American Experiment (388 page)

Union labor in the auto industry shared the prosperous times. Outstripping even the steelworkers in hourly pay during the late sixties and early seventies, auto labor used its union power to gain abundant wage settlements. For years the UAW picked off GM’s weaker competitors one by one to win generous agreements that the rest of the auto manufacturers were then bound to accept. When in 1970 the UAW leadership decided it was time to tackle GM first, the result was one of the most expensive strikes in American history, but once again the union won a good settlement. The auto workers conducted this strike without their widely admired leader, Walter Reuther, who was killed in a plane crash a few weeks before negotiations got underway. Two decades earlier Reuther and his brother Victor had been seriously wounded on separate occasions by shotgun blasts into their homes—a grievous portent of the assassinations of American leaders in later years.

The control that the auto industry in collaboration with union labor exercised over technology, capital investment, plant locations, wages, prices, consumer preferences made it a prime example of the kind of industrial planning Galbraith described in
The New Industrial State.
Ever since Henry the First had begun to flood the country with Model T’s, automobiles had been steadily transforming American life and geography. Before World War II the automobile began to channel Americans into suburban areas that had earlier been beyond the reach of commuter trains and had converted “autocamping” into a growing roadside industry of restaurants and motels. The massive road building commissioned by the Eisenhower Administration’s Interstate Highway Act of 1956 further stimulated automobile use, which in turn stimulated more road building. The spiraling of auto production and demand not only enlarged the auto network of garages, filling stations, and highway motels and restaurants but also knit together a wider array of the “Road Gang,” as Helen Leavitt called it—trucking companies, the Teamsters union, automobile dealers, turnpike builders, oil importers and producers, state politicians, lobbies, legislators, highway officials.

Thus the automakers sat in the middle of a carefully spun and balanced
web of group interests. But this web, in turn, lay in the middle of a pulsating and swiftly changing environment that was as chaotic as the industrial web was “rational.” One-hundred-foot-wide highways speared through urban ghettos and lush farmland. Suburbia expanded faster than ever, housing subdivisions proliferated, shopping malls mushroomed, industries moved out into the hinterland. “Mini-cities” and “urban villages” sprang up. Pollution spread in rural valleys that had never known smog or factory smells. National and state parks were overwhelmed. At the same time that driving one-and-a-half-ton steel projectiles at sixty or seventy miles an hour on crowded highways became “another inalienable American right,” in James Flink’s words, unintended slaughter on superhighways became a daily American tragedy.

Inevitably little outside the web
was
planned. Few observers in 1956, save for those of prophetic insight like Lewis Mumford, had thought of the wider impact of spending almost $30 billion on a 41,000-mile road-building program that would devour 2 million acres of land. In particular few had analyzed its impact on
people
—people living in bypassed towns and cities, people seeking privacy and peace of mind away from the roar of traffic and the pollution of air, above all people—many of them black and Hispanic and poor—whose neighborhoods and communities had been sliced apart and pulverized by the relentless expressways.

“White roads through black bedrooms,” some said, had been a prime factor in the unrest that triggered the Detroit rioting of 1967, leaving 40 dead, 2,000 injured, 5,000 homeless. The fury of the violence was a stunning surprise. Indeed, the social evils of the expansion of the auto industry and its Road Gang had been as uncalculated as the economic expansion had been analyzed, quantified, and projected. Uncalculated too was the extent to which the auto, by gulping down oil from abroad, helped transform America’s relationship with a far-off region of the world.

In the Yom Kippur War of October 1973, Egypt suffered its third defeat at the hands of Israel since 1948. The aroused Arab world retaliated with an oil embargo against nations friendly to Israel. After abortive earlier efforts at cooperation, Saudi Arabia and the other oil-producing nations had at last formed the OPEC cartel, and now began to wield their united economic power. By March 1974, when seven Arab nations—all but Libya and Syria—lifted the embargo, the price of oil had soared from $3 to $12 a barrel.

Although Arab leaders had long threatened to use their potent economic weapon, the political leadership in Washington appeared to be
unready to cope with the crisis. So did American car owners. As gasoline prices doubled and pumps ran out, people waited for hours, tempers fraying. Fights broke out as drivers tried to jump the line. The fear of running dry was greater than the experience of actually doing so; in the first quarter of 1974 gas consumption in the United States dropped only 7 percent, but Americans, long used to gasoline gushing readily and cheaply out of hoses, panicked at the very thought of being unable to jump into their cars and roar off at any time to any place for any reason.

A search for scapegoats followed, with the automakers among the first targets. Henry Ford II, whose motto in awkward personal circumstances was: “Never explain, never complain,” had already been grumbling that the auto industry and the “so-called highway lobby” were being blamed for causing “a host of environmental problems—including, to name just a few, air, noise, and visual pollution, urban traffic congestion, unplanned suburban sprawl, the decay of central cities, the decline of public transportation and the segregation of minorities in urban ghettos.” In the aftermath of the oil crunch, criticism escalated on all these counts. Cars were too big and were gas guzzlers. Annual style changes were simply a crafty device to raise sales through planned obsolescence. The automobile industry, once world-famous for its experimentation and innovation, had become complacent and routinized, as in its failure to shift from rear-wheel to front-wheel drive. Its concern for its customers’ safety was nil. And now critics like Ralph Nader, who had briefly jolted automakers out of their complacency with
Unsafe at Any Speed,
his 1965 exposé of the “designed-in dangers” of American cars, were finding a larger and angrily receptive audience.

The capacity of the automobile industry to respond to this, the worst crisis in consumer relations it had ever faced, became a test of individual leadership in the three dominant car companies. There was no united front, despite charges from the left that the automakers formed a tight conspiracy against humankind. It was sink or swim for each company.

After World War II no large corporation had a bigger and perhaps more deserved reputation for its top leadership than General Motors. Sloan’s “industrial statesmanship” was a model for such strong GM executives as William Knudsen, who became FDR’s head of war production during World War II, and Charles “Engine Charlie” Wilson, later Eisenhower’s Secretary of Defense. Sloan’s decentralization of operations, which left major decisions in the hands of production chiefs, and his willingness to innovate had attracted innumerable bright young men to the company.

By the 1960s the rising new generation at General Motors was finding its vaunted industrial leadership to be a thing of the past. Control of the
company had passed into the hands of finance officers who had had little experience in production. They played a safe game, with annual profits as their guide and god. Behind the façade of teamwork, top executives carved out private dukedoms that did silent battle with one another. Typically the finance officers were hostile to innovation, creativity, and unorthodoxy. Men had to conform in attitude, advice, and even attire—an executive wearing a brown suit one day instead of the prescribed blue or gray was sent home to change. The result, in the eyes of Young Turks who were later to write with the benefit of 20/20 hindsight, was repeated failure to innovate, to experiment boldly.

GM executives often gave speeches about the free market, private enterprise, and individual initiative, even while their dominant role in the auto industry vitiated these ideas. They denounced government for its swollen bureaucracy, waste, heavy-handed controls, even while their own organization displayed these same tendencies. Indeed, the famous Fourteenth Floor of GM’s Detroit headquarters building exhibited many characteristics of the White House—crisis decision-making, jockeying for advancement, ad hoc coping, favoritism. Occasionally the Fourteenth Floor even acted like the Kremlin: on one famous occasion in the presence of a large assembly of executives, GM finance officers who had climbed the greasy pole castigated the old-line “production men” who had, they said, left the company in a shambles. It seemed a bit like new masters in the Politburo attacking past leaders to whom they had once truckled.

Restless young executives at GM often pointed to Ford as more innovative and creative, but inside GM’s chief rival, Young Turks were having their own problems. The hostility of the engineering and production men at the industrial grass roots toward the bosses in the executive suites was even greater at Ford than at GM. When Ford went public with a huge stock offering in late 1955, amid huge excitement in the investment houses, the company appeared to turn its back on Henry the First’s adamant opposition to control by Wall Street or “the bankers.” The shift also heightened the power of the auto companies’ financial officers over the production people, for now the New York men of finance could hold the Detroit men in line. Sharply budgeted and restricted, Young Turks noted that Henry the Second had inherited his grandfather’s distaste for innovation. Just as the first Ford had stuck to the Model T too long, giving Chevrolet an edge it never lost, so the heir cast a dim eye on many a proposal from the engineering and production people, especially after the Edsel fiasco. Advised to diversify, he liked to say flatly, “My grandfather made cars and I make cars.” Urged in the mid-1970s to build the Fiesta with a Honda
engine and transmission in it, he said, “No Jap engine is going under the hood of a car with my name on it.”

Few Ford executives felt more frustrated by Ford executives in general and by Henry II in particular than an up-and-coming young protégé of McNamara’s named Lee Iacocca. After a meteoric rise through the ranks, Iacocca became president of Ford at the end of the euphoric sixties, which alas was the start of the dismal seventies. A tempestuous, outspoken, egotistical man, he soon came into conflict with Chairman Ford and with the finance people over change and innovation. Face-to-face confrontations followed, especially when Iacocca pressed for a strong small-car program. One of the two had to go, and it was not Ford.

For years Chrysler had been running third among the Big Three; by the late 1970s this had become a very poor third. Its sales, employment, net earnings, and common stock were all sharply down. Iacocca, freed from Ford in 1978, was summoned to the rescue. During the long months that followed, he and his crisis team put together an extraordinary combination of UAW support, the influence of Michigan black leaders in Washington, the willingness of suppliers to accept delayed payments, the cooperation of bankers and other creditors in staving off bankruptcy and putting pressure on Congress to help. Washington, moving with all deliberate slowness, at last agreed to guarantee $1.2 billion in loans, enough to keep in production the fuel-efficient, front-wheel-drive “K” car on which Iacocca had set his hopes. By mid-1982 Chrysler was beginning to show a profit again, and Iacocca was a national hero.

It had indeed been a heroic rescue operation, but some had misgivings. Tens of thousands of laid-off Chrysler workers were left unemployed, as were other thousands among its suppliers. Elinor Bachrach, who had served on the staff of Senator William Proxmire, an opponent of the bailout, said five years later that it had been “oversold.” The company was saved but had the “guy on the assembly line” been substantially helped? Proxmire himself called “absolute nonsense” the claim that the bailout program had saved more jobs or factories than a Chapter Eleven reorganization. Others pointed to jobs salvaged, community stability reestablished, welfare cases avoided and hence public money saved, three-way competition extended among the Big Three. In perspective the bailout seemed to have worked for a wide array of interests except for the non-reemployed.

The rescue had once again presented American executives at their most resourceful in an emergency. A host of practical steps saved the day. At the same time it presented major institutions at their worst—a once formidable corporation in collapse, the government moving with glacial slowness, the
failure of business and political leadership to anticipate crucial problems or to make institutional changes in advance. It seemed doubtful in retrospect that much had been learned, or at least changed. Amid much talk about the need for employee or union representation on the Chrysler board, the head of the auto workers’ union was grudgingly admitted. This amounted to little more than a token compared with the kind of workers’ participation represented by the Swedish model. Nor had this immense failure in anticipation and prevention brought about institutional changes that could help to avert recurrences of major sectoral economic breakdowns and crises. There was no agency for long-range planning that could avoid major bailouts such as those of Chrysler, Lockheed, and indeed New York City.

There remained the supreme irony—the industry that had most opposed “governmental paternalism,” that had shunned government and even defied it, had seen its third most important component turn to the feds in Washington. And as the Japanese challenge intensified, the entire industry—automakers, auto unions, the whole once powerful Road Gang—had to beg Washington to adopt tariffs, quotas, and other protections against Tokyo. The Koreans, Taiwanese, and other up-and-coming industrial nations also invaded the big, tempting, high-priced American market. It was not like the old days, when Henry Ford and Al Sloan could talk with Presidents almost as equals. Automakers and workers were just another claimant. Failed economic leadership now had to depend on political leadership.