My Years With General Motors

by Alfred P. Sloan Jr.

  . . . To meet the challenge of the market place, we must recognize changes in customer needs and desires far enough ahead to have the right products in the right places at the right time and in the right quantity.

  We must balance trends in preference against the many compromises that are necessary to make a final product that is both reliable and good looking, that performs well and that sells at a competitive price in the necessary volume. We must design, not just the cars we would like to build, but more importantly, the cars that our customers want to buy.

  The dramatic events in the market of the late 1950s and early 1960s are a good example of how rapidly consumer tastes can change—and also an example of the industry's ability to respond to such changes. In 1955, when car sales reached a new high, 98 per cent of the industry's volume was accounted for by standard size domestic cars. The balance of 2 per cent, representing fewer than 150,000 cars, included some forty-five foreign and smaller domestic lines. By 1957 foreign imports and the domestic smaller cars had increased to 5 per cent of the total. In 1957 it still appeared far from certain that the demand for smaller cars would continue to grow, but the possibility had been recognized by General Motors for some time, and the designs for such cars had already been initiated. As early as 1952, Chevrolet had, with the approval of central management, set up a research and development group charged with the task of developing such a car, which would be ready if and when demand rose sufficiently to justify volume production. To some extent, this activity was a projection of work done prior to 1947, when the development of a small car had been actively considered by General Motors.

  The design of the Corvair was made final in late 1957, and the car was introduced in the fall of 1959. Other manufacturers introduced new small cars at about the same time. Later, we added other lines, including the Buick Special, the Oldsmobile F-85, and the Pontiac Tempest, all introduced in i960, the Chevy II, introduced in 1961, and the Chevelle in 1963. While the smaller cars were designed to appeal to the economy-minded customer who wanted lower initial cost and lower costs of operation, it soon became apparent, somewhat contradictorily, that the customer had not lost his taste for the comfort, convenience, and styling of the regular-size cars; he was ordering his smaller car with better interior appointments, convenient and useful accessories, and equipment such as automatic transmissions, power steering, and power brakes, which he had previously specified on the regular-size car. The Corvair Monza, featuring automatic transmission, bucket seats, special upholstery, and deluxe trim, was brought out in i960, and almost from its introduction accounted for well over half the Corvair sales. Moreover, it soon became evident that the customers wanted the smaller cars in the same range of models and body styles that were available in the regular cars—that is, they wanted hardtops, convertibles, and station wagons as well as two and four-door sedans. The addition of these smaller cars to the wide range of standard size cars has provided the customer with an unprecedented variety of models from which to choose.

  Certainly the late 1950s and early 1960s saw the most dramatic change in the car market since the 1920s, when the closed body rose to dominance, the Model T came to an end, and the upgrading of cars began. The events of the past few years in the car market, I believe, have validated the General Motors product policy that we formulated in 1921. John Gordon, president of General Motors, recently observed that our slogan of "a car for every purse and purpose" is as appropriate as ever; indeed, we have never offered our customers greater variety and choice than we do today. In the 1963 model year the industry offered 429 models of domestically produced cars, compared with 272 in 1955; General Motors alone had 138 models in 1963, compared with 85 in 1955. Of this, Mr. Gordon said: "Taking into account all of the colors available and all of the optional equipment and accessories we now offer—power assists, air conditioning, tilt steering wheels, autronic eyes and so on—we could, in theory at least, go through a whole year's production without making any two cars exactly alike. Our objective is not only a car for every purse and purpose but, you might say, a car for every purse, purpose and person."

  The trend toward the smaller car was clearly visible after 1957, and by 1959 foreign imports were accounting for 10 per cent of industry sales in the United States, while domestically produced smaller cars accounted for an additional 10 per cent. The foreign imports declined in relative importance after 1959, and in 1963 were accounting for about 5 per cent of the total market. However, sales of the domestically produced smaller cars continued to increase, and after i960 accounted for about one third of the entire market. Meanwhile, part of the formerly low-price group has become established in the medium group.

  In the face of these trends, some of the domestic manufacturers reduced their offerings in what were traditionally called the medium-price ranges. The Edsel, introduced late in 1957, was discontinued in 1959; the De Soto, which had a long history at Chrysler, was discontinued in i960; and the Mercury, certain Dodge models, and American Motors' Ambassador were reduced in size and appointments. In General Motors, we elected to maintain our regular size cars in the medium-price group at about the same weight, size, and number of models, while at the same time adding smaller cars to these lines.

  The automobile constitutes 90 per cent of our business, but each operation or potential operation is considered as a separate problem. We have no inflexible policy on products that we might manufacture, but motors are at the center of the business. Our product decisions must, of necessity, be in part empirical, and actual experience with some products may suggest that they are not well suited to our managerial skills. In such cases we withdraw from the activity.

  For example, in 1921 we found it best to withdraw from the agricultural tractor business, because we did not believe that we could make a special contribution in that field. Since then we have built up and subsequently disposed of interests in companies which manufactured airplanes, household radios, glass, and chemicals. We entered the aviation-engine and diesel-engine fields to put our know-how in engineering and mass production to work and create new values. We developed a new concept of the diesel—the two-cycle engine—put it into a locomotive, and revolutionized the American railroads. We poured many millions of dollars into this unproven product at a time when many of the customers for it were in serious financial condition or bankrupt and the majority of them appeared to be totally uninterested in innovation; and we thereby helped the railroads back to solvency—a fact that is acknowledged by railroad management today.

  In none of our product markets did we achieve a prominent place by buying out a company. In general we entered each of our related activities at a very early stage and then labored to develop the market for our product, whether automobiles, household refrigerators, diesel locomotives, or aircraft engines. We have not bought our way into operations, we have built them up.

  In describing the General Motors organization I hope I have not left an impression that I think it is a finished product. No company ever stops changing. Change will come for better or worse. I also hope I have not left an impression that the organization runs itself automatically. An organization does not make decisions; its function is to provide a framework, based upon established criteria, within which decisions can be fashioned in an orderly manner. Individuals make the decisions and take the responsibility for them. The men who have made General Motors' decisions in the years since I retired from active management have had a remarkable record of success in tackling some very complex problems. In no instance was the answer explicitly provided by the automatic operation of the organization. The task of management is not to apply a formula but to decide issues on a case-by-case basis. No fixed, inflexible rule can ever be substituted for the exercise of sound business judgment in the decision-making process.

  The end product of what I have described in this book is efficiency, using that concept in its broadest sense. I hold that General Motors' efficiency and growth are interrelated in our highly competitive economy. And I hold
that if companies are attacked simply because they are big then an attack on efficiency must be a corollary of that attack. If we penalize efficiency, how can we as a nation compete in the economy of the world at large?

  So far as I am concerned, my work is done. Long ago, in 1946, at seventy-one, I reduced my commitments when I retired as chief executive officer of the corporation, though I continued as chairman of the board. In 1956 I became honorary chairman. Since then my active participation has been limited to service on the Finance Committee, on the Bonus and Salary Committee, and on the board of directors. In the board, time is taking its toll. Great changes have been under way, affecting its composition. The du Ponts, who accounted for about 25 per cent of the corporation's shares in the past, and who served the corporation so well, have already passed out of the board. Many of the old generation of members have died. The remaining older members from management, who have been and continue to be large individual shareholders, among them Messrs. Mott, Pratt, Bradley, Hunt, McLaughlin, Fisher, and myself, cannot be expected to serve many more years on the board and its committees. The responsibilities we have discharged for so long, in intimate association as operating executives, have been or soon must be assumed by others. Each new generation must meet changes—in the automotive market, in the general administration of the enterprise, and in the involvement of the corporation in a changing world. For the present management, the work is only beginning. Some of their problems are similar to those I met in my time; some are problems I never dreamed of. The work of creating goes on.

  Illustrations

  Saginaw Street, main thoroughfare of Flint, Michigan, about 1903.

  Modified "Sixty" Canstatt Mercedes of 1903 in Newport. Mercedes made the first real automobile, i.e. a car that was not a buggy, in 1901. It was also a racer and the first popular sports car, although the expression "sports car" was unknown. It cost $12,000.

  Simplex (left), circa 1904, and chain-drive Locomobile, circa 1906, on a main highway.

  Tire trouble on an Ohio road in 1907. Driver on right waits in a 45-hp Royal Tourist.

  Weathering a blizzard in Times Square in early 1900s.

  Model T in soft shoulder

  Winshield, 1909.

  The author's office at the Hyatt, 1912

  Author (right) with advertising execuitive Harry Carroll, about 1915

  Buick Motor Company group, about 1912. In front row center are Walter P. Chrysler and Charles W. Nash.

  Louis Chevrolet.

  Early Buick plant, Flint, Michigan.

  General Motors Building, Detroit.

  Edsel and Henry Ford, May 1927.

  The author at a Senate hearing, 1939.

  At shareholders meeting, 1950.

  With editors, John McDonald and Catharine Stevens.

  The author and a group of 1964 cars. Left to right: Pontiac, Buick, Cadillac, Chevrolet, and Oldsmobile.

  Diesel electric locomotive, made by General Motors.

  Olds, 1908.

  Cadillac, 1908.

  Buick, 1908.

  First model of the Model T; appeared in 1908.

  Chevrolet models ... 1912 through 1938.

  Chevrolet models . . . 1939 through 1964.

  One of the last Model T's, 1927.

  Chevrolet, 1927.

  Styling Staff building a wood base for a clay model of a new car.

  Clay heated to 150 degrees and applied by Styling Staff to wood base to eliminate air bubbles.

  Original "dream car" designed by Harley Earl and introduced by General Motors in 1938 to test consumer reaction to advanced ideas.

  Fifth-wheel device for measuiring speed and distance with extreme accuracy at Proving Ground.

  Cadillac on banked wall of speed loop.

  Financial staff, May 1963

  Research laboratories, July 1963

  Engineering staff, June 1963

  Manufacturing staff, May 1963

  Styling staff, July 1963

  Distribution staff, May 1963

  Personnel staff, May 1963

  Footnotes

  1-1. Mr. Nash, although the first president of General Motors to play a large role in that office, was in fact the fifth person to hold the title. Mr. Durant, in founding the company, chose the position of vice president for himself. The first person with the title of president was George E. Daniels; his term lasted less than a month, from September 22 to October 20, 1908. The second was William M. Eaton, who was in office about two years, from October 20, 1908, to November 23, 1910. James J. Storrow was an interim president for two months, from November 23, 1910, to January 26, 1911. The fourth was Thomas Neal. His term ran from January 26, 1911, to November 19, 1912.

  1-2. The fact that the Chevrolet Motor Company held a controlling interest in General Motors was proved in 1917. Of the 825,589 shares of General Motors Corporation common stock outstanding (after the exchange of five shares of General Motors Corporation common stock for each share of General Motors Company common stock), 450,000 shares were owned by the Chevrolet Motor Company; thus Mr. Durant clinched his earlier claim. This odd knot, in which Chevrolet controlled General Motors, was not undone until some years later. General Motors, in May 1918, bought the operating assets of Chevrolet and paid for them in General Motors common stock. Still later the General Motors stock owned by the Chevrolet Motor Company was distributed to the latter's shareholders upon the dissolution of the Chevrolet Motor Company. The Chevrolet Motor Company became the Chevrolet Division of the General Motors Corporation.

  1-3. The General Motors Corporation was incorporated on October 13, 1916, under the laws of the state of Delaware. The New Jersey company was dissolved and its assets taken over by the corporation as of August 1, 1917, and the latter became the active operating corporation on that date.

  1-4. In quoting, I have followed original materials as closely as possible. This results in some variation in spelling, punctuation, and the like.

  1-5. The entry of the du Pont interests into General Motors became the basis of a suit by the government against du Pont and General Motors — filed in 1949, or more than thirty years after the fact. The basic charge was that the acquisition violated the antitrust laws and had enabled du Pont to secure for its own benefit the business of General Motors in products produced by du Pont. This charge was denied by General Motors and du Pont. The district court, after hearing testimony over a period of several months of a broad cross-section of the active participants in the matter and the examination of many hundreds of documents, found there was no evidence to support the contentions of the government and dismissed the case. The Supreme Court on review held that the acquisition by the du Pont interests, some thirty years earlier, was illegal because there was a reasonable probability that the acquisition was likely to result in a restraint of trade. The Supreme Court agreed, however, with the finding of the trial court, stating that "considerations of price, quality and service were not overlooked by either du Pont or General Motors" and that "all concerned in high executive posts in both companies acted honorably and fairly, each in the honest conviction that his actions were in the best interests of his own company and without any design to overreach anyone, including du Pont's competitors." The trial court's judgment of dismissal was reversed and the case remanded for relief. On remand, and after further litigation and appeal, the district court decreed that the du Pont interests divest themselves of their General Motors stock over a period of years. It appears to me, as a layman, that the reasoning of the Supreme Court in the case is almost purely academic and is not supported by the realities of the situation as found by the district court.

  3-1. A copy of this chart is at the end of the chapter.

  3-2. It is only in recent years that I have had occasion to recall the surrounding circumstances and now for the first time I am able to place the approximate time when I drafted the study. It was at the end of 1919 — some time after December 5 and before January 19, 1920 — instead of in the spring of 1920 as I had long tho
ught. I reach this conclusion from the fact that the study refers to the Appropriations Committee, which was created by the Executive Committee on December 5, 1919, and from a letter to me from H. H. Bassett, then general manager of Buick, dated January 19, 1920, in which he expresses his enthusiasm for the study. "I have read over every word of the attached report and I firmly believe it is a wonderfully thought out scheme of organization and certainly has my unqualified endorsement," said Mr. Bassett, very kindly. I replied to him on January 21 as follows: "My dear Harry: — I have your letter of January 19th and am pleased to note that die plan in general meets with your approval and support. "I do not know what action, if any, is going to be taken, but I hope that something will be worked out that will be satisfactory to all because I really believe that it would be desirable to have things a little more definitely arranged."