Ford on the verge of launching its own two-seat roadster, the Thunderbird, a retreat by Chevrolet would be disastrous. In an awkward blend of immigrant English and corporate-speak, he pleaded for the Corvette’s life. “If Ford makes success where we failed, it may hurt,” Duntov wrote. “With aggressiveness of Ford publicity, they may turn the fact to their advantage… We will leave an opening in which they can hit at will. ‘Ford out-engineered, outsold, or ran Chevrolet’s pride and joy off the market.’ In the bare-fisted fight we are in now, I would hit at any opening I could find and the situation where Ford enters and where Chevrolet retreats, it is not an opening, it is a hole!”

It was a brash memo, even for a man who had survived the Russian Revolution and escaped the Nazis. But the bosses relented. The Corvette’s leaks got fixed and in 1955 it got a V8 engine that was lighter than the Thunderbird’s, but just as powerful. In 1957 the Corvette got a fuel-injected engine that produced nearly 100hp more than what it had under the hood two years earlier. That March, a Corvette gave Maserati a scare at the high-profile auto races in Sebring, Florida. “The seeds of a storybook tale were sown,” gushed Sports Illustrated. “A Detroit sports car, of all things… contending in a world championship race.”

In 1958 Ford added a back seat to the Thunderbird, sharply boosting sales. GM was tempted to do the same with the Corvette, but Duntov argued that a four-seat Corvette would be like a sprinter carrying a backpack. He got a break when GM President John Gordon had to be pulled out of a four-seat Corvette prototype because the back seat was so small.

It was just one more battle in the war Duntov fought for three decades to keep the Corvette from becoming a bloated boulevard-barge, as the Thunderbird eventually did. Through sheer determination and a willingness to buck his bosses, a Bolshevik boy saved the great American sports car.

“Zora Arkus-Duntov is so firmly identified with Corvettes they could bear his name,” wrote Car and Driver in 1962. When Duntov died in 1996, columnist George Will wrote: “If you do not mourn his passing, you are not a good American.”

When Lee Iacocca and Hal Sperlich launched the Ford Mustang in 1964, they caught America’s baby-boom generation coming of age. By 1984 both men were at Chrysler, and the boomers were entering a new phase of their lives—they had gone to college, gotten haircuts, taken showers, gotten jobs, gotten married and started families. Not always in that order, of course.

Thus the stage was set for Iacocca and Sperlich to capture the mood of America’s largest generation once again. The two men responded with a totally new type of vehicle. Like the Mustang, this one would help define the lifestyle of a generation, or at least the lifestyle of baby-boomers now painting the nursery instead of the town.

Ironically, the Chrysler minivan could have been Ford’s. Sperlich pitched it to CEO Henry Ford II in the early 1970s as the “Mini-Max”—minimal exterior length but maximum interior space, and deemed it the perfect vehicle for families in an era of high gas prices. But Henry II deemed the idea too risky and grew increasingly irritated by Sperlich’s persistent lobbying for it. In 1976 he fired Sperlich, and two years later he fired Iacocca. Both men landed at Chrysler, and couldn’t have arrived there at a worse time.

In 1980, the ailing company was saved only by Congress’s Chrysler Loan Guarantee Act. That fragile lifeline gave it enough cash to launch the K-cars—the Dodge Aries and Plymouth Reliant—in 1981. The hugely successful K-cars were built on front wheel-drive platforms, which Ford didn’t have. They were lighter and roomier than rear-drive cars because they didn’t need a bulky drive shaft. The K-car platforms also provided the ideal chassis for the vehicle Sperlich had been pitching for years.

The cover of Car and Driver in May 1983 showed five members of the Detroit Pistons basketball team posing in front of a new Chrysler to be launched that fall. It had a short hood and a large passenger compartment. The headline read: “A Van for All Seasons,” and dubbed it a “minivan.”

“Picture a van that is three inches shorter, ten inches narrower and fifteen inches lower… than the next-smallest [van] on the market,” the magazine wrote, “yet has enough room for the Detroit Pistons and their luggage… ”

In February 1984, five months after the minivans debuted, Chrysler paid dividends to stockholders for the first time in five years. By February 1986 the company’s stock had surged above $48 a share, a 1,500 percent increase since the dark days of 1980. Minivans quickly replaced station wagons as America’s family vehicle of choice, thanks to their copious interiors. A Kansas City homemaker told the local newspaper that she shuttled her kids among doctor appointments, piano lessons and soccer games, making the minivan the family’s home-on-wheels between 3 and 7 p.m. “My kids eat in the car, they change clothes in the car, they do their homework in the car,” she said.

SUVs have since replaced minivans in many suburban driveways, but Sperlich’s “mini-max” remains an enduring symbol of American family life. It also speaks to the sheer determination sometimes required to push an innovative idea through a big corporate bureaucracy. Iacocca once said Sperlich approached product development as if it were hand-to-hand combat. Sperlich took that as a compliment.

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Today our young Americans cannot afford automobiles. Burger flippers don’t earn enough for $35,000 cars and $4/gallon gas.

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