The Dinosaur Hunter, Part III
Monday, Apr. 06, 1959
Reprinted Coutesy of Time Magazine
At Alcoa, Romney was frustrated by lack of opportunity to
advance through the layers of executives. "As near as I could figure
it," he says, "I would have been about to go by the time I rose to the
top." When the Automobile Manufacturers Association offered him a job
as manager of its Detroit office, he jumped at the chance.
Romney's first big job for the A.M.A. was a study of car use, and it
shaped his whole thinking about the role of the auto. The overriding
finding was that the U.S. auto was being used less and less for long
trips, more and more for short, essential trips, such as going to
church, to work, to stores. Romney saw its meaning immediately: an
inevitable trend toward more functional, basic transportation.
As director of the Automotive Council for War Production during World
War II, Romney worked up a cooperative system that enabled companies to
share one another's production advances. At war's end he performed one
of his biggest services by persuading Government officials to cut short
cumbersome contract-termination procedures that might have tied up auto
plants for months. Instead, automakers began rolling out new cars
almost immediately after war's end, thus averting heavy unemployment.
Nash was convinced that it was on the right road with its small
cars—but the company was running out of gas. The war had spawned many
bad habits. Competition was rough. Mason made a move to keep the
company going by merging Nash-Kelvinator with Hudson to form American
Motors Corp., but before he could straighten the company out he died of
pneumonia in 1954. Romney was elected president—and heir to a mess of
Pray & Work
His first act as president was to give his problems
"thoughtful and prayerful consideration." Says he: "Prayer is not a
substitute for work. First we have to do all we can ourselves to
understand a situation. Then when we ask for help, sometimes it is very
evident, sometimes it isn't. Sometimes we may well be helped by not
getting a decision."
Having prayed, Romney got to work. He reorganized top management,
retired older executives to bring in new hustlers. He built up
American's selling organization by thinning out weak dealers, got rid
of a sales manager who did not believe in the small car. Despite the
belt-tightening, American lost nearly $7,000,000 in 1955, lost another
$20 million in 1956. Bus drivers stopping at the entrance to the
company's cathedral-like headquarters in Detroit called out: "All out
for the old folks' home."
Romney cut out the ailing Nash and Hudson big-car lines, concentrated on
the Rambler (the Metropolitan now sells about 1,000 units a month). "I
knew we were on the right track," says Romney. "The question was: Would
the car-buying public discover that in time?"
Wolfs at the Door
Just when American was in deepest trouble, Raider
Louis Wolfson appeared on the scene, waving 200,000 shares of freshly
bought American Motors stock. Wolfson had chilling news: he wanted to
sell off the company's automaking facilities—and had $8,000,000 more
to buy stock control if there was any argument. Wolfson was a tough
in-fighter who had won many victories, but Romney treated him just as
if he were another heckler in Hyde Park.
Romney glowingly described the future of American Motors, and Wolfson
decided to let matters stand—if he could have a man on the board of
directors. Romney also talked him out of that. But he knew he was
living on borrowed time, with only a few months to go before
bankruptcy—or liquidation—would swamp the company. Later, after
Wolfson had bought 220,000 more shares, he wanted American Motors to
finance his acquisition of other companies by trading stock. Romney
flatly refused to go along. Then the public finally took to the
Rambler. In late 1957 the company nudged into the black—and has been
there ever since. Wolfson secretly sold his holdings, later said that
American Motors stock was fully priced at 13. Last week it was selling
Never has Detroit seen an auto executive like Romney. In an
industry noted for hard drinking and tough talk, Romney does not drink
(not even tea or coffee), or smoke or swear. He is the president (i.e.,
bishop) of the Detroit stake of twelve Mormon churches, was the leader
in building a new $750,000 Mormon tabernacle in suburban Bloomfield
Hills. He gives 10% of his $100,000 salary, and sometimes more, to the
church. He reserves his Sundays exclusively for church activities,
often travels to other Mormon churches to set up conferences or deliver
"My religion," says Romney, "is my most precious possession. Except for
it, I could easily have become excessively occupied with industry.
Sharing responsibility for church work has been a vital counterbalance
in my life."
Romney keeps his athletic frame (5 ft. 11 in., 175 lbs.) in top shape
("Our body is the temple of our spirit"), plays competitive sports with
his two sons, Mitt, 12, and Scott, 17 (his two daughters are married ).
The Romneys live in a $150,000 modern Swiss-chalet house (with a
waterfall in back) that he built last year in fashionable Bloomfield
Hills. (When he invited the auto industry brass for a housewarming,
one G.M. wife remarked dryly: "George, you've bought yourself quite a
gas guzzler.") He begins his day at 5 a.m., uses the first daylight
hours, except when snow is on the ground, to play solitary golf with
luminous balls at a country club next to his home. He keeps no score,
dashes up and lunges at the ball, then chases it across the fairway at
a fast jog. Caddies call him "the ghost."
He makes his daily 20-mile trip from home to office in about half an
hour (most of his colleagues would rather walk than ride with him),
rolls up his shirtsleeves for the day's work. American Motors
headquarters is perhaps the most relaxed and informal in Detroit's auto
industry. Romney often leaves his modest office (18 ft. by 18 ft.) to
drop in on executives down the corridor. When he has anything important
to say, he is not above calling them together, sitting down on the back
of a chair to give a talk.
Once, while attending a musical in Manhattan with other company
executives, he drafted the announcement of a major reorganization of
American's divisions between the acts, using an aide's shoulder as his
desk. When the British Broadcasting Corp. recently asked him to take
part in a small-car panel, and submitted a list of ten questions
beforehand, Romney summoned an aide. The aide began briefing him, but
Romney cut him short. "Never mind the answers," he said. "Just give me
Change in Thinking
One big question for which Romney thinks he can
create his own answer is the fate of American Motors after the Big
Three roll out their compact cars. "They will come in partially at
first," says Romney, "at about the same volume at which we operate. But
sooner or later they will be in on an all-out basis, with no holds
barred. If we are right, they will have no alternative."
By being "right," Romney means that the compact-car market is far bigger
than other makers have previously estimated. One prime piece of
evidence: the entrance of Studebaker-Packard's compact Lark, which has
not hurt Rambler at all, even though the Lark is being turned out at
the rate of 4,300 cars a week. A year ago, the Big Three's experts
estimated the compact-and small-car market at 500,000 a year—at most.
Last week they had raised their sights, expect the compact market to
range from 1,500,000 to 3,000,000 within five years, exclusive of
imports. Says Romney: "In five years the compact car will have at least
half the auto market."
That market may be 7,000,000 cars by 1965, as the U.S. population
explosion continues and all the World War II babies reach car-buying
age. Thus, in a growing market, the Big Three's compact cars will not
necessarily be sold at the expense of the Rambler.
No one expects that the market for small foreign cars will disappear,
but most automakers estimate that it will grow no bigger. In fact, it
may shrink. One indication is that foreign cars are no longer as hard
to get as they once were, and order backlogs have dwindled. The Big
Three's compact cars will also be competing against their own imports.
No one expects the big car to disappear, but its market, too, may
shrink. While working on their compact car, the Big Three are gambling
on continued demand for bigger, flashier cars by planning 1960 models
that are longer, lower and wider—with new fin treatments. G.M.'s cars
will be completely done over; the Ford, Edsel and Mercury will also be
completely redesigned; while Chrysler is planning changes, its main
emphasis will be on new interiors.
But there is little doubt that the big car's medium-priced lines will be
hard hit by the approaching battle of the compact cars. Their sales,
which were 37% of all sales only four years ago, last week were down to
25%—and still slipping. Most experts expect the new compact cars to
occupy the spot once held by the Ford, Chevy and Plymouth before they
got big enough to push out the medium-priced cars.
In the upcoming battle Romney will have one great
advantage that the Big Three cannot match: his low break-even point. He
can turn out considerably fewer cars now and still make
respectable profits. In its last fiscal year American Motors netted its
$26 million profit on sales of only 169,000 units. Ford and Chrysler
together, on the other hand, sold 1,429,000 cars in the first nine
months of 1958—and lost $61 million between them. Romney can also
count on financial backing from his Kelvinator appliance division,
which he has thoroughly overhauled; Kelvinator sales are up 18.7% over
On the other hand, Romney will have a problem with some of his dealers.
Some 30% of them are auto bigamists; they sell a Big Three car as well
as the Rambler, will probably carry the Big Three's line of small cars
(though only Chevrolet, Ford and Plymouth dealers, of which Rambler has
practically none, are expected to). Romney hopes that his hard core of
2,800 dealers will stick with Rambler. During the industry's 1958
slump, Rambler saved many of them; last year they made a 2.8% profit on
their total sales v. .2% for the average U.S. dealer. Another reason
for holding on: Rambler has a current resale price advantage of from
$99 to $191 over a same-year Chevrolet, Ford or Plymouth.
For all his confidence, Romney does not underestimate the
threat he faces—or expect anyone to underestimate him. "We don't have
research and development facilities in magnitude equal to the Big
Three," he says. "But we have greater freedom and flexibility of
operation. We're leaner. We're harder. We're faster. I've seen
halfbacks, out in the clear, trip and fall flat with a sure touchdown
in sight. That sort of thing could happen to anybody." Then Romney
breaks into a wide grin: "But I don't intend to let it happen to us."