The Dinosaur Hunter, Part III

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 troubles.

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 at 35.

The Ghost
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 sermons.

"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 the questions."

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.

Auto Bigamists
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 last year.

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.

Fall Flat?
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."