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A Brief History of
The First 100 Years of the Automobile Industry
in the United States

Chapter 6 - Mr. Sloan, Harley Earl and dynamic obsolescence

by Richard A. Wright

"Dependability" is a common enough word today, but it did not begin appearing in dictionaries until the early '30s. It was a word coined by the men who sold the cars that John and Horace Dodge began building in late 1914.

Letters from buyers of those early Dodges praised the car's power and rugged construction, but their most consistent comment was that the car could be depended upon. It did not take Dodge marketing people long to begin talking about the car's "dependability." (The word was coined by Theodore MacManus, who also wrote the famous "penalty of leadership" ad for Cadillac.)

The Dodge brothers were legendary figures in the early auto industry. Born in poverty in Niles, Mich., they amassed enormous fortunes building transmissions for the Curved Dash Olds and engines for Ford Motor Co.

They were stockholders of Ford Motor Co. and John was a vice president of Ford. They would regularly offer improvements to Ford cars -- until the Model T. The Model T was Ford's baby and he would brook no tampering with it.

In November, 1914, the Dodge brothers began building their own car, which incorporated many improvements they had offered Ford.

John and Horace Dodge were famous for their saloon escapades, drinking and roughhousing. The public announcement that the Dodges would build their own motor car was made at a party in Detroit's fashionable Book-Cadillac Hotel, capped by John Dodge marching up and down the banquet tables, darkening the hall by smashing light bulbs in the chandeliers with a cane.

But "dependability" described the Dodge brothers in their business dealings as well as their cars and they were just as well known for their integrity as for their escapades.

Gen. John Pershing used Dodge cars to chase Pancho Villa and other Mexican bandits back over the border. American troops used three Dodge touring cars to charge bandit headquarters 200 miles south of El Paso, destroying the rebellion without American casualties and making history as the first motorized combat operation by the U.S. Army.

The Dodges played another important role in military technology when French Marshal Joseph Joffre visited Washington in search of an American firm that could make the delicate recoil firing mechanisms for French 75 and 155 cannons, which were the backbone of the Allied artillery effort in World War 1. Secretary of War Newton D. Baker called on John Dodge.

Dodge told Joffre and Baker that if the French provided his firm with accurate blueprints and left the project entirely to Dodge management, the mechanism could be produced in any quantity desired. Joffre and Baker did not think it was possible to mass-produce the mechanism and so informed Dodge.

"The hell is isn't," Dodge said.

"I am not accustomed to being spoken to in that kind of language," said Baker.

"The war would be a hell of a lot better off if you were," Dodge shouted back. "Do you want us to do this job or don't you?"

The Dodges did the job and after the war the French Government awarded the Legion of Honor to John Dodge and his 8,000 workmen.

The Dodge brothers had their differences and quarrels, but through most of their lives they were inseparable and they were in death also. They died within a year of each other in 1920.

Their widows asked Frederick Haynes, manager of the Dodge plant in Hamtramck, to run the company. Under Haynes, the company continued to grow and acquired Graham Truck in 1925, which became Dodge Truck. Joseph, Robert and Ray Graham worked for Dodge for a while, then left to build the Graham-Paige car.

In 1925, the widows of John and Horace Dodge sold Dodge Brothers Motor Car Co. to the New York banking syndicate of Dillon, Read and Co. for $146 million, biggest cash deal up to that time in the auto industry. Less than three years later, the bankers sold it to Chrysler Corp. for $170 million.

Pierre du Pont resigned as president of General Motors in 1923, in part at least, as a result of the copper-cooled engine affair. And the first crisis Alfred P. Sloan Jr. faced as president was also a result of that debacle. Research wizard Charles Kettering, discouraged by the failure and rejection of his engine, resigned.

Sloan knew that du Pont, still chairman of the board, would be upset by Kettering's departure. He also knew that Kettering was a genius and Sloan did not want to lose him. So Sloan proposed to Kettering that he head a new GM Research Corp. to be established in Dayton. Kettering would be paid $120,000 a year, $20,000 more than Sloan was being paid.

Kettering accepted the offer. The copper-cooled engine issue faded quickly. The hard feelings cooled and soon they were "Alfred" and "Ket" again. (Kettering and Chrysler were the only colleagues to call Sloan by his first name; to everyone else, he was "Mr. Sloan.")

The research operation paid for itself many times over through the years. And Sloan turned to a more enjoyable and absorbing task: taking advantage of the auto sales boom just getting under way and making sure that GM made a profit, good times or bad.

Sloan had organized GM management along the lines of the German Army under Bismarck, using a staff-line concept. With only minor changes, that organization served GM for 50 years. Business administration students studied it and most major American corporations adopted some form of it.

After losing $38.6 million in 1921, the first annual loss sustained by the corporation, two financial whizzes brought in by du Pont - Donaldson Brown and Albert Bradley - developed plans to assure that it would not happen again.

Du Pont had brought Brown from the chemical company to GM, where he served as treasurer and later vice president in charge of finance. Brown was a gifted executive, although his financial jargon, pedantic lectures and charts and graphs did not endear him to his colleagues, one of whom is said to have complained that Brown "didn't speak any known language."

Brown worked out the "standard volume" concept, a financial strategy that has endured with little change to the present. GM would set its prices to produce a 20 percent return on investment based on what it sells in an average year. When sales were above average, profits soared. When they slumped, the company would still make a profit.

The theory got a quick test. In 1924, the anticipated spring upsurge in sales did not materialize. Dealers had heavy inventories of cars. Sloan ordered divisions to cut production and lay off workers.

The result was that the workers bore much of the hardship of the downturn. This would become the general pattern: when times were bad, dealers and workers bore most of the brunt. Donaldson Brown's concept worked. GM sales in 1924 were way off from the preceding year, but GM earned a 20 percent return on investment.

All through the Great Depression of the '30s, GM never had a losing year. In fact, it would never lose money again until 1980.

The recession of 1924 put severe financial pressure on Oakland Motor Car Co., which had never been one of GM's stronger divisions. Sloan ordered design of a car using as many Chevrolet parts as possible and priced between Chevrolet and Oldsmobile. Charles Mott suggested the name for the new car: Pontiac.

GM had been running well behind Ford in sales, but had been slowly closing the gap. In 1924, GM accounted for about 19 percent of U.S. new-car sales, Ford for just over 50 percent. The next year, GM cut Ford's lead to 42-20, then the next year to 35-28.

When Chevrolet introduced a new model in 1925, it was competing with a Ford Model T so old in its design and so different from its contemporaries that some states required a special license to drive it. The handwriting was on the wall. The days of the Model T, the most successful car in history, were numbered.

If any year had to be picked as the dividing line between the old auto industry and the modern, 1924 is a likely candidate. When Sloan ordered design of the car that became the Pontiac, it was the first to be fitted to a particular market slot and the first to use parts from a sister car.

He also wanted cars that would offer new features to bring in customers and convince them to change cars. Almost everyone owned a car by 1925. Now cars would have to be sold almost entirely to current car owners.

This last factor, which developed into what was benignly called annual model changes and which critics termed "planned obsolescence," was perhaps the most far-reaching in its implications for the auto industry.

In addition to ordering the car that became the 1926 Pontiac, Sloan also assigned Cadillac to come up with a family car to fill the gap between Buick and Cadillac. The LaSalle, introduced in 1927, was another of those rare landmark cars that change the industry forever. But its innovation was not technological, as was the 1912 Cadillac's; it was designed not by engineers and body builders, but by a new automotive breed, a stylist.

Lawrence Fisher, one of the brothers of Fisher Body fame who became head of Cadillac Division, had noticed that the best-looking Cadillacs at the New York Auto Show had bodies designed by Harley J. Earl, a Hollywood customizer of cars for the stars.

Fisher hired Earl to act as consultant on the LaSalle, which was to be lower-priced and less conservative than the Cadillac. The Hollywood designer, who sometimes appeared in the staid Detroit automotive studios in jodhpurs and riding boots, seemed eccentric to GM brass, but they liked his work.

After the '27 LaSalle, Earl designed the '28 Cadillac, then went back to Hollywood. But not for long. Sloan made him an offer he couldn't refuse: a newly formed Art and Color Section, which he would head, to style all of GM's car lines.

In 1927, Ford Motor Co. halted production of the Model T after more than 15 million had been built. It was truly the car that had put the United States on wheels, but it was out of date.

Henry's son, Edsel, was now president of Ford Motor Co. and had been pushing to expand Ford's offerings to meet the GM challenge and wanted more elegant styling. But the Model A was still Henry's. Edsel would get his elegant styling later, in the '30s. Ford was out of production for much of 1927 while the Model A was being readied and GM beat it in sales for the first time.

The Model A was an overnight sensation and Ford recovered the lead in 1928. Henry did not like the new approach GM was taking to styling and annual model changes, but the die was cast. It quickly became apparent the Model A would not be built for 19 years as the Model T had been. GM passed Ford in sales in 1931 and Ford never regained the lead.

In 1932, Ford tried to stem the challenge of established GM and upstart Chrysler by introducing the first low-priced car powered by a V-8 engine. Ford sales improved, but GM was still No. 1.

In 1933, Chrysler Corp. also passed Ford in sales. The sales race was on.

Copyright 1996, Richard A. Wright
Published by Wayne State University's Department of Communications