My essay about Lee Iacocca elicited some interesting pushback, so I would like to offer some follow-up thoughts.
Some commentators have pushed back against my criticisms of Iacocca by pointing to things he did well. For example, John Cee quite rightly noted that Chrysler’s purchase of Jeep turned out to be a rousing success. And Keith Lee itemized a number of Iacocca “hits” such as the Continental Mark series.
While it’s entirely appropriate to flesh out the positive side of Iacocca’s career, there’s a point where it still begs the larger question: Did the totality of Iacocca’s actions help to hold back a rising tide of imports? Or was he part of the problem?
My essay itemized four specific ways that Iacocca fueled the decline of Ford and Chrysler. That analysis is grounded in an important assumption: One can be a brilliant tactician yet still make strategic mistakes during a time of dramatic change. Let’s drill down a bit more.
Iacocca made some strategic blunders in the 1960s
In a story about the early Ford Mustang, I pointed out that while Ford was getting lots of headlines for the car’s extraordinary initial sales, General Motors was making an even bigger killing in the mid-sized field. Meanwhile, Ford’s mid-sized cars did so poorly during the second half of the 1960s that they were usually outproduced by Chrysler.
This may have partly reflected “cannibalization” — that is, customers who came into a Ford showroom with the idea of buying a Fairlane but drove off with a Mustang instead. However, the weakness of Ford’s mid-sized cars was also arguably the result of not being updated quickly enough to fend off GM’s invasion of the field in 1964.
Also see ‘General Motors trumped Ford’s 1962 foray into mid-sized cars’
I am not suggesting that the Mustang was a mistake per se, but rather that in the long run GM ended up in a better strategic position by heavily investing in mid-sized cars rather than pony cars in the mid-60s.
Even more importantly, Iacocca — as Ford Division head — played a key role in killing Ford’s proposed subcompact, the Cardinal, and in moving the Falcon up to a mid-sized platform in 1966. These decisions helped to give imports more room to ramp up their sales in the second half of the 1960s.
And even when Iacocca finally came out with the compact Maverick and subcompact Pinto, they were both only temporary hits. The graph below gives a sense why this led to a bigger problem.
Iacocca became president of the Ford Motor Company in 1970 and was fired eight years later. The automaker’s total car and truck market share at the start of the decade was 28 percent. By 1976 it had drifted down three points but in 1980 fell to 20 percent. Meanwhile, import market share soared from 14 percent in 1970 to more than 23 percent a decade later. The public was clearly turning away from what Iacocca had thought that they wanted.
Yes, but didn’t Iacocca save Chrysler?
Keith Lee makes the reasonable point that Iacocca played a crucial role in keeping Chrysler alive in the late-70s and early-80s. Foreign automakers would have had a lot more room to grow if Chrysler had died.
As mentioned in the previous essay, we can’t conduct a laboratory experiment to see how other executives would have done in Iacocca’s shoes, but he should get credit for steering Chrysler through exceptionally turbulent waters. In addition, coming out with the minivan and recognizing the value of the Jeep brand were excellent strategic moves.
That said, if we are being honest we should also acknowledge that Iacocca made mistakes which hurt Chrysler’s competitiveness. I batched those mistakes into four categories in my previous essay so won’t repeat them here.
Also see ‘‘Detroit Mind’ led to collapse of U.S. automakers’
Why we should airbrush away Iacocca’s weaknesses? For example, it doesn’t take a rocket scientist to recognize that the 1981 and 1990 Imperials were mistakes. That the Plymouth brand was kept alive entirely too long. And that the Chrysler TC by Maserati was an embarrassing flop.
One might point out that despite Iacocca’s errors, Chrysler’s car and truck market share went up during his tenure — from 12 percent in 1978 to 13 percent in 1992. That was much better than GM’s 12-point drop during the same time period. However, an increase of 1 percent wasn’t a whole lot to crow about given Chrysler’s dismal condition when Iacocca first came on board.
In addition, the market share of foreign automakers grew by more than 14 percent from 1978-92 — and surpassed 28 percent of the market. That was an extraordinary turn of events, yet it only hinted at foreign firms’ eventual dominance of the American market.
My punchline is that Iacocca’s errors at both Chrysler and Ford were not random. Instead, they reflected an increasingly obsolete way of thinking. And that thinking pattern was heavily grounded in Detroit groupthink. Iacocca may have been talented in many respects, but he was still a product of his time and place. That limited his vision during an era of dramatic societal change.
NOTES:
Production and market share figures were calculated with data drawn from the following sources: Auto editors of Consumer Guide, 2006; Gunnell, 2002, 2004), Wards Auto (2017) and Wikipedia (2020b). The figures between these sources do not always align, so judgments were made about which data appeared to be most accurate.
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Auto editors of Consumer Guide; 2006. Encyclopedia of American Cars. Publications International, Lincolnwood, Ill.
- Gunnell, John; 2002. Standard Catalog of American Cars, 1946-1975. Revised 4th Ed. Krause Publications, Iola, WI.
- ——; 2004. Standard Catalog of Volkswagen, 1946-2004. KP Books, Iola, WI.
- Wikipedia; 2020a. “Ford Mustang.” Page last edited May 3; accessed May 12.
- ——; 2020b. “U.S. Automobile Production Figures.” Accessed Accessed March 28.
- Wards Auto; 2017. “U.S. Total Vehicle Sales Market Share by Company.”
While it could be said that Ford might have benefited from producing the Cardinal/Redwing in spite of the negative forecasts (instead of imposing it on Ford Germany at the expense of their own local Kadett A-sized sub-Cardinal project that would have allowed for earlier integration with Ford UK), how could Ford have improved sales of the Falcon/Maverick and Mustang between 60-72?
One remedy for the Falcon if am guessing correctly would be keeping the 3rd gen Falcon on the existing platform with the Mustang instead of growing in size by being based on a shortened Fairlane platform, however could Ford have been justified in bring the Mustang 4-door prototype to production in place of the Falcon?
Additionally even though the Cardinal/Redwing project was Ford US’s baby and likely suffered with NIH syndrome, would Ford US have been better off in hindsight embracing Ford UK’s Archbishop project aka the Cortina at least in slightly enlarged Corsair form (and adapted more for the US)? Interestingly despite the weaknesses and roughness of the V4 in the Taunus P4/P6, West Germans actually viewed the former as more sophisticated due to its FWD layout compared to the more conventional RWD Cortina mk3-based Taunus that replaced it (with it and the RWD Escort being unfairly viewed in West Germany as comparable to Eastern Bloc cars like the Lada).
On the engine front Ford US could have either stuck with the Taunus V4/Cologne V6 (or the Lancia style narrow angle V4 alternative), adopted the Kent and built a larger pre-Pinto half-relation or followed rival GM in developing a 1.6-2.0-litre+ 4-cylinder version of the Thriftpower Six / Falcon Six (possibly with earlier Ford Australia type developments).
Good points, Lotus Rebel. The Maverick, which was essentially a decontented Mustang, hinted at what Ford could have done with the third-generation Falcon.
I get that a front-wheel-drive subcompact was a big stretch for a US automaker in the early-60s. It likely would have taken someone who thought outside the box like McNamara to get it into production. After he left for the Kennedy administration in late-1960, Iacocca apparently lobbied hard to kill the Cardinal/Redwing, according the David Halberstam’s account.
It would have been something if the Cardinal had reached production and Ford expanded its lineup enough to make the platform more profitable. The possibilities were much more interesting than with the Falcon platform, such as a real minivan and a mid-engined two-seater.
I’m skeptical that the Cardinal didn’t pencil out. The total development cost figure I’ve seen was lower than the Mustang’s. And given the nature of the subcompact field, they presumably could have squeezed a longer life from the Cardinal’s basic sheetmetal than with a style-conscious car like the Mustang.
Despite the Cardinal’s rough edges from both a stylistic and engineering standpoint, it could have been a real competitor to the VW Beetle in the United States. And that could have gone a ways toward holding back the ascent of the imports. I would suggest that as strategic decisions go, ditching the Cardinal was one of Detroit’s biggest mistakes of the 1960s.
I’m somewhat skeptical that the development costs of the Cardinal were lower than that of the Mustang. The Mustang used lots of off-the-shelf components from the Falcon and Fairlane, along engines that were offered in everything from the Falcon to the full-size Ford. The Cardinal shared no other platforms with a North American Ford, and would have required a unique drivetrain, and a dedicated production line to build the car itself. The Mustang could share production facilities with other Fords.
Another issue is that Ford could have found itself playing the role of British Motor Corporation (BMC) here in North America with the Cardinal. In Great Britain, the Austin Mini was very advanced and set the template for future subcompact cars. It was also expensive to build – Ford of England bought one, took it apart, and estimated that, at the prices BMC was charging, the company was LOSING money on each one sold! BMC hotly denied this, but if the company did make much money on the Mini – and subsequent 1100 – it wasn’t much, and not enough to pay for regular updates and facelifts. Meanwhile, Ford entered the market with the very conventional but well-developed Cortina, followed by the Escort, and because it was making a solid profit on the cars, was able to regularly update them to keep customers interested. By 1975, Ford was the number-one brand in the United Kingdom, and British Leyland (the successor corporation to BMC) was on the ropes.
We also operate with the benefit of hindsight…it was not obvious in 1963 or 1964 that front-wheel-drive would come to dominate the small-car segment. The subcompact car market in North America didn’t coalesce around the transverse-engine, front-wheel-drive layout until the debut of the VW Rabbit and Honda Accord in 1975 and 1976, respectively. (Fiat did offer it first in the U.S., but in the 1970s, use by Fiat was definitely not considered proof that a feature was ready for prime time.)
In the mid-1960s, subcompact vehicles were offered in a variety of configurations, and the most popular model, by far – the VW Beetle – featured a rear-engine, rear-wheel-drive layout. The Japanese were on the verge of entering the market with the the thoroughly conventional Toyota Corona and Corolla. Ford would have been stuck with a small car that cost more to build, but still had to be sold against competitors with lower cost structures. If given the choice, most Americans would have taken the more stylish and better trimmed conventional small car over the stark model with interesting engineering.
We auto enthusiasts and writers tend to have our own “groupthink” – that more advanced engineering equals better, and if buyers go with the refined tried-and-true over the riskier, more interesting approach, the fault lies with…the buyers and the companies that cater to them. But history has shown that, in both the U.S and Europe, being first with an important feature does not equate to long-term success. (Where is BMC today?) I thus can’t necessarily criticize Iacocca for cancelling the Cardinal.
As for his luxury cars – they were quite successful until the downsizing of 1979-80. Blame Iacocca for the botched downsizing effort, but that was because he demanded that stylists simply shrink the lines of the Continental and Mark V to a smaller platform. It didn’t work. GM took a more sophisticated approach, and was more successful – particularly with the E-bodies – but they were hardly Euro-inspired. No one ever confused a 1979 Buick Riviera or Cadillac Eldorado with an import in those days. And let’s note that the two passenger-car platforms that helped carry Ford through the 1980s – the Fox and Panther platforms – were developed under Iacocca’s watch, even if he was fired before the Panther platform debuted. Both platforms needed some refinement to really come on to their own, but the basic bones of each platform were quite solid.
Geeber, I share your skepticism about comparing development costs but worked with the numbers that I have access to. It makes intuitive sense that the Mustang would be cheaper to bring to market. Even so, I have also read that Iacocca hid some of the car’s development costs in other budgets. And unlike the 1963 Buick Riviera, the Mustang wasn’t using an existing body with a new set of sheetmetal; it was significantly different from the Falcon’s.
The Mini is a useful data point on costs but it is hardly definitive. If front-wheel drive was so prohibitively expensive then why did it become increasingly popular with smaller cars?
I see your point about how a conventional rear-wheel-drive subcompact could have been a safer move for Ford. And, in general, I have a fairly minimalist attitude about technological advancements. For example, I think that if Romney had stayed at AMC and tried to turn the Rambler Ambassador into an American Mercedes, he wouldn’t necessarily have had to quickly embrace all of the technological bells and whistles that excited enthusiasts, such as independent rear suspension and four-wheel disc brakes. In light of the sloppy road dynamics of most American cars of that era, more attention to detail could have gone a long way in improving the Ambassador’s stature.
That said, all technical advancements are not equal. Four-wheel disc brakes may may have mainly been relevant to buyers of high-end performance cars, but unit-body construction had significant practical implications for all kinds of smaller cars. Thus, it made sense for even a resource-constrained independent automaker like Nash to take the risk of pioneering the technology. I would put front-wheel drive in the latter category. If McNamara had his fingerprints on the Cardinal, I can imagine why given his penchant for exploring new market niches rather than merely copying General Motors.
Finally, note that I, nerdy car buff, am not the one who came up with the idea of a front-wheel-drive subcompact — Ford did! That’s intriguing to me given that this automaker has not typically shown leadership in engineering. And given the traditional power of the bean counters at Ford, I have confidence that they would have managed to squeeze a subcompact platform for maximum profitability just as much as they did with the Falcon’s.
Thank you for the reply! Regarding development costs – When Ford offered the optional V-8 for the Falcon in 1963, it had to upgrade the suspension and strengthen the basic body, from what I understand. Those improvements could be carried over to the Mustang, which was expected to offer an optional V-8 from the day it debuted. Iacocca was undoubtedly cagey enough to know that those upgraded Falcon parts could be used for the Mustang.
Another question is whether the Mustang and Falcon shared a cowl and windshield. Those are two of the most expensive parts of a car to change…if they shared those critical parts, that would reduce tooling costs for the Mustang. Note that the 1965-66 Mustang shared the Falcon’s dashboard, with the main differentiation being the more comprehensive instrument cluster Ford later made standard on the Mustang.
As for the cost of front-wheel-drive – it’s interesting that Ford of England and Ford of Germany were simultaneously looking at brand-new entries, but Ford of England stuck with a conventional layout. (Ford’s European operations weren’t integrated when the Cardinal/Redwing and Cortina were under development, so the British and German operations were free to choose their own paths.) The British operation choose the conventional Cortina to face off against the advanced BMC 1100, while the German operation went with the front-wheel-drive Taunus 12M to face off against the rear-engine VWs and conventional Opels.
Yet the British approach would prove to be more successful, with the combination of the Cortina and later Escort leading Ford to a victory over BMC/BL. In Germany, I don’t believe that the front-wheel-drive Taunus 12M did much to change Ford’s competitive position as compared to VW and Opel. I’m thus not so sure that building the American version of the Taunus 12M would have given Ford that much of a head start in the North American subcompact market. The company probably would have been better off starting with the Escort or the second-generation Cortina, and adapting them to American driving habits, maintenance expectations and regulations.
When Ford was developing what became the first Fiesta, it resisted adopting the front-wheel-drive layout until the feedback from the customer clinics showed that customers were now demanding it. But this was in the early 1970s, or a decade after the Cardinal/Redwing project. Customer expectations had changed over the past decade. Ford partially addressed the cost (and profit) issue by building the car in its brand-new, low-cost factory in Spain.
The impression one gets is that the Germans did not chose the Cardinal aka Taunus P4, rather Ford HQ foisted it upon them at the expense of their own largely conventional (and more Anglia/Escort-sized) NPX-C5 project that was to feature a Glas 1004-like OHC engine.
https://www.curbsideclassic.com/curbside-classics-european/automotive-history-how-the-american-ford-fwd-cardinal-became-the-ford-taunus-12m-from-dearborn-with-love/
Could see a North American Ford Cardinal based family of cars persisting until the early/mid-1980s at most (possibly longer if later made in South America in place of the Renault 12-based Corcel – providing the V4 could be adapted to ethanol as said to be the case with the Cologne V6), prior to the North American Ford Escort/Tempo.
While would have ideally preferred the narrow-angle Lancia style V4 idea Ford looked at during the development of the Cardinal and a hypothetical narrow-angle V6 (that like the later VW VR6 could be mounted transversely), it would have been fascinating to see what solutions Ford comes up with to both remedy the roughness (and other issues) of the 60-degree V4 as well as further enlarge/update it to 1.8-2-litres in parallel to the European Cologne V6 (kind of like how GM eventually sorted out most of the Buick V6’s issues).
However despite large 2-litre+ displacement 4-cylinder engines being a thing in North America, cannot conceive Ford actually sanctioning a 2.2-2.6-litre V4 derived from an early equivalent of the 4-litre Cologne V6 (the 3.2 Cologne refers to the real-life 260 hp 3.2 Swaymar tuned engine used in the Ford Capri Swaymar and TVR Evolution S aka ES).
First and foremost, while Iacocca gradusted from Lehigh University with an engineering degree, he made his chops as a district sales manager: “$ 56.00 / month for a 1956 Ford”. Success was measured at Ford by moving product, not by engineering. The Whiz Kids ran Ford’s financials, but McNamara’s leadership abilities brought him to the top at the Ford Division. Iacocca succeeded McNamara from the sales management and Ford Trucks positions prior to 1961. Given Ford’s programs and the advance time necessary except for trim, grills, etc., Iacocca didn’t impact Ford that much other than to push for the Mustang as a sporty version of the Falcon Futura, but all it did was to diminish the sales of the Falcon and peobably the 1964-1965 Fairlanes. What if the 1977 Fairmont / Zephyr-sized car had been available in 1969, instead of the Maverick ? What if Ford under Iacocca had invested more and had the U.S. Escort in 1977 instead of 1981 ? Ford’s line-up after 1972 was mostly a dead-end. Only the Fox platform had a future. The 1978 Panther platform was too little, too late, in my opinion. The competition in 1974 was the VW Rabbit. Chrysler and G.M. had small front-wheel-drives in 1978. Ford ? Lee was trying to find out what was in Hank The Duece’s cheeseburgers in the Ford executive dining room rather than doing something about Ford’s declining market share and baroquely-styled cars. Politics triumph when you are accomplishing something. I agree with the premise that Lee Iacocca was an extension of the 1950s Detroit groupthink mentality. HFII was right to fire Iacocca.
Iacocca’s early years at Chrysler were good, but he stayed with the K-cars and its narrow variants for too many years. Instead of investing Chrysler’s profits in developing the next generation of cars, like the LH-series and the Cloud car trio, Iacocca bought Gulfstream and Lamborghini (briefly) as well as A.M.C.-Jeep. Iacocca dilly-dallied, again playing politics with appointing a successor. The LH-cars were again, too little too late with too-much 1950s-think badge-engineering. Would Knudsen have been a better leader at Ford ? As many have stated before, I doubt it.
James, I’m curious in what ways you feel the Chryser LH cars were “too little too late with too-much 1950s-think badge-engineering.” The badge-engineering I can see, to an extent, especially with the first gen LH models but what else?
I remember when the first LH cars hit the showrooms (for sale, that is) in 1994. I was blown away, but they were still huge cars, with in the case of the Dodge Intrepid, the worst American car headlights since 1939, among other developmental issues. My first drive in an LH (Intrepid) at night was in 1995 in North Carolina. Even with the high-beams on driving on I-40, the lights were inadequate at 65-m.p.h. Maybe the Eagle and Concorde were better, but I doubt it. Chrysler was thinking about trimming the overhangs of the second-gen LH which did happen for the 300M. The quality of the LH’s I shopped, except for the LHS (which was out of my price range) was just so-so. In 1995, I bought the final year first-generation Ford Taurus, a great car that I kept until 2001 and traded on a new Taurus SLS, 150,000-miles later. The 2001 LH models did not even rate a consideration. My next-door neighbor had a 300M and had nothing but trouble with it. The 300M did not age well. Robert Eaton and Bob Lutz did not fix Chrysler’s quality issues. I wanted Chrysler to succeed, but even Daimler-Benz did not fix Chrysler’s fundamental problems.
Robert Lacey’s excellent book, “Ford: The Man and Machines”, details the decision Ford faced with the planning for the cars that became the 1977 Futura and Zephyr, which also begat the Fox platform Mustang. Would Ford go with a “world-car” front-wheel drive or stay conventional. If Iacocca had been a more visionary leader, he might have sold H.F.II on but I believe Iacocca was more concerned with pinching-pennies and a new platform for the Mustang than where the market was heading. Although the X-cars, the J-cars and the front-drive intermediates were horribly developed at introduction, at least G.M. had front-wheel drive in production by 1979. Ford was not ready until the fall of 1981 with the Escort. And John J. Riccardo, the Chrysler C.E.O. who recruited Iacocca, I believe, is not given enough credit for knowing (like Rick Waggoner at G.M. in 2008) that he had to walk the plank to save the company. Riccardo had a hand in the Omnirizon developed from the Simca 308 and the K-cars were in the preliminary design stages. So, Riccardo, while a part of the Chrysler management that had tanked the company, left Iacocca with product that was in various stages of the pipeline. Yes, Chrysler in 1978 and 1979 needed a super-salesman, so Lee fit that bill well.
One other thought, the power Ed Cole had at G.M. after 1956 was immense, which is why he was able to push through the Corvair and later the Vega. While I admired Cole’s pioneering spirit, he introduced cars to market before they were fully ready for the market, a problem G.M. would repeat for decades. The 1984 G.M. TV ads touting that “G.M. sweats the details.” was sadly untrue.