Freedom's Forge: How American Business Produced Victory in World War II

by Herman, Arthur

  The partnership would grow and prosper at both ends as the infant automobile industry grew. By 1908—the year the first Model T chugged out of the Piquette Avenue factory and entrepreneur Billy Durant founded General Motors—the twenty-nine-year-old Knudsen was general superintendent at Keim and employing fifteen hundred people. Three years later he proudly took a bride, a girl of German descent named Clara Elizabeth Euler. That same year, 1911, Ford was impressed enough with the Keim operation that he bought the whole company outright. Knudsen suggested Ford think about assembling Model T’s right there in the Buffalo plant, as well as in Ford’s brand-new setup in Highland Park off Detroit’s Michigan Avenue.

  Knudsen spent weeks arranging the tools and machines on the Keim floor in order to put together the Model T components. He taught his mechanics how to assemble the car in separate stages, from bolting together the chassis to trimming the body and varnishing. Then one morning Knudsen was stunned to come in and find all the machines idle.

  The Keim workers told him they were on strike. They had decided they didn’t like the piecework rates they were being paid on some of the outside contracts. Knudsen couldn’t believe they were so shortsighted as to break off building the country’s fastest-selling automobile over a minor contract dispute. But the men wouldn’t budge. He decided this was a crisis requiring the advice of the owner himself. At great trouble and expense, Bill Knudsen managed to reach Ford on the primitive telephone in the Keim office.

  Ford listened and said, “That suits me. If the men don’t want to work, get some flatcars and move the machinery to Highland Park.”11

  Three days later it was done. Then Ford ordered Knudsen himself, William H. Smith, and other key Keim managers out to Michigan.

  They were now part of the team running the most famous factory in the world.

  Nineteen hundred and twelve was a crucial moment in the evolution of Ford’s business. His Model T† consisted of nearly four thousand separate parts. Eight years earlier Walter Flanders, a veteran machinist who had dropped out of grade school and gone to work at Singer Sewing Machine, had shown Ford the value of making as many parts as possible interchangeable. These eliminated the need for custom or form fitting, which slowed production to a crawl. Flanders also showed him and his young engineers—Carl Emde, Peter Martin, and another Danish immigrant named Charlie Sorensen—how to arrange their machines in a priority sequence so that tools and parts were easily accessible.12

  Flanders had just taught them the rudiments of assembly line production. Ford was lucky to have on hand young engineers like Martin and Sorensen, men whose idea of fun was breaking the assembly of a Model T down into eighty-four discrete stages—from forging the crankshaft and drilling out the engine block to stuffing the seat upholstery—then lining them up to form a single process.13 Highland Park became the first mass-production assembly line in automotive history. When Knudsen arrived, they were making a Model T every hour and a half, at a rate of five hundred a day.

  Outsiders treated Highland Park as a manufacturing miracle. People toured the factory and snapped pictures (Ford sensed that inviting visitors, even other automakers, to see his assembly line would only enhance its mystique).14 Others tried to reproduce its elements, without success. But when Bill Knudsen arrived, he found the surroundings looked rather familiar. He realized he and Smith had used the same techniques at Keim for stamping steel parts for fenders and doors and for Ransom Olds’s brake drum assemblies. Instead of being mystified or dazzled by Ford’s accomplishment, Knudsen set about finding ways to make it work at a whole new level.

  He had learned other things at Keim, especially from its manager William Smith. He had learned he had a special gift for making something with his hands while visualizing its outcome in his mind—and he learned the value of practical experience. When Knudsen was trying to save enough money to get an engineering degree at Cornell University, Smith had told him, “You’re a better engineer right now than any college graduate I have ever seen,” and he was right.15

  When Keim was first contracted to assemble Ford cars, Smith had a Model T delivered and then he and Knudsen spent the day taking it apart and putting it back together again. Then Knudsen drove it around the plant floor—it was the first car he had ever driven—and out the door. He took Smith home and then drove to his lodging, where he stayed up half the night studying the transmission and gear system. “By the time I went to bed,” Knudsen later remembered, “I had a good working knowledge of the Model T.”16

  From Smith he also learned certain economic lessons. Smith made Knudsen think about a factory as something more than a place for making things. A factory is a place for wealth creation, his mentor would tell him, and a place for practicing the dignity of work. There is something sacred about work, about an honest productive effort that earns the wages that are the foundation of home and health, education and security—and the foundation of the America the Danish immigrant had fallen in love with.

  Knudsen took to Ford for the same reason. Its owner paid his men a standard five-dollar-a-day wage and looked out for their welfare. But above all, the factory floor at Highland Park offered a fascinating array of problems and challenges, into which he jumped with the same enthusiasm as a conductor with a new orchestra.

  “It takes us too long to make cars,” Ford told him the first day. “We are beginning to get good materials, but we are not moving ahead as fast as we should…. That’s what I want you for.”17 Ford and his engineers had figured how the assembly line worked. Knudsen’s ultimate feat was to figure out why it worked, and how to make it a continuous process.

  He started with materials.

  “Don’t lay anything down if you can help it,” Bill Smith used to tell him. “Whatever you put on the floor you have to pick up again. Try to keep things moving until you get them to the shipping room.”

  Knudsen realized that the key to mass production was not uniformity or even speed. It was creating a continuous linear sequence that allowed every part to be fitted where and when it was needed, while keeping costs down by growing the volume instead of skimping on materials. Knudsen had found the key to the economy of scale underlying all industrial manufacturing. “In other words,” as Knudsen liked to explain it, “the less complex parts were, the easier they were to make; the easier to make, the less the cost; the less the cost, the greater the demand.” It was a guaranteed formula for success and profit.18

  Ford had developed his assembly line to make a single product. Knudsen would show him how it could be used to make any product, anywhere. He was happy to explain the process in his gruff Danish accent to anyone willing to listen—including later the president of the United States.

  “First determine what machinery should be used,” he would say. “Next decide where every machine tool is going to be placed.”

  Then he would spread out a blueprint with the floor layout. “Be sure the flow of materials coincides with the sequence of operations,” so there was no wasted motion or unnecessary steps. Finally, once you have your machines and operations and materials all in a row, “be certain all noses are pointed in the right direction,” he warned—so there were no bottlenecks and no need to back and fill in order to complete the job.19

  What other Ford engineers had made seem complicated and mysterious, Knudsen revealed as simplicity itself. Henry Ford caught on at once. He sent Knudsen out to set up Ford production assembly lines around the country, from Buffalo to Los Angeles. By 1916 Ford was operating twenty-eight branch factories, most of them developed by Knudsen.20 Knudsen also found just the architect he needed for his factory plans in Albert Kahn, a poor immigrant like himself with a positive genius for industrial architecture. Kahn had revealed that gift in 1907 in his factory building for Packard—the nation’s first modern factory with great cathedral-like windows that flooded the shop floors with sunlight—and then with Ford’s Highland Park plant.

  Kahn understood the core elements of the Knudsen formula. “If you wanted to buil
d a factory,” Knudsen explained, “the thing to do was to make a layout of your machinery, and the flow of material, and then build a building around it”—instead of the other way around.21 In all, Kahn would erect more than one thousand plants for Ford. Ford factories sprang up in Chicago, Boston, Indianapolis, St. Louis, Memphis, Atlanta, Portland, Seattle, San Francisco, and Los Angeles. Knudsen would go on to do the same in Europe, while Kahn would even lay out the plans for a plant in the Soviet Union, based on Highland Park.22

  Together Knudsen and Kahn made the Ford emblem a universal symbol of America’s industrial might. When on a chilly January morning in 1941 engineers set to survey the land on the far edge of San Francisco for what would become Henry Kaiser’s Richmond shipyards, their one glimpse of civilization was the Ford Motor Company sign rising high above the marshes.

  Knudsen was grateful for his opportunities at Ford. They enabled him to build his own home on Moss Avenue in Highland Park and to buy a car for his wife, an all-white Model T with black-rimmed wheels.23 He enjoyed the constant challenge of new assignments, including building Eagle boats for the Navy during World War I—Knudsen’s first experience of contract work for the federal government. In fact, Ford made him head of all the company’s wartime production. When the big Dane scrounged up hard-to-find steel for Ford plants during the wartime steel shortage and devised a way to mass-produce Ford’s Liberty aircraft engine cylinders, Ford made him his corporate production manager. He raised Knudsen’s salary to a robust twenty-five thousand dollars, with a 15 percent annual bonus.24

  An industry that had produced fewer than 90,000 automobiles in 1910 was now making ten times that number. Two in three were made by Ford.25 He and Knudsen had triggered a second industrial revolution based on mass production, one that lowered costs by making more, not fewer, of a product—and one that ruthlessly weeded out the old and obsolete to make way for the new.

  But there were also problems at Ford. The old man ran his company like a Renaissance court, with partner James Couzens, Henry’s son Edsel, production chief Pete Martin, labor relations head Harry Bennett, and Martin’s assistant Charles “Cast-Iron Charlie” Sorensen jockeying to be the current favorite. Then there was the paternalism that sometimes chafed. Any employee who wanted to buy his own Model T had to get permission from a Ford company officer. Even getting Ford’s famous five-dollar-a-day wage, an employee had to prove he was married and taking good care of his family, or, if single, that he was either the sole support of next of kin or able to “prove his thrifty habits.” At one point Ford hired a team of investigators to check up and report on the home life of his employees. Knudsen talked him out of it, and the files were burned.26

  The fifty-seven-year-old patriarch didn’t just believe he knew better than his workers (one reason he later resisted unions so long and so fiercely). He also believed he knew better than his customers. This was the issue that first drove the wedge between Knudsen and Ford.

  Nearly a million Model T’s were on American roads, and there were more in Ford’s lots and showrooms. In 1915 every second car in America was a Model T. Knudsen sensed that with the war’s end and the return to peace, Americans’ demand for automobiles would soar—as would their demand for a more advanced car than the old Tin Lizzie.

  Knudsen had some sketches made for a new car design and showed them to Ford. They could begin production at the River Rouge plant where they had built the Eagle boats, he explained, while finishing up the Model T line at Highland Park before converting over to the new car there.

  Ford looked over the drawings. He noted that it was heavier than the Model T and had a gearshift like the more expensive models of his competitors. What color? he asked. The customer would choose, Knudsen said.

  Ford digested this. Model T’s, after all, came in only one color: black. He asked, “How long will it take you to get into production on this new model?”

  “A few months, maybe six.”

  “How long will it take you to get into production on the Model T?” Meaning at River Rouge.

  “Sixty days,” Knudsen said.

  Ford handed back the sketches. “There’s your answer,” he said, and walked away.27

  Ford never mentioned the subject again. Neither did Knudsen. But after he helped Ford through an economic downdraft in 1920, when every division of General Motors except Buick and Cadillac had to lock its gates and Ford had to cut prices from $575 to $440 per car, he began to sense Ford’s trust slipping away. Ford saw in Knudsen less of an employee than a rival. Then one day he learned Ford had told some employees to ignore one of Knudsen’s directives. Knudsen drafted a simple letter of resignation and dropped it on the desk of Henry’s son Edsel.

  Early the next morning, Henry Ford marched down to the River Rouge plant. There, amid the sounds of rivet guns and grinders and lathes and the hum and click of conveyor belts,‡ Ford and Knudsen had their final confrontation.

  “Edsel tells me he has a letter from you, saying you are resigning.”

  “Yes, Mr. Ford,” said the ever courteous Knudsen.

  “What’s the matter, William?” Ford demanded.

  “Well, Mr. Ford, I’ve thought it over very carefully, and I’ve made up my mind to quit.”

  “Now, William, you can’t do that,” Ford protested. “You’re tired, so go away and take a rest. Take two or three months.”28

  But Knudsen didn’t want a rest. He wanted out of Ford. The old man stormed out, and although he sent Knudsen’s mentor William Smith back to try to dissuade him, Knudsen could not be moved. On April 1, 1921, Knudsen left the Ford Motor Company and his salary of fifty thousand dollars a year—plus the 21 percent bonus. He had almost no savings. Most of his money went to various Detroit charities or to his family back in Denmark. His wife knew their situation was precarious but also knew that tensions with Ford had been steadily mounting. She simply hugged him and said, “Now we can have some peace around this place.”29

  The auto industry was stunned. Knudsen never told Ford why he had decided to leave, but Ford told friends at a dinner party why he had finally decided to accept the resignation of his wizard of production—the man who had propelled Ford sales from $90 million to more than $680 million.

  “I woke up one morning to the realization that I was exhausting my energy fighting Mr. Knudsen,” he said, “instead of fighting the opposition. Now I can concentrate my energies.”30

  What was Ford’s loss, however, was about to become General Motors’ opportunity.

  News of Knudsen’s resignation came as a surprise to everyone. But one man took particular notice. He was Alfred P. Sloan, the new executive vice president of General Motors. Sloan had a hell of a mess on his hands, and wondered if Knudsen might be the man to help out.

  Sloan was something of an anomaly in the rough-and-tough world of self-made automobile men. He came from a bookish and genteel family, with a father who owned a successful coffee-roasting company on Hudson Street in New York and a brother who was a professor. But early on, young Alfred became fascinated with machinery. Like Knudsen, he started with bicycles (his one childhood photograph shows him astride a high-wheel 1886 Columbia Light Roadster). He ended with the noisy, oil-smeared but reliably rhythmic workings of the automobile.31

  His company, Hyatt Roller Bearings, had been bought up by Billy Durant in one of his last great waves of acquisitions for General Motors (another was Dayton Engineering Laboratories, better known later as Delco). Sloan’s twin devotion to superior engineering and the bottom line had turned it into one of the smoothest-running companies in the Northeast, and a major supplier of roller bearings to Ford. When Durant asked him in the spring of 1916, “Is Hyatt for sale?” Sloan had been shocked. He had always imagined if anyone made a bid, it would be Ford.32

  Sloan liked Billy Durant. As Walter Chrysler said, “Billy could charm the birds off the trees.” There was no doubt the man also had a gift for the automobile business. It was Durant, not Henry Ford, who first asked himself the crucial quest
ion, What if everyone in America wanted an automobile? It was Durant who set himself the task of making that possible. “I look forward to the day when we’ll make and sell a million cars a year,” he would tell his friends, and meant it.33

  To make his dream come true, Durant bought up every company connected with making automobiles he could and made them part of General Motors. They ranged from those of Ransom Olds and David Dunbar Buick to Cadillac of Detroit, which Durant bought from founder Henry M. Leland for $4.75 million in cash. He bought Chevrolet, a company founded by strapping, handlebar-mustached Swiss immigrant Louis Chevrolet, who learned to build cars in France and loved to race his own machines, beating the famed Barney Oldfield three times.34

  Then there was a car-body-making plant in Flint owned by the four Fisher brothers, and another called Pontiac Body, which Durant merged with Oakland Motors. There was also former bicycle enthusiast Albert Champion’s company, which made a spark plug that suited Buick’s high-speed, high-compression valve-in-head engine so well Durant bought the entire operation and moved it to Flint, where it became AC Spark Plugs. There was a company in Saginaw that made steering wheel mechanisms, called Saginaw Steering Gear. There was even a refrigerator company called Frigidaire.35

  But while Billy Durant could create, he could not administer. Although GM had a financial department, the boss never paid attention to the numbers it generated. Sitting on GM’s Executive Committee, Sloan watched as Durant’s foibles and mercurial temper drove out first Walter Chrysler as president (“He banged the door on the way out,” Sloan wrote in his autobiography, “and out of that bang came the Chrysler Corporation”), and then William Nash, who, like Chrysler, set up his own company in direct competition with GM.36

  Twice powerful outside investors had to save General Motors from going under. Then the 1920 economic downdraft that almost swept away Ford, the best-selling automobile company in the world, toppled Durant’s awkward conglomerate like a cardboard garage.