Winning The War At Home
Like Baghdad, if you look hard enough in Detroit you can still see the vestiges of opulence. Windows are broken, storefronts are boarded up, and trash is littered in the streets. But every few blocks there’s a grand old structure reminiscent of a different day. “Look at the way they ran the staircase up the outside of that building,” Jay Rogers says pointing up at a huge old single family home. In his iPhone he carries a picture of himself on the ground in Iraq. He’s standing in front of another huge old structure–Saddam Hussein’s 600-room palace of King Nebuchadnezzar II–with a machine gun in his hands. Riding around Detroit in a rented SUV, Rogers explains how narrowly he escaped dying in Iraq. He remembers a mortar landing so near him in Bagdad that his brain shook. He had another near miss at the multinational training center then run by General Patraes and a third in Basar just before going out to patrol the river between Iran and Iraq. But the closest call came when Roger’s caravan, which was traveling near Ali Hassan al-Majid’s summer home (the first cousin of Sadam who was nick named “Chemical” for gassing the Kurds), came under direct attack killing two men in the next Humvee and seriously injuring two more. Thinking about his lost Marines, Rogers shakes his head slightly.
Even though he’s no longer in combat, he’s still a commander, now in a war to save the auto industry from itself. “A couple years ago GM and Ford would go to senior project day and literally slip scraps of paper with starting salaries written on them to every kid in the class,” he says of the students in the audience earlier in the day at the College for Creative studies, where he was giving a guest lecture. “Every design project at the school used to be sponsored by Ford or GM. Now those amazingly talented kids are designing fork lifts and scooters. I was in Flint yesterday and the city is dying for me to build a plant there. It was painful to tell them that even if I did I would employ 42 people.”
Rogers enters a rib joint where he’s invited twenty-five Local-Motors community members for dinner. There’s a baseball game on televisions over the bar. But the mood is somber. Rogers keeps talking at dinner about Pittsburg and the steel industry, how it never came back, and ended up in micro-mills. He visibly bristles when students at the table repeat the mantra heard all over town, “We still have the highest density of skilled workers in the world right here.” The look on Roger’s face is of a counselor at a rehab, confronting a cocaine addict.
“I’m sorry but you’re in denial. There was amazing wealth created in this town, but that mindset is a historical legacy. It’s over. The Messiah is not coming back. Half the skilled labor in this town is unemployed, the other half is employed by companies that are bankrupt, and everybody has skills that are arguably out-of-date.” He says all this matter-of-factly, not in a mean tone of voice but more like a preacher leading his flock to safety.
In response to the sermon, a community member stares Rogers down and asks the ultimate question, “Can you really save the American automotive industry?” It’s the first time Rogers has stopped talking all day long. It’s as if the designer were asking him if really could guarantee peace in the Middle East. The day seems to have worn even on Rogers–the soldier, the student, the eternal optimist. For the first time the question has Rogers pondering the magnitude of his challenge, the fact that Detroit and the country’s biggest industry are both dead and he has been telling the world he knows how to fix it.
“I don’t know.”
After dinner, Rogers returns to his hotel room to start his work day in earnest. He checks on the status of clay model of his first car, the Rally Fighter. He goes to his website to review new design ideas that have come in during the course of the day. He returns email from the owner of a NFL football team that is very interested in locating the first Local Motors factory near their stadium, complete with advertisements on fifty foot screens during time-outs. On his blog, he figures out how many start-up auto companies could have been funded if Washington had supported new rather than old technology (6,286 companies and 276,571 jobs by his math). At three in the morning, he sets his alarm for five, turns out the light, and goes to sleep.
Milwaukee Junction became the very heart of the American auto industry nearly a hundred years ago. It’s the spot in downtown Detroit where the Detroit & Milwaukee and the Chicago, Detroit & Canada Grand Trunk railroad intersect, allowing for easy distribution across all of the United States and Canada. Henry Ford built his Piquette Avenue plant there in 1904, when he was still tinkering with a series of “letter” cars. The Model N actually made Ford, then only three years old, the highest volume producer in America. But Ford had a much grander vision of what the auto industry could be. Still a young man, Ford spent most of his time in the shop, the drafting room, or the experimental department. He was at work before eight, went home for supper, but then went back to the office and worked late into the night trying to solve mechanical problems with his newest design. He was said to sit in his mother’s rocking chair, when he got frustrated to calm his thoughts.
Ford was obsessed with putting, “America on wheels.” The first Model T was built on September 27, 1908 and became the first mass produced automobile, making it affordable to the public. It was in the Piquette plant that Ford began producing 100 Model T’s in a single day. Ford built the first 12,000 Model T’s at Piquette during the plant’s operation from 1904 to 1910.
Today, eleven city blocks southwest down Beaubien Street, students at the College for Creative Studies file into a cavernous studio space. Free hand car drawings cover the walls and one quarter scale physical models of student-designed cars sit in the middle of the room. Though an independent school, the building carries the Ford name. There’s plenty of glass, and multi-level entryway, and central courtyard where the students play Frisbee when it’s not raining, like it is today. There are two women in a crowd of forty students, but quite a few Asian men who have come to study from overseas. Many of the students have pony-tails, glasses and several days of growth. Most look like they could use a shower, hair matted with a faint scent of bodies that have spent too many consecutive hours staring at a computer screen. Steaming pizza boxes are piled high at the front of the room along with two liter bottles of coke.
The students all look dejected. “Last year at the Senior Show, only one senior got a job right through school,” a junior reports. “The rest had to fend for themselves.” But there is a general sense amongst the students that the industry’s troubles are not the big three’s fault. “I think its so much design or what’s being put in the vehicles; it’s just the way the economy is set up. It’s a domino effect starting with the housing market.” Jay Rogers is here to try to convince these students that the solution to the problem has to come from outside Detroit–has to involve a completely new approach to car design and construction. The students are skeptical. But they are happy to eat the free food.
These students, and frustrated car designers around the globe, are at the center of Local Motors. Rogers discovered that most transportation design students can’t get jobs in the auto industry even when its healthy. They end up taking jobs at Martha Stewart or Home Depot, but at night they are still drawing cars. “After traveling to these schools,” Rogers says, “I realized that there’s a pent up supply looking for a place to put their work.” He has developed an online community of over two thousand designers from 121 countries who participate in contests and collectively design next generation cars. Using this distributed model, he was able to design his first car in less than three months rather than the two years it would have taken Detroit and will have it on the road in less than 18 months rather than the six year cycle time in Detroit.
Rogers never sits down, doesn’t work from a script. He’s a field commander again, explaining enemy territory. At 6’3″ and 210 pounds with a military crew cut, he’s hard for even the heavy-eyed students to ignore. Rogers is accompanied by one of his first full-time employees, Aurel Francois. Dressed in a Celtics hat, red striped sneakers, and a black purse the Frenchman scratches his juvenile beard while Roger makes his pitch and surfs the Local-Motors website on a screen at the back of the room. Each time Rogers reaches a fever pitch, he turns around to point out the relevant page of the website on the screen, which the Frenchmen has magically anticipated.
Francois went to the ISD in Toulouse, France. “His life’s ambition has always been to be a car designer,” Rogers explains. “But when he graduated, he couldn’t get a job so he worked at a meat rendering facility, as an abatteur cutting meat. He was one of our first community members. I’ve never seen a guy, other than d’Tocqueville, look at America, never having been here, and understand our culture better than we do.” So Rogers bought him a plane ticket and gave him a job.
Rogers is adamant that the billion dollar steel-based factories are at the very root of Detroit’s problem. He plans to build fifty micro-factories around the country, each one producing cars designed for that particular geography. Rogers explains that all the focus on electric engines is fine but is just the tip of the ice berg. To him it’s the whole paradigm that hasn’t changed since the model “T.” He tells the students that if you took all the cars that were built and not sold, in the best of times, the inventory in America would fill a parking lot the size of Rhode Island. He points out that race cars from Formula One all the way down to Porsches haven’t been made out of steel for years–they use structural composites of carbon fiber and plastic for its superior strength/weight ratio. Detroit doesn’t go to modern materials because of the huge invested capital in steel and the UAW. You can’t build a steel car just-in-time in a micro factory but you can build a plastic one. “It literally comes down to whether you can mold forms in the equivalent of a microwave oven or you need a $1,000,000 for a set of steel part dies.”
When Rogers admits that he doesn’t plan to use any of his own parts on his cars–just source everything on the secondary market from Ford, BMW, whoever has the right piece at the right price–several students look visibly disturbed, as if to do so is breaking a code of ethics. “Look, why should I reinvent the wheel by trying to design the perfect engine or fender or headlight when I can buy each of those parts very cheaply in the secondary market and take advantage of the billions spent on perfecting each one. It wasn’t like Steve Jobs actually figured out any new music technology; he just pulled together the existing technology in a remarkable design that changed the whole music ecosystem.” Rogers is playing to the students now. After all, their dream is to design the next Model T that revolutionizes the industry. A few lean forward, seeming to wake from their slumber. Hands go up. What began as a lecture is now an animated conversation.
“This isn’t about building the perfect electric engine, though we will certainly install the one that gets developed,” Rogers concludes at the end of his talk. “Its about designing cars on the web and building them out of advanced materials in factories of the future. There is a better, cooler American auto industry just ahead but it requires a complete paradigm shift. We don’t need better record stores; we need to start designing iPods.”
There’s a model for what Local Motors is doing except it’s not a car company or even a heavy manufacturing company. It’s a t-shirt company called www.threadless.com. Here’s how it works: threadless is a community of half a million members design and vote on t-shirts. The most popular get made and are sold in advance. The result is a fun and very profitable business. It’s like Wikipedia in the sense that everything is collaborative but community members are designing a physical product and participating in weekly contests to see whose design actually gets made. There’s a nominal prize for winning but the real reward is in seeing your shirt on the site for sale. Open-source software has long depended on the users of technology to design and improve a product through online collaboration. The internet itself is the ultimate example of distributed engineering. But threadless was actually the first company, when it was founded in 2000, that the concept could be translated to the physical world.
Roger’s studied this phenomenon, called “crowd-sourcing,” at Harvard Business School with Professor Karim Lakhani, an expert on innovation. Rogers had been struggling with how to solve the design quagmire in the auto industry. “I realized that the car industry needed to create totally new designs and do it a more honest way, where we learn from the community out there: what do you want to buy?” He realized that advances in design software would allow crowd-sourcing to work for the far more complicated task of designing cars.
The offices of Local Motors are modest–a few rooms in an out the way office complex on the way from Boston to Cape Cod. A one quarter scale model of the Rally Fighter sits up on top of a Snap-On tool cart. Progress designs are pinned up on all the walls. Rogers holds three inch chips of air permeable laminated vinyl in his fingers. “This is amazing,” he exclaims when he sees how indistinguishable the finish is from a top end sports car. It costs up to ten grand to paint a car. Detroit has massive invested capital in putting color on steel, both in their teams of chemical PhDs and equipment on the line. They are not about to stop painting cars even though it’s environmentally hazardous. “We’re going to press vinyl on our composite frames and than heat it off to recycle,” Rogers explains. “And it will cost us five hundred bucks.”
A Chrysler Challenger side view mirror (cost $120), a Mitsubishi Eclipse center high mounted stop light (cost $19), and various other parts crowd what might otherwise be a conference table. Roger’s picks up a BMW bumper hanging assembly. “The radiator goes inside here,” he says pointing to the middle of the flat piece of metal. “This is a stamped bumper, you can see where they spot-welded it here, so we aren’t going to use it.” Then he picks up a Mercedes bumper assembly, a much sleeker looking piece of black metal. He explains that they are going to use the Mercedes piece because it’s extruded making it simpler, lighter, and better looking.
Out back, on what constitutes the factory floor, engineers have mocked up the body of the car out of blue foam and installed the Mercedes diesel engine that they had planned to power the Rally Fighter. They have also rigged up a primitive seat with steeling wheel and pedals. At the back of the factory, Roger’s has parked his dad’s 1971 Mercedes 280SL as inspiration and reminder of his family history of car enthusiasm.
Rogers points at the Ford axle that will go into the car and then large cardboard box containing a BMW engine. He explains that they were going to go with the Mercedes but then BMW turned out to have a superior clean diesel design. He picks up two large plastic containers. “Before we made the shift, we had to make sure BMW’s saddlebag fuel tank would fit with the travel of the suspension when it comes through the tunnel in the middle where the drive shaft goes up. It did. So we went with the BMW engine in this box. The price of that thing is extremely attractive even at an N of 1.” He continues through the space, talking to his employees and pointing at parts and design elements. He picks up a Mercury Milan Sports Fusion side marker light. “It says Ford on the side here, which is great. We’re going to leave that. That’s the whole point for us is that the existing car companies are suppliers to Local Motors, not competitors. The design is radical, the parts are proven technology.”
Rogers herds his troops into the tight quarters of his own office for their twice a week “Stand-Up,” a practice he has borrowed from combat when every morning the commanding officer would review where the enemy had last been seen, the plan for attack, and all the related logistics and contingency plan for the day. At Local-Motors, half the team dials in remotely via iChat. He reports on the site selection trip with the secretary of commerce in the state of Arizona for the Rally Fighter as well as the potential for a second site their Boston model. He updates the team on the interior competition for the Rally Fighter, the progress of clay modeling, and the summer build time-line.
Rogers plans to unveil ten Rally Fighters, and being to take orders, at the huge Specialty Equipment Market Association convention held in Los Vegas the first week of November. The ten cars will actually be assembled at the Local Motors facility over the summer by beta customers. The final innovation in Roger’s model is that his customers will become members of a unique community of drivers who know their cars inside and out. Not only will they help design, buy, service, and recycle their vehicle at a local micro-factory out of state of the art composite materials, they will actually spend a couple weekend helping to put it together.
The Shatt-al-Arab, a waterway in southern Iraq which is bordered by Iran on the East and Iraq on the West, is the closest thing to a conventional battle front there is in Iraq. The Coalition try control the river but are constantly being shot by Iranian river guards and Al Qaeda. Iraqis, or foreign born terrorist passing as such, routinely waited on the two bridges to toss hand grenades into patrol boats. During the summer of 2004, 8 British soldiers and Royal Marines were taken hostage and imprisoned in Iran during a routine patrol on the Shatt.
On an August evening of 2004, Rogers waited for the sun to go down with his team of Royal Marines, Navy Seals, Marines, and an Iraqi interpreter he didn’t trust. He doubled checked the night vision gear, laser optics, rockets, and flak protection equipment. Even at dusk it was 120 degrees. Rogers sweat profusely and thought, “I have so much gear on that I’m going to drown if I have to go for a swim.” Just then a mortar landed nearby, sent as a seeming warning from the Iranian border. Their camp had been under attack all day.
Finally it was time for the all-night patrol on the Shatt-al-Arab. They stopped the first boat they saw on the water–sure that it was full of a surprise platoon of crazy Iranians ready to eat a magazine of their bullets. As they approached the first of the two bridges, Rogers ordered, “Let’s go dark boys,” to avoid targeting. Iranian civilians crowded on the bridge. The patrol turned had night optical devices on with laser pointers out in every direction. “Those poor folks on the bridge had no idea how they were one trigger pull away from meeting Allah because of the invisible infrared signature on the back of their heads from a silent boat passing beneath them under the bridge,” Rogers recalls. Under the bridge, Rogers realized he was cramping because his gut was clenched so tight. “I really thought I was going to die,” he remembers. “When we made it to the southern end of the patrol in the middle of the night I really couldn’t believe I was still alive. But then I realized we had to do it all over again to get home.”
Building Local Motors from scratch is like navigating the waters of the Shatt-al-Arab in the dark of night–the odds are stacked against Rogers for sure. But he’s found a way around the challenges. To source engines and parts, he had to find the biggest supplier possible. So he approached James Cash–a Harvard Business School professor for 27 years and currently on the boards of Microsoft, Chub, Wall-Mart, and General Electric. Rogers knew Cash was very close to Roger Penske, the reigning royalty of the NASCAR world, winner of the Indy 500, and the owner of the largest chain of car dealerships in the country. With Cash’s introduction providing the tiniest of openings, Rogers put a couple cars on a trailer and drove across country to prove to his potential benefactor that Local Motors was for real. “All I wanted was a picture with the car legend and old school mechanic but instead Penske had his head under the hood and his butt up in the air,” Rogers says with a grin. Penske came away from the meeting saying, “Wow, you really are going to do this, aren’t you?” As a result of the meeting, Local Motors can now get the best engines on the market at wholesale pricing. It took Detroit billions to design the most recent anti-lock brakes. Local Motors can buy those brakes along with axel, rotors, cuffs and spindle suspension for their cars for less than $1,000 total.
“Penske’s played a very important role,” Cash points out of his friend. “He was willing to endorse and support Jay, which allowed Local Motors to get access to inventory and resources that he simply couldn’t have gotten any other way.”
Jay Roger’s grandfather, Ralph Rogers, is blown up in photographs on the walls of Local Motors. Ralph ran Indian Motorcycles and then founded Texas Industries. Every step of the way Jay, like his grandfather who turned down a scholarship from Harvard in the ’30s to support his family, could have taken an easier path but choose not to. After getting admitted to Stanford business school, Jay decided to decline the offer and went to basic training instead. Five years later, while serving in Iraq, he asked his general for permission to apply to Harvard Business School with the stated goal of revolutionizing the auto industry to reduce American dependence on oil. He graduated at the top of his class in 2007 and immediately founded Local Motors.
Yet, Rogers has the lurking understanding that he, and Local Motors, and attempting the near impossible and might fail. “My family was super wealthy,” he says. “But then they lost it all. They got wrongly sued by government in the Savings & Loan debacle in Texas.” The experience of success after success, despite having taken the hardest possible path in life, doesn’t seem to have completely healed the scar of watching his once famous family’s fall from wealth. “I have this incredible angst because I don’t ever want to be in that position where whatever I do doesn’t turn to gold. It’s the cross I have to bear.” Rogers wants to redeem his grandfather’s Indian motorcycle roots. At the same time, his prodigious intelligence and battle instincts sense that this fight is also bigger than all of that, it’s about the future of the auto industry and the country. “In the end, I might not succeed,” he concedes. “But I will die trying.