American Drive: How Manufacturing Will Save Our Country

Introduction

Leaders are made, they are not born. They are made by hard effort, which is the price which all of us must pay to achieve any goal that is worthwhile.

—Vince Lombardi

Coach, Green Bay Packers

My name is Richard E. Dick Dauch. Over nearly a half century in the auto business, it has been my privilege to lead teams on the cutting edge of many things—new products, new processes, new management techniques, new plants, new workforces, new companies—that have had lasting impact on the auto industry and the people who work in it. In most of these ventures into unfamiliar ground, my teams have enjoyed conspicuous success, and I am not the least bit shy about claiming credit for the things we have achieved. As Muhammad Ali said, it ain’t bragging if you can do it. Those who take the risks, also enjoy the rewards.

At the same time, I recognize that breaking new ground is disruptive. My willingness to strike out in new directions has alienated a few people. That is a very human trait that goes along with the territory. It is the reason so many people are reluctant to stick their necks out, take risks, and express contrary opinions. When you’re out there all alone, you can feel very vulnerable. You know if you fall on your face, the critics will be quick to say they told you so. If you are successful, they will push you aside and claim credit for your achievement. I have heard it said that the world is divided between those who do the work and those who take the credit, and I have often found that to be the case.

So be it. In fairness, some of the slings and arrows launched in my direction over the years can fairly be described as self-inflicted wounds. I can be outspoken, aggressive, and impatient. Can be? Hell, I am! A corporate bureaucracy will squeeze the life out of you if you let it. When you are trying to get things done in that environment—and I am without question hotwired to get things done—you have to be direct, determined, demanding, and tough. From the first day I walked on the floor of a General Motors factory, I have been rocking the boat. I set high standards for myself and those who report to me. I have no tolerance for mediocrity. Mistakes, yes, mediocrity, no. Anyone who takes on tough challenges will make mistakes, but mediocrity is intolerable. If you are having trouble doing your job, I will ask what you need to get it right. New equipment? New resources? More training? Better maintenance? But if I determine your attitude is the problem, you will soon be gone. Attitude begets attitude.

At the same time, I have managed to acquire the loyalty of a cadre of extremely able business executives who have joined with me to take on many challenges across a span of decades. Every time I called on them, they knew it would be tough, and that I would demand a lot from them. Yet they also knew I would return their loyalty with interest and support. I have left many millionaires in my wake, which is a matter of pride to me. Even more precious to me are the many lasting friendships I have acquired over the years. I would not swap them for all the U.S. treasury bonds in China. It is highly fulfilling.

One of those friendships is with the legendary Lee Iacocca, who earned lasting fame for rescuing the Chrysler Corporation from oblivion back in the early 1980s. At Chrysler, Lee inherited an ineffective organization that was hemorrhaging hundreds of millions of dollars a year. Lee knew finance, marketing, engineering, and sales. He also had a deft hand for working with dealers, communicating with the public, working with banking institutions, and handling politicians. He managed to persuade the Federal Government to guarantee loans to Chrysler, buying him time to turn the company around. Back in those days, government bailouts of private companies did not come easily. But Iacocca won loan guarantees which then became akin to a running soap opera for several years, a staple of the nightly news, until Chrysler paid them back seven years early, with 17 percent interest.

What Iacocca could not handle on his own was manufacturing, quality and labor relations. That was a problem because in the final analysis, the fatal flaw of Chrysler in those days was poorly built products that did not hold up well. Before Iacocca could revive car sales, he needed cars that people wanted to buy. For that you need quality manufacturing, and back in those days quality was still an unfamiliar concept in many parts of Detroit. At Chrysler, especially at that time, quality was lacking at least partially because of confrontations between labor and management. A critical institution that had to be dealt with to correct this problem was the United Auto Workers (UAW).

So Iacocca went to see his friend Roger Penske, one of the biggest names in Detroit and the auto industry, a celebrated former race car driver who also is a renowned corporate entrepreneur. Penske gave Iacocca a list of people who could help him turn Chrysler’s manufacturing and quality problem around. There was one name on that list—mine.

Roger’s advice resulted in a pivotal moment in my career, and one I will always remember fondly. It would present me with an extraordinary opportunity to show what I could do in a campaign—to help save Chrysler—that the whole nation was watching with interest. I was ready for such a challenge and endowed with an immense reservoir of energy, confidence, and experience. I would need all of those qualities when I sat down to cut a deal with Iacocca. To salvage Chrysler’s manufacturing and quality problems, I needed the authority and a free hand. Anyone who knows Lee Iacocca knows he holds authority close to his chest. That was a tough and protracted negotiation. Yet I knew if I did not carve out my territory and authority going in, I would never get it later on. I hung tough, knowing I wanted the job but that I needed running room to get it done.

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I cannot say with certainty why, but since my earliest days of self-awareness I have believed I was capable of being a leader. It could not have been a birthright, because I was born to humble circumstances. My family operated dairy farms near Norwalk, Clarksfield, and Ashland, Ohio. There is very little about tending bovines to inspire notions of grandeur, or commend a young boy to the volatile and demanding auto industry.

Nor was I the anointed son. I was the youngest of seven children, and five of my six older siblings were brothers. In the manner of country farm boys, we were all rough and ready characters eager for a dare or a challenge. Fighting was frequent, and as the youngest and smallest, I usually caught the worst of it. It wasn’t that my brothers did not love me, but in today’s terminology, that affection would be described as tough love.

My parents were disciplinarians, loving but stern. They expected a lot of us, beginning with the farm responsibilities. Cows have to be milked twice a day. They don’t take off weekends or holidays. It gets mighty cold at 5:00 A.M. on an Ohio dairy farm in deep winter, but that’s just too bad. When Dad sent us out to do a job, we learned early not to come back complaining that it was too cold or there was three feet of snow on the ground. Dad did not want a weather report; he wanted to know if the work got done. He expected production, performance, and accountability. Come to think of it, I feel the same way about the people who report to me. I can get the weather from the newspaper or TV.

I knew early in that time and place that I wanted to do something with my life, and I had a hunch what it would be. Since the age of nine, I can remember being fascinated by cars and trucks. I watched them, listened to them, and learned about them. My brothers were impressed by the way I could lie in bed at night listening to trucks and cars running up and down the highway near our house, identifying their make and power by the sound. It was second nature to me. It was the 1950s. The Interstate Highway System was being built. The great American motor vehicle adventure was in its heyday, and I wanted to be part of it.

I still could have been caught up in the agricultural cycle, farming like my parents did, were it not for sports. I grew up big and fast, and my brothers made me tough. To build my strength and contend with brotherly love, I got some weights and worked out on them religiously. Not surprisingly, I savored sports, especially football, where my speed, size, and toughness served me well. As early as the fifth grade, I saw sports as my ticket off the farm and into something more interesting.

By the time I was a senior in high school, I was one of the best high school football players in Ohio, a state rabid about football. My senior year I rushed for nearly 1000 yards and scored 20 touchdowns. I was wooed by more than forty colleges and universities, including Purdue, Kansas, Iowa State, Cornell, the Naval Academy, and Cincinnati. Woody Hayes tried to recruit me to play at Ohio State. I chose Purdue for a variety of reasons, but mainly the opportunity to study industrial management, science, and technology.

The day I graduated from high school led into one exciting summer—I graduated in June, got married to my high school sweetheart Sandy in July, played in the Ohio North-South All-Star Football Game in August, and then reported to Purdue. Those were 120 exciting days for a young fellow still in his teens. It was only the beginning.

At Purdue, I played for the legendary Hall of Fame football coach Kenneth W. Jack Mollenkopf. In those days, Purdue was one of five Big Ten teams ranked among the top ten in the nation on a regular basis. Mollenkopf was tough as nails. When recruiting, he could have been a Methodist minister—all smiles and gentleness—but when you got out on the field, he could be the most demanding man you ever met. He was very much in your face and very stern, but he had a big heart and you knew he cared about you. He and his coaches kept tabs on all of us. If you were having trouble in class, they knew about it and helped you through it. If you acted irresponsibly, you were gone. They were there to mold men, not just football players.

Mollenkopf had little patience with injuries. If you could walk, you were expected to play—and man, did we play. There was no liberal substitution in those days of college football. You went out on the field and you stayed there until intermission. I played fullback on offense, linebacker on defense, and whatever they needed on special teams, including kicker. On Sunday, we reviewed films of the previous day’s game. If you did something really spectacular, they showed it once or twice. If you screwed up, they showed it over and over. You wanted to find a place to hide.

We had some great games and were nationally ranked. We always came up a bit short in the final standings, but we had our moments. We beat Michigan State, Notre Dame, Michigan, and the Washington Huskies. We played a heartbreaker against the Miami Hurricanes in the Orange Bowl stadium. We were inside the 10-yard line twice and did not score, ended up losing 3–0. That hurt big time, but you learn in defeat. In my last game, we beat Indiana 21–15. All in all, I was privileged to be part of a top Division I football team, and to learn from Mollenkopf about teamwork, determination, self-sacrifice, and discipline—qualities that have served me well over a lifetime. I believe Jack was proud of me then, and would be proud of me now. I know I was proud of him and his able staff.

I had legitimate pro opportunities. I was invited to the Green Bay Packers training camp. Those were the days before professional football players raked in the really big money. I thought about it long and hard, but I had a family by then and there are no guarantees in professional football. One blindside tackle can end your career forever. I took a job at General Motors—I had always aspired to a career in the automotive industry—and I never looked back.

When I started working at GM, I was on the production line supervising tough guys—hard-bitten factory workers who had moved to Detroit from all over the south and Midwest looking for economic opportunity. The plant floors were loud, dirty, and often dangerous. If those guys did not come with an attitude toward management, they quickly absorbed one from the UAW, which was born in violence and steeped in hostility toward management. Those guys were totally unimpressed by a young football player from a Big Ten university. No one at GM, management or hourly labor, cut me any slack. I had to earn respect. The factory floor became my testing laboratory.

The management techniques I had learned from my father and a series of sports coaches—including Mollenkopf—served me well on the factory floor. I got to know the people who reported to me and established personal relationships with them. I asked about their families, their problems, and their aspirations. I knew where they went on vacation and which sports teams they followed. I set high standards for them and made it clear I expected excellence—but I also made it clear I was always ready to help them achieve excellence. If they needed a new machine, I went to bat to get one. If they needed more training, I helped them get it. I was there when they came to work and when they left. I did not tolerate mediocrity in anything. We kept a clean and orderly shop, and observed safety precautions up and down the line. I made them my team, or strived to. We always gave the highest priority to making quality products for GM customers.

Of course, within the context of a UAW workplace, there were restrictions on my authority. I understood that and learned to work within the contract. I became familiar with the rules and went out of my way to deal effectively with the shop stewards. I made it a point never to blindside them. When I had a problem with an employee’s performance or attitude, which were usually the same thing, I worked to correct it within the existing guidelines. I have found that most of the time in the industrial setting, it comes down to a simple matter of caring and respect. When you show people respect, they are inclined to cooperate with you. I am a great believer in people. A supervisor’s job is to bring the best out in them.

On the negative side, I quickly became disgusted with the rank and file attitude toward absenteeism—it was about 20 percent daily back then, as it still is today in Detroit—but I was in no position to do much about that. It was part of the Detroit industrial landscape, and remains a debilitating affliction of a segment of the UAW workforce, at least in Detroit. It goes back to an attitude, culture and behavior problem. I learned to live with it, juggling work assignments as best I could to compensate for missing hands.

I did well at GM. I got results and my ability to obtain positive performance from a UAW workforce impressed my superiors. I earned a series of promotions and was eventually promoted to plant manager. That was a first—at the age of thirty I was the youngest plant manager in the history of GM’s Chevrolet Motor Division. It was quite an achievement and I proved I could handle the additional responsibility. In fact, I thrived in that environment. It was tough on my family because I was gone much of the time—often working from before sunrise to well after sunset—but Sandy is loving and resourceful, and did a wonderful job of covering for me when I could not be there. I did make it a point to be there for important things, like ball games and school events. I always advise everyone who works for me that they must have balance in their lives. But there is no question this kind of life demands a lot of people like me, and our families. It isn’t for everyone.

I was on the fast track—and some were predicting I would eventually make it to the fourteenth floor of GM, which is the executive level. I was never certain of that, however. I knew how to make cars, trucks, and axles. I was well ahead of the trends in lean manufacturing and quality, anticipating the influence of Japanese carmakers that was just then beginning to be felt in Detroit. But to get the results I wanted, I often stepped on toes, some of them in highly polished corporate shoes. My aggressive style and approach to senior office protocol did not endear me to everyone.

So I was receptive when Jim McLernon, a former senior GM executive, invited me to join him moving over to Volkswagen of America (VWoA) in 1976. Here was another first for me—a chance to launch a high volume auto assembly plant in the United States for a foreign automaker—Volkswagen Group (VWAG). That had never been done before.¹ Back in those days, all the Toyotas and Nissans being sold in the United States were made in Japan. None of the foreign automakers had been willing to set up shop here to make their products until Volkswagen took the lead. In fact, Volkswagen took the lead setting up manufacturing facilities all over the world. Volkswagen recognized the potential backlash that could occur if they displaced too much of a domestic industry, and knew that creating jobs in host countries was an excellent way to reduce any such resentment. They were a global company before true globalization occurred.

We finished building the VWoA plant in New Stanton, Pennsylvania, in Westmoreland County. It became known simply as the Westmoreland Plant. We got it started six months ahead of schedule, and by 1979 were cranking out nearly 200,000 VW Rabbits and pickup trucks a year.

I had been attracted to the VWoA deal because of Volkswagen’s legendary focus on quality, service, and advanced technology. It also got me into the front office as an officer of a major enterprise and a world-respected company. In military terms, I had jumped four ranks moving from GM to VWoA. Further, I had been led to believe that the Westmoreland plant was the first of many VWoA investments to come, and that I would have a great chance to play a key part in it. Events back in Germany, though, undermined that commitment. The German labor unions had representatives on the VW board of supervisors, the Aufsichtsrat, and they were annoyed that the company was creating jobs in the United States instead of Germany. For the time being, VWoA’s ambitions for expansion in the United States were put on hold, as were my career ambitions.

That’s when Iacocca came calling. I had signed a contract to work for VWoA for four years, 1976–80. By the time that contract was winding down, and it appeared VWoA would be building no more plants in the U.S. in the immediate future, I was looking around for another professional opportunity. After Penske played matchmaker, Iacocca and I began discussions in earnest. We were both working at our day jobs, so we met in the evenings and on weekends. This was not especially difficult because we lived near each other. I would go by his house and we would chat for hours, often into the early morning.

The gist of our meetings was my insistence on having a free hand at Chrysler in terms of spending capital money, integrating manufacturing into an advanced design process, establishing a new in-line sequence for production, buying new equipment, and investing more in worker training. It wasn’t just a matter of Iacocca being reluctant to cede authority to a junior officer (though that was surely a factor), but also a matter of dollars and cents. At the time Chrysler was losing $7 million a day. A day! I knew if I went in there without a clear mandate to invest millions in quality and manufacturing processes, the financial people would have me for lunch. In meeting after meeting, I pounded it into Iacocca—Chrysler could not come back without a tremendous turnaround in product quality, that I was the only guy who knew how to do it and who was prepared to make the commitment to make it happen. I would need money and time to do it.

We went back and forth for eleven months. As in most tough negotiations, we would seem to make progress on some days and lose ground on others. We would break off communications for a while and then get back together, back and forth, back and forth. Finally, we reached an agreement giving me what I needed. On April 1, 1980, I went to work for Chrysler. I could have used a few days off by that time, but there was no time to lose. Chrysler was in crisis. It was time to dive in and go to work!

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The rest, as the old saying goes, is history. I pulled together a team of veteran managers, most of whom had worked with me at GM and/or VWoA. Among these was a smart, tough manager named George Dellas who years later would figure prominently in the story I tell in this book. There were some odd ducks at Chrysler, Dellas said. The place was basically bankrupt; they just refused to admit it. We were working long hours like the Dauch team always did, but the old-time Chrysler guys were just Cadillacing along, drifting in about nine thirty, taking long lunches, leaving early. The company is basically dying and we are the only ones working. That always mystified me.

To salvage Chrysler, I had to get labor on board with us. I established a positive working relationship with Marc Stepp, the UAW vice president for Chrysler. Marc was a forward-looking union leader who understood the need for change if Chrysler were to survive. Most importantly, we needed more flexibility with the workforce, which meant less restrictive work rules and fewer job classifications. We needed a full commitment to produce quality products at Chrysler. We called it the Product Quality Improvement Partnership (PQIP). The union had to make concessions, not so much in money but in labor practices, Stepp said. In Chrysler’s Jefferson Avenue plant, located on the East Side of Detroit, we had 107 job classifications. We reduced that down to eleven.

The radicals in the union fought Stepp every step of the way, but he held firm and worked around them. It was gratifying to me to see a senior UAW leader stand up before thousands of his members and tell them they had to start coming to work every day. That was a very big deal and got a lot of attention in Detroit. With his determination and leadership, we persuaded the great majority of hourly workers to buy into a new work ethic. For a while, absenteeism actually dropped. Chrysler was a major league challenge but we hit the ground running. Within a short period of time, most everyone at Chrysler was committed to quality—and we were producing quality vehicles. It was very fulfilling to see the teamwork in action.

Of course, much of the credit for the Chrysler turnaround belongs to Iacocca and the lead product planner/engineer, Hal Sperlich. Both Iacocca and Sperlich had worked many years at Ford Motor Company, and both had been fired by Henry Ford II. We will never know what provoked Ford to dump Iacocca, one of the most dynamic auto executives in history, who had brought Ford the Mustang among other triumphs, but Sperlich’s offense apparently was his vigorous advocacy of a new type of vehicle, sort of a crossover between a pickup truck and a car. The new vehicle would seat as many as seven people and could be used to haul a lot of stuff. Working together, Iacocca, Sperlich, Gerry Greenwald, Jack Withrow Jr., Steve Sharf, myself, and others came up with a revolutionary innovation: the minivan—which has proven to be one of Detroit’s most successful vehicles ever. It created a whole new segment in the automotive industry. It was a great example of innovation.

Here was another first in my career. It was my responsibility to actually produce the minivans. That was no small chore given that it was a totally new design. We had to start from the ground up.

There was no way of gauging whether the public would respond positively to such a vehicle. Producing it—especially for a company that was hemorrhaging cash like Chrysler was at the time—and risking the massive investment that any new vehicle requires, was an act of great courage and leadership. We were betting the farm on this product. Sperlich had the idea and I made certain it was well built at our plant in Windsor, Ontario, Canada, but Iacocca was the leader who took the risk and put his neck, and Chrysler’s future, on the line. Had it failed, his reputation would have been tarnished and his career probably over. I doubt Chrysler would have survived.

Fortunately, the Chrysler minivan took off like a rocket. In 1983, the year we launched it, the company turned a $923 million profit! In July of that year, we paid off the loans that the government had guaranteed for us, with 17 percent interest. The following year, Chrysler earned $2.4 billion, an all-time record. We started racking up more than $2 billion net profit every year. The minivans continued to fly out the door and soon our major competitors, including our Japanese friends, were developing imitative products. It would take them many, many years to catch up, and Chrysler is still making the best minivans today.

The creativity required in launching a totally new product like the minivan gave us a certain amount of freedom to adopt revolutionary new processes. Some of the most notable were in-line sequencing, which had never been used in the United States; the rolling model change (RMC) that eliminated the need to shut down assembly lines for two weeks to accommodate a new product model; applied statistical process control (SPC) that denoted a quantum jump forward in product quality; and the concept of common locating points (CLPs) for different products that greatly improved flexibility and productivity. All of these were firsts that are today standard throughout the U.S. auto industry. We also maxed out on the use of robots and automation.

The minivan was so hot we could not make them fast enough. Iacocca called me in and recommended we go to three shifts. He asked me to do it in three to four months. I told him it would more likely take three to four years. The logistics of running a factory twenty-four hours a day are highly complex and demanding. Just getting thousands of workers in and out three times a day is a challenge. Then you have to factor in delivery of materials and parts, plus maintenance which is always a major ticket item in an auto plant. But we were the first in North America to do it successfully. Today, everyone does it—when they have enough volume to justify three shifts.

I can’t resist adding what may have been our most significant first because this was born of our extraordinary achievements in quality improvement at Chrysler. In 1985, Chrysler began offering a Five Years or 50,000 Miles warranty for its products. We had improved our quality dramatically. No other carmaker had done that before. Today, competitive warranties are standard throughout the industry.

One of my more interesting responsibilities at Chrysler was the manufacturing of the XM1 Abrams tank for the U.S. Army. As soon as I was given responsibility, I learned we had problems. I flew to Washington to meet with the four-star general in charge of the tank’s development. I told him there were two key problems—one was the tracks provided by a supplier that were not validated and which were coming off the tank in routine exercises. The other was the 1,500-horsepower turbine engine that was not reliable after a few hours of use. I recommended we stop production for thirty days to give us time to correct the problems. I promised we would to make up lost production in the first year. The general accepted my plan, we did as we promised, and when Desert Storm erupted ten years later, those tanks performed flawlessly and played a key role in helping the United States win the