INDUSTRY: THE AUTOMOBILE
Model T
In 1908, when Henry Ford was forty-five years old and the president of the Ford Motor Company, he had an idea that must have made both his associates and competitors think he had taken leave of his senses. The Ford organization, following conventional wisdom, had been manufacturing the Ford Model N, a large, popular car. Auto producers generally believed that the car demanded by the public would be large and expensive, since by definition the auto attracted only those in the upper-income groups and would never be produced for the average man who could not afford it. But now Henry Ford wanted to manufacture a small car to sell to a mass
market at a low price—less than $1,000—an invitation to bankruptcy, the industry thought. Before the Model T went out of production, nearly twenty years later, the lowest-priced model was sold for $260. While his associates had predicted disaster, by 1920 Ford was the most famous figure in the industry, and his Model T the best-known car in the world, seventeen million having been sold.
The Industry
The industry was in great flux during the decade. Dozens of small firms merged with others or ultimately left the automobile field completely; from 1900 to 1930 some two thousand or more auto manufacturers were in business for at least some period of time. Such well-known smaller companies as Packard, Reo, Nash, Velie, Hudson, Franklin, Duesenberg, Chandler, Pierce-Arrow, and Rickenbacker enjoyed a reasonable share of the market, though many of them ultimately failed. Generally these smaller firms concentrated on the high-price/high-quality end of the market.
The "Big Three."
Yet the smaller companies were of course overshadowed by the giant auto manufacturers. Founded in 1908 by William C. Durant, General Motors rose during the 1920s to the top of the industry, followed later in the decade by the Chrysler Corporation under the leadership of Walter P. Chrysler; both GM and Chrysler were amalgamations of other companies. The "big three"—GM, Chrysler, and Ford—accounted for well over 70 percent of the auto market, GM controlling about 40 percent of the market, and Ford and Chrysler dividing roughly 30 percent, though, as the decade passed, Ford began to lose its market share to the other two major firms. The greatest area of competition took place in the low end of the market occupied by Ford's Model T and, later, Model A; GM's Chevrolet; and Chrysler's Plymouth—the three most widely sold cars.
THE DAY THE NEW CARS ARRIVED
IN TOWN
Interest in the automobile during the 1920s was immense, perhaps because there was no television or because in those days the various makes were quite distinctive. The introduction of new models in the local dealers' showrooms was a major event.
September and October were the magic months. In small communities new Fords, Chevrolets, Plymouths, and other makes would begin arriving at the local freight yard to be unloaded and driven to the nearest dealer, the process supervised by small boys and hangers-on. And when the cars reached the showroom, everyone came to see them. Brochures illustrating the new models were stacked on tables, and, in some cases, passed rather sparingly to those who gave some appearance of being likely customers (small boys not included).
Loud, sometimes heated discussions would get under way over the advantages of hydraulic brakes, "free wheeling," the "turret top," "knee action," "synchro-mesh" transmission, and so on.
Salesmen boosted the youngsters into front seats, opened hoods, pointed out improvements, and suggested trial spins. Serious negotiations began when a prospective customer and a salesman stepped outside to look over the trade-in.
The scene at the high-priced auto showrooms was a bit different from that at the Ford or GM dealerships. Packard, Cadillac, and Lincoln customers were older and clearly more affluent, the salesmen more restrained. The automobile brochures for upscale cars were more attractive and often expensively produced. Later they would become collectors' items.
GREENFIELD VILLAGE
Henry Ford had many interests—farming, social issues, food fads, politics, and pacifism among them. During a legal proceeding he once said that history was "bunk," but around 1919 he began to re-create history on his property near Dearborn in the neighborhood of his River Rouge plant. Greenfield Village became over the next twenty years a potpourri of American history: a somewhat unstructured living museum filled with tradesmen's and workers' shops and historic buildings of various kinds (including Thomas Edison's laboratory moved from New Jersey and rebuilt on the Greenfield Village site). Ford and members of his family spent some $37 million on the project, far more than they put into their other philanthropic endeavors, such as the Ford Hospital and the Berry Schools.
Source:
William S. Adams, Henry Ford and Greenfield Village (New York: Stokes, 1938).
Evolving Structure
By middecade the industry had begun to change in structure and emphasis. The number of makes in autos had substantially declined, and while emphasis was still put on stylistic innovation and mechanical developments, increased attention was being given to management and the business side of the industry. The major figure of this era was Alfred P. Sloan Jr., who became the dominant personality in General Motors after the departure of Durant. Unlike many of the early giants of the industry, Sloan was a professional engineer, a graduate of MIT. Under Sloan, GM became a model of
the modern corporation, just as Ford earlier had become the symbol of mass production and low prices.
Related Industries and Social Phenomena
The auto industry produced a vast network of related industries and generated significant social phenomena. Among the related businesses were car dealerships; parts and supplies manufacturers and retailers; petroleum-products developers; service stations and garages. Highways were built linking almost every city, town, and village in the nation. As automobile ownership made distances easier to cover, schools were consolidated, and factories moved to the countryside. The suburbs mushroomed well beyond the limits of the electric interurban system, which had fueled the original exodus to the suburbs. Investments in motel-like tourist courts, gas stations, and other auto-support facilities rose to enormous levels by the end of the decade.
Profits
In the middle and later parts of the decade the auto industry was hugely profitable almost across the board but especially noticeably in the largest firms. When Henry Ford introduced his Model A (put on the market in November 1927 but generally unavailable to the public until 1928), the company took in more than fifty thousand orders (with cash deposits) before the model had entered production or many buyers had even seen the car. In the same year, GM declared a $65,250,000 dividend on its 17.4 million shares, the largest dividend in any firm to that date. Dealers throughout the nation prospered. And while most attention was fixed on the big three's low-priced entrants, demand was substantial and increasing, as the market boomed at the high-priced end of the market: Packard, Pierce-Arrow, Cadillac. In large cities some imported models, such as Rolls-Royce and Bentley, were seen. Other than these extremely expensive autos, the imported auto was unusual, and the idea that Japan would someday be a major supplier of U.S. cars would have been laughable.
Automania
Public interest in the automobile was intense. During the tooling-up period for the Model A, for example, rumors swept the country about what it would look like and how much it would cost. Newspapers ran pictures purporting to show the new car. On the day the Model A was introduced, Ford ran fullpage ads in every paper in the country, and its introduction attracted worldwide attention. Crowds in showrooms were immense. In New York the major dealer had planned a show in the Waldorf Hotel lobby but had to shift to Madison Square Garden instead. In small towns the status symbol over the next few months was to own a new Model A. Although the old Model T was being phased out, it actually remained in production for months to fill orders, and Model T replacement parts were manufactured for years. Yet a new day had dawned. No longer would a standard model remain in production for twenty years, as the Model T had done, and, in fact, the Model A, of which about a million units were produced a year, was replaced by Ford in 1932.
Strength of the Industry
The auto industry would soon become the largest industry in the nation. In 1926, 4.2 million units were produced, and by 1930 the figure rose to 5.3 million. It has been estimated that by 1927 Americans owned 39 percent of all the autos in the world. Yet Ford and GM were also very strong in Europe where, during the 1920s, they established branch plants or bought interests in European firms. Even later, in the depth of the Depression, the demand for autos remained amazingly strong, partly because of the availability of used cars and partly because auto producers were among the first industries to adopt installment-buying plans.
MR. QUALITY
Henry M. Leland (1843-1932) was one of the great figures in the development of the automobile during the first two decades of this century. Beginning as a toolmaker, he rose to executive positions in several corporations, and in 1908 he won the Dewar trophy for automotive excellence. He had reassembled three knocked-down Cadillac automobiles that had interchangeable parts, and all ran successfully for five hundred miles or more.
After he sold Cadillac to General Motors in 1909, Leland and his son continued to operate the Cadillac division, where they introduced many technical improvements. In 1917 he left GM to manufacture Liberty airplane engines, and in 1920 he began to produce the Lincoln.
At first the Lincoln was well received, largely on the basis of Leland's reputation for high-quality work. But although the car was superbly engineered, it was poorly styled, and its production was slowed by Leland's insistence on quality and by the economic decline in the early 1920s. The car was soon in difficulty.
In 1922 the Lincoln passed to the control of the Ford Motor Company. Henry Ford and Leland were both strong-willed men. The Lelands, who had been slated to manage Lincoln production under Ford direction, soon left. Edsel Ford had the automobile restyled in the late 1920s and in the late 1930s produced the Lincoln Continental, a superb car. Henry M. Leland is remembered as the man who created the top cars of both the GM line (Cadillac) and the Ford line (Lincoln Continental).
Sources:
Ottile M. Leland and Minnie M. Millbrook, Master of Precision: Henry M. Leland (Detroit: Wayne State University Press, 1966);
Allan Nevins and Frank E. Hill, Ford: Expansion and Challenge, 1915-1933 (New York: McGraw-Hill, 1957).
DISTRIBUTORSHIPS, DEALERSHIPS, AND AGENCIES
The structure of the automobile industry in the 1920s was built on the needs of the market at the time. High-priced cars sold poorly in small towns and rural areas, where incomes tended to be low. The Packard, with its $1,200 price tag, was beyond the reach of the lower-income groups, and in a small town or rural community there might be only three or four Packard owners. Ford, Chevrolet, and Plymouth, on the other hand, were popular in these markets, and it was a small town, indeed, that lacked dealers in these lines.
General Motors, Ford, and Chrysler produced makes of cars to fit most budgets, but the independents—Packard, Reo, and Pierce-Arrow, for example—found it impossible to maintain dealerships in small towns. These manufacturers relied instead on distributorships that were located in large cities and supplied cars to small-town "dealers," often local service stations or garages that sold on order only.
Dealers, in contrast, held franchises and maintained inventories of automobiles. The market was sliced up by the individual manufacturers into segments; a medium-sized town might have dealerships that sold two lines of cars only: Chevrolet/Oldsmobile or Buick/Cadillac or Buick/Pontiac, for instance. Chrysler might match up Dodge/Plymouth or Chrysler/Plymouth or Dodge trucks/Dodge cars or De So to/Plymouth. Ford, since it had so many dealers and sold so many Ford cars and trucks compared to smaller companies, generally preferred dealers to offer the full line of Ford vehicles, although it was clear that few Lincolns would be sold in small communities. Only in the largest cities would one find dealers selling luxury cars and, only in the very largest, dealers in Rolls-Royce, Mercedes-Benz, and other costly European cars.
Source:
Charles E. Edwards, Dynamics of the United States Automobile Industry (Columbia: University of South Carolina Press, 1965).
Source:
Alfred D. Chandler Jr., Giant Enterprise: Ford, General Motors and the Automobile Industry (New York: Harcourt, Brace & World, 1964).
