Business: Upheaval in the House of Ford

A bruising battle ends with the dramatic firing of an industry titan

Power struggles are nothing new at Ford Motor Co., but the one that climaxed last week was a stunner. After weeks of futile maneuvering to save his job, Lee lacocca, 53, the harddriving, cigar-chomping president of the world’s fourth largest manufacturing company, found himself quite bluntly sacked by his equally tough-minded boss, Chairman Henry Ford II. It was the culmination of months of behind-the-scenes quarreling between two of the auto industry’s most respected—and often feared—executives. The end came for lacocca following a day of stormy meetings of the ten-member organization committee of the company’s outside directors at Ford’s headquarters in Dearborn, Mich. Afterward, lacocca denied widely published reports that he had asked his boss, “I have been with the company 32 years. What have I done wrong?” And that Ford had replied, “I just don’t like you.” In fact, Ford was recently heard to say, “I haven’t liked you for two years.”

The icily frank appraisal, like a line out of Wheels, sums up a relationship between two strong-willed men that was never warm and has been deteriorating for several years. “The body chemistry wasn’t right,” said Henry W. Gadsden, one of the several outside directors who hoped that the president could stay on. Both Ford and lacocca can be at times charming, abrasive, cordial and arch. A clash of their personalities was all but inevitable from the moment that Ford, the celebrated heir who liked to remind subordinates that “my name is on the building,” elevated lacocca, the ambitious hired manager, to president in 1970. Early rumored to have the inside track on the job of chief executive upon Ford’s retirement at the age of 65 in 1982, lacocca made the mistake of encouraging subordinates to regard him as the dauphin. That did not sit well with Chairman Ford, who thought that lacocca had too many rough edges, and whose company has always been headed by a member of the first family of American industry.

Ford has grown increasingly preoccupied with providing for an orderly transition before the eventual takeover of his job by another Ford-most likely his only son, Edsel, 29, an executive of Ford of Australia Ltd. The first open signs of Henry Ford’s determination to nudge lacocca aside came 15 months ago. In a maneuver that infuriated lacocca, who throughout his presidency had alone reported directly to the chairman, Ford set up a three-man “office of the chief executive” composed of himself, lacocca and Vice Chairman Philip Caldwell, 57.

The change diluted lacocca’s control over day-to-day operations, and sent him on a supersecret scouting mission for a possible job as assistant and heir apparent to J. Stanford Smith, chief executive of International Paper Co. The talks came to nothing. lacocca’s role at Ford was reduced still further only a month ago when Ford expanded the office of the chief executive to include his brother William Clay Ford, 53, owner of the Detroit Lions football team. At the time the internal structure of the office was modified so that lacocca could no longer report to the chairman at all but instead had to deal through Caldwell.

In the past several weeks, lacocca launched a fevered campaign to gather support from among the company’s outside directors. Though some backed him, it was a pointless effort, since the chairman has the power to pick whomever he wishes as president.

lacocca has been one of the most skillful managers in the auto industry’s modern history. His quick decisions and his flair for styling not only brought him a spectacular rise at Ford in the early 1960s but was a key reason that the company overcame its stodgy image of earlier years. He made the Falcon a hot seller by adding bucket seats and a bigger engine as an option, captured a large piece of the youth market by making Ford cars conspicuous on the racing circuit. He is proudest of his revitalization of the company’s dealer network, but industry historians may remember him most for the Mustang. He helped design the sporty car for Everyman with his own hands, and put it into production in 1964. By personally orchestrating a snappy marketing campaign, lacocca logged 418,000 Mustang sales in the first year, still a record for new models.

The company that he leaves is in fine shape (last year sales jumped from $29 billion to $38 billion, and earnings rose from $983 million to $1.7 billion), but it will miss lacocca’s talents. Warned Ed Mulane, president of the Ford Dealer Alliance, which represents 1,200 car and truck outlets: “lacocca is the only guy with charisma. He was able to slot in the right product at the right time.”

In the past year the company has also been distracted by a series of lawsuits and reported scandals. Executives are worried by persistent rumors within the company that one top official may have misused hundreds of thousands of dollars in business-related travel expenses. In a totally unrelated matter, Henry Ford himself last month became the subject of a bizarre stockholder lawsuit by New York Attorney Roy Cohn, which accused Ford and other company officers of taking $750,000 in illegal kickbacks from a catering concern, Canteen Corp., a charge that Ford denies vigorously. The Justice Department is also investigating allegations that Ford executives paid $900,000 to an Indonesian government official in return for an aerospace communications contract.

On top of that, lacocca’s firing could lead to further departures by managers. Almost always when a top executive is removed, his close supporters and recruits become vulnerable. Chairman Ford is said to be looking closely at a number of General Motors executives to replace some lacocca loyalists. The automakers may be in for a period of industry-wide executive raiding.

lacocca is not the first mighty executive to be cast off by Henry Ford II. When Ford was only 27, he led other family members in a celebrated coup that forced his aged and autocratic grandfather, the original Henry Ford, to relinquish power. Then, in a series of historic confrontations in 1945, he forced the resignation of Director Harry Bennett, who to keep his own de facto control over the company had surrounded himself with a gang of hired thugs. In 1969 Ford unceremoniously canned President Semon (“Bunky”) Knudsen, in large part at the urging of lacocca, who was Knudsen’s rival for power. When asked why he was letting Knudsen go, Ford simply answered: “It just didn’t work out.”

Nine years later, Lee lacocca sat on the gold-colored couch in his office and remarked that the boss had used ironically similar words to justify his own ouster. “Mr. Ford said it’s just one of those things, we’re going to do it and that’s it.”