The New York banks rode to the rescue by lending GM money and installing a new five-man management committee and an executive team headed by GM up-and-comer Walter Chrysler. Durant remained on the management committee but was semidisgraced and sidelined. He soon sought new horizons, gaining control of Chevrolet Motor Company and using its profits to start secretly accumulating General Motors stock. GM was Durant’s baby, and he wanted it back.
On September 16, 1915, when he showed up for a General Motors board meeting, he was treated as a gate-crasher at a family gathering. A GM official took him aside beforehand and said, “Let’s not have any trouble.” Durant replied, “There won’t be any trouble. It just so happens that I own General Motors.”
Indeed, Durant had amassed more than half of GM’s shares, or so he claimed. Months of proxy-counting and maneuvering followed, but on December 23 a New York Times headline proclaimed: “Durant Again Holds Control of General Motors.” Chevrolet was just one-fifth the size of GM, which made Durant’s feat the equivalent of a corporate minnow swallowing a whale.
Durant installed the blue-blooded Pierre S. du Pont as board chairman, giving comfort both to GM’s bankers and to the du Ponts, who were plowing their munitions profits from the war in Europe into buying GM shares. Durant took the post of president (and CEO) for himself and convinced Walter Chrysler to stay.
Over the next couple of years Durant folded Chevrolet into GM along with other companies, including Hyatt Roller Bearing Company of Newark, New Jersey, which he had bought from Alfred Sloan, Jr.
The polar opposite of Billy Durant in almost every respect, Sloan was born in May 1875 to upper-middle-class respectability in New Haven, Connecticut, the oldest child of a wholesaler of coffee, tea, and cigars. His father moved the family and the business to Brooklyn when Alfred was ten and at seventeen he was admitted to the Massachusetts Institute of Technology. Sloan graduated in just three years, in 1895, with an engineering degree and a Phi Beta Kappa key.
Through a friend of his father’s Sloan landed a job at Hyatt Roller Bearing, a New Jersey company that made bearings for sugarcane-crushing machines and was teetering on failure. But Sloan believed Hyatt’s product—a proprietary ball bearing flexible enough to adjust to its housing, a capability that made machinery run better—had broad potential. In 1899 his father and a partner put up $2,500 each to buy the little company and installed Alfred Jr. at the helm. He quickly reorganized production, fixed the record-keeping, and produced a profit of $12,500 in his first six months. A year later, in the summer of 1900, he landed an order for roller bearings from a Michigan company called Olds Motor Works (later to become Oldsmobile).
The new motorcar industry proved a boon to Sloan’s company. After a decade his single largest customer was Ford Motor, which was a blessing but also a potential threat. While Ford was America’s biggest and fastest-growing car company, Henry Ford was mercurial; Sloan feared Ford would start making its own ball bearings instead of relying on outside suppliers. When Durant came along in 1916 and offered to buy Hyatt Roller Bearing for $13.5 million, Sloan accepted and agreed to stay on to run a group of GM’s car-components companies.
Predictably, their styles clashed. Sloan was low-key, methodical, and prudent, making decisions with his head instead of his heart. Durant was just the opposite: intuitive, undisciplined, and frenetic, always charging off in several directions at once. He would summon Sloan, Chrysler, and other executives to meetings, only to leave them cooling their heels outside for hours—sometimes days—while he handled other matters, juggling half a dozen phones on his desk in an all-too-real parody of a corporate tycoon. Ego and excess staked out an early claim on the Detroit executive mind, and it would stay entrenched for decades.
By the summer of 1919 Chrysler had had enough. Sloan, one of Chrysler’s best friends, tried to talk him out of quitting, but to no avail. A few months later Sloan sent Durant a corporate reorganization plan that would streamline GM’s structure and give Durant more time to think about long-term corporate strategy. True to form, Durant never even found time to consider the plan. He was too busy borrowing more money and issuing new shares of stock to finance GM’s headlong expansion. Sloan was on the verge of leaving too.
In 1920 America’s postwar economic boom collapsed. That spring GM had been selling more than 40,000 cars a month, but by fall monthly sales volume dropped below 15,000 cars. GM’s stock price plunged as well, from more than $400 a share to under $15. One of the biggest losers was Durant himself, who had been buying GM stock heavily with borrowed money and was $38 million in debt.
It was 1910 all over again. On November 20, 1920, just weeks before his fifty-ninth birthday, Billy Durant left GM for good, and board chairman Pierre du Pont became president and CEO of General Motors.
An overextended and failing company. A financial rescue from people who insisted, in return, that the CEO resign. Was this GM in 1920 or GM in 2009? It was both, actually, though in 2009 the money would come from the government, and the CEO would be named Rick instead of Billy. But the similarities are more striking than the differences.
In 1920, meanwhile, Pierre du Pont’s mission was to stablize GM and find a long-term leader for the company. Thirty months later, on May 10, 1923, Alfred Sloan was elected president and CEO of General Motors.
Sloan started touring the country in a private railcar (the corporate jet of its day) to visit GM’s dealers, factories, and far-flung offices. Wherever he went, the slightly built Sloan “dressed just as he did in New York City,” wrote one biographer. “He wore custom suits, beautifully tailored, usually double-breasted and made of the finest wools, and starched hand-tailored white dress shirts with high, stiff white collars.” The clothes, indeed, defined the man. Sloan quickly concluded that GM couldn’t beat Henry Ford at his own game—constantly cutting costs, boosting efficiency, and passing the benefits on to consumers in the form of ever-lower prices. Besides, he figured that strategy had about run its course as America’s transformation from a rural nation to an urban one accelerated. Farmers might be satisfied with basic transportation, but city dwellers wanted comfort, status, and style.
Sloan laid out his strategy in a letter to shareholders in GM’s 1924 annual report, writing that General Motors would “build a car for every purse and purpose.” Instead of competing directly against each other, GM’s different divisions—Chevrolet, Oakland, Oldsmobile, Buick, and Cadillac—would constitute a hierarchical product portfolio, in which more costly cars would have more and better features, all the way up the line.
Sloan envisioned a “mass-class” market, as he put it, and an organization governed by “decentralized operations, central control.” Division managers would be given wide latitude to run their business within the financial parameters established by headquarters. The concept basically invented the modern corporation and would underlie the structure of companies for decades to come. To create the designs that would make each GM brand different, Sloan retained a consultant named Harley Earl, whose father had owned a Los Angeles “carriage” shop that built custom car bodies for Hollywood movie stars. Seeking an alternative to the stolid, upright shapes on most GM cars, Sloan asked Earl to design a different look for a new marque called LaSalle, intended as a lower-priced “companion brand” to Cadillac.
The six LaSalle models were unveiled on March 4, 1927, with a lower, sleeker shape than other cars of the day. Thanks partly to their success, 1927 was the year everything came together for Alfred Sloan and General Motors. By then the Model T looked hopelessly outdated and sales were collapsing. On May 25 Ford announced it would discontinue the car after a twenty-year run, during which 15 million had been made. Henry Ford had stuck to his beloved Model T so tenaciously that Ford Motor wasn’t ready to launch its successor, the Model A, for another six months.
That summer, meanwhile, Sloan hired Harley Earl full-time to head GM’s new Art and Colour Section, the auto industry’s first design staff. And at year end, for the first time ever, General
Motors seized sales leadership from Ford. It would hold the top spot for more than eighty years.
To create social acceptance for GM, Sloan used corporate advertising to portray the company as an institution that provided tangible benefits to society. Typical was an advertisement in the Oakland Tribune on January 27, 1929. “Every year has offered you more for your automobile dollar—in performance, in comfort, in safety, in beauty and in style,” Sloan wrote in an open letter to the public. “Such progress, born of the inherent ambition of an organization of active minds to do better and to give more, is of benefit to all.”
During the late 1920s Alfred Sloan’s new, more modern vision of the automobile industry had trumped that of Henry Ford. Sloan transformed cars into dream machines, with help from a man he imported from Hollywood, America’s foremost city of dreams. But though he catered to Americans’ emotions, Sloan ruled GM with strict business discipline. In 1940 he killed the LaSalle brand because sales were slumping and hurting profits. Killing brands to boost profits was a concept that his successors, unfortunately, would forget. They also would forget something else Sloan proved: that a dominant and seemingly invincible company—in his day, Ford Motor—could fall behind if it failed to adopt better ideas. It would have been a useful lesson to remember.
In the dozen years following the ascendancy of Alfred Sloan and General Motors, two more men emerged to shape the American automobile industry. Walter Chrysler had grown up in Kansas City as the son of a railroad engineer. After he quit General Motors in 1919 in disgust with Billy Durant, Chrysler went into the car business for himself.
He purchased control of several small car companies, including Maxwell and Chalmers, and folded them into Chrysler, which he incorporated in 1925. In 1928 he launched a couple of new brands, Plymouth and DeSoto. His biggest breakthrough that year was the purchase of Dodge from New York bankers, who had gained control of the company after the deaths of Horace and John Dodge.
After the Dodge deal, General Motors, Ford, and Chrysler collectively controlled 75 percent of the U.S. car market. A trade publication, Automotive News, started calling the companies the “Big Three,” a term that would be valid for another eight decades. Walter Chrysler himself, meanwhile, was making a personal impact as big as his company.
In 1928 he broke ground on the Chrysler Building at East 42nd Street and Lexington Avenue in New York; its distinctive art deco spire briefly made it the tallest building in the world. The building was his personal, private venture, separate from the car company, though it would contain Chrysler Corporation’s New York offices and an office for Walter himself. The announcement of the building capped a year of activity that made Chrysler Time’s 1928 Man of the Year.
During the 1930s, as the power of the Big Three solidified, the Depression brought an end to many of their would-be rivals. Among them were Peerless, Marmon, Pierce-Arrow, Stutz, and Duesenberg—the last of which had made cars so esteemed that it fostered a lasting approbation: “It’s a Duesie.” A few other smaller companies soldiered on, but General Motors, Ford, and Chrysler settled into a comfortable oligopoly, of which GM was the undisputed leader. The only real challenge to their power came, not from another company, but from a union.
The United Automobile Workers was formed in 1935 after the passage of the federal Wagner Act, which guaranteed workers the right to organize. Its first elected president was Homer Martin, a former Baptist preacher, but the union’s keenest intellectual and ideological energy came from the three Reuther brothers—Victor, Roy, and especially Walter, the oldest. Their father, Valentine Reuther, was a German immigrant and a trade union leader in Wheeling, West Virginia, where family dinners typically were devoted to discussion and debate about social justice and the central role of unions in achieving it. After coming to Detroit in 1926, Walter Reuther completed high school and three years of college before landing a job at Ford, only to be fired in 1932 for union activity.
Reuther’s response was to take a road trip. He and Victor—eager to see the world and to examine firsthand the experiences of workers in other countries—took their $900 in savings and bicycled through Europe, often sleeping in youth hostels. In Berlin they witnessed the Reichstag fire on February 27, 1933, and moved on to the Soviet Union, where they worked in an American-built auto factory in Gorky.
While the Reuthers admired Russia’s rapid march to modernity, they were repulsed by the brutality of Communism—an attitude that would later earn them enemies in the U.S. labor movement. When the brothers departed Gorky, they headed east, traversing the Soviet Union and landing in Japan before returning to the United States, eighteen thousand miles later. In 1935, at age twenty-eight, Walter Reuther helped organize the UAW’s West Side Local 174 in Detroit, which elected him president.
In late 1936 UAW members at two General Motors plants in Flint, frustrated by their inability to gain recognition from the company, took matters into their own hands. On December 30 they simply sat down at their posts, occupying the plants and refusing to leave. The union “served a new demand on GM,” reported International News Service, “for a national conference on collective bargaining for all GM plants.” Alfred Sloan wanted no such thing. What followed was the tense forty-four-day standoff known ever after as the Sit-down Strike.
GM guards turned off the heat in the factories, but the workers stayed put anyway, warmed by homemade fires. On January 11, 1937, local police—“bulls” in the derogatory slang of the day—stormed the Chevrolet No. 2 plant with tear gas and billy clubs. Workers hurling car parts repulsed them, in a victory that the union labeled the “Battle of the Running Bulls.” Had the incident occurred on a college campus thirty years later, it would have been called the “Battle of the Running Pigs.”
On February 11, after the Michigan National Guard had failed to expel the strikers, the company caved. GM executives signed a short agreement that pledged, “The corporation hereby recognizes the union as the collective bargaining agency for those employees of the corporation who are members of the union.” Within months Chrysler signed a similar agreement.
Ford, however, proved difficult to crack. On May 26 a group of UAW organizers in Dearborn decided to distribute organizing leaflets at Ford’s massive Rouge manufacturing complex. Among the leaders was Walter Reuther. He neither drank nor smoked, and his red hair and pink complexion gave him a cherubic look that belied his toughness. Shortly before the march Ford’s thuggish personnel chief, Harry Bennett, said his security guards wouldn’t try to stop the leafleting, but added, “Of course, we can’t say what the men will do.” Actually, it was predictable.
As they walked across a pedestrian overpass and neared the plant, the UAW men were assaulted by the Ford security guards and beaten. The guards’ brutality was matched only by their stupidity, because the assault occurred right in front of press photographers. The incident made front-page news around the country, along with pictures of Reuther nursing a bloody nose alongside other wounded colleagues. The young union leader became an overnight celebrity.
Just three months after the Battle of the Running Bulls, the UAW added the Battle of the Overpass to its lore. Not until 1941, four years later, would the union win recognition from Ford, thereby achieving a labor monopoly in the nation’s auto plants that matched the corporate oligopoly in the new-car showrooms. The oligopoly-monopoly combination would rule the American auto industry for decades, propelling it to prosperity, then sowing the seeds of its undoing.
The UAW’s early battles fostered an antipathy toward the car companies that would stay with the union forever. Even in the 1960s and 1970s, after the UAW had won remarkable middle-class prosperity for its members, autoworkers’ emotions would run high when they gathered in union halls to lock arms and sing labor’s unofficial anthem, “Solidarity Forever.” Written early in the century by an organizer for the Industrial Workers of the World, or Wobblies, it was sung to the stirring tune of the “Battle Hymn of the Republic.” Among the verses:
They have take
n untold millions that they never toiled to earn,
But without our brain and muscle not a single wheel can turn.
We can break their haughty power, gain our freedom when we learn That the union makes us strong.
During World War II Detroit served as the Arsenal of Democracy, producing planes and tanks instead of cars. But the victory over Germany and Japan, when it came, brought no peace to Detroit. In November 1945 Walter Reuther led a strike against General Motors. He demanded that GM hold the line on car prices while granting a 30 percent increase in wages, or else open its books to the union to prove that it couldn’t afford to pay.
Sloan regarded the demands as an outrageous usurpation of management’s right to run the business, and the battle lines were drawn. The strike lasted 113 days, after which GM still refused to open its books or discuss its pricing with the union, but it did grant workers a hefty raise and better vacation pay. It was an enormous victory for Reuther, and a month later, in April 1946, he took the next step. In a tightly fought election he ousted UAW president R. J. Thomas and became, at thirty-eight, president of the United Auto Workers. For the next quarter-century he would win better and better contracts for his members and help shape Detroit’s destiny.
The other young man who consolidated his power in Detroit in the mid-1940s was Henry Ford II, grandson of the founder.
In 1945, at age twenty-eight, Henry II was elected president of Ford Motor and inherited an empire in such disarray that bills were paid simply by weighing them on a scale, on the assumption that every pound of paper equaled a certain amount of money that the company owed. A few months later the young heir hired a group of former military officers who offered to deploy the organizational skills they had learned at the Department of Defense to fix Ford Motor. The ten included a brainy young analyst named Robert McNamara, later to run both Ford and the Pentagon. They quickly became known as the Whiz Kids. By the time Henry I died in 1947, at age eighty-three, the Whiz Kids were pushing Ford toward recovery.
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