Fifties (104 page)

His ascent was a reflection of the changes at the company. At the daily meeting with the heads of the divisions, Fred Donner kept talking about the stock, about what the stock analysts in New York said about it. For Bunkie Knudsen, then the head of the Pontiac division, talk like this was downright sacrilegious. There had
never
been talk of the stock price at these meetings in the past. It was
perfectly proper for the head of a company to talk about the need for profits, even the need to maximize profits, but to talk about driving the stock up and to talk about what Wall Street analysts thought of the company, he believed, was unthinkable. In the old days there had been a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock.

Donner’s talk signaled something ominous to Knudsen: a profound change in the purpose of the corporation. It meant that profit, rather than the quality of the product, was now the objective of the corporation, and it meant, though few realized it at the time, that there would be an inevitable decline in the power of the engineering and manufacturing departments. It also signaled an even greater decline in the willingness of the corporation to experiment with new technology (each new development added costs to a car), and finally, it would lead to an unswerving drive to make the divisions as homogenous as possible, so that the same pins and screws and nuts and bolts and body shells could be used in each division. For a profound metamorphosis was taking place in America’s largest and biggest industrial companies: the rise of financial experts over product men. It was a sure sign that these companies, unconsciously at least, believed that they were de facto monopolies and faced no real competitive challenges anymore. Rather, their only real concern was to maximize the profits that now seemed to be permanently theirs and to drive the stock up.

Bunkie Knudsen did not understand all of the ramifications of this, but he knew that something was terribly wrong. What begot greater performance on Wall Street did not necessarily mean greater performance in terms of autos; what was good for Wall Street was not, regrettably, always good for General Motors. When the meetings with Donner were over, Bunkie Knudsen could not go off and have lunch with any of his colleagues. Instead, he would go down to the Detroit Athletic Club and work out furiously to burn off his anger. Knudsen couldn’t have seen it then, but the issue he was so upset about was nothing less than the entire purpose of American industry, whether it was to make the best product possible or whether it was merely to make the maximum profit possible each year. The two, it turned out, were not mutually compatible—not by a long shot. All of this placed the corporation in jeopardy.

The first shot across GM’s bow was a small import whose makers rejected all the norms that were regarded as sacred in Detroit. It was smaller than most American cars—
much
smaller. It did not offer more power, more options, more luxury; it offered decidedly
less. The “Bug,” or “Beetle,” as it was dubbed almost immediately, did not promise that next year’s model would be hotter and sexier; in fact just the opposite was true—next year’s model would be very much the same as this year’s. This last was a basic repudiation of Mr. Sloan’s philosophy, based as it was on the annual model change. In fact, the Volkswagen was so different from anything Detroit offered that it seemed to be immune to criticism. And there were advantages: It was cheap; it was reliable; it was fun; and because there were no model changes, repairmen always had an excellent inventory of parts and knew exactly what to do with them to fix the car should anything go wrong.

Volkswagen had placed a high priority on creating a strong service department and had sent its best mechanics to teach the American mechanics how to service a car whose problems were, given the nature of the car, quite simple. As such it got high marks from the start from customers for service, an area in which Detroit was just beginning to slip. Lack of spare parts had signaled the death knell for many other foreign imports. It was a no-frills approach; Volkswagen did not even do any serious advertising until 1959, because its executives in America believed in word-of-mouth advertising. Therefore, they felt that whatever extra money the car generated could be better spent on good service rather than on something as frivolous as advertising.

The Beetle was the dream of Ferdinand Porsche, the great German automotive genius who wanted to create a German version of the Model T, a car for ordinary workers. Porsche had been a great admirer of the first Henry Ford, and he had made a trip to America in 1937 to tour American factories. He was greatly impressed by the production lines and the confidence and life-styles of the workers. He had met with his hero Ford, and they spoke at great length of his desire to produce a comparable car in Germany. Did that bother Ford? he asked. No, answered the great industrialist. “If anyone can build a car better or cheaper than I can, that serves me right.”

For a time before the war, Hitler had backed Porsche in his idea of a people’s car—a “Volksauto” in German. But the car and its prospective buyers were overtaken by events, and the company never put the car into production. At the end of the war, no one knew quite what to do with the Volksauto plant; it was offered to various major auto companies, none of which was interested. In March 1948, it was offered to the Ford Company at a meeting attended by the young and inexperienced Henry Ford II, who had just taken over a nearly bankrupt company, and the actual head of the company, Ernie
Breech, then chairman of the board. Ford, who still deferred to Breech, asked his chairman what he thought of it. “Mr. Ford, I don’t think what we’re being offered here is worth a damn,” Breech answered. With that the Wolfsburg plant was turned over to an exceptional man named Heinz Nordhoff, who not only rescued it but made it the premier symbol of Germany’s industrial rebirth. His car, remarkably like Porsche’s original design, was the perfect vehicle for a nation struggling to rebuild itself after a cataclysmic war. When Porsche eventually saw the production line, at that point producing 90,000 vehicles a year, he said, “Yes, Herr Nordhoff, that’s how I always imagined it.”

Nordhoff was a brilliant businessman. He knew immediately that he had to cut production time from 400 man-hours per car to 100, which he did, and he knew he needed better materials. He understood that the pride and commitment of his workers was of paramount importance, and he got rid of a sign in the parking lot that said
BRITISH OFFICERS ONLY
. What Nordhoff needed was hard currency so that he could improve both his workplace and the quality of his cars. The only way to get it was to sell in the United States.

The Beetle’s first venture to the land of the automotive giants was a good deal less than a complete success. Sensitive to postwar anti-German feelings, the company sent its first car to America in 1949 in the care of a Dutch salesman named Ben Pon. He had won the honor of bringing the Beetle to America by dint of his considerable success in selling it in Holland, where anti-German feeling was still very powerful. Pon brought one car to the States with him in January 1949 and ran into complete rejection. No American dealer would take him seriously. Pon did not get a lot of media attention and in the stories he did receive, the car tended to be referred to as Hitler’s car. In the end he was forced to sell his one model to a dealer for $800 to cover his hotel bill. It was not, however, a permanent defeat. The next year, 1950, some 330 Volkswagens were sold in America. They seeped into the country, brought back by returning servicemen, who had picked them up in Europe. Gradually, a fragile dealer network was being created. But very quietly, relying as much as anything on word of mouth, the Beetle became a success. It happened because the car was everything it was said to be. By 1955 it was selling some 30,000 vehicles; by 1957, some 79,000.

Detroit from the start quite predictably treated the phenomenon of the Beetle with contempt. It was in the immortal words of Henry Ford II, “a little shit box.” It lacked power, it lacked size, and it lacked style. It was two feet shorter than the smallest Chevy of its
time, and its 1300cc engine seemed an insult to the colossal engines Detroit was producing. The car was not particularly comfortable and the early models lacked even a gas gauge. It was a work of minimalist but very sound engineering. Some of Detroit’s engineers, however, were impressed from the start, because it is in the nature of engineers to be minimalists, to seek the most production for the least amount of input. That most basic of engineering values had become virtual heresy in Detroit after Kettering’s high-octane gas had created the idea of power as an end in itself, accompanied by the waste of power and fuel. In 1956, Arthur Railton, writing in
Popular Mechanics,
said of the VW: “The Volkswagen sells because it is, more than anything else, an honest car. It doesn’t pretend to be anything it is not. Being an honest piece of machinery, it is one the owner can be proud of. Wherever he looks, he sees honest design and workmanship. There are no places where parts don’t fit, where paint is thin, where the trim is shoddy. There are no body rattles, no water leaks. Neither, of course, is there overstuff, false luxury either. There is nothing about the car that is not sincere. One cannot imagine, for instance, a Volkswagen with a fake air scoop or tail fins to make it look like an airplane in flight.”

To the degree that Detroit took the VW seriously, it was pleased because it ended the pressure to build a small low-performance car, which industry critics had been demanding since the end of the war. Detroit, therefore, for a surprisingly long time, was happy to have the VW at the low end of the line, costing only $1,280, to take care of people it regarded as cranks—all those college professors, rocket engineers, and architects who could afford to pay more but were content to pay less. It was, after all, good basic transportation, the perfect second car, particularly for Americans who took their self-definition from something other than their cars. There was on the part of Detroit’s top people a certain amount of irritation with those who could easily have afforded larger, more expensive cars and were shirking their civic duty as Americans by buying the Beetle. “Gray flannel non-conformists,” one Detroit executive called them. Because it took up little space, it was easy to park in increasingly crowded urban environments. That its owners represented a more significant part of the market than their sheer numbers indicated, that the people themselves were tastemakers, that by their education and self-confidence they were making decisions more independently than average American consumers, did not register quickly in Detroit. But when it did, Detroit sat up and took notice.

The growing success of the Volkswagen eventually convinced
General Motors that it would have to offer something competitive to protect the low end of the market. Somewhat reluctantly, GM gave the go-ahead on a small rear-end-engine car to the one person who truly hungered to do it: Ed Cole. By 1956, he was the general manager of Chevrolet, and what he envisioned was nothing less than a car that was totally new in its engineering and styling—in effect a faster, more high-powered, thoroughly Americanized Volkswagen. Almost as soon as he became general manager of Chevy, Cole set out to plan his small car. This time, however, unlike the earlier crash programs when he created the ’55 Chevy, he did not have the full force of the corporation behind him. Quite the contrary. From the start Cole encountered the old wariness about doing a small car, particularly a new car that would have to be completely retooled. It soon became obvious that he was fighting a powerful corporate undertow of opposition. Some people in the company did not want to do small cars because they might not be successful, and some did not want to do them because they
might
be successful. To say that the company’s more senior executives were ambivalent about the project is an understatement. At one point in 1958, Harlow Curtice visited the design room where Cole was preparing his model. He got inside the prototype Corvair and reportedly said, with some degree of irritation, “This is amazing—there’s as much head room here as in a Buick.” Then he paused and thought for a moment. “Take some of the headroom out. We can’t have a little car like this with as much room as a big car.” With that, Cole was more isolated within the ever more conservative corporation than he realized. Sure of his own vision, confident, indeed overly confident, of his strengths, he did not entirely understand his new marching orders. In reality, they went like this: We’ll do your small car at GM, though it goes against our grain, but only on our terms. If there is a conflict between what you want and what we want, we, not you, will make the final decision. Energized by the excitement of a new challenge, Cole poured his energy into the Corvair. It would have a rear-engine drive and an air-cooled six-cylinder aluminum engine.

Three years in the essential design and creation, the Corvair debuted in the showrooms in September 1959. As far as Detroit executives were concerned, it was just in time, for the low end of the market had been consistently growing over the past decade and could no longer be ignored. In 1958, some 379,000 imported cars were sold in America; added to the growing sales of the little American Nash Rambler, the compacts now accounted for about 12 percent of the market. The Corvair had a chance, some automotive
people thought, to be a superb small car. There was, on the part of its creator, a receptivity toward new ideas and new technology. But from the start it was always an orphaned car—the institution itself never really approved of it and the sales department at Chevy hated it. Arguments that Cole might have won when he was working on the ’55 Chevy he now lost or had to compromise on, because he was fighting the culture of the company, and he could not prove that what he wanted was cost-effective. The Corvair’s small size worked against it. Because it was a small car and not likely to make a large profit margin for the company, Harlow Curtice was able to set very strict limits on what it would cost. It had to sell for under $2,000, he said, which was Volkswagen’s list price in 1959.