Car Wars: Fifty Years of Backstabbing, Infighting, And Industrial Espionage in the Global Market

Prologue

IN THE TWO THOUSAND YEARS since the death of Jesus Christ, there have been only two main forms of personal transport: the horse and the automobile. The automobile has existed for only the last one hundred years, and in that short time, unlike the horse, it has transformed the lives of peoples, countries, and continents.

This is the story of individuals and nations in the second half of this century through the rise of the worldwide automobile manufacturers. It is the story of a struggle that began with the end of one war and developed into the economic and political equivalent of another — for just as there has never been an invention as revolutionary as the automobile, there has never been an industry like the automobile industry.

The automakers are the largest manufacturing industry in the world, employing 4 million people and investing hundreds of billions of dollars in America, Europe, and Japan. One hundred years ago, there were six experimental cars in France and Germany Today, jammed bumper to bumper on a six-lane highway, the earth’s 350 million cars would stretch for 200,000 miles, eight times around the world and two thirds of the way to the moon.

Against this potentially cataclysmic environmental scenario, with its contribution to the greenhouse effect, must be set the indispensability of the automobile and the internal combustion engine. In 1928, Bruce Barton — author, salesman, and early industrial guru — spelled out to the oilmen of America the significance of the automobile:

Stand for an hour beside one of your filling stations. Talk to the people who come in to buy gas. Discover for yourself what magic a dollar’s worth of gasoline a week has worked in their lives.

My friends, it is the juice of the fountain of eternal youth that you are selling. It is health. It is comfort. It is success. And you have sold merely a bad smelling liquid at so many cents per gallon … You must put yourself in the place of the men and women in whose lives your gasoline has worked miracles.

The miracle was that of freedom and mobility. For the first time in their lives, people could go where they wanted. The automobile transformed the daily life of America, and the demand it created for freedom and mobility transformed the American car manufacturers. General Motors and Ford became synonymous with the American dream; with the rise of the multinational corporation; with the power of the individual executive and the family dynasty; and with American supremacy in the postwar world.

But it only began in America. After the end of the Second World War, that freedom was brought to millions in Europe and the rest of the world. Today, parked down any street in any developed or developing country on the planet, is a map of the world in the form of automobiles. The miracle Barton was preaching has transcended national and international barriers to become the barometer of individual prosperity and of the wealth of nations.

In the 1960s, the automobile manufacturers fueled and drove the economic miracles of postwar Europe. In the 1970s, the flaws in those industries and the first of the great oil shocks took America and Europe by surprise and enabled the beginning of the rise to power of Japan. In the 1980s, America and Europe were joined by Japan as world powers and the battle was on for world domination.

in the 1990s, the car companies have grown to such supranational status that the traditional stuff of history — migration of labor, of national and international frontiers — no longer applies to them. The automakers have created the first truly global marketplace in the history of the world.

In the last years of this century, the remaining space in this marketplace is being filled by the Far East and China. The struggle that began with the end of one war has developed into another. A new kind of war, with its own origins and momentum and combatants and alliances, has begun.

The automobile is as integral to war as to peace, and to poverty as to prosperity. It is the vehicle of progress and its nemesis. It is a proposition of this book that whenever that balance between necessity and excess begins to teeter toward the latter, it begins to right itself, and the automobile reverts toward its utilitarian origins as the people’s car.

This book is a political biography of the automobile, and an automotive history of the world in the second half of the twentieth century. It establishes the automobile as the vehicle of modem history. To do so, it travels from Berlin in 1945 to Shanghai and Los Angeles in the 1990s and traces the people and the political and technological developments behind this story. It charts the victories and defeats in what has become a global contest for a prize of unprecedented proportions.

It reveals the role of industrial espionage in the competition between rival manufacturers on both a national and an international scale. It explores the political and economic forces at work in the world’s first global marketplace, and the quest of the individual for that miracle of freedom and mobility, for which as yet no better answer is to be found.

1

The Struggle Begins with Peace

1

Hitler

The Dictator in the Driver’s Seat

MUSSOLINI, STALIN, PéTAIN, and Mao Tse-tung have not gone down in motoring history. Alone among twentieth-century tyrants, totalitarians, anti-democrats, and dictators, this distinction rests with Adolf Hitler. Although he never learned to drive, his legacy to a shattered world was a car. They called the company that would make it Volkswagenwerk: The People’s Car Company

The New York Times reported in 1936 that Hitler was believed to reel off a higher annual motor mileage than any other ruler or head of State, In 1983 he opened the annual Berlin Motor Show, and did so every year thereafter until 1939. Each year he made a new grandiose statement about the car industry.

At the opening of the 1935 show, he declared that Messrs. Daimler and Benz were among the great pioneers of humanity in the sphere of transport. His remark stemmed not least from the fact that the company gave the dictator a substantial discount on its most powerful model.

But the next year he admired the powerful new BMW 326. He announced that Germany had "effectively solved the problem of producing synthetic gasoline/’

Hitler was overambitious in this, as in so many other respects, but he had launched a campaign to build a network of autobahns and limited-access highways across the country. These, as he declared, would mark a turning point in the history of German automobile traffic.

Hitler’s most ambitious project was already under way. By 1934, more than one in five Americans owned their own cars. But in Germany the figure was barely one in fifty, and half of all road transport was still horse-driven. In the same year, Hitler had commissioned Dr. Ferdinand Porsche and others to design a people’s car. It was to cost under one thousand reichsmarks (the equivalent of $140 at the time), and have an air-cooled engine and a top speed of sixty miles per hour. The low-revving, high-geared engine was specifically designed for the great autobahns that Hitler and his chief architect, Albeit Speer, envisaged would stretch from Berlin to Moscow with gas stations every thirty miles.

Hitler himself admitted, ‘All strategic roads were built by tyrants — for the Romans, the Prussians, or the French. They go straight across country. All the other roads wind like processions and waste everybody’s time."

According to Porsche, Hitler said the car should look like a beetle.

A Town Called Strength Through Joy: Germany, 1938

By 1935, testing of a prototype car was taking place. The original suggestion was that Volkswagenwerk should be built near Nuremberg, so that customers could collect their cars after attending Nazi Party rallies. This suggestion had proved impractical. It was decided instead to build a gigantic factory and town on Luneberg Heath.

The plant was modeled on the great Ford factory at Rouge River, Detroit, in the United States. Henry Ford had revolutionized automobile production in the early years of the twentieth century, putting America on wheels and changing the social and economic structure of America and the world. Hitler much admired Der Fordismus and pronounced this to be the German way. As we shall see, the mutual admiration between Hitler and Ford took on terrifying forms about which the American company remains silent alongside its paeans to its ail-American heritage.

The German plant was financed with funds confiscated from trade unions, and built by Italian construction workers on loan from Mussolini. In 1938, at a huge rally hung with Nazi banners, Hitler laid the cornerstone: It is for the broad masses that this car has been built, he declared. ‘Its purpose is to answer their transportation needs, and it is intended to give them joy,’ Hitler added that the car was to be known as der KdF (Krafl-durch-Freude)-Wagen — short for the Strength-Through-Joy Car. The name dismayed Hitler’s marketing men.

The KdF-Wagen was displayed for the first time at the Berlin Motor Show in 1939. Work on KdF-Stadt, or Strength-Through-Joy Town, went slowly, and marketing became increasingly important in order to maintain public interest. A novel savings scheme was developed that typified the threatening atmosphere of the times. Prospective KdF drivers could reserve a Strength-Through-Joy Car by paying five reichsmarks a week to the German Labor Front. Once they had paid 990 marks, they could take delivery of their car.

The fact that it was as yet unbuilt, in a factory that was as yet unfinished, was no concern of the ordinary citizens of the Third Reich. This was to be the new Europe’s Model T. In another nod to Henry Ford, they could have any color they liked, as long as it was gray-blue.

Full payment would take four years, although extra payments could be made to procure earlier delivery. A single missed payment, however, would result in the cancellation of the entire agreement. Children could save five reichsmarks a month. The company was still compensating some of them thirty years later.

By 1939, 336,668 subscribers had paid 110 million reichsmarks into a Berlin bank account.

At the Berlin Motor Show in the same year, Hitler was approached by a Dutchman named Ben Pon. Pon secured the official distributorship for the Strength-Through-Joy Car in the Netherlands. The Dutchman returned home pleased with the deal, and awaited the next move.

It did not come quite as he expected. On August 28, 1939, the Netherlands were forced to mobilize their armed forces. On September 1, Germany invaded Poland, and by May 10, 1940, German troops were on Dutch soil.

The Dutch royal family fled to London, Less than two weeks later, Rotterdam was captured and the Netherlands surrendered to the victorious forces of the man Ben Pon had met at the Berlin Motor Show

By the outbreak of the Second World War, KdF-Stadt had produced very few of the KdF-Wagen. The management, Dr. Porsche and his son Ferry, preserved their positions by putting the plant into wartime production,

KdF-Stadt produced the Kübelwagen, or bucket car, a German version of the cross-country Jeep. It went into mass production after the invasion of the Soviet Union and found particular favor with Rommel’s forces in Africa. The Kübelwagen could not, however, cross water; this obstacle was surmounted by the Schwimmwagen, which was built of welded steel with rubber seals in crucial places. The wheels remained turning in the water, but propulsion was provided by a rear-mounted propeller.

The few KdF-Wagen produced were not delivered to subscribers, but supplied as staff cars to Nazi Party officials. As fuel became scarce, many were converted to run on coal, coke, bottled gas, anthracite, and even peat.

As the war dragged on, KdF-Stadt depended increasingly on slave labor from concentration camps and Russian prisoners of war. The plant became one of the dark engine rooms of the Reich. To the west, it dispatched the fuselage and wings of the V-l flying bomb. To the east, it dispatched sheet-metal army stoves to the Russian front.

The VW had mutated, like Doctor Frankenstein’s creation, into the V-l. One of them, fittingly, played its part in the last days of the dictator who, less than seven years earlier, had launched the little car that had turned into a flying bomb.

Hitler’s Last Ride

The heroic quest had turned into a nightmare. This was the final, inevitable travesty of the Hitlerian ideal that had begun only six years earlier. Warsaw had fallen to the Red Army; Roosevelt, Stalin, and Churchill had met at Yalta to divide the world without Hitler. Dresden had been destroyed in an Allied firestorm, and Cologne had fallen to the Allies.

When, in the spring of 1945, Hitler made a last, desperate visit to rally his troops on the Eastern Front, the war was already lost. His chauffeur, Erich Kempka, drove him east from Berlin in a modified version of the KdF-wagen. The Type 87 Kommandeurwagen was a four-wheel-drive vehicle fitted with a roller at the front to clear large obstacles out of the way There was no questioning the engineering principles behind the vehicle, but the logistical obstacles loomed larger in its path.

This was the end of the strategic road built by the tyrant, the great autobahn that Hitler had envisaged would one day run all the way from Berlin to Moscow.

Six weeks after his return from the Eastern Front, Hitler and Eva Braun committed suicide in their bunker in Berlin. In a fitting end, their bodies were doused with gasoline, also provided by the chauffeur, and ignited.

Although his last journey was in a KdF-Wagen Hitler had preferred to tour his territories in his 7.7-liter supercharged Mercedes-Benz. His favorite architect, Albert Speer, preferred the faster, lighter BMW. The difference between Mercedes-Benz and BMW was as great as that between Hitler and Speer; and this difference would outlive the Führer, Speer, and the Thousand Year Reich.

BMW — Bayerische Motoren Werke, Bavarian Motor Works — had been founded shortly before the First World War by Franz-Josef Popp. The company sported a circular blue and white badge symbolizing an aircraft propeller against the blue and white of the Bavarian flag, also the colors of the cloud and sky.

BMW built airplane engines. One of these quickly established its reputation in high-altitude combat: Its only flaw, said Lieutenant Ernst Udet of the Richthofen Fighter Squadron, who scored thirty victories, ‘was that it arrived too late."

After the First World War, BMW was prohibited from manufacturing airplane engines, and turned to motorcycles. A British-made Douglas was acquired and stripped down in order to see how it worked. The company later returned to airplane engines as well. In the late 1920s it made its first venture into car manufacture. Unlike the Japanese, who would obtain a British Austin Seven, strip it down, and use it as a model for their own car, BMW had built the Austin Seven under license as the Dixi

Germany’s resurgence in the 1930s put BMW back on the map. The BMWs were the fastest production cars in the world. BMW motorcycles triumphed on the racetrack at home and abroad.

The Second World War saw BMW concentrating again on airplane engines. The other area of expertise was V-2 rocket development — another innovation that came too late.

But the founders and principal patrons of BMW were no Nazis. At times, you’ve got to make a pact with the devil, for aviation’s sake, provided he doesn’t have you for dinner, wrote Lieutenant Udet of the pressure placed on him by Goering, after the Luftwaffe failed to dominate the skies. In December 1941, Udet shot himself.

BMW management was engulfed in the evil momentum of the Reich. The plant at Allach in Bavaria used slave labor from Dachau and other concentration camps. Inmates suffered unspeakable barbarities and found the plant no refuge from the Nazi extermination policy of Nacht und Nebel… night and fog.

By 1945, BMW was high on the invading Allies’ war crimes list. The plants in the west, like Allach, were stripped of their machinery and put to work making pots and pans and bicycles.

The BMW plant at Eisenach, which had spent the war producing cars and motorcycles, was also in the path of the liberating forces. But instead of being destroyed, it was to be preserved for a different fate: night and fog were to be replaced by the red star.

Eisenach, Germany, April 1945

Albert Siedler saw the first tank and breathed a sigh of relief that the tank was American. He was chief engineer for BMW at Eisenach, and the German military had ordered him to blow up anything that was still standing before surrendering the plant to the enemy The fact that the Americans were here meant he could ignore his orders without fear of being put up against the nearest wall.

Eisenach, the old town under Wartburg Castle, was already largely destroyed by bombs. The plant too was a place of smashed windows, ruined boiler houses, derelict repair shops, and broken-down walls.

Siedler and the small group of colleagues put down their white flag. The Sherman rolled to halt at the factory gate. An officer clambered out of the tank, which was from the Sixth American Armored Division. A GI in a Jeep took Siedler back to what remained of his home. Siedler told his wife the joyful news.

By the same afternoon he was back at the plant, under instructions to start work. The printing shop could produce leaflets to broadcast the town commandant’s appeals for help from the local population. Enough men were alive to form a skeleton workforce. Enough vehicles existed to form a small vehicle pool

Siedler did not mind what form this work took. This was the first time in six years that he could work without fear.

By June 1945, the interest of the Americans in Eisenach was waning. Siedler took this as a sign that things were getting back to normal. In fact, this was because they had gathered sufficient information about BMW’s role in the German rocket program at its other plants, information that would play a crucial role in the American space program.

The Americans left Thuringia and Saxony at the end of June.

Siedler was asked if he would prefer to go back to BMW headquarters in Munich. He thought about this, and decided he would. He filed a van with the family possessions and prepared to take to the road.

But early on the morning of July 1, an American GI roared up to his office on a BMW motorcycle. The GI wanted to know if he could still have the cylinder heads he needed. Siedler wondered what he meant by still — but did not give it a second thought. He nodded to the GI. "Come on,’ he said.

Nix come on. The GI shook his head. He pointed to the warehouse. The Russians were there, he said.

The Russians? Siedler rushed to the shed where he had parked the van, ready for his departure.

The door to the shed was open. Siedler looked in. The van was gone.

Poshol! a voice behind him called. Come on! You boss here? the voice demanded.

Siedler closed and bolted the door, although there was nothing left to guard inside.

He turned around. Yes, he said slowly, me boss here. The GI on the motorcycle had disappeared. In his place stood a Russian soldier with a Kalashnikov.

The chief engineer’s chances of working in an environment free of fear had disappeared. The Russian major who approached him and politely asked him to repair his captured BMW 321 did not have to resort to social niceties. The Russians were there to stay.

Siedler protested only once, and realized that the alternative to cooperation was the Russian equivalent of night and fog. It was a short, but fatal, step from being a hostage valued for his expertise to being a capitalist lackey and a saboteur.

Over the next few days, he saw the expressions of terror on the faces of those who were summoned to the Russian Commandant’s building at Eisenach, Most of them never returned. One day, he, too, was summoned. He said good-bye to his wife.

The Russians locked him in a cellar without heat or light or food. They kept him there for some time. Then they unlocked the door and dragged him out.

Can you make motorcycles? they asked.

With pleasure, Siedler replied weakly.

We need two hundred a month.

How? With what?

You don’t want to do it?

Siedler knew the penalty for the wrong answer. Of course I do, he said.

Siedler told the Russians what they wanted to know. BMW had hidden spare parts and tools in a potash mine near what was now the border of the Russian and Allied zones. The Russians took him there under heavy escort. He clambered down into the bowels of the earth, marked what he needed, and the Russians took it back to