Durant also acquired a dozen or so automotive parts and accessories companies. He bought the Hyatt Roller Bearing Company of Newark, New Jersey, for $13.5 million, mostly in the form of GM stock. As part of the deal, the firm’s chief executive and principal owner, Alfred Sloan, joined GM as head of the United Motors Group (composed of parts and accessories subsidiaries) and member of the board of directors. Durant paid $8 million ($3 million of it in GM stock) for Dayton Engineering Laboratories Company (Delco) of Dayton, Ohio, the firm that produced the first electronic “self-starter” for Cadillac. Again, the deal included the exclusive services of the company’s founder, Charles Kettering, who became the head of GM’s research division.
In his biggest such deal, Durant paid $27 million for a 60 percent interest in Detroit-based Fisher Body Company, which had been providing about three hundred thousand bodies a year to GM and other major companies, including Ford. Founded by brothers Frederick and Charles Fisher, who were joined later by their younger siblings William, Lawrence, Edward, and Alfred, the company continued to operate independently but built bodies exclusively for GM. In 1926, GM paid $200 million for the remaining 40 percent of the company.
In assembling all the pieces of General Motors, Durant proved himself to be a daring and visionary entrepreneur. But he was a terrible administrator—impetuous, disorganized, unpredictable, and either unwilling or unable to delegate authority, attributes that led his two most experienced division heads, Cadillac founder and president Henry Leland and Buick president Walter Chrysler, to leave GM in a huff to start their own companies. Leland launched the Lincoln Motor Company and intended to compete with Cadillac in the luxury car market.
Durant was also an inveterate gambler whose reckless forays into the stock market ultimately led to his downfall and almost destroyed the company. When the U.S. economy experienced a short, sharp recession in 1920, a decline in car sales caused a precipitous drop in GM’s stock price, from $420 a share to $20. In a desperate attempt to shore up the price, Durant secretly began buying up shares on 10 percent margin through friends and private syndicates, pledging his stock as collateral in loans to buy more, which was not illegal at the time. When the price continued to drop, he was undone. GM’s bankers and board of directors stepped in and bailed out Durant and the company to prevent the total collapse of the stock. They stopped the price slide at $12, but Durant lost a personal fortune of $100 million and was forced to resign from the company he’d created and always referred to as “my baby.”
For all its stock woes, GM was still the second-largest manufacturer in the United States (behind Ford), worth $350 million, with eighty thousand employees spread across thirty-five cities and annual sales of nearly $600 million. And as car sales climbed back to record levels over the next two years, the company’s new VP of operations, Alfred Sloan, developed a broad plan to bring order to the unruly behemoth that Billy Durant had built. The main problem, as Sloan saw it, was that the five automobile divisions operated too autonomously, with little regard for the best interest of the corporation as a whole. He cited as an example the “irrationality” of individual division heads setting price ranges that either overlapped or, in the case of Oldsmobile and Oakland, were virtually identical. Which meant the divisions were competing against one another for the same customer, an indication, Sloan said, that GM had “no clear-cut concept of the business.”
By the time Sloan was named president in 1923, he had instituted an executive committee to rein in the division heads and had overhauled the pricing structure by segmenting the automobile market along socioeconomic lines, with each of GM’s five divisions focused on a different segment. Chevrolet (with cars priced at $600–$795) was priced for the blue-collar workingman in need of basic transportation. Oakland, later named Pontiac ($900–$1,200), appealed to the middle-class merchant or manager able to spend a little more for a modicum of comfort and quality. Oldsmobile ($1,200–$1,700) aimed for the rising executive looking to show off his new status. Buick ($1,700–$2,500) targeted the well-to-do established professional, a doctor or lawyer. And Cadillac ($2,500–$5,000) spoke to the wealthy gentleman for whom quality was paramount and price of no importance. (Female drivers would not factor into the company’s marketing plans for several more decades.)
In his 1924 annual report to shareholders, Sloan put forward the new price structure as an organizing principle that would guide the company into the future. “The ideal for which the corporation is striving is to have a car for every purse and purpose,” he said.
The pricing revamp lessened competition among GM’s divisions, but it didn’t solve the problem of competing with Henry Ford, whose massive production capability and sales volume allowed him to produce a Model T profitably at a price several hundred dollars less than the cheapest Chevrolet. Indeed, Ford appeared to be “unbeatable by any ordinary means,” Sloan admitted later in his memoir. “No conceivable amount of capital short of the United States Treasury could have sustained the losses required to take away volume from him at his own game.” Still, Sloan thought he saw a chink in Ford’s armor.
As the world’s preeminent industrialist, Ford remained defiantly committed to his original business model of building a simple, durable, and economical car with no extras, no trimmings, no color even, only black, because black paint was the cheapest and dried the fastest. But in an industry that was evolving rapidly, his stubborn resistance to change was beginning to put his company at a disadvantage. Cadillac had introduced Charles Kettering’s revolutionary electronic starter in 1912, but Ford did not make it available on the Model T until 1920, and then only as an option. GM began offering its customers financing through its General Motors Acceptance Company (GMAC) in 1916, and within five years was financing two-thirds of the cars it sold. But Ford refused to get into so-called captive financing for more than a decade because he thought buying a car on time was foolish. “It always seemed to me that putting off the day of payment for anything but permanent improvements was a fundamental mistake,” he explained. In 1924, Kettering’s GM research department and DuPont Laboratories introduced a breakthrough in automobile paint called Duco, a lacquer that held more pigment than traditional varnish and enamel paints, dried much faster, didn’t fade in sunlight, and allowed for the economical application of a wide variety of deep, rich colors. Most of the auto industry quickly adopted Duco, but not Ford, who stood pat with his basic black enamel.
Ford’s intractability blinded him to some fundamental changes that were occurring in the industry. Thanks in large part to the success of his Model T, the market was approaching the point where every American who could afford a car already had one, and new car sales were beginning to level off. “The growth in the motor vehicle market depends on the ability of the lower income brackets to purchase used cars, not necessarily new ones,” said the National Automobile Chamber of Commerce.
As Alfred Sloan later wrote in his memoir, “When first-car buyers returned to the market for the second round, with the old cars as a first payment on the new car, they were selling basic transportation and demanding something more than that in the new car. Middle-income buyers, assisted by a trade-in and installment financing, created the demand, not for basic transportation, but for progress in new cars, for comfort, convenience, power and style. This was the actual trend of American life.”
And the trend did not favor Ford’s static business model. Sloan put it concisely: “Mr. Ford’s concept of the American car market did not adequately fit the realities after 1923.”
Sloan and his GM executive committee began discussing the idea of competing with Ford’s unchanging product by putting out a constantly changing product. They knew that consumers were replacing their cars, on average, once every seven years. What would make them do it more often, say, every five years? Or three?
The most obvious answer was better-looking, more stylish cars. The typical mass-produced auto of the time was—again, thanks to Ford’s Model T—a nondescript, somber, clunky-looki
ng contraption with all the sex appeal of a bank clerk in a cheap, ill-fitting suit. It wouldn’t be hard to produce a more attractive vehicle than that. Packard and Pierce-Arrow were doing it all day long. The real difficulty, the GM executives knew, lay in doing it on a grand scale at a reasonable cost. How could they make a Chevrolet with the sleek hand-finished look of a Packard but without the high price tag? And then, how could they change the look every couple of years or so without bringing the factories to a halt for retooling?
In one such discussion, Lawrence Fisher, who had just been named to the executive committee as president of the Cadillac division, talked about his recent visit to California to meet with the state’s largest Cadillac dealer. While in Los Angeles, he’d met a young car designer who was “doing amazing things” making custom car bodies for movie stars.
“I think we should talk to him about coming to work for us,” he told Sloan.
4
The Cadillac Kid
Harley Earl’s name may not have meant much to the president of General Motors, but he was something of a celebrity on the West Coast—the boy wonder of the California car business. The Los Angeles Times had trumpeted his professional debut at the 1919 Los Angeles Auto Show: “Perhaps the most startling local models at the show are those built by the Earl Auto Works, whose sensational Chandler and Marmon are attracting huge crowds. These cars are designed by Harley J. Earl, a local man who only three or four years ago was broad jumping for the University of Southern California and who has sprung into prominence as a maker of motor fashions almost over night.”
Both cars had been built for wealthy clients, according to the Times article, which couldn’t have been more celebratory if it had been a paid advertisement:
The gray Marmon four passenger sport model, sold to a New York banker for $7,000, is something of a tribute to local builders, the said banker preferring to go to the expense of having the car built out here then shipped East because he liked the way they build their automobiles on the Coast. The Chandler town car, in blue, is the classiest thing of its kind ever shown on the Coast or any place else. It is surely distinctive, being a low slung creation; so low that a good sized man can stand alongside and look right over the top, yet there is sufficient room inside to keep one from being cramped. Earl claims there is six inches of clearance between his head and the top when sitting down, and Mr. Earl is a young man of considerable altitude.
He was also a young man with considerable social connections, notably his former Stanford classmate Norman Chandler (no relation to the car), whose father, Harry Chandler, owned the Los Angeles Times. The newspaper became an unabashed booster of Harley’s career, following up a few months later with a similarly gushy report that Harley had designed a new automobile that “seems to surpass even the wonderful creations of the recent automobile show.” This one was for E. L. Doheny Jr., the local heir to an immense oil fortune. A satin-finished gray four-passenger body mounted on a Pierce-Arrow chassis, the car boasted English wire wheels and side-mounted coach lamps “by the Tiffany Company of New York” that added a “very foreign touch,” according to the newspaper, which pronounced the vehicle “pretty nearly the classiest creation of the year.”
Doheny was so happy with what Harley created that he posed for a publicity photo seated behind the wheel with his smiling designer sitting next to him. The Times published the picture with the caption, “If you wouldn’t like to own this car, you can’t be satisfied.” (A decade later, Doheny and his personal assistant were found shot to death in Greystone, his fifty-five-room Beverly Hills mansion, a crime that remains one of Los Angeles’s great unsolved mysteries.)
The fact that J. W. Earl wasn’t mentioned in either of the Times articles spoke to the changes that had occurred in the Earl family and business since Harley dropped out of Stanford after his mother’s death.
J.W.’s remarriage in 1916 created a fissure in the family that grew worse when his new wife, Nellie, gave birth to a son, Henry, a year later. Fair or not, the older Earl offspring saw their stepmother as a controlling, hypercritical harpy who had bewitched their fifty-one-year-old father and aggressively favored her own child. Billy bore the brunt of her opprobrium, though his sister, Jessie, did her best to shield him. The three older boys—Harley, Carl, and Arthur—were less affected by the new family tensions because they were now grown men and no longer lived in the big house on Hollywood Boulevard. Harley moved out not long after J.W. and Nellie’s wedding and married Sue Carpenter, a stunning blonde who had graduated from Hollywood High School several years behind him and then attended USC.
Harley, Carl, and Art continued to work with their father at Earl Automobile Works, with Harley operating as second in command. “Those were the days when Santa Barbara and Pasadena were great winter resorts,” Harley recalled nearly four decades later. “Well-to-do people would come from all over the country and a lot of them drove foreign cars. They began to bring them to me when they’d develop trouble and I’d patch them up. But first I crawled all over them and took down every dimension. I was thinking of what I’d like to build for myself. Before long, I began to get a good idea of what it took to make a good-looking car that was also comfortable.”
He also developed a process for making factory-built cars look custom-made by repainting them more interesting colors and adding wire wheels, nickel-plated radiator shells, side-mounted extra tires, and trunk racks. He called it “dolling them up.”
In 1918, J.W. became ill and was unable to work for six months. While he was away, Harley took over the shop and transformed it. “When my dad came back, we must have had half a million dollars’ worth of special bodies in our place,” he recalled. J.W. was “fairly irate” when he found that Harley had turned his business into “a glorified hotrod shop,” according to the Detroit Free Press.
A few doors down the street from the Automobile Works on the stretch of South Main Street that had become known as “Auto Row,” Cadillac dealer Don Lee had been paying close attention to the goings-on at his neighbor’s shop. Lee was GM’s exclusive Cadillac distributor in the state of California, with dealerships in San Francisco, Sacramento, Oakland, Pasadena, and Fresno in addition to Los Angeles. As such, he had a clear-eyed view of the luxury car market.
Cadillac had earned a reputation under its founder, Henry Leland, for unsurpassed engineering and outstanding styling and comfort. But Lee was keenly aware that many wealthy car enthusiasts viewed GM’s luxury offering as a poorer man’s Packard or Pierce-Arrow, a step or two down from the hand-finished excellence of those competitors. And now superwealthy buyers like E. L. Doheny Jr. were looking for something even more eye-popping than a Packard. They’d order a Cadillac chassis from Lee, have it delivered to Earl Automobile Works, and then pay two or three times the price of a Cadillac to have Harley create a one-of-a-kind body that was guaranteed to elicit “oohs” of appreciation on the street.
Two months after the Doheny photo in the Times, Lee made a bid to buy the Automobile Works. The terms of his offer remain unknown, except that it was contingent upon Harley’s remaining in place as chief designer. J.W. accepted the deal at a price that allowed him to retire comfortably at the age of fifty-three. “Dad felt he was too old to start a new activity,” Harley explained. Earl Automobile Works became Don Lee Coach and Body Works with the mere hoisting of a new sign on the building. The only other change was the foreword to the shop’s sales brochure. “Gone are those picturesque days of the gilded coach, the dappled grays and the silver mounted harness,” it now read. “Gone, too, are the top-hatted coachman, the old family victoria and the high-backed carriage.”
Gone as well was J.W.’s old-fashioned “Earl Guarantee of Satisfaction,” replaced by his son’s more contemporary assurance that Don Lee designers stood ready “to express your tastes and ideas so that your coach may be an expression of your own individuality.”
No one in 1920s America expressed their individuality more extravagantly than Hollywood’s silent film stars
. Show-offs by nature and flush with more money than they’d ever imagined making, they flocked to Don Lee, where they formed a sort of salon of exotic-car lovers with Harley as their host—charming and larger than life, an artist at home in the world of welders and mechanics.
“They’d come in with a Rolls Royce or a Bentley and say, ‘I want a sports car made,’” Harley told the Detroit Free Press. “I’d take them through my plant, get an idea what they wanted and then do a sketch.”
One of his earliest celebrity patrons, Mary Pickford, asked him to design a roadster body on a Cadillac chassis for her growing collection of expensive cars. It seems that under all the curls and lace, “America’s Sweetheart” was a car fanatic, a habitué of racetracks and auto shows who became a familiar sight bombing around Los Angeles in a flashy cream-colored Maxwell roadster she named Fifi.
Pickford’s husband, Douglas Fairbanks, her sister, Lottie, and their ne’er-do-well stuntman-actor-producer brother, Jack, became Harley’s customers, as did her good friend Mabel Normand. Hailed as “the queen of comedy” for her appearances in numerous Keystone Cops movies, Normand wrote, codirected, and starred in a car-racing movie called Mabel at the Wheel, in which she did her own driving while being filmed by a camera she mounted on the front of the car. Off screen, she was a self-proclaimed speed demon who owned both a Stutz Bearcat and a Mercer Raceabout similar to the one Harley had driven to win that 100-mile race his father only found out about after the fact, except that Normand’s Mercer was fitted with a dressing table and makeup mirror that folded into the driver-side door.
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