In 1961, Iacocca resolved that instead of creating a car in search of a market like the Edsel, he would find a market in search of a car. The starting point was Iacocca’s pitch to Henry Ford II about the youth generation:

(1) Young people had new economic power as the baby-boomers were beginning to grow up,
(2) The 20 to 24 year old demographic would increase by 50% over the course of the 1960s;
(3) Ford II wanted to be hip and with it, so did Ford;
(4) Consumers were looking for a more luxurious model in the 1960s as it was projected that there would be more money and more wealth then ever before.

In house research showed that that customers were willing to pay extra to soup-up their Falcons with more features than any previous model. So The Fairlane Committee (led by Iacocca) argued that they needed a less expensive small car at a price tag no higher than $2,500. The assumption being that personalized extras would increase revenue. With the Fairlane Committee which was built around developing a new vehicle that would capture the interest of their target market, Lee developed what customers were asking for: a) great styling; b) strong performance and; c) a low price.

Design-wise, Iacocca had the idea of a long hood and a short deck. A long hood gave the impression of energy and performance. The car had to be sporty and distinctively styled. The intention was to appeal to multiple markets at once such that a kid would drive the car to school, work, go on a picnic, visit grandma at the farm AND do a drag race. The only way to sell this car was to have mass appeal and sell at a high volume in order to get the margins needed to make a profit. A new car build for production from scrap would be $300 to $400 million but to save costs, the basic frame, engine, transmission and axles for the Falcon which already existed was adapted to the Mustang. The cost of production for this new car then then be dropped to to $75 million.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

In 1956, Ford Motor Company went public and Iacocca wanted to compete directly with GM’s Cadillac. So, the Ford Edsel (named after Henry Ford’s son) was released with much fanfare. But it was remarkably unsuccessful. The production costs were set in motion long in advance and the car was released on schedule. Unfortunately, sales for the Edsel were dismal at a price tag of $3,500 – $3,766. It was an ugly car that had a strange looking front. Ford lost $350 million on the production while only 119,287 Edsel’s were actually built. An additional problem was that the Edsel competed on price against its own sister divisions within Ford. The Edsel had been priced as high as a Mercury $4,280 – $4,405. Also, there was a recession in 1957. McNamara pushed for the closure of production for the Edsel in light of these facts…

Iacocca learnt from the Edsel errors. The 1960s represented youth with Kennedy in the White House. As the head of the Ford division, Lee shut down the Cardinal project, which was McNamara’s brainchild after Falcon. Again this car was utilitarian, cheap, fuel efficient and well built. It was also boring and built, designed and tested in Germany. Ford projected 300,000 units for the Cardinal but in the US market it was hard to imagine that it would work. The car was too ahead of its time so Iacocca advocated scrapping the Cardinal even though it cost $35 million to produce at the stage Iacocca had it shutdown. This was after McNamara had left to be Secretary of Defense under the Kennedy administration.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

In the auto-industry, change is constant and for Detroit, the challenge is always figuring out what’s going to appeal to customers three years down the road. That is because production from design, research and fitting the plant for a production run takes a lot of time. Iacocca says that Ford and the others in the Big Three (GM and Chrysler) as well as smaller manufacturers are always designing cars 3 years in advance of their sale date even though consumer tastes may change drastically in that time.

Coming out with a product too early is never good, just as coming out with a product too late is equally bad. The spike in oil prices in 1979 was not predicted so the response of the Big Three was very late. In the auto-industry, the consumer has a major impact on whether a specific model will sell. In Detroit, cars cannot afford to lag too far behind consumer demand, or lag to far ahead of them. The myth was that car companies create the cars and then tell the consumer that they want to buy it. For Iacocca, the products have to be researched, Ford can only sell what customers are willing to buy.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Iacocca was managing 11,000 workers in the Ford Division in 1962. The question is how did Iacocca motivate these workers? According to Iacocca, the truth is that the only way to motivate workers is to communicate with them, although you can be a great debater, you need to prepare for important public speeches. Lee Iacocca has done that through Dale Carnegie’s public speaking training course. You need to be able to speak on the fly in any organization or company. You also need to learn how to listen to people. You need to be able to listen well in order to motivate people who work for you. Preparation for a speech in front of a large audience is very very important. You need to understand that audience or you have no business taking up that audience’s valuable time. You need to use their language when you speak rather than speak above that person.

Never be too tough on someone when they are down, if he is upset about his own failure, you run the risk of hurting him badly and taking away his incentive to improve. You need to be able to play on a team. There were smarter people who know more about cars than Iacocca, but he was able to handle people properly. People skills are what make Iacocca successful. You need to be able to talk plain and simple. The key to success is not information rather people are the key.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.

Iacocca supported management by Quarter Reviews at Ford Motor Company. Accountability to themselves as employees is more important than accountability to the boss. The employee will know whether they are doing well or not, and can effectively marshal, fire or promote themselves. You don’t want to intervene too early as a boss and a quarterly review system is ideal for self-assessment and goal setting. Iacocca would ask three questions of his line managers: 1) What is your goal for the next 90 days?; 2) What are your aspirations, dreams?; 3) How are you going to get there?

This allows workers to set their own agenda; making them more productive and motivated and this helps the best ideas bubble to the top. Once there was an agreement in goals, goals would be written down and signed off on. For Lee, putting objectives down on paper forces you to get down to specifics. Understanding what you have achieved, what is to be accomplished next and how to go about it is crucial to self-accountability. The quarterly reviews also create a dialogue between the manager and his boss so that good workers do not get passed over and their working relationship usually improves through interaction. If someone is not appropriate for a given role then red flagging it sooner than later is always better for everyone. Iacocca is skeptical of moving people around from role to role however because specialization has to set in at some point.

This is a synopsis & analysis based on Iacocca: An Autobiography and other miscellaneous research sources. Enjoy.