The Biggest Switch

One of the remarkable strengths of General Motors Corp. is its ability to hang on to key men through a system based on tradition, hefty salaries, and stratospheric but delayed bonuses subject to costly forfeit if a man quits. Automen were understandably astonished two weeks ago when Semon Emil ("Bunkie") Knudsen, G.M.'s fourth-ranking officer, abruptly resigned as executive vice president and a company director. Even more stunning was last week's announcement that Knudsen had become the new president of Ford Motor Co., G.M.'s archrival in one of the toughest competitions private enterprise has yet produced.

In auto annals, there are few switches of allegiance that even come close to equaling Knudsen's. In 1946, Ernest Breech, a former G.M. vice president, left the presidency of Bendix Aviation --then partially controlled by G.M.--to become Ford's executive vice president. And then there was Knudsen's father, William S. ("Big Bill") Knudsen, who switched in the opposite direction, from Ford to G.M.--but that was early in his career.

Blocked Promotion. The record clearly belongs to Bunkie* Knudsen, 55. After 29 years as a G.M. executive, he was earning some $481,000 a year as boss of domestic nonauto and all over seas operations. But he was keenly disappointed at his failure to win G.M.'s presidency last fall. Instead, his only obvious rival, Edward N. Cole, 58, won the job that Knudsen had coveted and courted for most of his life. Cole's ascension meant not only that Knudsen's road to promotion was blocked for at least another four years; it also meant that even if Knudsen did follow Cole to the top at G.M., he would have so few years to serve before mandatory retirement at 65 that his age might deny him the chance to win the job at all. As a multimillionaire by inheritance as well as by his own labors--his 42,507 shares of General Motors stock alone are worth $3,257,000--Knudsen regarded his failure to move to a higher salary bracket with comparative indifference. But he looked on a dead-end career with dread.

While hiding his unhappiness in public, Knudsen told G.M. Chairman James Roche and a few close friends that he would probably leave the auto industry or "look for another assignment" inside it. Word soon got to Henry Ford II, who started the nation's most audacious executive raid in years. "Sure I did it," Ford said last week. "Nobody but me--so I have to take the credit."

Ford moved with secrecy and circumspection. A month ago, while Knudsen was still on G.M.'s payroll, Ford telephoned him at home and hinted at the presidency. "I made no commitment," recalled Knudsen last week, "nor were any details worked out. Then I told Mr. Roche that I had been approached." The next Saturday, Ford drove to Knudsen's home in Bloomfield Hills, and there the deal was clinched. Knudsen then phoned Roche. "He wished me well," says Knudsen, "and hoped we could be friendly competitors --and I assured him we could."

For another two weeks, while Knudsen wound up his affairs at General Motors and Ford called a directors' meeting to approve his decision, the arrangements remained one of autodom's best-kept secrets. Ford shuffled able but colorless President Arjay Miller, 51, to the new post of vice chairman. As such, Miller will run Ford's finances, legal department, public relations, Washington staff and long-range planning. Knudsen, as chief operating officer, will not only control sales, product development and plant operations, but will also assume full command of the company when Chairman and Chief Executive Ford is absent.

Upsetting though the importation of an outsider was to other Ford executives, Vice Chairman Miller seemed almost relieved. No engineer, Miller has never worked on an assembly line or run an auto plant. In his five years as president, he found it difficult to keep some underlings under firm control, notably the brilliant but impulsive Lee lacocca, 43, who heads Ford's North American automotive operations. lacocca (TIME cover, April 17, 1964) had been widely regarded as a candidate for the Ford presidency. Now, he presumably faces a decade of waiting under Knudsen--and one of Detroit's current speculations is what he may do.

Reversing History. When Henry Ford presented his prize catch to newsmen, he recalled the precedent set by Bunkie's father. Big Bill Knudsen had worked for ten years at Ford, rising to production manager, before he quit in 1921 after Henry Ford I had rejected his advice to abandon the Model T and broaden Ford's one-product line. Moving shortly to General Motors as vice president of Chevrolet, Knudsen gave Chevrolet the pickup that put it ahead of Ford. His reward was G.M.'s presidency. "Today," said Henry Ford II, "the flow of history is reversed."

As Bunkie Knudsen cautiously allowed, "only time will tell" if he can reverse Chevrolet's lead. He likes to remember one of the few pieces of advice his father gave him: "In this business, the competition will bite you if you keep running; if you stand still, they will swallow you." Bunkie Knudsen has been mostly running ever since the day in 1927 when his father announced that he could have a new Chevrolet if he would stop by the plant. Bunkie, 14, found the car waiting--in several thousand pieces. "It took me a couple of months to put it together," he recalls, "but I finally got it running."

After a year at Dartmouth and an engineering degree from M.I.T. ('36), Bunkie went to work for a Detroit machine shop. He reached Pontiac in 1939 as a menial "tool chaser." Then, for a decade, he tried out anything that might broaden his experience from defense-plant inspector to car-assembly superintendent.

In all, Knudsen worked for 106 G.M. plants before, at 43, he was made boss of the drooping Pontiac Division. His first move was to order styling changes on the 1957 model to rid Pontiac of its "grandma" image--something that few automen would have dared just 60 days away from volume production. Off came two pieces of chrome across the hood and trunk lid--no matter that his fa ther had introduced them in 1935. Next, Knudsen reached for what the youth of the day wanted. He brought out a 21 in. wider and flashier model to appeal to young drivers. Soon, Pontiac sales jumped from sixth place to third in the U.S. market, and they have remained there ever since. When Knudsen switched to being boss of Chevrolet, G.M.'s largest division, he turned in another dazzling sales record. After more promotions, he moved up to executive vice president two years ago.

In the end, Knudsen missed the presidency because of General Motors' tradition of always having at least two men ready to take over every job. And Ed Cole, three years his senior, with many of the same qualifications, had, after all, run Chevrolet and become an executive vice president before him.

Abandoned Options. By jumping to Ford, Knudsen forfeited some $674,000 of accrued but unpaid G.M. bonuses. He also abandoned options to buy at least 30,000 more shares of G.M. common stock, although he insisted that he would keep the 42,507 shares he already owns. For the time being, Knudsen's Ford pay remains undisclosed (under SEC rules, it must be divulged to stockholders in April before Ford's annual meeting).

Knudsen's impact in Ford's fight in the auto market could be considerable. Despite such trend-setting firsts as the sporty Mustang and the intermediatesized Fairlane, Ford's share of domestic auto sales has slipped from 31% of U.S.-made cars in 1961 to no more than 28% since. Ford's latest strategy is to battle for the medium-priced market, which G.M. dominates with its Pontiacs, Oldsmobiles and Buicks. Obviously, Knudsen carries in his head much inside knowledge--from styling to engineering to marketing--of G.M.'s future plans. Nor can he erase them from his mind. But as automen quickly recognized, this was hardly what Henry Ford sought. What counts is the disciplined insight Ford most can use: Knudsen's ingrained intimacy with the concepts and techniques (from cost control to dealer organization) that have long made General Motors, by common consent of both friends and foes, one of the world's best-managed corporations.

As for Henry Ford himself, reports persisted around the auto business last week that he might soon step aside as head of the company he has run since 1945, perhaps to take a Cabinet post in Washington. "That's a lot of baloney," Ford said. "I'm going to continue to do just what I've always done--right here in Detroit."

* His father gave him the nickname as a boy. It is argot for military barracks mates who are buddies.

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