Looking down from Heavy Industry Heaven, it must be tough for Henry Ford, Walter Chrysler, Louis Chevrolet and the other battling titans who built this motor metropolis to make sense of what`s going on here: The new warriors, it seems, are all in pizza.
Once, this landscape was known for grueling assembly lines, fiery rivers of molten metal, hulking furnaces and ”dark satanic cathedrals of private enterprise,” as a stunned visitor called the looming towers at Ford`s River Rouge plant, once the largest industrial complex on Earth.
Now, Detroit has become a battleground that reflects a softer, cheesier reality. It is a service-economy struggle, part of what Restaurant Business magazine calls ”Pizza Wars.” The conflicts involve two pizza moguls, a college football legend, the sale of the local baseball team, the sagging fortunes of a corporate empire and renewed efforts to jump-start downtown Detroit, abandoned parts of which resemble the brooding landscapes of Batman`s Gotham City.
As often happens while a war is still running hot and heavy, details are tangled but broad outlines are becoming clear.
Flamboyant suburbanite Tom Monaghan, the head of Domino`s Pizza Inc., is losing ground. Scrappy city kid Mike Ilitch, the head of Little Caesars Enterprises Inc., is gaining ground. University of Michigan football icon Bo Schembechler, axed as president of the Detroit Tigers, which Monaghan is selling and Ilitch is buying, feels he has a lot of ground-for a lawsuit.
That`s the way it is in Detroit these days, especially since Monaghan`s surprise joint firing last week of Schembechler and the Tigers` longtime chairman, Jim Campbell. Packs of shouting reporters. Live coverage on radio and TV. Screaming headlines: ”BO TO TOM: SEE YOU IN COURT!” ”THE TERMINATOR!” and ”VOID THE NOID,” or nerd, a reference by the Detroit News to ”the Tom Monaghan School of Business Management, otherwise known as `There Must Be 50 Ways to Fire Your Buddies.` ”
And a thousand urgent questions.
”Isn`t this like Clarence Thomas and Anita Hill, a question of who`s lying?” snorted Bill Bonds, a local ABC anchor, known as the Rambo of Detroit television news, during a noisy press conference at the elegant offices of Sommers, Schwartz, Silver and Schwartz, a Detroit law firm that recently won the largest wrongful termination verdict ($3 million) ever awarded in Michigan.
”Joe, if they offered you $6 million, would you walk?” a reporter shouted at Joseph A. Golden, an expert on wrongful discharge, who had flown home from a two-week tour of Scotland to sit with his client, Glenn E. ”Bo” Schembechler, and face the assembled press of the city.
”Joe, do you have the napkin?” someone yelled.
”We have the napkin,” Golden replied quietly, referring to a scrap of paper on which Monaghan had scribbled certain financial figures in 1989 as he lured coach Schembechler away from the University of Michigan to the Detroit Tigers and a stadium, 80 years old in spots, that blue and orange paint, Domino`s colors, seems to hold together.
”Is there,” someone asked, ”a Little Caesars or Domino`s logo on it?” ”Neither,” said Golden, but he added that the napkin was evidence that notice of the firing, which hit Schembechler in a modern way, via fax machine, broke ”a strong commitment” to a 10-year employment contract that had seven years to run, one that would have allowed Schembechler ”to finish his working life with the Tigers, working until age 70.”
This was not, of course, the town`s first notable firing, as Schembechler himself noted. ”I`m sitting here disappointed and confused but, hey, everybody`s got a right to be fired. A lot better men than me have gotten fired. Even Lee Iacocca got fired,” he said, referring to a momentous day in Detroit history, Thursday, July 13, 1978, when Henry Ford II and Iacocca, once his designated heir, went head-to-head in what one historian called ”the OK Corral of recent American corporate history.”
Yet, even Monaghan`s supporters noted that it seemed churlish, especially for a corporate chief whose business hangs on consumer approval, to use a fax machine to fire a sports legend, cutting off his pay, medical benefits and company housing at a time when his wife is ill with cancer.
It`s a tough business, pizza, especially around Detroit, the area where two of the nation`s Big Three chains are anchored.
”The gut-level tactics of the pizza wars became evident on New Year`s Day, 1991,” reports Restaurant Business, a source of running reports from pizza battlefronts. ”Pizza Hut aired a commercial during the Orange Bowl depicting Domino`s drivers in tattered jeans and uncombed hair-eating Pizza Hut pizza! Domino`s executives were furious. Pizza Hut pulled the ads eight days later, but the damage was done.
”Little Caesars, by this time, was well into a two-for-one campaign that`s come to define its promotional activity in the pizza market.”
Compared to automobiles, pizza is not a complicated matter. It is made from, among other things, flour, cheeses, tomatoes, olives, pepperoni, mushrooms, green peppers, sausage and, in some cases, pineapple. Basically, there are three ways to obtain one from a chain outlet. You can eat it there, take it out or have it delivered. The principal chain bakers:
– Pizza Hut, with 8,500 outlets, leads in sit-down service, with $5.5 billion in sales last year, though recently Pizza Hut, a PepsiCo subsidary, has added delivery and carryout service at about one-third of its outlets.
– Domino`s, with 5,600 units, calls itself the world`s largest pizza delivery company. With about $2.4 billion in sales last year, it accounted for half the pizza delivered in the U.S., about 260 million pies.
– Little Caesars, described as ”the world`s No. 1 carryout pizza chain,” had 3,650 restaurants and $1.7 billion in sales last year and expects that to grow to 4,575 outlets and $2.16 billion by the end of 1992.
”Like the airline industry, they`re all fighting for market share,”
observes Jay Ritter, a University of Illinois professor of finance who once lived a mile from Domino`s Farms. The lavish, 1,500-acre headquarters of Domino`s is on the outskirts of Ann Arbor, a half-hour drive from Detroit.
Though demand for pizza is rising, so is competition. At Domino`s, profit margins have been slim, Ritter notes, far below those needed to attract investors, as Monaghan found out three years ago when he sought to sell out for $1.2 billion. Monaghan, 55, still owns 99 percent of the company, but a continuing slide in Domino`s share of the pizza delivery business, leading to a 1991 loss of $48.7 million, has led to some serious corporate retrenching.
One reaches Domino`s Farms by driving past the barns and cornfields northeast of Ann Arbor, past a semicircle of tall poles with flags from 18 countries where ”a hot, quality pizza is safely delivered to a customer`s door in 30 minutes or less,” toward a main building, done in Frank Lloyd Wright`s prairie style, with the world`s longest copper roof.
A receptionist gives a visitor a copy of a lavish coffee-table book,
”Domino`s Mansion,” with photographs of the chairman`s suite, a two-level lodge with working fireplace, textured silk ceiling and leather tile flooring which, some who have been in it note, tends to retain spills.
These are not, however, the glory days of empire. Those were in the 1980s when Monaghan, backed by profits running above $15 million a year, stocked a museum with $20 million worth of classic cars, including one $8 million Bugatti Royale. He put $29 million into his Drummond Island resort in Lake Huron. He plunked a fortune into Frank Lloyd Wright furniture, often fending off another notable bidder, Illinois` then-Gov. Jim Thompson. In 1983, he bought the Detroit Tigers for a reported $53 million.
These days, under pressure to turn matters around, Monaghan, friends say, often retreats to his inner sanctum, a head-office hideaway with a rocking chair. There, for considerable lengths of time, he rocks and ponders. ”He read a book, which inspired him, that said if you purchase things for pride, that`s sinful,” an associate said recently. ”He`s determined that he`s done a lot of that. He`s going to get rid of a lot of things.”
Thus far, 16 antique cars have been sold. Another 14 are on the block. Drummond Island has been dumped. Also gone are two radio stations; a tall ship, the Domino Effect; a Rolls-Royce limousine; and the company aircraft. He also, others say, has taken to fasting on bread and water two days a week.
These are not matters Monaghan wants to discuss with outsiders, as his eyes made clear last week when he encountered a reporter outside Barton Hills Country Club-a new $8 million facility, a half-mile from his woodsy Frank Lloyd Wright-style home-where he is a member.
”Hi,” said the reporter.
”Hi,” said Monaghan, concluding the interview.
Yet, in a move that confounded his publicity department and irked the rest of Detroit`s competitive news community, he did sit down last week with one reporter, Bill McGraw of the Detroit Free Press, and poured out his feelings about everything from Schembechler (”there was never a written contract”) to rumors that he and Marje, his wife of 30 years, are divorcing. ”I`ve heard that, but I don`t think there is any truth to that, certainly not from my end,” McGraw quoted Monaghan as saying during an interview in which McGraw said Monaghan ”wrung his hands and seemed distracted at times.”
Meanwhile, across town, Mike Ilitch, 63, head of the arch-rival Little Caesars, was preparing to take over Monaghan`s Tigers for a reported $85 million.
Ilitch also is reluctant to talk these days, but for different reasons. According to spokeswoman Susan Sherbow, he doesn`t want to get involved until the deal goes through. But it is clear, from a walk through Little Caesars world headquarters, that the two men, in style, couldn`t be more different.
Born to immigrants from Macedonia, a region in the south-central part of the Balkan peninsula, Ilitch, who grew up on Detroit`s west side, started in the pizza business in 1959, using $10,000 he had saved while selling awnings door-to-door. With his wife, Marian, he opened a carryout operation in a shopping center just west of Detroit. The name was her idea. He liked Pizza Treat. She retorted that he seemed like a Caesar, but not a big one.
Two years later, they added a second unit. A year after that, they started franchising their ideas, notably a conveyor oven that Ilitch designed to produce pizza faster than competitors. In 1982, Ilitch bought the Detroit Red Wings hockey team for $8 million and, to the surprise of many, kept the team downtown, instead of pushing for a new suburban stadium. Last year, Financial World magazine, which keeps tabs of such things, estimated the worth of the franchise at $70 million, highest in the National Hockey League.
”I don`t look at myself as a special type of leader or anything like that,” Ilitch has said. ”I just worked alongside my people and tried to lead by example, tried not to talk too much.” With considerable help from Marian Ilitch, secretary-treasurer of all Ilitch-owned businesses, and seven children, also involved in the enterprises, Ilitch also has become, as the Detroit News noted, ”a point man in the battle to save Detroit`s sagging downtown.”
In 1988, Ilitch reopened the 4,804-seat Fox Theatre in the city`s moribund movie palace district, part of a $50 million complex that includes a 10-story office building with a new interior atrium, for Little Caesars head office staff. It is considered likely, if the Tigers get a new stadium, that it also will be located downtown, in the empty blocks around the Fox.
Now part of Detroit`s upper crust, pizza mogul Ilitch is, to Tiger fans, the Great Mozzarella Hope. He still takes time for extensive philanthropy, including one favorite project: Little Caesars Love Kitchen, a mobile pizza operation, working through soup kitchens, which has supplied free pizza to 750,000 needy people in the last seven years.
That`s a different approach from the Detroit of the old days, as those in Heavy Industry Heaven might recall.
In 1932, hunger marchers came to the gates of the River Rouge plant, demanding help from Henry Ford. Four of them were shot dead.
