Freedom's Forge

by Arthur Herman

  It was a fear shared by many of the ardent liberals in town. The economist Waldo Frank, Vice President Henry Wallace, the First Lady, even the president’s chief advisor, Harry Hopkins, watched Knudsen with some misgiving. They were hoping war might offer a chance to complete the New Deal agenda—a super New Deal, in fact.21 Through the regimen of mobilization, the government could finally transform all sectors of American society—business and labor, rich and poor, managers and the unemployed—into a single vast cooperative enterprise. War would force American capitalism to work for the general welfare at last. Businessmen like Sloan, Ford, and Knudsen himself would have to realize “there is no real hope, either for them or for the country,” Ickes furiously wrote, “unless they are willing to be satisfied with much less than they have.”22

  In private, Harry Hopkins was even more apocalyptic. “Democracy must wage total war against totalitarian war,” he wrote in a secret memo for the president. “It must exceed the Nazi in fury, ruthlessness, and efficiency.”23 How likely was it that a man who had directed one of America’s biggest profit-making corporations, and a Republican to boot, would share their collectivist philosophy and goals?

  On the other hand, Knudsen did have his supporters. One was Bernard Baruch. He saw the former GM president as “a production genius” but sensed “the formalized rituals of government are not for him.”24 Another was Jesse H. Jones, the former Texas cotton broker who headed the Reconstruction Finance Corporation.

  His and Knudsen’s paths had crossed back in 1934 when the RFC had put Detroit’s failing banks back in business after companies like Ford and Packard had to send executives to New York with empty suitcases to carry back enough cash to pay their workers.25 A Hoover appointee, Jones had been waging a one-man guerrilla campaign against the administration’s strident New Dealers since they took office. Jones had liked what he’d seen of Knudsen, and the more Jones got to know him, the more impressed he became.

  “He seemed to carry in his head a picture of the whole manufacturing business in the United States,” Jones remembered later, plus the phone numbers of the corporate heads who ran them. With his encyclopedic knowledge of industries from steel and airplane engines to chemicals and furniture making, Knudsen could tell Jones at once which plants “would have to be greatly enlarged, which with only a little retooling were ready to go to work” for the war effort. Knudsen was a vital resource for what would be Jones’s primary job under mobilization: directing RFC loans to those businesses that were getting their factories ready for wartime use.26

  For his part, Knudsen found in Jones a kindred spirit: a man who knew how to get things done in Washington with a simple handshake, who understood what American business needed to get on board the war effort—above all, the assurance that wartime conversion wasn’t a prelude to a government takeover—and who had a keen sense of the bottom line.*

  When Knudsen got his first office in the Federal Reserve Building, someone asked him if there was anything special he needed. Yes, he said. “I want a direct telephone from my desk to Jesse Jones.”27

  Their partnership would be one of the most important in the war years. One out of every ten dollars spent on the war effort from 1940 to 1945 would flow through one or another of Jones’s agencies, especially his Defense Plant Corporation. He would expand airplane plants and—with the help of former Union Pacific president Bill Jeffers—create a massive American synthetic rubber industry almost from scratch.† Abroad, his agents bribed South American officials to keep certain strategic materials such as tungsten out of German hands. Neither America’s wartime aircraft industry nor Kaiser’s wartime industrial empire would have been possible without the loans from Jones. Yet even Jones couldn’t help Knudsen with what would be his most daunting task: getting the Army, Navy, and Army Air Corps armed, clothed, and ready for modern battle.

  During his first weeks in Washington, Knudsen learned that the American military itself had only vague ideas of how to do this. Knudsen was given a copy of their Industrial Mobilization Plan, which was first drawn up by War and Navy Department experts back in 1922 and which had gone through multiple revisions since. He was dismayed to discover it was only eighteen pages long. The IMP did make a good-faith effort to figure how the U.S. economy could produce enough steel and rubber for tanks and vehicles and aluminum for airplanes and cotton for uniforms—something they had failed to do before World War I. It also identified some 25,000 plants the Army believed could be converted to wartime use.28 It had also launched a pilot program the year before called Educational Orders, to revive a moribund American munitions industry. The Army had given contracts to Goodyear to manufacture gas masks, R. Hoe and Company to develop recoil mechanisms for antiaircraft guns, and General Electric to make sixty-inch searchlights. General Motors had been enlisted to produce military trucks, and Winchester to make the Springfield Armory’s new M1 rifle.29

  Knudsen himself had signed the 1939 GM order. But the Educational Orders had been tiny, the applications largely theoretical. The Army and Navy simply did not have the staff to think through problems of this magnitude—or even conceive of war on a scale this big. Nor had they considered the impact mobilization might have on the larger economy. They seemed to assume a civilian economy didn’t even exist.30

  Drawing from their World War I experience, soldiers and sailors—and many New Dealers—assumed changing to a wartime economy was like throwing a switch. All one had to do was pick a date—the Army even had a term for it, Mobilization Day, or M-Day—and issue the orders. Miraculously, the next day men would be drafted and reserves called up, factories would start making rifles and machines, and trains would steam for ports and depots with their cargoes of men, tires, bullets, shells, and artillery pieces.31

  Knudsen knew M-Day was a fantasy. It made no allowance for what Knudsen would call “lead time”: the time needed for a conversion effort. Based on his own experience at Ford in World War I, he calculated that would be about eighteen months.

  Knudsen had been the old man’s trusted director of wartime production then. He could remember standing out in hip-deep water in the Rouge River, helping to lay out the pylons for docks where Henry Ford was going to build the Navy subchasers known as Eagle boats (the facility would later become part of the River Rouge plant). What he discovered producing the Eagle boat and the Liberty engine for Glenn Martin and other American aircraft makers was that the process of mass-producing war materiel was no different than mass-producing anything else. Once you broke it down to as many interchangeable parts as possible, and arranged for the parts to come together in a continuous assembly line, you could make as many of what was needed, as quickly as needed, and as fast as anyone demanded—all the while driving the cost down the more you produced.

  Designing the mass-assembly process for wartime production had been easy. Knudsen had done it first with cylinders for the Liberty engines and then for the Eagle boat. Before the war was over, he had had seven production lines going at once, each handling seven boats at a time—something unheard of in American shipbuilding—and all using workers who had never built a ship in their lives. By the time of the Armistice, Knudsen was set to produce one 112-foot-long Eagle a day.32

  Together Knudsen and Ford made the Eagle subchaser famous. “As boats, Eagles were not so hot,” remembered one Navy man who piloted one. “But as evidence of Bill Knudsen’s production ability they were a magnificent achievement.”33

  The Eagle boats had been one bright spot in the otherwise dismal World War I mobilization picture. When President Woodrow Wilson had declared war in April 1917, the situation had quickly descended into chaos. The Army and Navy had no idea what they needed or how to get it, even as they handed out contracts right and left. In July Wilson appointed the War Industries Board to try to pull things back from the brink. Its first chairman, overwhelmed by the problems, suffered a nervous breakdown. Its second quit in frustration as the Army’s insistence on doing everything itself, from handling transportation (it to
ok over the nation’s railroads when supplies weren’t arriving in time) to supervising industrial plant expansion, did more harm than good.

  At last, in January 1918, Wilson appointed Bernard Baruch to restore some sort of order. But it was too late. American companies wound up producing tons of war materiel, but almost all of it arrived in France after the Armistice. British prime minister Lloyd George noted bitterly in his diaries, “It is one of the inexplicable paradoxes of history, that the greatest machine-producing nation on earth failed to turn out the mechanism of war after eighteen months of sweating and toiling and hustling.”34

  Knudsen decided his job was to make sure that never happened again.

  On June 2 he sent a letter to President Roosevelt:

  “Dear Mr. President,” it read, “I trust you will permit me to express my most sincere appreciation of the honor conferred on me by your recent appointment…. I will function for any period that may be necessary to demonstrate my fitness, entirely at my own expense and further, I will cheerfully accept for any additional period necessary the duties assigned to me, on the same basis.”

  In closing, Knudsen penned down at the bottom:

  “I am most happy and grateful that you have made it possible for me to show, in small measure, my gratitude to my country for the opportunity it has given me to acquire home, family, and happiness in abundant measure.”35

  Two days later the last British soldier waded out to boats along the shore and left Dunkirk, along with virtually every piece of heavy equipment the British army owned. Only a miracle could save France and Britain now.

  The source of that miracle would have to be the United States.

  As he headed back to Detroit for one last weekend with his family, Knudsen weighed the heavy obstacles ahead. He did, however, have certain advantages. For one thing, America was not yet at war. Unlike in World War I, there was still lead time for wartime conversion—if Britain and France could be kept in the fight. That would have to be one of the priorities of America’s conversion to wartime production: finding a way to keep the Allies in Europe from collapsing before America was ready to face Hitler on its own.

  Knudsen also had faith in the power of mass production. He knew that in World War I large parts of American industry still had not switched over to the flexible-assembly-line methods that were now common in the automobile industry. Once they did, he reasoned, he could turn America’s engineers and managers and workers loose to do what they did best—making things for use, in this case for the United States Army.

  Once he got back to Washington, however, he learned that discovering what the Army needed wasn’t so easy.

  “What do you want?” That would be the first question Knudsen would ask whenever he met the generals in charge of Army procurement. Each time, the answer would be the same. We want an army of 400,000 men equipped and provisioned within three months of M-Day, they would say, and another 800,000 men after one year. Knudsen would then shake his head.

  “That’s not what I need,” he would say. “I need to know what kind of equipment you need for these men—and how many … Please tell me how many pieces.”36

  And increasingly he learned none of them really knew the answer. He had lunch at Fort Myer with General Marshall, who told him his fears of fighting a war when everything from rifles (the Army was still using the ’03 Springfield model) and machine guns to telephone cable and medicine was in chronic short supply, and when trainees would have to train using wooden guns and fire on wooden boxes labeled tanks, and fire salvos of artillery from tree stumps labeled artillery.

  “Our greatest need is time,” Marshall told him. Knudsen could see that, but he also needed to know exactly what equipment Marshall and the Army needed and how many, and no one could tell him. The situation in the Navy was much the same.37 The truth began to dawn on Knudsen. He couldn’t get a straight answer because they were waiting for him to tell them what the American economy could produce, and how much. If the country was going to make itself seriously ready for war, neither the politicians nor the generals nor the admirals were willing to take the lead. American business and industry would have to figure it out on their own.

  Others besides Harold Ickes had their doubts they could do it without a single person in charge. For them the lesson from the other side of the Atlantic was clear. America had to mobilize all its resources for war, and quickly. A comprehensive plan had to be devised, orders had to be given, and someone needed to take the helm: a Wizard of Oz figure, with his hands on all the production levers and whose stern commands carried the moral force of law.

  “The nation clearly, almost violently wants a man of action,” thundered Time magazine the weekend after Dunkirk, “a powerhouse of strength and sureness.” It was worried that America was getting Bill Knudsen instead, “a ponderous, accented, self-made man, a production genius,” but evidently not Time editor Henry Luce’s first pick for a war production czar.38

  Still, Knudsen believed he and his colleagues could do it without becoming czars or wizards. “Industry in the United States does more for the country in direct, or indirect, contributions to the public wealth than in any other country on earth,” he had told an audience in Detroit three years earlier. “And it will continue to do so if given the opportunity without restrictions.”39 Those restrictions had come in the thirties, with the Nye investigations that had essentially destroyed America’s munitions industry, and absurd new tax laws that made making armaments almost prohibitive.‡ Even making as basic a compound as gunpowder, Knudsen was learning, America would have to start virtually from scratch.40

  The evening after his sobering talk with Marshall, Knudsen sat up all night in his hotel room with a yellow legal pad. He had discovered how primitive the thinking about procurement still was in Army circles, where everything was based on units of one: If one man needed so much cotton for making his uniform at such and such a cost, then two men needed twice as much, and so on.41 From uniforms to rifles and tanks and airplanes, Knudsen knew mass production would introduce economies of scale and reduce such thinking to nonsense. “The first thing to do,” Knudsen told himself, “was to get started on the weapons that required a long cycle in manufacturing.” Those would be ships, tanks, airplanes, guns, smokeless powder, and TNT. The second was begin planning for the shorter-cycle items like trucks and vehicles, clothing, food, and smaller arms like rifles and machine guns. The third step was to assemble a team who understood the dynamic power of mass production, but also the technical problems facing a modern economy.

  By dawn he had his list. One name he didn’t bother to write down. That was his fellow NDAC member Edward Stettinius, chairman of U.S. Steel. Stettinius had been on the short-lived War Resources Board. With Stettinius and his deputy Donald Nelson, the former president of Sears Roebuck, in charge of NDAC’s Materials Division, Knudsen knew he had a strong ally on that flank.

  The name at the head of his sheet of legal pad paper was that of young, vigorous John D. Biggers, president of Libby-Owens Glass. Knudsen had known him since his Ford days, when Libby-Owens made the glass for Model T windshields, and had worked with him on various charitable causes. Biggers was one of the most principled men Knudsen knew, and an FDR favorite.42 He decided to make Biggers his personal deputy, as well as head of procurement for trucks, tanks, and other large vehicles.

  Then came Harold Vance, chairman of Studebaker, which had one of the smartest engineering divisions in the car business. Knudsen decided he would put Vance to work on machine tools, artillery, and artillery shells, while Earl Johnson, an alumnus of General Motors as well as of DuPont, would be in charge of explosives, small arms, and ammunition. At the end of World War I, America produced more gunpowder and TNT than Britain and France combined. In 1940 it produced almost none. Johnson’s skill in mobilizing this most basic side of war mobilization would earn him a nickname in the corridors of the War Department: “Powder Johnson.”43

  There was Bill Harrison, head of construction from Amer
ican Telephone and Telegraph, whose president had been the first to push for a National Defense Advisory Commission.44 Knudsen gave Harrison charge of finding communication and radio gear, as well as military construction; while Dr. George Mead, one of the most respected figures in American aviation, co-founder of Pratt and Whitney Aircraft and designer of the original Wasp engine, would deal with airplane production.

  The last person on Knudsen’s list was a military man, not a business executive. He was Admiral Jerry Land, chairman of the United States Maritime Commission, a man with unparalleled knowledge of America’s shipyards, who would supervise what would become one of the biggest projects of the entire war: building up America’s merchant shipping fleet. In World War I, lack of an adequate merchant fleet had kept the growing supplies of equipment and munitions stuck on the wrong side of the Atlantic. Knudsen was not going to let that happen this time. Balancing the shipbuilding needs of the Navy and the civilian fleet would remain one of his highest priorities.

  Six names, six men. Later there would be others. For now Knudsen would get Bigger, Harrison, and Vance leave of absence from their companies (the others were retired or, in Land’s case, already in Washington). He also landed them offices near his own in the Federal Reserve Building, the NDAC’s temporary home. They were the first of the so-called dollar-a-year men who would begin to descend on Washington from scores of other companies and business to take charge of the war production effort. As a group and as individuals, they would be scorned and vilified, dismissed as narrow-minded incompetents or, alternately, denounced as scheming greedy profiteers.

  But as a team, Knudsen and his colleagues would guide the country into facing the greatest and most complex challenge in its history.

  And thus far Henry Kaiser was not even a glimmer in anyone’s eye.

  On June 12, a steamy Wednesday, the National Defense Advisory Commission held its first official meeting. Far away in Europe, Italy had declared war on France and Great Britain—a move Roosevelt denounced in a speech at the University of Virginia as a “stab in the back”—the most militant speech from the president on foreign policy so far. Meanwhile, a demoralized French government was groping toward an armistice with Hitler.