June/July 2003 | Volume 54, Issue 3
After one Ford changed America, another accomplished something almost as amazing
Sometimes corporations that bestride their industries for decades stumble. Western Union was the most powerful company in the electronic communications market of the late nineteenth century. Today it is a very minor player indeed.
Sometimes, of course, has-beens surprise us with comebacks. One of the best of all Hollywood movies, Sunset Boulevard, starred, in her greatest role, a has-been actress named Gloria Swanson playing a has-been actress named Norma Desmond.
Corporations, too, can come back from the dead. Recently, the man who designed one of the greatest corporate comebacks in recent years published his memoirs. Louis V. Gerstner, Jr.’s Who Says Elephants Can’t Dance? is an instructive tale in how to rejuvenate a company. A legendary corporate success story (between 1939 and 1979 its stock rose 22,000 percent), IBM by the 1980s had become stultified, riddled with fiefdoms, and deeply resistant to changing its ways. The advent of the PC had altered everything in the computer market, and by the early 1990s the company was hemorrhaging money (it lost a staggering $16 billion in 1993), and the death of IBM was widely predicted.
By the time Gerstner retired in 2002, IBM’s corporate culture had been revived, its product line reborn, and its stock price had risen 1,000 percent. IBM is once more a leader in the computer market it did so much to create in the first place.
But perhaps the greatest turnaround in American corporate history was that of the Ford Motor Company in the 1940s. What is most interesting about it is that it was largely the work of a man who—unlike Gerstner, a seasoned executive—was only 28 years old when he took control of the company and had little on his résumé to recommend him besides his name: Henry Ford II.
The Ford Motor Company was founded exactly a century ago, a time when auto manufacturers were springing up like mushrooms (and usually disappearing nearly as quickly). Henry Ford had the idea of designing a car the average man could afford and to keep lowering manufacturing costs so as to be able to continually reduce the price and enlarge the market. This business plan made him one of the seminal figures of the twentieth century. (The zero year of the calendar in Huxley’s Brave New World, published in 1932, was what we know as 1863, the year of Henry Ford’s birth.)
Although Ford was a great mechanic and manufacturing innovator, he was not a great businessman. Far from it. Having devised his business plan and ridden it to one of the world’s major fortunes, he flatly refused to change it, even when the automobile market began changing rapidly. And because the Ford family owned 100 percent of the stock, no one could tell him what to do, including his own son, Edsel, who had been made president of the company in 1919.
Even after the market had forced him to abandon the Model T in 1927, Ford, in his sixties, clung to the past and became more and more paranoid, seeing spies and enemies everywhere. He interfered constantly with his son’s attempts to make Ford into a modern automobile corporation like General Motors, which had surpassed Ford in the mid-1920s to become the largest in the world.
Meanwhile, Henry Ford became ever more dependent on a man named Harry Bennett, who ran under the innocuous name of the Service Department what was essentially an in-house security and intelligence operation. Bennett may have been the most Rasputin-like figure in the history of American business. He was the power behind the throne who nearly destroyed everything.
About the same age as Edsel, he had come from a poor background, joined the Navy in World War I, and became both a deep-sea diver and a boxer. Hired by Ford after the war, he called attention to himself with his pugnacity and, having a gift for politics, he soon rose to power as Henry Ford’s eyes, ears, and, when necessary, fists and guns. He had many executives routinely followed to see where they went and whom they saw. In one labor dispute he saved his own life only by pulling a man on top of himself; the man was killed in the fracas. Ford gave Bennett a Lincoln as a reward for bravery.
By the late 1930s the Ford Motor Company was in chaos. Edsel and his faction kept trying to bring the company into the present, while his father, aided and abetted by Bennett, did his considerable best to thwart him. Long-term planning was impossible, financial controls nearly nonexistent. Only the avalanche of government orders after Pearl Harbor prevented utter disaster.
Then, in 1943, the long-suffering Edsel died of stomach cancer at the age of only 49. Now there was no countervailing force to Henry Ford’s growing senility or Bennett’s machinations. Henry Ford began to hint that he wanted Bennett to succeed Edsel as president, and when Edsel’s widow, now owner of his large block of stock, objected strenuously, Ford took over the office himself. He promptly fired most of Edsel’s supporters and told one employee, “We’ve got to build only one car. There won’t be any Mercury, no Lincoln, no other car.” Henry Ford wanted to go back to 1903.
Even the federal government was concerned about what was happening, and there was talk of putting Ford under the direction of Studebaker or even nationalizing the company so as not to threaten the war effort. Then Ernest Kanzler, an Edsel loyalist who was serving in Washington on the War Production Board, went to see Secretary of the Navy Frank Knox and asked him to release Henry Ford’s grandson from the Navy so that he could take over the company.
Henry Ford II spent weeks reading his father’s files, trying to get a grip on the company, deciding what needed to be done, and making allies among the remaining executives who had sided with Edsel. But as long as Harry Bennett held the real reins of power, nothing much could be done, and Bennett would hold them as long as Henry Ford I was president. Finally it was the Ford wives, Eleanor, Edsel’s widow, and Clara, Henry I’s wife, who brought matters to a climax.
Clara, the one person on the planet who could sometimes boss Henry Ford around, told him that if Henry II wasn’t given the power he needed to run the company, she would sell her interest in it and Eleanor said she would do the same. Finally Henry offered his grandson the presidency of Ford. Henry II told him, “I’ll take it only if I have a completely free hand to make any change I want to make.” The old man bristled at this, but one glance from Clara and he accepted.
Henry II returned to the office and had his grandfather’s secretary—a Bennett man, of course—draw up a letter of resignation. Henry knew the secretary would immediately call Bennett, who soon phoned Henry to say, with matchless effrontery, “I’ve got wonderful news. I’ve talked your grandfather into making you president of the company!”
The board of directors met on September 21, 1945, and put Henry II in charge of the Ford Motor Company. He sent John S. Bugas, an executive he knew he could trust, to fire Harry Bennett. When Bugas walked into Bennett’s office, Harry screamed, “You son of a bitch!” and took a .45 out of his desk. Bugas was prepared. He pulled a .38 out of his waistband and said calmly, “Don’t make the mistake of pulling the trigger, because I’ll kill you. I won’t miss. I’ll put one right through your heart, Harry.”
By the time the elder Henry died, in 1947, Henry Ford II, a very gifted executive as it turned out, had ended the chaos of his grandfather’s sad final years and begun to make the Ford Motor Company once again a formidable engine of the American economy. Today, at the dawn of the twenty-first century, it is one of the largest corporations in the world.