My Years With General Motors

by Alfred P. Sloan Jr.

  In short, none of the three aircraft markets seemed inviting to General Motors. Furthermore, I said, if General Motors got into the business of manufacturing complete aircraft, we might jeopardize the other aviation business of the corporation. Our Allison Division was, and would continue to be, a major producer of airplane engines and certain aircraft accessories. In general, these accessories, with comparatively minor variations of an engineering and production character, would be applicable to many kinds of planes and might normally account for some 40 to 45 per cent of the cost of a complete airplane. The sales potential in this area of the market was substantial. But in order to realize this potential, an accessory manufacturer would need the engineering co-operation and confidence of the aircraft manufacturers who were his customers. If we were producing complete aircraft ourselves, we would have difficulty establishing such a relationship with our customers. How could we expect an airframe manufacturer engaged in developing a new plane to disclose its forward designs to an accessories producer who had the opportunity to make use of these designs as a competitor? In short, it seemed incomprehensible to me that we could expect to sell our accessories successfully and at the same time compete with those to whom we must sell them by producing one or more types of airframes ourselves.

  Discussion of this subject continued for some time and on August 17, 1943, our postwar aviation policy was formally defined in the following resolution of the corporation's Policy Committee:

  First: The corporation should not contemplate the production of complete airplanes in either the military or transport areas.

  Second: The corporation should develop as complete a position in the manufacture of accessories as its capacity and circumstances make possible.

  The reader will observe that we did not, at this time, specifically exclude the possibility of our manufacturing a small plane for private business and personal use. We still doubted that volume production of such a plane would be possible on a basis attractive to General Motors; however, we felt we could not ignore the possibility completely. In my report I recommended that we establish a program to keep abreast of technological developments in the small-plane business, but we later discarded the idea as impracticable. However, North American Aviation did go on to design and manufacture a plane for individual transportation, the Navion.

  The formulation of our postwar aviation policy naturally had considerable bearing on our attitude toward our investments in North American and Bendix. During the war North American became one of the nation's leading airframe manufacturers, and we concluded that a continued investment in the company would be no less damaging to General Motors' accessory business than direct manufacturing of airframes ourselves. Furthermore, it became increasingly clear that General Motors could not employ its mass-production techniques effectively in the airframe industry. We decided, therefore, that it would be in the best interests of both General Motors and North American to dispose of our holdings in the company at some appropriate time.

  Bendix was a somewhat different proposition. This company already held a strong position in the aviation accessories field, and its activities fitted in very nicely with our own scheme of operations and postwar policy objectives. At one point we gave very serious study to acquiring Bendix outright and operating it as a consolidated division or subsidiary of General Motors, but decided against it. We gradually arrived at a general policy of disposing of minority interests, and in 1948 sold our interests in North American and Bendix. The capital thus released was employed in our rapidly expanding automotive operations.

  Our contributions to Bendix and North American during the period of our association were not in the engineering and technological fields. They were in the more intangible area of business management. To the extent that our management philosophy was imparted to these companies and to the aviation industry in general, General Motors, I think, made a tangible contribution to that industry.

  Chapter 20 - Contributions To National Defense

  The problem of defending the United States against aggression has come to seem a permanent one; and as each year passes, it grows increasingly hard to envisage a time in which we would not have to maintain our vast military establishment. For General Motors—and for hundreds of other corporations—defense work appears to be one of the inevitable facts of modern corporate life. In the years 1959 through 1962 General Motors' defense business amounted to between $350 million and $500 million a year, or about 3 per cent of sales—important, but relatively not large, and not comparable to what General Motors has done in time of war. The history of our defense work has several episodes —each largely unrelated to its predecessor.

  Four distinct periods are involved. The first was World War I, during which we were one of the important manufacturers of aircraft engines for the army. Our total military production during this period was only $35 million, an insignificant amount by modern military standards. No serious effort was made to "mobilize" the corporation during the war; we produced automobiles without interruption, and it was possible to regard our military work as a kind of temporary sideline. When World War I ended, so did our military activities. For more than a decade, we had very little defense work and certainly no awareness that we would one day be the world's largest private producer of military "hardware."

  This unexpected distinction was achieved during the second period—the years just before and during World War II. In this period we produced an incredible $12 billion of military goods. Most of this production was compressed into a few years, during which we were fully mobilized for war. Between February 1942 and September 1945 we did not make a single passenger car in the United States. Our earlier experience in World War I was largely irrelevant to the problems we faced in World War II, and, in fact, I can think of only a few lessons learned during the first war that we were able to apply during the second. One of these, for example, concerned the rigid control of inventories and commitments in line with definite contractual agreements.

  The third period, 1950-53, covered roughly the Korean War. Here again we faced a new situation. At the end of World War II virtually all our military business had ceased, and we had looked forward to a time in which we could devote ourselves substantially to making automobiles and other commercial products. However, we proposed to continue close liaison with the armed services, and we in fact continued to produce a few military items. This work was concentrated largely at Allison, which, in addition to its aircraft engines, began development and production of powershift transmissions for military tactical tracklaying vehicles. Thus in June 1950, when the Korean crisis brought new demands for defense production, Allison already had delivered substantial quantities of jet engines for fighter aircraft and was producing tank transmissions. In addition, several divisions were also at work on special engineering and development assignments. This time, the proposition we faced was a sort of "partial mobilization": the government reimposed controls on wages and prices, and it restricted the use of some materials (for example, rubber and copper), but we were allowed to continue most of our commercial business. As it turned out, our military products accounted for no more than 19 per cent of our business during the Korean War. However, we were kept alert to the possibility that full mobilization might be reimposed, and we had to plan accordingly.

  The fourth period, the present one, is quite unlike all the previous periods, and it has required still another adjustment on our part. For one thing, military technology has become so advanced as to require new modes of production and new kinds of research. Meanwhile, the concept of total mobilization has become almost archaic. We know now that we will never again be fully organized for war. It is generally conceded that if there is another major war, it will be over in a relatively short period of time.

  Our World War II experience with full mobilization is nevertheless of some interest, I think. Few people realize the dimensions of the task imposed on us then, or the manner in which we performed it.

  To begin with a ra
ther obvious point, General Motors turns out a different product during a war. In this respect we are unlike other military contractors, whose conversion to war production involves relatively minor changes. Clothing manufacturers, for example, can make uniforms for the armed forces; builders can make barracks or set up housing for defense workers; airframe manufacturers make more bombers and fewer passenger planes. But only a small proportion of General Motors products have wartime applications. When we were mobilized during World War II, we were obliged to transform the great bulk of our operations almost completely, to learn rapidly and under great pressure how to produce tanks, machine guns, aircraft propellers, and many other kinds of equipment with which we had no experience at all. We had to refit many large plants and retrain hundreds of thousands of workers. One statistic is perhaps worth citing: of the $12 billion of military equipment turned out by General Motors during World War II, more than $8 billion was represented by products that were entirely new to us. We were able to do this because we were decentralized: each division sought its own contracts; the yearly model change gave them know-how and flexibility.

  In another way, too, perhaps a more fundamental way, our business was transformed by war. When we were mobilized for war, we operated under a new set of economic and other rules. General Motors at war became an entirely different organization from the one that sells automobiles in peacetime. Even the people who comprised the organization were different. More than 113,000 of our employees left us to go in the armed forces during World War II, and several of our highest executives served as administrators in Washington, prominently Mr. Knudsen, who was made one of the heads of war production. This change in the character of General Motors took place quite suddenly, for the most part; the bulk of the change was compressed within a few months of the year 1942.

  Our assignment for that year, stated briefly, was to transform the world's largest automobile company into the world's largest manufacturer of materials for war. The dimensions of this task became clear immediately after Pearl Harbor. In the one month of January 1942 we received orders for some $2 billion of military goods— a figure which approximately equaled the total of all the orders we had got during the entire defense program until then. During the rest of 1942 the government placed $4 billion more of military orders with General Motors. Thus by the end of that year we had received military orders totaling more than $8 billion—an immense figure even for a corporation like General Motors, whose record prewar total output, achieved in 1941, was $2.4 billion. In other words, we had not only to alter the character of our product, but to increase our total output substantially.

  Fortunately, we had done some advance planning which enabled us to take on this vast problem systematically. In June 1940 our Policy Committee, of which I was chairman, had begun to study the problems that would arise in General Motors if the corporation were converted to war production on a large scale; and in the ensuing months the committee made some basic policy decisions. One of these decisions concerned the size of our wartime operations. We concluded that, since General Motors then had about 10 per cent of the nation's facilities for manufacturing metal products, the corporation should endeavor to produce about this proportion of the nation's armaments in wartime. In retrospect, it is hard to say whether we ever did achieve this goal. Altogether, the United States government spent some $150 billion on military hardware during World War II. General Motors sales of war materials came to $12 billion, which would represent only 8 per cent of the total. However, I believe that our costs were lower than those of the average war contractor for similar products.

  Another basic decision reached by the Policy Committee concerned our form of organization during wartime. Three members of the Policy Committee—Mr. Wilson, president of the corporation, and Mr. Bradley and Mr. Hunt, executive vice presidents—were made a "triumvirate" to handle all operations policies. Then in 1942 we formally set up the War Administration Committee to take charge of all war operations for the duration. The committee had twelve members, later increased to fourteen, including the triumvirate who remained as its senior operating members.

  At the same time we concluded that our basic organizational policy—the policy of "decentralized responsibility with co-ordinated control"—should stand in war as in peace; for flexibility was as important in the one as in the other. This decision meant that in war the primary responsibility for contracting, pricing, and production rested with each individual division of the corporation, subject, of course, to our over-all policies. The decision also meant that our system of corporate integration, under which the various divisions "subcontract" work to one another, should be preserved. This system of internal subcontracting worked very effectively under wartime conditions, even though it required a great effort of co-ordination. For example, the M-24 tank, which Cadillac began to produce in 1944, had parts supplied by seventeen other divisions.

  We also decided that we would continue to rely heavily on outside subcontractors. We had business relations with some 13,500 peacetime suppliers. During the war, this figure grew steadily, and at the peak of our wartime production, in 1944, we were using the facilities of some 19,000 subcontractors.

  Another policy decision, designed to increase the efficiency of our production effort still further, called for the transfer of plant and equipment within the corporation, and to some extent outside it. During the war years, almost 5000 machines belonging to General Motors, and almost 2000 belonging to the government, were transferred from one division to another. We leased several of our plants to other corporations that were able to make better use of them; and we in turn acquired the use of many other plants for varying periods. (At the beginning of 1945, eighteen of the 120 plants we were operating in the United States were leased from the government, and another six were leased from others.)

  I should mention one other very important decision reached in 1940. We decided that General Motors should seek to perform the most complicated and difficult production assignments.

  As I have already indicated, most of the military products we made were entirely new to us. But the problem was not merely one of production; the military sciences were then advancing so rapidly that we were also obliged to design, and redesign, much of the equipment we produced. Toward the end of the war, we prepared a list of all General Motors military products, broken down by design origin. The breakdown based on net orders received through 1944 was as follows:

  Twenty per cent were war products designed by General Motors in co-operation with the armed services. These products included light, medium, and heavy tanks, tank destroyers, armored cars, aircraft engines and propellers, and the amphibious "Ducks." Thirty-five per cent were designed by others but incorporated some major design or production-engineering improvements by General Motors. These included the .30and .50-caliber Browning machine guns, the M-1 carbine, and the Wildcat fighter and Avenger torpedo-bomber planes.

  Seventeen per cent were peacetime General Motors products winch we were able to redesign for military use; for example, trucks, diesel engines, and electrical equipment.

  Thirteen per cent were peacetime General Motors products which could be put to war use with no major design changes; for example, commercial trucks, certain gasoline and diesel engines, ball bearings, and spark plugs.

  Fifteen per cent were military products designed by others and produced by General Motors with no major design changes; for example, the Pratt & Whitney aircraft engine, B-29 and B-25 sub-assemblies, and ammunition items.

  The upshot of these figures is that of all the military products which General Motors manufactured during the war, it designed, at least in part, 72 per cent. The table below, based on deliveries through 1945, shows the great diversity of our military output.

  This tabulation suggests yet another of our big problems: the continuous change in our "product mix" all during the war. In part, the change was caused by the rapid rate of obsolescence of all weapons. In 1944 the War Department reported that it was "not no
w using a single weapon in the same form or design as before Pearl Harbor." In part, the steady change in our output was caused by the changing tactical requirements of our fighting forces. Scheduling production under these circumstances was a hair-raising problem. Consider a typical situation: In January 1945 our Delco Products Division, which produced, among other things, landing gear struts for the B-24, was told that production of the struts for the month of April should be 95 sets. In February the April target was suddenly raised to 285 sets. In March the April target was cut back to 60 sets. On April 1 the target was raised again to 120 sets. Actual production for the month of April was 85 sets—a remarkably close approximation of the final target, considering the scheduling problems Delco Products had been confronted with.

  Despite these difficulties, our record of meeting contract delivery schedules was exceptionally good, on the whole. To enable the top officers of the corporation to check continually on this record, we devised two kinds of production progress reports, to be sent to us regularly by each division. The first progress report, which was prepared monthly, that this information in it: total production to date on all major war contracts; anticipated production on these contract for each of the following for months; expected total production at the end of these four months, compared with contract requirements; termination date of each contract; peak contract requirements; peak capacity of present facilities. In addition, detailed explanations had to be given for any recent expected contract delinquencies.

  The other report covered the short-term prospects. This report was submitted semimonthly, and it compared the actual production through the fifteenth or the end of the month with the schedules set up by the armed forces at the beginning of the month. Again, the division had to report and explain every contract delinquency, however minor, for every product, however unimportant. I may add that our delinquencies were relatively few; furthermore, the large majority of them were caused by circumstances over which we had no effective control—labor or material shortages, lack of shipping instructions, changes in government requirements, and so forth.