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GM Chairman Jack Smith wasn't the only top automotive executive who liked Jose Ignacio Lopez's style. So did Ferdinand Piech, chairman of Volkswagen AG in Germany. Piech had been called upon to do, in effect, for Volkwagen what Smith was trying to do for GM -- turn it around from disarry toward profitability. Piech was grandson of Ferdinand Porsche, designer of the first Volkwagen, that became the legendary Beetle, the car that finally beat the lifetime production record set by the Ford Model T. Volkswagen under Chairman Karl Hahn, like GM under Roger B. Smith, had sought salvation through acquisitions and automation. It didn't work for VW either. Like Jack Smith, Piech decided "Inaki" was his man and in 1992 began wooing him.
Inaki arrived in Detroit to "help Jack Smith save GM," but he had his own agenda too. He wanted an ultraefficient car factory in his home Basque region of Spain, a factory built to his specifications and in accordance with his theories. It became clear to Lopez, however, that the likelihood of such a project from GM was fading. Less than a year after coming to Detroit, Lopez began to show an interest in Piech's overtures.
In February, Lopez was promoted to group vice president at GM. He publicly stated that he was happy at GM and that the rumors that he might leave the corporation were not true. In March, he left GM to join VW. And, GM charged later, he took a lot of confidential data with him.In April, GM filed a complaint of industrial espionage against VW in Germany.
Witnesses came forth to tell of the shredding of documents at a house in Wiesbaden by two of Inaki's "Warriors" who had followed him to VW. German prosecutors seized four cartons of documents at one of three sites in Germany where documents were being copied into Volkswagen computers and shredded.
After several years of turmoil, Lopez resigned from Volkswagen in November, 1996, and started his own consulting business. In December, a German court indicted Lopez and three of his followers on charges of stealing confidential GM price lists and plans for its next-generation assembly plant, called "Plant X," that GM claimed Volkswagen used in a truck plant it opened in Brazil.
Lopez has been given much of the credit for Volkswagen's turnaround, so VW was reluctant to sever ties with him, which was one of GM's conditions for settling its civil suit against Volkswagen. After Lopez's resignation, VW continued to pay his salary and fund his defense. Lopez never got his plant in the Basque region of Spain. Volkswagen also shelved plans for such an undertaking.
Jerry Greenwald had been Iacocca's choice to succeed him as chairman and chief executive officer of Chrysler Corp. But Greenwald was frustrated by Iacocca's refusal to set a retirement date and he left the corporation in 1990. In 1991, Bob Lutz was appointed president of Chrysler Corp., making him Iacocca's heir apparent. Iacocca wanted Lutz at the corporation, but didn't want him in charge and effectively blocked his bid for the top job. Lutz had undergone a messy and public divorce (as Iacocca had earlier), but mostly Iacocca and Lutz differed sharply on their visions for the corporation. Iacocca liked traditional Detroit cars with vinyl roofs, wire wheel covers, deep plushly cushioned seats and a boulevard ride. Lutz liked fast, European-style sports cars. These were two strong egos in conflict. Lutz made no attempt to hide his differences with Iacocca, often going public with them. Lutz's relationship with Iacocca reminded observers of Iacocca's relationship with Henry Ford II. The search for succession at Chrysler Corp. in 1991 was at a stalemate.
Roger Penske, of motorsports fame, had acquired Detroit Diesel from GM in 1988 and turned it around. Under GM management, it had been a perennial loser in the '80s. Penske turned the operation around quickly, introduced a new heavy-truck engine and Detroit Diesel soared from 3 percent of the domestic diesel engine market to 25 percent by 1991. Penske had achieved this miraculous tuirnaround with the same employees who had been losers under GM's management. All this made Penske very attractive as the man to lead Chrysler Corp. Rick Mears won the Indianapolis 500 race for Team Penske on May 26. Penske called Iacocca to seal the agreement which would bring Penske and the glamour of big-time racing celebrity to Chrysler. But a snag developed when Iacocca said he wanted to stay on as chairman two more years. Penske was leary of having Iacocca peering over his shoulder. Penske said no deal.
The board of directors turned to another outsider, Robert Eaton, who was running GM of Europe at the time and would almost certainly return to Detroit in the shakeup that would follow the ouster of Stempel as GM chairman, already in progress. Eaton indicated he was interested, but would need a quick decision. Directors were sold on Eaton and stood firm against Iacocca, who was still backing Greenwald against ever-lengthening odds. Eaton was elected the new chairman of Chrysler.
Iacocca was out, but would return to haunt Chrysler. In 1995, Kirk Kerkorian, financier and a major shareholder in Chrysler Corp., launched a hostile takeover bid. The following year, Iacocca joined Kerkorian's effort, earning himself the title of "turncoat." Eaton skillfully fended off the takeover and some of the measures taken to do that did increase the value of the corporation. In the end, Eaton praised Iacocca as "the last titan."
In 1994, the industry got a hint as to who is front-runner in the Ford family to take the reins at Ford Motor Co. when the board of directors appointed William Clay "Billy" Ford Jr. to replace his father as chairman of the powerful finance committee, apparently moving him ahead of Edsel Ford II, son of Henry Ford II, in the line of succession to the corporate throne.
Some industry watchers wondered at the time if this move into the very powerful position on the corporation's board signaled that Billy was slated to head the company, perhaps when Chairman Alex Trotman retires. In July, 1997, the board dropped another hint. It agreed to establish an environmental and public policy committee, reflecting in part Billy Ford's 10-year campaign for the company to be more active on environmental issues.
Billy's elevation in 1994 to a higher position in the corporation than his older cousin Edsel II reflects the fact that the William Clay Ford branch of the family owns more stock than Henry II's, according to some observers. "Henry's holdings were reduced by divorce settlements," one said. "The ascension of Billy to such a high position reflects this greater power in terms of stock ownership."
Billy, 40, and Edsel, 48, are great-grandchildren of legendary founder Henry Ford and have both carved out careers at the company. Each has worked in a variety of Ford positions and both have international experience.
The Finance Committee which Billy Ford heads is a powerful committee created by Edsel II's father, Henry Ford II, that controls major business decisions at the company. William Clay Ford Sr. had held the chairmanship since 1987, until it went to Billy.
The Ford family holds about 10 percent of outstanding Ford Motor Co. stock, but controls about 40 percent of the company's voting stock through the superweighted Class B shares created in 1936 by Henry Ford and his son, Edsel Ford. After Henry Ford II died, his surviving heirs agreed to vote their shares as a block and pooled their shares in a voting trust to ensure that their power will not be diluted if a family member sells stock. Ford Motor Co. went public in 1956. Ford's chief executives have been non-family members since Henry II's retirement, but there have always been members of Henry Ford's family involved in management of the giant auto maker since it was founded in 1903.
By 1997, the globalization of the auto industry and most major industries was in place. A new world order seemed to be taking shape. It has become clear that the top executives of the auto makers are global in their thinking. At GM, Jack Smith spent a lot of time in GM of Europe. Robert Eaton, chairman of Chrysler Corp., came from GM of Europe. Bob Lutz, vice chairman of Chrysler, had spent much of his career at Ford of Europe. Alex Trotman at Ford Motor Co. is British and Jacques Nasser, president of North American operations, is also chairman of Ford of Europe.
As more foreign automakers establish factories in the United States and more American and foreign makers blend their operations, the line between foreign and domestic becomes very blurred.
In Europe, Swedish Saab is already largely owned by General Motors and Ford owns British Jaguar. German BMW owns British Rover, but Chrysler Corp. has cast envious eyes at Rover and also hinted that it would be interested in joint ventures with BMW.
Since Honda Motor Co. first broke ground in Marysville, Ohio, in 1982, eight more foreign-owned assembly plants have set up shop in the United States. AB Volvo is considering a U.S. assembly plant, the latest in a rush of European luxury carmakers to the U.S.
Honda, Toyota and Mitsubishi Motors Corp. now seem as American as GM, Ford, and Chrysler in Ohio, Kentucky, Indiana and California. "In California, we are the auto industry," according to Philip A. Hutchinson Jr., president of the American Association of International Automakers, a trade group representing "transplants." Maybe it is time to forget about differentiating on the basis of national origin, suggests Philip A. Hutchinson Jr., president of the Association of International Automobile Manufacturers. Imports accounted for the lowest market share in 1995 in 20 years, Hutchinson said.
This is because foreign carmakers sold more U.S.-built cars and trucks in the United States than they imported. Automotive imports into the United States fell to 1.7 million in 1995 compared with a peak of about 3.2 million in 1986. Meanwhile, output by international automakers at U.S. plants rose to 1.9 million, more than three times what they built in 1986.
"So why do we still say 'the Big Three' when the international automakers hold more than 25 percent of the U.S. market," Hutchinson asked. In fact, he said, internationals are building one in four of the cars manufactured in the United States. "That is more than Ford and three times Chrysler Corp.'s U.S. production."
When Volkswagen decided in 1976 to open an assembly plant in the United States, the question was asked: Was the VW Rabbit being produced in Westmoreland, Pa., a German car or an American car?
The profits (if there had been any) flowed to the German company, but anyone can buy stock in any auto company anywhere in the world. Capitalism's home is the world. Wages paid went to American workers and benefited the local economy around Westmoreland, just as when it was a Chrysler plant.
Similarly, profits from Honda's assembly operation in Ohio go to the Japanese parent firm, but wages benefit American workers and an American community. And anyone in any country can buy Honda stock.
Business is no longer divided by nationalism. The top executives of American auto makers really have more in common with top executives in Germany, Great Britain, France, Japan and Korea than they do with American workers. The ruling class in China understands and has more in common with the ruling class in America than it does the Chinese masses.
In the new world order, corporations are reaping the immediate benefits of free trade, while workers are suffering because of the competition for jobs of millions of lower-paid workers around the world. It seems likely the industry is in for a long period of labor turmoil as workers try to carve out an economic niche.
On the other hand, international peace may have snuck in the back door while we were absorbed with each year's new models.
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