The Beauty of ¢utting £o$$e$
“…making a sporty car out of the Falcon [is] like putting falsies on Grandma.”
Lee Iacocca took over the Ford Division from resigning president, Robert McNamara. It was the early 1960’s. Robert McNamara’s Cardinal (designed to rival the German Volkswagen) was top in Ford’s production plan, on the heels of the successful Falcon. Iacocca made it his personal business to know all there was about social economics and politics. Immediately, he traveled to Germany to check on production and was… dumbfounded.
Back in the States, Iacocca announced to the bigwigs that although the European market would be okay with the Cardinal, the United States would reject it for the most part and in his opinion. This, even though Ford had already invested $35,000,000. He urged Ford to scrap the Falcon, cutting their losses.
Ford introduced the Edsel in the late 1950's and it failed. Miserably. A $250,00,000 (more than $2 billion in today’s dollars) fail. The Cardinal, according to Iacocca, would not appeal to America’s youth. He knew youth was the key to success at this stage of the car race.
The buying power of our youth was unrecognized in the car industry. The Cardinal was determined to be relatively cost-effective and small (V4). It was just transportation and nothing more.
American youth wasn’t concerned about gas shortages or cost at this point (give them a decade — the Great American Energy Crisis). General Motor’s Corsair Monza was selling like hotcakes. Ford hadn’t bothered to show up for the competition.
Extensive research by Ford agreed: young car buyers want a sexy car. They want to enjoy their car, not just get from place to place.
Iococca’s Ford jumped at the chance to please the entire car buying market: offer one sleek car with several options. They relied on the components already being used in production-which led some to say, “making a sporty car out of the Falcon [is] like putting falsies on Grandma.”
The first Mustang rolled off the assembly line on March 9, 1964.
When Lee Iacocca suggested ditching a $35,000,000 investment (and the energy/manpower that goes with it), you can imagine the entire company thought he was crazy and were scared beyond belief at such a big-probable-loss. Still, he succeeded, and, because of his persuasion, the Ford Mustang was created and it’s release and subsequent two first years set worldwide records, profitting by over $1,000,000,000 (one BILLION 1964 dollars).
The best business decisions can come out of trying times and desperate situations, as we learned from the birth of the Mustang. Play “what if…” all you like; what matters is what is.
And to that, I say, God bless cutting losses.
“… gain the information and the insight and the inspiration that you need to make the right calls, at the right time…”
“…learn to see beyond the shit that you have to deal with, every day.”
Simple. Smart. Easy. Read.