Love or hate him; Henry Ford was a true pioneer in the auto industry. He created the moving assembly line, paid his workers almost double the going wage ($5 a day), and built the first mass-produced automobile, the Model T—all revolutionary innovations with long-lasting social and economic impact. But none would have been possible if Ford hadn’t snubbed George Selden and the Association of Licensed Automobile Manufacturers (ALAM) in 1903.
In the early days of the American car business, ALAM held the auto industry hostage using patent no. 549,160. Authored by Selden, it outlined the design for a “safe, simple, and cheap road locomotive, light in weight, easy to control, and possessing sufficient power to overcome any ordinary inclination.” Selden and ALAM claimed it encompassed all types gasoline-powered engines. Anyone wanting to build a car had to bow and pay tribute to the dastardly duo, or they were brought to court and forced out of business. A nice little oligarchy, huh?
Ford told them to shove it and started building cars regardless. Of course, Selden and ALAM sued. While he lost the original case, the ruling was overturned on appeal in 1911. “The appellate court ruled that the Selden patent was valid, but only for cars made to its specifications,” says Paul Ingrassia, editor of the Revs Institute for Automotive Research in Maples, Florida; Pulitzer Prize-winning reporter for the Wall Street Journal; and author of several books on the automobile and automotive industry. “Since no working automobile had ever been built to Selden’s design, automakers no longer had to pay the extortion, causing automobile production to boom and the industry to explode.
Over the last century, risk-taking like Ford’s has been as much a part of the auto tradition as racing and gear lust. Detroit’s most famous pioneer might have been the first risk taker, but he wasn’t the last. On Cars Technica’s list of notable risk takers, some auto-adventurers put themselves directly in the limelight and became househole names; others operated in anonymity behind-the-scenes. But all changed their companies—and the industry—in positive ways.
A loan for a rainy day
Ford Motor Company’s former President and Chief Operating Officer Alan Mulally will most likely go down as one of the Blue Oval’ s most progressive, forward thinking leaders. He refocused the automaker on its core competency (building affordable, reliable vehicles), trimmed back the fat in its operating budget, and greenlit the use of lightweight building materials (aluminum) on a popular mass-produced vehicle, the F-150, when others were afraid to do so.
But it was his decision to mortgage company assets in 2006, securing nearly $24 billion in loans when the capital markets were thriving that’ll go down as one of the most significant undertakings in the company’s 100-plus year history. Financial analysts thought the move screamed of desperation. But it turned out to be the company’s salvation, as the loans strengthened its balance sheet and to stand on its own two feet while crosstown rivals begged for bailout money from the U.S. government in 2009, endearing Ford to the American public. “He didn’t make Ford’s financial problems, ours too,” says Karl Brauer, executive publisher of Kelly Blue Book and KBB.com. “In the process, Ford captured significant market share from its rivals.”
I’ll do that for a dollar
Today, no one thinks twice when a company’s head honcho takes an annual salary of a dollar. Google co-founders Sergey Brin and Larry Page are in the dollar-a-year club. So are Twitter’s Jack Dorsey and Facebook’s Mark Zuckerberg. Today, the practice borders on the cliché, especially with all of the Golden Parachutes floating around corporate America.
But things were different when Lee Iacocca set the precedent in 1978 when he was chairman of the board at Chrysler. The embattled automaker was in dire financial straits. To keep it from bankruptcy, Iacocca cut costs to the bone, fired redundant executives, and pushed the United Auto Workers (UAW) to accept huge salary and benefit reductions. Then he cut his salary, too.
“Iacocca’s plan was shrewd—make his employees think that ‘We’re all in this together’—and it worked,” says Leslie Kendall, curator of the Petersen Automotive Museum in Los Angeles. “He immediately became known as the Blue Collar CEO.”
It’s still the exception to the rule that a CEO’s pay and long-term benefit is 100 percent dependent on the success of the company. If Chrysler hadn’t been resurgent, Iacocca would have made nothing, not just appear to make nothing.
Redefining the business
Elon Musk is on a mission to upend the auto industry. Not only has Tesla Motors’ chief executive officer transformed the public’s image of the electric car, but he has also reinvented the way traditional automakers think about technology and how it is integrated into the automobile. He did so by going on the offensive, painting traditional automakers as bloated behemoths tied to old technology and old ways of thinking.
At the same time, Musk portrayed Tesla as an innovative, altruistic alternative that offers a better, much smarter product than anything else on the road. The move worked. “In so doing, he has made the establishment re-think its assumptions about how to run a car company,” says David Cole, Chair of AutoHarvest and Chair Emeritus, Center for Auto Research at the University of Michigan. “The establishment is now following his lead, instead of the other way around. And Tesla hasn’t made a dime!”
The birth of the catalytic converter
Passed in 1970, the first Clean Air Act required automakers to reduce new car tailpipe emissions by 90 percent within five model years. Most manufacturers were toying with mechanical means of doing it but were having no luck. General Motor’s President Ed Cole greenlit the use of catalysts to scrub exhaust, and it worked. Catalysts convert exhaust pollutants into compounds that occur naturally in the atmosphere, allowing vehicles to run better, cleaner, and on less fuel. Combined with the use of unleaded fuel, they reduced emissions by 95 percent, the most significant reduction in pollutants ever!
That wasn’t the risk, however. Cole was going against the wishes of his colleagues and the Nixon White House by outfitting every 1975 model GM with a catalytic converter. Everyone else wanted the transition delayed. “Delayed forever, [if possible],” says Rev’s Ingrassia. Cole disagreed. He even threatened Big Oil. The catalytic converter required unleaded gasoline, while oil companies added lead to their gasoline as a cheap solution to engine knock. Cole didn’t care. “He said ‘If you’re not ready, people will simply have to buy different gas,’” says Ingrassia. Cole drew a line in the sand, and everyone capitulated.