POWER

How J.D. Power III Became the Auto Industry's Adviser, Confessor, and Eyewitness to History

Sarah Morgans, Bill Thorness

• Publisher: Fenwick Publishing
• Year: 2013
• ISBN:
  9780981833699
• Topic: Business
• Subtopic: Business History
• Index: Business

No other individual has had as broad an impact on the auto industry during the past fifty years as Dave Power. Dave's persistence in getting auto executives to listen to customer concerns was key to the across-the-board rise in car quality, and the influence of his J.D. Power and Associates rankings has permanently raised the bar on customer satisfaction. Enhanced with anecdotal quotes from Dave as well as dozens of industry insiders, POWER is a compelling study of an intelligent, polite, market-research wonk who unblinkingly spoke truth to power, and ended up making customer satisfaction a watchword not just in automotive but in all manufacturing and service industries. Foreword by CNBC's Bill Griffeth

---

SECTION ONE

INDEPENDENCE

---

Many young Americans have learned early life lessons through stints in the military, and Dave Power was no exception. A young man fresh out of the College of the Holy Cross, the Roman Catholic Jesuit institution in Dave’s hometown of Worcester, Massachusetts, Dave found opportunities for leadership, collaboration, and perseverance in the military. Fellow officers even offered valuable mentoring and career advice. But it was through adversity—in the form of an unreasonable senior officer—that Dave discovered an innate skill that would later propel him to success in business.

After graduation in June 1953, Dave knew that military service would be likely. The Korean War was being fought, and there was an active civilian draft of young men. Rather than allow his fate to be determined by chance, Dave chose to enlist in the Coast Guard because it was a smaller branch of the service where he felt he could have a greater impact. That fall, he was inducted into Officer Candidate School at the U.S. Coast Guard Academy in New London, Connecticut. Just over half of the sixty candidates graduated in February 1954, Dave among them.

He was posted to the icebreaker ship the USCG Eastwind, which was stationed in Boston and would sojourn to the Arctic and Antarctic to open channels, service weather stations, and explore the frozen seas. The lanky youth, who was nearly a head taller than many of the other recruits, had not spent much time on boats and certainly had no experience on a ship of Eastwind’s size. The candidates had been briefly trained in rowing and navigating the small lifeboats stowed aboard the ship, and just a slim portion of that training had taken place aboard a large sailing ship, the Eagle, berthed at the academy.

Dave’s first drill on the Eastwind did not go well. He had been on a midnight watch, during which he contracted an intestinal problem from drinking tainted water. Although groggy, he was called to the deck at eight in the morning to participate in a man-overboard drill. He was to man the sweep oar at the rear of an eight-oarsmen boat, which meant maneuvering the boat through the drill and back to the Jacob’s ladder attached to the ship. His docking did not go well, and he was summarily called to the bridge to meet the captain, a gruff man with a reputation for being difficult to serve under. “He said, ‘I’m going to give you an opportunity to learn how to row a boat,’” Dave recalls. The captain had his own dingy lowered over the side, and sent Dave to it. Dave was ordered to row circles around the ship. “He had a megaphone and was shouting out to me, ‘Row with your back!’ and ‘Feather your oars!’” As Dave, still weak, slogged along first the port and then the starboard side of the ship, the entire crew followed him to watch the spectacle. When he returned up the Jacob’s ladder and reported to the bridge, the captain was not there, but a senior officer on duty commented to Dave that he’d never witnessed such behavior from a captain. Later, Dave heard rumors that the captain was trying to get him transferred off the ship.

But his service on the Eastwind continued, and soon the ship was outfitted for the Arctic. Dave was made exchange officer and put in charge of taking on a load of beer reserved for a later liberty leave in the far north, where the crew would blow off steam with a barbeque on the ice. Coast Guard rules prohibited sailors from drinking aboard ship. It was a lot of beer—two hundred cases—and was to be transferred from the Eastwind’s sister ship, the Westwind, which was berthed in New York and would rendezvous with them in the harbor off Nova Scotia.

It was pouring rain the day the ships met, but the crews began the transfer. The rain destroyed the beer’s cardboard cartons, so hundreds of loose cans had to be gathered up in cargo nets and transferred. During the lengthy transfer, the captain called down to the crew bringing the beer across and told them they would each be allowed to have one beer while in transit. This was said in full view of the rest of the crew on board, Dave recalls. As the beer was being stowed, seeing there would be no way to accurately track the number of individual cans, some sailors slipped a can or two in their jacket pockets.

That night, at the weary end of his midnight watch, Dave was again called to the captain’s bridge. He learned that two of the younger sailors, teenagers, had been found drinking beer in the engine room. The captain held a captain’s mast, a shipboard disciplinary review, at which he found the young men guilty and punished them by revoking two nights of liberty at the ship’s next port of call. Dave, as both a junior officer and the exchange officer in charge of the beer, stood as witness to the action. After-ward, the captain again called Dave to him, this time in his cabin, and told him how disappointed he was in Dave’s handling of the beer stowage.

At this point, Dave Power took a chance. He saw—as he would many times in later years—a leader who needed a reality check, and he was determined to give it to him. With the captain reportedly already wanting him off the ship, Dave decided he had nothing to lose. He stood up to him and said, “Captain, I think you’re the one who’s at fault for having handled the crew the way you did from the bridge, allowing some of them to have cans of beer and others not.” The young officer delivered his speech calmly and respectfully. The captain kicked him out of his cabin.

Dave felt his days on the Eastwind were numbered. Several days later, as they navigated through ice floes in Hudson’s Bay, Dave was called to relieve the officer of the deck, who had been summoned to the captain’s cabin. Dave performed the navigation. When the officer returned, he told Dave that the captain had been drinking in his cabin while addressing him. During the course of the conversation, the captain asked who was conning the ship in the officer’s absence. The officer told him it was Mr. Power. Ten minutes later, they received a call on the bridge. The captain wanted Mr. Power to come down to his cabin. Dave warily complied. The captain, sitting in his bathrobe with a drink at his side, said unexpectedly, “I’m making you officer of the deck under way, icebreaking.” Dave was stunned. This was an honor, and one not yet bestowed on officers senior to him. Through his straight talk he had won the trust of the captain, and so began his three-year stint on the Eastwind.

“I was often faced with this type of decision,” Dave recalls. “Winning over the captain and having to overcome all his negative feelings was a challenging thing. But I did it, and it reinforced my thinking; and that’s why I became successful in my dealings with the CEOs of the car companies. I stood up and, in a pleasant manner, laid the facts out to them.” His congeniality in the face of bluster, presenting a calm argument that relied on facts and data, would be Dave’s calling card.

CHAPTER ONE

---

THE OUTSIDER’S PERSPECTIVE

A seafaring career was not Dave’s destiny, which he discovered toward the end of his three-year tour in the Coast Guard. He had held the title of “plank owner” for serving on the Eastwind longer than any other officer and had outlasted three captains. He had experienced many missions aboard the icebreaker, with its crew of two hundred and its storied history, which included capturing a German ship off the coast of Greenland in World War II. During Dave’s time aboard her, the Eastwind had made three trips to the Arctic and one to the Antarctic, once getting frozen in the ice for two weeks. Dave had made the acquaintance of Admiral Richard E. Byrd when the famed explorer traveled on the ship on its way to McMurdo Sound. One mission was memorialized for Dave in a picture of him on the frozen deck with two-inch icicles hanging off the ship’s rails. But with six months left in his tour, and the Eastwind about to depart on another long Antarctic expedition, he was transferred to a buoy tender in Boston Harbor. These ships maintain navigational buoys and perform other duties to aid navigation in America’s waterways.

On board, Dave spoke to other officers about his next move. He could reenlist, which was the decision his superiors preferred. He was set on more education, though, and talked about pursuing an engineering degree. He had no specific goals, but he knew he did not want to end up teaching, a career for many with a liberal arts degree like his. The other officers steered him away from more undergraduate studies. “They said, ‘You should be looking at an MBA degree,’” Dave says. “I had to ask them, ‘What’s an MBA?’”

He looked into it and decided to apply. True to his methodical nature, he researched the top schools and applied to six of them. The first to respond was the Wharton School of Business at the University of Pennsylvania. The dean wrote informally, encouraging Dave’s application, because, he said, they needed liberal arts students as well as those with a business background. “So I immediately signed up with Wharton,” Dave recalls. He later learned he had been accepted to three other schools.

He spent two years studying business and finance. It was a far cry from his studies at Holy Cross, where he had completed his liberal arts education by submitting a senior thesis on the philosophy of Don Quixote, the fictional character created by Miguel de Cervantes who “tilted at windmills,” attempting to joust against imaginary giants. That iconic scene has come to symbolize fruitless effort, something a successful business leader can ill afford. But Dave’s thesis took another approach to the famous jousting scene: he saw it as an idiom about Quixote’s foolishness of sticking with the outmoded culture of a knight-errant while the world changed around him. This was a theme that would resurface regularly in Dave Power’s later work with a seemingly immovable object: the U.S. auto industry. The industrial juggernaut clung to legacy product and manufacturing methods while informed consumers were beginning to demand something different.

Studying the Rambler

Toward the end of his MBA studies, Dave had his first professional involvement with the industry he was to serve. He was on a team of students responsible for analyzing American Motors Company (AMC) and what the automaker needed to do to make its Rambler a viable competitor in a U.S. car market dominated by the Big Three (General Motors, Ford, and Chrysler). AMC was formed in 1954 from the merger of Nash-Kelvinator and the Hudson Motor Car Company. Manufactured in Kenosha, Wisconsin, the Rambler—a legacy from Nash—was redesigned in 1956 in a bid to distinguish the model from those of the large automakers. AMC President George Romney was staking much on the redesign, which gave the car a lower look and bigger engine but still positioned it as a smaller, more fuel-efficient car.¹ This was the situation that Dave’s team analyzed.

“It was my first rigorous exposure to the automobile industry, and I was fascinated,” he recalls. He and his teammates would have long conversations about the Rambler and the auto industry in general. The team analyzed the Rambler business model, evaluated sales trends, and duly delivered a paper that was skeptical of the Rambler’s prospects. For the first time, Dave was thinking about a profession, and the idea of a career in the auto industry proved an attractive one. “I learned that one out of seven jobs in the U.S. was somehow connected to the automobile industry,” he says. “It seemed to me the automobile industry was the place to be.” Intrigued, he carefully inspected the list of companies recruiting at the Wharton placement office and made it a point to interview with every car company. Of course, he also felt it important to consider the merits of other industries and he eventually interviewed with management consultant firm McKinsey & Company, an insurance company, and a number of government agencies.

Dave was particularly excited to meet the recruiter from General Motors, by far the biggest automaker and, at that time, one of the largest companies in the world. Furthermore, it was a company at which Dave had family—an uncle was high on the management team. But his excitement was soon replaced by disappointment at the New York–based recruiter’s approach. “He displayed a superior attitude,” Dave recalls. “He started the interview by asking me, ‘What makes you think you can do anything for General Motors?’” It was as if GM knew it all and there was nothing Dave, or any student, could offer. Some weeks later Dave was in Manhattan and, from a pay phone, called the GM recruiter to follow up. Dave could tell that the recruiter was distracted, had no idea who was calling, and was too busy to take the time to talk with an interested applicant. Dave was so put off by the way he was treated that he crossed GM off his list of potential employers—another independent-minded decision, considering Dave’s family background with the company.

His meeting with a Ford Motor Company recruiter left a better impression. The recruiter, a controller at Ford’s assembly plant in Chester, Pennsylvania, had come to the University of Pennsylvania to meet with promising Wharton students to talk about the executive training program in Ford’s finance department. The recruiter was curious about Dave’s studies and treated the MBA student with respect. Dave said that his academic concentration was in marketing, not finance. The recruiter countered that Dave should seriously consider the finance training program because it would prepare him for anything, and then, after two years, he could transfer into marketing, if that’s what he wanted to do. Dave thought this plan sounded workable. The recruiter put him in touch with a personnel manager at the Ford Tractor Division.

In June 1959, at the age of twenty-eight, Dave graduated with an MBA degree from Wharton, and within weeks he flew to Detroit. It was the first airplane ride for him, though soon he would be routinely flying more than a hundred thousand miles each year. In the Detroit area, he stayed with his uncle, Aloysius “Al” Power, general counsel for General Motors, and drove his aunt’s Cadillac El Dorado to the Ford Tractor Division headquarters for a follow-up interview. Ford Tractor hired Dave on the spot.

His uncle was skeptical. “Why would you work for Ford,” Al asked, “and not even Ford corporate, but the Ford Tractor Division?” Al added that he could help his nephew land a job that would put Dave on the fast track for success at GM. Uncle Al proposed to get him a job working in the New York finance office with the people who would one day likely run GM. In fact, two of GM’s future CEOs—Roger Smith and Jack Smith (not related)—emerged from that office during that period. Al Power said he was heading to New York City the next day for a GM board of directors meeting and he was ready to arrange a job on his nephew’s behalf.

Dave politely but firmly resisted. He struggled to make his uncle understand that while he appreciated the offer, it was important he succeed or fail on his own merits. Dave knew enough of GM corporate culture to know that any kind of authentic feedback about his performance was simply not possible for a nephew of one of the most powerful executives in the company. Dave didn’t mention the cavalier treatment he had received at the hands of the GM recruiter. Nor did he tell his uncle that he was skeptical of the insular, old-boys-club spirit he knew existed at GM, a corporate culture that would frustrate him for much of his career. Al accepted Dave’s decision.

That he was being hired to work for a division of Ford Motor Company and would not be based at Ford’s headquarters in Dearborn, Michigan, didn’t put Dave off in the least. “I always liked the smaller operations,” he explains, “because I didn’t want to be in a room with twenty MBAs pounding away on Friden calculators, which is what happens when you work at the headquarters.” The Ford Tractor office was in Birmingham, Michigan, northwest of Detroit. While it was miles from Ford’s corporate offices, Dave relished the autonomy he never would have experienced at Ford headquarters. “At Ford Tractor, they were short of people and they put me immediately into my own project.”

Auditing at Ford Tractor

Dave started his career with the Ford Tractor Division in the auditing department, in a job that would later provide great insight into working with car dealers. Audits are vital to any accounting process, although, as Dave observed, no one would have known that by the level of respect the auditing department received within Ford Tractor. Nevertheless, he was determined to do a thorough job.

His first responsibility was to audit some of the tractor dealers in Michigan. The tractor business was just starting to pick up after slow sales during the recession of 1957–58, recalls Dave. During this economic downturn, Ford Tractor had offered a series of incentive programs to promote sales of tractors and tractor implements, such as plows and hay balers. By the terms of this promotion, dealers would receive $500 from the manufacturer for each sale made during designated months. Dave’s first job was to audit the dealers to ensure they had earned each of the $500 payments they had received. In addition, Ford offered the dealers financing incentives to promote sales. Dave was tasked to audit this program as well. In both cases, the starting point was the same: physically visit each dealer and perform an inventory of the tractors on the lot. For tractors not on the lot and presumed sold, Dave required a sales receipt or a journal entry indicating a sale.

On a blistering summer morning, Dave and a colleague from the Ford Tractor distributor arrived at a small tractor dealer in Pigeon, Michigan, to perform Dave’s first inventory. “It was a crummy, rundown dealership,” he recalls. On a clipboard, he had a list of tractors and implements the dealer claimed had been sold or financed. What he needed were the sales receipts or the journal entries indicating completed sales. The owner of the tractor dealer turned Dave over to the bookkeeper, a nervous woman who had much to be nervous about. Neither the sales receipts nor the journal en...