My Years With General Motors

by Alfred P. Sloan Jr.

  No attempt will be made here to present detailed individual histories of our products outside of the automobile. The stories of our pioneering in the diesel business, of our development of the Frigidaire line of products, and of our aviation business are the subjects of this chapter.

  It would be nice to be able to trace a coherent pattern in General Motors' ventures outside the automobile business, but chance and other factors that entered the picture make it difficult to do so. We had, of course, some natural interest in diversification which might afford us a hedge against any decline in automobile sales. But we never had a master plan for nonautomotive ventures; we got into them for different reasons, and we were very lucky at some crucial points. We got into the diesel field, for example, because of Mr. Kettering's special interest in diesel engines, dating back as early as 1913, when he was experimenting with diesel power in an attempt to find a suitable engine for the generator in a farm-lighting set he wanted to manufacture. Mr. Durant put General Motors in the refrigerator business for reasons of his own; but it is clear, as I shall show, that we would have abandoned Frigidaire in its earliest years had it not been for an odd combination of events. And we got into aviation because we thought the small airplane would be an important competitor of the automobile.

  It is worthy of note, I believe, that these were relatively new products at the time we first invested in them. There was no diesel locomotive capable of providing mainline service on American railroads; the electric refrigerator was only an impractical gadget, and the future of aviation was anybody's guess. In other words, we did not simply use our financial and engineering resources to "take over" new products outside the automobile business. We got in early—as long as forty-five years ago—and helped develop them. Our operations in these fields have been expanded, but we have gone into nothing entirely new in more recent years except for the purchase in 1953 of the Euclid Road Machinery Company (manufacturer of earth-moving equipment), and war and defense production.

  Diesel Electric Locomotives

  General Motors entered the locomotive industry in a small way in the early 1930s. At the time, railroads in the United States seemed to have very little interest in diesel locomotives except for special switch-engine use. Yet in less than a decade the diesel was outselling the steam locomotive, and General Motors was outselling all other locomotive manufacturers combined. Because we led the diesel revolution, with tremendous savings to the railroad industry, the Electro-Motive Division today enjoys a large part of the locomotive market.

  There were, I think, two principal reasons for this rather spectacular progress. The first was simply that we were more tenacious in our efforts to produce lightweight, high-speed diesel engines suitable for over-the-road use on American railroads. The second reason was that we brought to the locomotive industry some of the manufacturing, engineering, and marketing concepts of the automobile industry. Until we began making diesels, locomotives had always been produced on a custom basis, with the railroads specifying their requirements to the manufacturers in considerable detail so that virtually no two locomotives on American railroads were alike. But almost from the beginning we offered the railroads a standard locomotive—one that we were able to produce in volume at a relatively low price. In addition we guaranteed performance at a lower net cost per ton mile than was possible with the use of steam engines, and we made good our guarantees by maintaining a service organization and providing standardized replacement parts. This program revolutionized the locomotive industry and secured our own place in it.

  There was, of course, nothing new about the principle of the diesel engine at the time that General Motors first became interested in it. Rudolph Diesel, a German inventor, received the original patent for this kind of engine in 1892 and built a successful unit with one cylinder and twenty-five horsepower in 1897. As early as 1898 a sixty-horsepower, two-cylinder diesel unit was built in this country. These early devices embodied essentially the same compression-ignition principle as the engine in a modern diesel locomotive.

  The four-cycle diesel engine works this way: On the first suction stroke of the piston, the engine draws in air and nothing else. The next stroke of the piston compresses the air to something like 500 pounds per square inch, creating a temperature of around 1000 Fahrenheit. Just before the end of the compression stroke, oil is injected as a fine spray into the combustion chamber under high pressure. The hot air ignites this fuel. The third and fourth strokes of the piston provide the power and exhaust—as in a gasoline engine. However, the diesel requires neither a carburetor nor an electric ignition, and thus has an edge in simplicity over the gasoline engine.

  As this description indicates, the diesel converts its fuel directly into a source of energy. In this respect it is unlike the steam engine, whose fuel is used only to create steam, and unlike the gasoline engine, which vaporizes its fuel before it can be ignited. Both of these engines are less efficient than the diesel—which has in fact the highest thermal efficiency of any heat engine in everyday use. The modern diesel uses a distilled petroleum fuel oil, but other fuels have been used in the past. Rudolph Diesel himself had intended to run his engine on powdered coal, but his engineer associates persuaded him at the outset to use petroleum oil in order to avoid the problem of scoring. Powdered coal was used later experimentally by others attempting to follow Diesel's original intentions, and other fuels have been tried. But petroleum oil remains the standard diesel fuel.

  Despite its great efficiency, the diesel engine was for many years quite limited in practical use. With few exceptions the engines were large, heavy, and slow running, and so found their greatest application in power stations, pumping, and marine use. They weighed 200 or 300 pounds per horsepower, and this, indeed, was the heart of the problem—to build a powerful, fast-running diesel of relatively small size.

  I have said there was nothing new about the principle of the diesel engine. I might add that there were no unknown principles concerning any component part of the diesel-powered locomotive that General Motors created. What was lacking was the imagination, the initiative, and the talent to work out the problem to the point of practicability.

  Europeans had been working on this development since the second decade of this century and had some diesel railcars and locomotives in operation by 1920. By 1933 a few U.S. diesel manufacturers had successfully built a number of diesel engines for switcher service. Since weight was an advantage in switchers, and since they showed economies over steam in operation, they met with some success. However, attempts to build diesel engines for mainline passenger and freight applications in this country were not successful, since in these cases weight, power, and size are critical. Bringing the diesel engine down to more manageable proportions, with a low weight-per-horsepower ratio, was the principal concern of our engineers.

  In a large organization like General Motors it is seldom possible to assign to any one person the credit—or blame—for initiating some major undertaking. But in the case of the diesel, Charles F. Kettering comes very close to being the whole story. The General Motors Research Corporation, forerunner of our present Research Laboratories, was testing diesel engines, under Mr. Kettering's close scrutiny, as early as 1921. After Mr. Kettering bought himself a diesel-powered yacht in April 1928 these engines became a major preoccupation of his. As anyone who knew him might have guessed, when on his yacht he was more often tinkering in the engine room than relaxing on deck. He was already convinced that the diesel did not have to be unreasonably large and heavy.

  I became interested in the possible development of the diesel engine for General Motors at about the same time. If my memory serves me correctly, I remember dropping in one day at the Research Laboratories in Detroit and saying to Mr. Kettering: "Ket, why is it, recognizing the high efficiency of the diesel cycle, that it has never been more generally used?" In his characteristic way he said the reason was that the engine would not run in the way that the engineers wanted it to run. I then said to him: "Ver
y well—we are now in the diesel engine business. You tell us how the engine should run and I will see that available manufacturing facilities are provided to capitalize the program." Of course, saying that we were in the diesel business was a manner of speaking. I meant I would support him in the organization.

  In 1928 Mr. Kettering and an engineering group at the Research Laboratories began a series of comprehensive tests on the diesel engines then being offered by various manufacturers. An analysis of these tests, combined with a thorough study of current scientific literature on diesels, finally led Mr. Kettering to conclude that the solution to his problem was the so-called two-cycle diesel engine. The two-cycle engine was nothing new at that time. Indeed, the truly remarkable feature of Mr. Kettering's conclusion was his conviction that the two-cycle principle was ideally suited to the smaller diesel engines. Though it had been thoroughly explored before, it generally had been rejected as unworkable except in large, slow speed engines.

  In the two-cycle engine the intake of fresh air and the exhaust of burned gases take place at the same time. One stroke out of every two is a power stroke instead of one out of four, as in the four-cycle engine. The result is an engine that has less than one fifth the weight and one sixth the size of its predecessor four-cycle engine of equivalent power output. But this smaller device created some awesome engineering problems. For one thing, the two-cycle engine as developed by Mr. Kettering called for much greater precision in the fuel-injection system. Specifically, what the Research Laboratories were called upon to produce—and finally did produce —was a unit fuel injector whose parts fitted with a clearance of 30 to 60 millionths of an inch and an injector pump which built up pressures as high as 30,000 pounds per square inch as it forced fuel through holes 10 to 13 thousandths of an inch in diameter drilled in the injector tip. The two-cycle engine also has to have an external air pump. This became another major project, but finally Research delivered what was needed: a light, compact device able to pump large quantities of air at a pressure of about three to six pounds.

  By the end of 1930 it was clear that the two-cycle engine was practical and that Mr. Kettering had achieved a major breakthrough in diesel technology. It was also clear that the time had come to provide the manufacturing facilities I had promised him. We looked around for the special facilities that were needed. Our buildup consisted principally of the purchase of two companies: the Winton Engine Company and the Electro-Motive Engineering Company, both of Cleveland, Ohio.

  Winton was a manufacturer of diesel engines, primarily for marine uses (it had built Mr. Kettering's second set of yacht engines), and also of certain kinds of large gasoline engines. ElectroMotive was an engineering, design, and sales firm with no manufacturing facilities of its own. The two firms had had an intimate business relationship for almost a decade. During that time ElectroMotive and Winton had built a substantial business and reputation in the design and sale of gas-electric railcars, primarily for use on short-haul runs. Building the engines for these railcars was a major part of Winton's business during most of the 1920s. Relative to steam, however, the operating economies of gas cars kept diminishing, and toward the end of the decade Electro-Motive began to find itself in trouble trying to continue to sell the gas-electric car, which in turn had its effect on Winton.

  Against this background Winton and Electro-Motive began, around 1928 and 1929, to look seriously into the possibility of using diesel power on the railroads. Harold Hamilton, then president of Electro-Motive, encountered the same problems of fuel injection that Mr. Kettering was then wrestling with. Mr. Hamilton was also trying to develop a small diesel engine. With the technology then available to him, the smallest diesel he could build was one weighing about sixty pounds per horsepower. A locomotive, he felt, required an engine weighing no more than twenty pounds per horsepower, with a crankshaft speed of about 800 revolutions per minute. Though there were a few available diesel engines which closely matched these specifications, Mr. Hamilton did not feel that they could stand up to the performance and reliability requirements which he felt were necessary for successful railroad application. Furthermore, Mr. Hamilton realized that the diesel he wanted would require metal tubes and joints able to last for long periods of time even when they had to carry fuel under pressures of 6000 and 7000 pounds to the square inch. Winton was not able to develop this kind of metallurgy and Mr. Hamilton knew of no place in the industry where it was available. He finally concluded that it would take about $10 million of venture capital to solve his and Winton's problems—perhaps $5 million to overcome the technological obstacles, and another $5 million or thereabouts to provide the plant and equipment needed for manufacturing facilities.

  It was speedily made apparent to Mr. Hamilton, and also to George W. Codrington, the president of Winton, that they would not be able to raise the money at the banks and that there was certainly no such venture capital anywhere in the railroad industry. (Neither the carriers nor the locomotive manufacturers showed enough interest in the diesel to undertake the research necessary.) At about this time, however, Mr. Kettering became acquainted with Mr. Codrington as the result of ordering Winton engines for his second yacht. He bought these engines simply because Codrington agreed, though reluctantly, to put in a new kind of injector that one of the Winton engineers was developing at the time, and which Mr. Kettering felt held great promise. I don't know who first suggested the idea of Winton's coming into General Motors. In any event, we began to negotiate formally in the late summer of 1929. Agreement on the purchase of Winton had almost been reached in October when the great market crash temporarily confused the picture.

  But there was never any serious question in our minds that Winton was a good buy for us. For one thing, we were not at this point certain about the future of the U.S. automobile market, which had not been expanding during the late 1920s. Consequently, we had a natural interest in any enterprise within our scope that offered us a reasonable opportunity to diversify.

  The case for buying Winton was stated by John L. Pratt, vice president, in a memorandum which he addressed to the Operations and Finance committees, dated October 21, 1929, as follows:

  We have had under consideration for some time past the possible purchase of the Winton Engine Company located at Cleveland, Ohio, which subject has been informally discussed at previous meetings.

  It is believed that the Diesel Engine development in this country has arrived at a point where it has become commercial and is probably on the eve of considerable expansion. The Winton Engine Company is unquestionably the outstanding Diesel engine manufacturer in the United States . . .

  The Winton Company has a capable management and would not require any additional personnel immediately. If the business continues to expand, as we believe it will, we may think it desirable to add to its personnel another good executive, perhaps as Assistant General Manager or Sales Manager . . .

  . . . The purchase of this company will give us a vehicle for capitalizing the developments of our research organization along engine lines and will assist materially in keeping us abreast of Diesel engine developments. The business should also be reasonably profitable, and if expansion continues, as most of our engineers believe it will, we should ultimately make a good return on the investment required to purchase the Winton Company . . .

  Finally, in June 1930 the Winton operations became a part of General Motors with Mr. Codrington continuing as president. Winton's principal market continued to be in large marine engines. (Note 19-1.)

  Five months after the Winton acquisition we also acquired ElectroMotive and again the old management of the company continued to run its affairs. During the negotiation to acquire Electro-Motive, Mr. Hamilton and Mr. Kettering continued to hold many lengthy discussions about the challenge of the lightweight diesel engine. In his 1955 testimony before a Senate subcommittee Mr. Hamilton described the tremendous enthusiasm of Mr. Kettering for the job of developing a diesel engine: ". . . it was just like ringing a bell to a fire horse,
" he recalled. Mr. Hamilton, in fact, made it clear that he was not attracted to General Motors merely by the corporation's great economic strength. ". . . we had more than that in General Motors," he commented. ". . . of the companies that I knew at that time, many of them with plenty of financial resources, none of them had the mental approach to this problem that was necessary to take it at that stage that it was in then, and the courage that went along with it to move it to its point of success. At least that was our opinion in the matter." For a while Winton and Electro-Motive operated about as before. Mr. Hamilton and Mr. Kettering both had the impression that it would take a considerable length of time to build a commercially acceptable diesel engine for the railroads. Meanwhile, Mr. Kettering devoted his efforts, in large measure, to perfecting the two-cycle diesel engine. By 1932 Mr. Kettering decided he could build a two-cycle, eight-cylinder engine that would produce about 600 horsepower. Since Mr. Kettering's new engine would have a good edge over existing four-cycle engines in the 600-horsepower range, particularly in the weight-per-horsepower ratio, his engine seemed worth building.

  At about this time we were planning our exhibit for the Century of Progress World's Fair, which was scheduled to open in Chicago in 1933. Our exhibit was to be a dramatic display—an automobile assembly line in actual operation, producing Chevrolet passenger cars. We needed a source of power for the assembly line and decided that two of Mr. Kettering's proposed 600-horsepower diesel engines would do the job.

  When we first conceived the idea of powering our World's Fair display with the new diesel engine, what we had in mind was to get a good long look at the engine under actual operating conditions. We were primarily concerned with proving that Mr. Kettering's basic design was a good and practical one; we did not anticipate that the commercial applications would come as soon as they did. But before the engine for the display was even finished, our perspective on this matter was drastically altered.