Townsend, Lynn Alfred
TOWNSEND, Lynn Alfred
(b. 12 May 1919 in Flint, Michigan; d. 17 August 2000 in Farmington Hills, Michigan), accountant who became head of Chrysler Corporation during one of its periodic financial crises, guided it to profitability and stability in the 1960s, and resigned in the mid-1970s when it again approached collapse.
The only child of Lynn A. and Georgia E. Crandall, Townsend moved at an early age to Los Angeles, where his father opened an auto repair shop. His mother, a gifted teacher, home-schooled him until he entered a Beverly Hills school as a second grader. His mother died when he was nine; five years later so did his father. As a result he went to live with an uncle in Evansville, Indiana, graduating in 1935 at age sixteen from high school there. After a brief stint as a bank clerk, in fall 1936 Townsend entered the University of Michigan at Ann Arbor, sustaining himself with a series of odd jobs. A top student (his accounting professors found him "gifted"), he earned a B.A. in 1940 and an M.B.A. (with distinction) in 1941.
Townsend married Ruth M. Laing on 14 September 1940. They had three sons. In 1941 Townsend joined the accounting firm Ernst and Ernst in Detroit, leaving in 1944 to serve as a disbursing officer on the aircraft carrier Hornet in the Pacific. In 1946 he returned to Ernst and Ernst and the next year went along as a supervising accountant when one of its partners left to start a firm. When that firm merged into what became Touche, Niven, Bailey, and Smart (soon one of the nation's largest accounting firms) he continued as a supervising accountant, later becoming a partner as well. He was in charge of the audits of one of the firm's major clients, the Chrysler Corporation, and became an expert on its finances. In 1957 he became Chrysler's controller and in 1958 group vice president in charge of international operations.
Chrysler had serious economic problems because of administrative infighting, purchasing scandals involving the company's president, staggering overhead costs, declining market share, and an aging plant. In December 1960 Townsend was named administrative vice president of Chrysler, in effect running it on a day-to-day basis, and on 27 July 1961 he became its president, the first "bean counter" to hold the job—that is, his background was in numbers rather than manufacturing. He was, as such, a trailblazer in this new style of auto executive.
Characterized as a "smart, facile, and abrasive" executive who "brooked no interference," Townsend dramatically cut Chrysler's bloated overhead, laying off 25 percent of its white-collar employees, who nicknamed him "The Brute." He closed obsolete plants, shut down an office building, and sold off company planes. He reorganized staff and line operations, oversaw complete restyling of Chrysler's product (improving quality to the point that he could implement the industry's then most extensive warranty, which was five years or 50,000 miles on power train components), and revamped the company's dealer system. Townsend also internationalized Chrysler, buying parts of foreign companies and taking over others outright. Under his direction the company's nonautomotive activities, such as space and defense, expanded. A Fortune profile found that "scarcely a corner of the company has not been transformed by the Townsend regime."
Initially Townsend produced marvelous results. Chrysler's share of the U.S. automobile market, which had fallen to less than 10 percent, nearly doubled by 1967. In just three years (1961 to 1964) the company's sales rose more than 100 percent. Annual sales continued to rise dramatically (23 percent between 1964 and 1965), as did profits (for eleven of Townsend's fourteen years at Chrysler's helm, the company was profitable). By 1965 Chrysler's net income had risen almost 2,000 percent. Until 1969, each year brought improved financial results. The company's stock appreciated, becoming for a time "a Wall Street pet"; during Townsend's second year as president, the price of a share of Chrysler stock rose from $38.00 to $74.00.
In 1967 Townsend became chair of the company. He soon faced a new set of problems arising in part from what automotive journalist Brock Yates has described as the "over-riding passion" of executives "rewarded on the bonus system based on annual profits …to pump up sales over the short haul." Chrysler (as well as various other American manufacturers) had become more concerned with numbers than with product. For Chrysler one result was "the sales bank," a business trend that began in the early 1960s. Instead of producing cars as a result of dealers' orders, the company manufactured cars in anticipation of orders, stacking them like "cans of beans on a shelf." A limited number early in the decade (66,000 at one point) by 1969 had risen to over 400,000 vehicles stored all over Detroit in the ruinous winter weather. Quality was affected because the company rushed production in order to keep up the numbers. Cash flow was affected because dealers increasingly could acquire cars at a substantial discount and because unordered cars were assigned to the Chrysler Financial Corporation "to give … the semblance of … something that could pass for an order sheet."
When Townsend took over in 1961, despite the company's parlous state, it had been debt-free. But in 1970 Chrysler owed nearly $800 million. The recession of the early 1970s and the 1974 oil embargo severely hurt the company's finances. It lost $52 million in 1974 and $260 million in 1975. The company faced a possible shutdown. Mass layoffs took place; investment in research and development was much reduced. In July 1975 Townsend resigned as chair, supposedly at the urging of the board, although he asserted the decision was made on his own.
Townsend died at the Botsford Continuing Health Center in Farmington Hills, Michigan. The cause of death was not disclosed. He is buried in Fairview Cemetery in Linden, Michigan.
Townsend was not a car guy but rather one of the first "numbers men" who took over the U.S. auto industry. He became the president in 1961 of a distressed company and did what was necessary, if unpleasant. He had a good run during the 1960s but miscalculated severely in the 1970s and ultimately, under other management, the company had to be bailed out by the federal government.
There is no biography of Townsend. Interesting comments on his role at Chrysler are in Robert Sheehan, "Success at Chrysler," Fortune (Nov. 1965); Brock Yates, The Decline and Fall of the American Automobile Industr y (1983); and David Halberstam, The Reckoning (1986). Townsend is the subject of a Time cover story (28 Dec. 1962). Obituaries are in the Detroit News (21 Aug. 2000), the New York Times (22 Aug. 2000), and Automotive News (28 Aug. 2000). See also Current Biography (1966) and Who Was Who in America, vol. XIII.
Daniel J. Leab