Return to Glory Read online

  In the other citadels of American power, the auto industry is borderline despised, and it is misunderstood or underestimated for precisely this reason. In Washington, the Republican right and even chunks of the Democratic left resent the power organized labor wields over politicians in Michigan and Ohio. In New York, Wall Street is baffled by the core proposition of the industry, which can create high-wage jobs at a clip that would stagger even the most avid libertarian technology entrepreneur. The fact that the automakers can operate as their own banks, using their profits to generate auto loans, doesn’t enhance this relationship. (And the fact that they can’t operate fully as banks, taking customer deposits, can exaggerate the differences, as it did during the financial crisis, when automaker finance companies couldn’t obtain the funds they needed to make loans.)

  In the United States, the automakers are also fortress employers, with a workforce that is assured of relative stability through the cyclical downturns that are a fact of its history. This obviously isn’t the case in nonunion Detroit South—the southern U.S. auto-manufacturing states such as Tennessee, South Carolina, and ­Alabama—where workers are employed “at will” and can be laid off at any time. (Union workers are also laid off, particularly when plants are idled to adjust production, but the layoffs are often temporary, and the workers are hired back.)

  The auto industry’s economic power hasn’t helped it remain relevant in the national economic narrative, however. While Motown was down in 2009 and climbing back from 2010 to 2013, Silicon Valley was riding high, at the height of its self-confidence (and, arguably, its arrogance) following its own meltdown when the dot-com bubble burst in the early 2000s. Apple was on its way to becoming the most valuable company in the world, displacing ExxonMobil. Google stock was trading in the thousands per share. Facebook’s initial public offering heralded the arrival of a new kind of Web 2.0 technology company, one built of user-generated shared content rather than computers and devices (as Apple was) or packaged software (Microsoft).

  Then there was Tesla, whose survival spurred a belief among major tech firms and start-ups alike that the landscape of mobility could be remade for a digital future. After an initial period of wariness, the carmakers were happy to partner with these schemes, bringing much more advanced technology into their cars.

  Ford led the way, as Mulally delivered frequent annual keynotes at the Consumer Electronics Show in Las Vegas, enabling the CES to commence the process of displacing in importance some major car shows (mainly those of Los Angeles and New York). Later, Mark Fields intensified Ford’s aggressive efforts to transform itself from a car company into a mobility company, as he often called it.

  It was better to join Silicon Valley than to try to beat it. That was the prevailing wisdom, and it was understandable. During the financial crisis, the American automobile was seen as a problem to be solved by the Silicon Valley elites, who often drove luxury vehicles but lamented the state of information technology inside cars and trucks. Larger-scale issues also gripped them: the economic inefficiency of the automobile, pollution caused by the internal-combustion engines, and the relatively slow pace of innovation compared with that in consumer electronics and software.

  A certain triumphalism also affected their attitudes, perhaps spurred on by their admiration for Elon Musk and Tesla (formerly Tesla Motors). Detroit had had its time in the American economic sun, but the iconic industry of the second industrial revolution was so twentieth century. The baton was being passed. Geeks writing computer code had won, while the gasoline-soaked engineers and slick executives of Detroit had lost.

  Detroit auto executives also knew that their vehicles’ development cycles wouldn’t allow them to keep pace with rapid changes in consumer preferences for connected experiences. So they formed partnerships with Microsoft, Apple, and Google and began to cede control of the dashboard. By 2016, nearly every vehicle in GM’s fleet would offer both Apple CarPlay and Android Auto as infotainment options, and the carmaker would install high-speed Wi-Fi connectivity across the board.

  You could say that the Detroit automakers both sold out to Silicon Valley and ran up the white flag of surrender. You don’t try to beat back a tsunami. By 2016, the Big Three were selling more cars than ever before, raking in the cash, and making sure Silicon Valley had access to these rolling “platforms.” Detroit was also designing and building its own self-driving cars and keeping pace with Tesla on the electric-vehicle front. This auto industry was confident. And at Ford, the company had its own visionary to thank for it—Alan Mulally, who looked out his Motown office windows every day not to bask in the trappings of his rise to the top but to remind himself that it could all disappear at any moment.

  Chapter 2

  One Ford

  If you want to get any current or former Ford employees to recall their finest hour, just ask them about “One Ford.”

  It’s exceptionally uncommon for large global corporations, especially companies that are as competitive and internally territorial as those in the auto industry, to get all their workers on the same page.

  General Motors has often been criticized as the American car company with the most political corporate culture and the most entitled attitude. But Ford has never been immune to internal strife or a healthy whiff of its own arrogance. In fact, Ford’s strife was just as intense as its crosstown rival’s, but it was of a different flavor. If GM was the defining example of the postwar American corporation—the organization chart as business destiny, according to its architect, former GM president Alfred Sloan—then Ford was the prime mover of the U.S. auto industry, and the ultimate family business. In the early twenty-first century, GM had no representatives of its founders, the men who created Cadillac and Buick, Oldsmobile and Chevrolet. But at Ford, members of the founding family still depended on the company for their livelihoods, either as idle heirs or as active participants in the business.

  That Ford as a company was both the direct Ford family and the extended “family” of Ford employees, white collar and blue, was a strength and a weakness. On the one hand, being part of either family came with the opportunity to feel you were part of something larger than yourself. On the other hand, all families are dysfunctional in their own ways, and the Fords and their workers had had decades to refine that dysfunction.

  In the years before the financial crisis, the sharp-elbowed rivalries and brutal internal politics inside Ford had created a culture that wasn’t just afraid of change—it was antithetical to it. The atmos­phere wasn’t uniformly horrible, but being at Ford, whether in the executive suite or on a factory floor, and thinking of yourself as part of a greater mission was pointless. Job one, to borrow a phrase that has taken on legendary significance at Ford, was to protect your own ass. Once that was accomplished, you could protect the asses of those you needed for your advancement. A distant third priority was the naive notion that you should be wholly focused on building better cars and trucks.

  But this is one thing you need to learn to appreciate, in every sense of that word, about the good and bad of the U.S. auto industry. A hundred years of building things with wheels and engines means that although its cars and trucks might not always resonate with the public—in fact, the public may vilify them—Detroit still understands the automobile. This understanding goes to some deep level where origin stories are wound into a glowing matrix of molten steel, burning rubber, an affluent postwar middle class, men in good suits overseeing it all, and the design and engineering of the machine that changed the world forever.

  Detroit can freely draw on that, for the good of us all. As for the bad . . . well, at Ford, the core principle of the company as the vision of a determined entrepreneur and family man had been twisted into unrecognizable shapes.

  Everything had gotten too slick, too careerist, too far from the legacy vision of “Fordism,” which although severely tainted by Henry Ford’s anti-Semitism and hard-core opposition to organized labor, neve
rtheless gave birth to the signature industry of the twentieth century and marked the high point in the ascent of industrial capitalism. Mass production of the automobile—the birth of transportation for everyone, to practically anywhere—was a very big idea. But at Ford, the legacy of that idea had led to its degradation; the game in the 2000s was to position yourself to thrive when business was good and to stock enough ammunition and canned goods to ride out the downturn and come out with your head still firmly attached to your body.

  Alan Mulally changed all that. He called his plan One Ford, and it was transformational in its simplicity.

  “At the heart of our culture is the One Ford plan, which is essentially our vision for the organization and its mission,” he told McKinsey & Company’s Rik Kirkland, senior managing editor of the consulting firm’s publishing program, in an interview in 2013, long after the storm had passed and the plan had been vindicated.

  “People here really are committed to the enterprise and to each other,” he added. “They are working for more than themselves.”

  Mulally wasn’t going to tolerate dissent. You were either on the bus or off the bus. “Some prefer to work in a different way,” he told Kirkland. “Ultimately, they will either adopt the Ford culture, or they will leave.”

  When he came to the company, Mulally understood the stakes, which were stark. Ford wasn’t just failing—it had been serially traumatized by Nasser’s disastrous tenure and Bill Ford’s well-intentioned but ineffective leadership. Mulally also understood that he could lead Ford’s workers to sand and tell them it was water, and they would drink it because there was no choice. His leadership wasn’t just inspired. It bordered on cultish.

  But it worked. “It made one plus one equal three,” as Mark Fields likes to put it. “It allowed us to rationalize everything globally,” he adds.

  It’s worth noting that as we look back on the spectacular job Mulally did saving Ford, we should recognize that his innovations were largely managerial and leadership-oriented. His ideas about the products Ford should be building and selling were misguided. This was where the plane guy proved that although he could reform the car guys, he couldn’t assess the marketplace as they did.

  Of course, numerous industry outsiders shared his viewpoint. The book on Detroit was that it was getting passed by more innovative foreign automakers, many of which were building their cars and trucks in the United States, to be as close as possible to this critical market.

  Mulally had read the book. He wanted Ford to press for more hybrids and fuel-efficient small cars, an understandable urge given that fuel efficiency had become a driving force in aviation. The Boeing airliners that Mulally oversaw made it an absolute priority. When he was doing the pressing, there was widespread analysis and punditry around the auto industry arguing that higher gas prices in the United States were a historic inevitability. “Peak oil” was much discussed—the theory that all the easily accessed oil on the planet had been discovered and that the great reserves of the Middle East were entering a time of declining productivity. A booming China, with a middle class that wanted nothing more than to own cars, was going to force oil-thirsty America to compete for a limited supply, driving prices to well above four dollars a gallon in the short term and probably toward European levels—ten, twelve, fifteen bucks a gallon—in a decade. On top of that, the U.S. government was raising its Corporate Average Fuel Economy, or CAFE, standards, demanding that automakers hit much higher combined MPG (miles per gallon) ratings across their fleets.

  It was all wrong. And it was all wrong at high levels. In Steven Rattner’s book about the crisis, Overhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry, President Obama is reported to have asked why Detroit couldn’t build a Corolla, the popular compact sedan from Toyota. The problem with that question is that it represents, in a lofty nutshell, why a lot of people, some of them extremely powerful, don’t get Detroit. They’re easily distracted by trends on the East and West Coasts and by the grand visions of futuristic disrupters of the status quo. Everyone has told them for decades that the Japanese make a superior car. It has become received wisdom.

  But it overlooks two things. First, small cars don’t sell for much, so the profit margin on them is modest. You have to manufacture a lot of them for not much payoff—or any payoff at all. Detroit could build a Corolla, millions of them, but it had no real incentive to do so over the long haul, and certainly no justification for making such a car the center of a portfolio of vehicles.

  Second, there’s the simple fact that the U.S. auto market is enormous and made up of numerous segments. In America, you never have the experience of looking out across a highway and seeing a sea of hatchbacks, with the occasional small delivery van tossed in, as I did when I traveled to France in June 2016 for Le Mans. In France, and for that matter much of Europe, there is one car segment, and it is compact gas sippers that don’t cost much and can traverse the tight roads of the continent’s ancient cities.

  In America, no one segment ever rules the road. The industry is cyclical, not just in overall sales, which can rise and fall by several million per year; it’s also cyclical in demand for large trucks and SUVs and for smaller vehicles. In 2009 and 2010, when gas prices spiked in much of the country, sales of gas-electric hybrids and compact cars rose, as truck and SUV sales declined. But starting in 2013 and 2014, pickup and SUV sales roared back. That meant substantial profits for the Detroit truck makers (the Japanese and Germans also did OK with their SUVs). All these trends are relative, of course. Total pickup sales are always higher than those of other vehicles in the United States, but automakers depend on selling lots of them year after year.

  Basically, the U.S. auto market is driven by employment and gas prices. In America, if you have a job and gas is cheap, you will be more likely to buy a big truck (whether it’s an Escalade or an F-150 will depend on your level of affluence). Whenever these conditions hold, Detroit will enjoy a happy time. When they don’t hold, Detroit will suffer.

  After all the dire talk about a permanent shift to higher gas prices, in 2015 and 2016, the price of oil collapsed; fracking for oil in once-inaccessible regions of the United States helped contribute to a worldwide glut in crude oil. Supply rapidly outpaced demand—remember, the number of miles that Americans were driving annually had been reduced by the financial crisis—and the familiar economic law took hold. In suburban New Jersey, I could buy gas for less than two bucks a gallon. It reminded me of when I first moved to Los Angeles in 2004 and could purchase California’s specially formulated gasoline (always pricier than gas anywhere else in the country) for just $1.25 a gallon. By the time we left in 2014, however, it had been costing us seventy-five dollars or more to fill up our Honda Odyssey minivan in the Golden State. I was flatly astonished the first time I pulled up to a pump in the Garden State. I readied a pair of twenties, but by the time I had filled up on regular, I owed eighteen dollars. OK, sure, I was filling up a Toyota Prius, but it was still a shock to realize how far gas prices had tumbled back down.

  With gas cheap, Ford was raking it in—but not because the company was selling small cars and hybrids. The SUV market had roared back, as Americans had happily returned to their old ways. The bottom line is that in America, for the most part, we don’t drive small cars. Or, more accurately, we will sometimes drive small cars, but only if there are extreme spikes in the price of gas, for instance in the 1970s or the late 2000s.

  Ford had loads of SUVs and a new type of car-based utility vehicle called a crossover to sell, plus the F-150. It was these vehicles, not the futuristic cars of tomorrow, that bolstered Ford’s post-crisis bank account, as the U.S. auto market surged toward the 2015 sales record of 17.5 million new cars and trucks. Meanwhile, China became a 20-million-per-year market, and the Chinese were becoming as addicted to SUVs as Americans.

  So, there were the actual vehicles that Ford was selling, and the
re was the new corporate philosophy that Mulally had introduced. Fortunately, they were mutually supportive, even if the SUVs didn’t fit with Ford’s crisis-era attitudes about the types of cars and trucks that were going to define the recovery. (In retrospect, Detroit was lucky that the SUVs had staged a comeback, as the return to large-and-in-charge also meant much juicier profits, helping to more rapidly bolster Ford’s bottom line and to enable the carmaker to add tens of billions in cash to its balance sheet.)

  “One Ford” was such a simple message that Mulally could fit it on a single card, which he printed in quantity and handed out. When I first heard about it, it reminded me of the famous “business plan” that tech giant Intel created in 1968. Cofounders Robert Noyce and Gordon Moore needed to raise capital for their idea, which effectively was to leave Fairchild Semiconductor, a company that for all practical purposes nurtured Silicon Valley. Noyce and Moore were working with some early venture capitalists and were asked to outline what they planned to do.

  The outline they created was all of three paragraphs, typos and all. “The company will engage in research, development, and manufacture and sales of integrated electronic structures to fulfill needs of electronic systems manufacturers,” was the pitch. It got the Intel cofounders $2.5 million, for a company that now has a $100 billion market cap.

  Engineers are always seeking the simplest solutions to problems, and like Noyce and Moore, Mulally was an engineer. So he crafted the One Ford plan as four key objectives, easy to understand, easy to memorize, easy to repeat to anyone who asked:

  1. Bring all Ford employees together as a global team.

  2. Leverage Ford’s unique automotive knowledge and assets.

  3. Build cars and trucks that people want and value.

  4. Arrange the significant financing necessary to pay for it all.