A glance at the General Motors price list that year shows that we had still to realize the ideal or theoretical list set up in the 1921 plan. The list for the still-dominant touring cars in 1924 was as follows: Chevrolet, $510; Olds, $750; Oakland, $945; Buick "4," $965; Buick "6," $1295; and Cadillac, $2985.
The most obvious gaps in this line were between the Cadillac and Buick "6" at the top and between the Chevrolet and Olds at the bottom. To fill the gap between the standard Cadillac and the Buick "6," I proposed that Cadillac study the possibility of making a family-type car to sell at about $2000, which eventually resulted in the famous La Salle car, introduced in 1927. From the strategic standpoint at that time, however, the most dangerous gap in the list was that between the Chevrolet and the Olds. It was big enough to constitute a volume demand and thereby to accommodate, on top of Chevrolet, a competitor against whom we then had no counter. It was therefore an important gap to fill both offensively and defensively; offensively because there was a market demand to be satisfied there, and defensively because competitive cars could come in there and come down on Chevrolet as we planned for Chevrolet to come down on Ford. On this reasoning, we made one of the most important decisions in the history of General Motors, namely to fill the gap above Chevrolet with a brand-new car with a new six-cylinder engine. We had come to believe from an engineering standpoint that the future favored sixes and eights. However, to make the strategy effective, it would be necessary to fill the gap with a car that also had some volume economies. Otherwise, because the new car would draw some volume away from Chevrolet, reducing its economies, a loss would result for both cars. We concluded, therefore, that the new car must be designed in physical co-ordination with Chevrolet so as to share Chevrolet's economies, and vice versa.
The idea for such a car was first discussed by Mr. Hunt, Mr. Crane, and myself a few months after I became president. We had learned something of value in trying to make dual-purpose bodies and dual-purpose chassis for the copper-cooled and water-cooled engines in the period of uncertainty in those matters. We talked now about the development of a six-cylinder car based on the use, if possible, of such Chevrolet body and chassis parts as would fit the new design. As a "6," it would be a smoother-running car than the Chevrolet "4" and would require a longer wheel base, greater engine displacement and horsepower, and increased car weight. A longer and deeper frame, a heavier front axle, and a short-stroke six-cylinder L-head engine, proposed by Mr. Crane, were the principal new units in the design.
While the corporation's engineering committee worked on the design, I remained uncertain where to place the car in the divisional picture. Mr. Hannum, general manager of Oakland, wrote to me proposing that his division undertake the development phase of the work. My reply to him, on November 12, 1924, shows how I felt about the new car then, from the point of view of co-ordination with Chevrolet and of competition. I quote:
Your letter of October 11th reached me in Detroit but I did not have, you will remember, a clear viewpoint with relation to the so-called Pontiac car. I have been, in a way, up in the air on the Pontiac car development and did not reply to your letter although I read it over several times very carefully pending a crystallization of a viewpoint on what appeared to be the best policy to pursue.
I am thoroughly convinced, and have been from the beginning, that there was a place for such a car and, second, that if General Motors didn't go in there someone else sooner or later would. If the whole field was left to General Motors I do not know as I would be so anxious about it but, of course, fortunately for us, I presume it is not, therefore, we must give weight to what the other fellow is likely to do.
One very difficult thing has developed in all the discussions there have been and that is the tendency to get away from the Chevrolet part of the idea. Every time it comes up some one wants to make something different and the result of that is that if everybody had their way we would have a second Olds or probably an Oakland car, more likely a second Buick or Cadillac. In other words, we are never going to make a success I think you will agree with me unless we st[i]ck to the principle, namely, a Chevrolet chassis with a six-cylinder engine.
That being the case, I have definitely come to the conclusion that the only thing to do in order to work along the lines of least resistance is to have the development undertaken by the Chevrolet Engineering organization, because in so doing there will be every tendency to use what we can of Chevrolet as against the other method—the tendency to use something different, due to the natural and very proper tendency of an independent engineer to inject his own personality and ideas into the picture, perhaps to the detriment of the car but certainly not to the detriment of this particular development, which must follow along Chevrolet lines if we are going to capitalize Chevrolet components, plants and assembly plants, either at the beginning or at some future date when volume justifies same.
Therefore, I have been discussing the matter with Mr. Knudsen and feel that we should turn over to Mr. O. E. Hunt, his Engineer, all that we have accomplished, let him weigh it carefully, let him undertake to work out for us a six-cylinder engine along constructive lines, recognizing, as he does, what the picture has got to be. As a matter of fact, Chevrolet should be experimenting with engine developments on its own account and these two things should work along concurrently . . .
On the same day, I crystallized my thoughts on the subject in a report to the Executive Committee under the title, "Status of the Pontiac Car So-Called." I quote from this report the passages relating to costs, competition, co-ordination, and assignment in the corporation, these being the final questions to be resolved in a decision:
Mr. Brown has had his Staff develop some costs which, although not in any way conclusive, appear to demonstrate what we have felt was reasonable, namely, that even loading the cost with such overhead as it should logically carry, that is, on a basis of equal distribution with other items, there remains considering a fist price of something like $700, a profit which will give us a very excellent return on the capital employed. This data has been laid down using figures on the Olds engine, the cost of which we know to be excessive and which for that reason will probably not be used. Looking at the development from the standpoint of the economic cost or real profit to the stockholders, the result is very satisfactory and of such a nature as really requires us to go ahead.
In addition to the above, information not conclusive seems to indicate that one or two of our competitors are going to attempt the same thing which brings us to the consideration that although this development will probably take business from both Olds and Chevrolet, it will be better that we take business from our own Divisions than have competitors do so. It looks now as if both things would ultimately happen.
We have been working on this proposition for about a year and I am frank to say we have made little headway. It seems as if every time we bring it up for discussion that an uncertainty develops in the minds of the Executive Committee as to its practicability. I have come to the definite conclusion that we are never going to get anywhere along the lines we must proceed to make it a success if we have it developed by an independent engineering department or by the Oakland Division where it was originally started. I am further definitely of the opinion that the only chance for success is to have it developed in the Chevrolet Division. Under such auspices coordination as to the chassis will come about as a natural course of events and there will be no tendency to introduce this and that difference simply because the engineer wishes very naturally and properly to inject his own personality into the picture. In other words, it will logically follow a development it has got to follow if we are to come through at all.
The thing especially worth noting in this report is the consideration given to the question of co-ordinating the manufacture of one car with another. For the Pontiac represented the first important advance in co-ordinating the physical product in manufacturing. Physical co-ordination in one form or another is, of course, the first principle of
mass production, but at that time it was widely supposed, from the example of the Model T, that mass production on a grand scale required a uniform product. The Pontiac, co-ordinated in part with a car in another price class, was to demonstrate that mass production of automobiles could be reconciled with variety in product. This was again the opposite of the old Ford concept, which we persistently met and opposed at every turn. For General Motors, with its five basic price classes by car makes and several subclasses of models, the implication of the Pontiac idea was very great for the whole line. If the cars in the higher-price classes could benefit from the volume economies of the lower-price classes, the advantages of mass production could be extended to the whole car line. This gave new significance to the product plan of 1921, and was in fact eventually applied in varying degrees by all the General Motors car divisions.
The proposed Pontiac was assembled and road tested at Chevrolet and then assigned back to Oakland with full responsibility to that division for its final development, production, and ultimate sale as a companion car to the Oakland. We scheduled it for the model year 1926.
During the time of this development, another more or less independent event took place which was profoundly to influence the fortunes of the Pontiac, the Chevrolet, and the Model T. In 1921 Roy Chapin of the Hudson Motor Company had introduced the Essex coach at a price of $1495, or $300 above the Essex touring car.
This was a relatively smaller price difference for the closed body than had been the case for the lines of other manufacturers. By 1923 the Essex "4" coach had been reduced to $1145. Early in 1924 the Essex "6" superseded the "4" and came on the market at a price of $975 for the coach model, which was $125 over the touring-car price. In June of that year prices were increased to $1000 for the coach and $900 for the touring car. Then, beginning in 1925, Mr. Chapin cut the price of the coach model to $895, or $5 below the touring-car model. Nothing like that had ever been seen before in the automobile industry, and the Essex coach had a considerable vogue. This suggested that closed cars, priced on a volume basis, could in the future dominate even the low-price field.
Such a development doubtless was inevitable, but in fact the Essex competition stimulated us in two matters at once, first our general closed-body development, and second, our preparations for the forthcoming Pontiac car.
General Motors had already been changing over to closed bodies. On September 18, 1924, the Executive Committee "expressed the sentiment that our Managers should be cautioned to be very careful about open car schedules as the trend seems to be very rapidly turning to closed jobs." In October we raised the proportion of our production of closed cars from about 40 per cent, where it had been for most of that year, to 75 per cent for November. A year later, at the end of 1925, the proportion of closed-car production for the corporation as a whole was up to almost 80 per cent.
I do not recall that the Essex coach influenced the Pontiac program directly, but the Essex and the future Pontiac were clearly to be competitors, and in point of fact we designed our first Pontiac cars exclusively with closed bodies, a coupe and a coach.
In the Executive Committee meeting of September 30, 1925, I reported confidently: ". . . when the 'Pontiac' car comes out in December it will give us everything for which we have been working, namely, the lowest priced 6-cylinder car that is possible, constructed with Chevrolet parts."
At the Executive Committee meeting of October 21, 1925, I reported on the over-all situation of growing tension in the market. From the minutes of the meeting I glean the following: "Attention was called to the fact that the Essex is attacking the Chevrolet market from the top while the Ford Company (whose policy now seems to be that of improving the quality of its car rather than reducing the price) is a strong competitor on the other side."
The Pontiac went on the market on schedule for the model year 1926 with the coach priced at $825, that is, about halfway between the Chevrolet coach, priced at $645, and the Olds coach, priced at $950; and the gap in our car line was closed.
That event settled General Motors' basic car positions for many years. The Cadillac and the Buick were first and second from the top of the price pyramid. Chevrolet was always the base of the pyramid. The Oakland organization, which produced the Pontiac car, later became the Pontiac Division, and the manufacture of Oakland cars was discontinued. The Pontiac became a distinctive car in its own right while maintaining its original economies. That put Olds between Pontiac and Buick, making the basic price line: Chevrolet, Pontiac, Olds, Buick, and Cadillac, more or less as it is today.
I shall not deal here with the evolution of all the cars in the line in the 1920s. I observe only that Olds and Oakland were not very lively lines. Buick, though always basically strong, had its ups and downs. Cadillac, as always, was strong in its price class, though it was superseded as sales leader for a time, beginning in 1925. I pass over the interesting record of these divisions to concentrate upon the most important changes that took place in that period, namely, those in the low-price, high-volume area where we were seeking a position against Ford.
The last decisive element in this competition, I believe, was the closed body, which itself was by far the largest single leap forward in the history of the automobile since the basic car had been made mechanically reliable. The closed body expanded the use of the automobile by making it a comfortable all-year-round vehicle, and added substantially to the price of the product. The 1925 Model K Chevrolet coach sold for 40 per cent and the sedan for 57 per cent more than the roadster.
Although the Essex was the first spectacular demonstration of volume production of a closed car at a price comparable to an open car, the price of both Essex cars was still relatively high. The Essex threatened the Chevrolet from the top, but was not really in the low-price field. Although Chevrolet in 1925 was still higher priced than Ford, it had a very good position in the low-price closed-car field, partly because of its relationship to Fisher Body.
A few words about Fisher Body, which had the responsibility for building most of General Motors' car bodies. General Motors, as I said earlier, acquired a 60 per cent interest in the Fisher Body Corporation in 1919, with arrangements that Fisher supply all General Motors' passenger-car body requirements that it could. In 1926 we purchased the remaining 40 per cent interest in Fisher Body and absorbed it into General Motors as a division. There were a number of reasons for doing this. As early as February 3, 1925, in the Executive Committee, "Attention was called to the fact that Chevrolet's sales are at present limited by its ability to produce new models, which is largely determined by the ability of Fisher Body Corporation to supply closed bodies." There were operating economies to be gained by co-ordinating body and chassis assemblies, and with the closed body becoming dominant in the industry, it seemed sensible to bring the body operation entirely under the General Motors roof. And it was felt desirable also to bring the Fisher brothers into closer relationship with our organization.
The story of the Fisher brothers is a remarkable family saga which I hope they will sometime record. I do not know it far back by personal association, since I came into the industry through the chassis, so to speak, while they were fabricating bodies. But I knew of them as skilled artisans with a background in the carriage industry. The Fisher Body Company was organized in 1908, the Fisher Closed Body Company—with an order for 150 Cadillac bodies—in 1910, and the Fisher Body Company of Canada in 1912. The three companies were brought together in the Fisher Body Corporation in 1916. They had made bodies for several automobile companies, including Buick and Cadillac. I first came to know Fred J. Fisher well when he came on the General Motors Executive Committee in 1922, and he was a valued member of that early team. In 1924 he was made a member of the Finance Committee. In that year Charles T. and Lawrence P. Fisher were made members of the Executive Committee and in 1925 I appointed the latter to head Cadillac. The other brothers, William A., Edward F., and Alfred J., remained with Fisher Body Corporation, with William A. as its president. Lawrence
P. Fisher played an outstanding part in the evolution of styling in General Motors, a story I tell in a later chapter.
As the closed body developed rapidly from 43 per cent of the industry in 1924 to 72 per cent in 1926 and 85 per cent in 1927, Chevrolet's percentage of closed-body production rose from about 40 per cent in 1924 to 73 per cent in 1926 and on to 82 per cent in 1927. A big change in every respect.
The rise of the closed body made it impossible for Mr. Ford to maintain his leading position in the low-price field, for he had frozen his policy in the Model T, and the Model T was pre-eminently an open-car design. With its light chassis, it was unsuited to the heavier closed body, and so in less than two years the closed body made the already obsolescing design of the Model T noncompetitive as an engineering design. Mr. Ford, nevertheless, put closed bodies on the Model T and sold 37.5 per cent of his production in this form in 1924. Although the market for closed bodies rose sharply in the next three years, he sold only 51.6 per cent in 1926 and only 58 per cent in 1927, while Chevrolet's sales of closed bodies during that period rose to 82 per cent.
From 1925 to 1927 the Chevrolet, as its cost position justified a lower price, became more competitive with Ford, as we had hoped, the Chevrolet two-door coach going in that period progressively from $735 to $695 to $645 to $595, while the Ford Tudor Model T went from $580 in 1925 to $565 in June 1926, and to $495 in 1927. Thus the old strategic plan of 1921 was vindicated to a "T," so to speak, but in a surprising way as to the particulars. The old master had failed to master change. Don't ask me why. There is a legend cultivated by sentimentalists that Mr. Ford left behind a great car expressive of the pure concept of cheap, basic transportation. The fact is that he left behind a car that no longer offered the best buy, even as raw, basic transportation.
My Years With General Motors Page 20