American automobile industry in the 1920s

The decade between the end of World War I and the onset of the Great Depression proved crucial both for the development of the automotive industry as a driving force in the American economy and for individual Americans. Practices established during the 1920s for the purchase and resale of automobiles and people’s reliance on cars as a principal means of transportation influenced American life for the remainder of the century.

The 1920s was a decade of great change in the American automobile industry. By 1920, the industry had consolidated in Detroit, although there were plants in other cities in the United States and Canada. Even though the percentage of automobiles produced overseas would grow during the decade, the overwhelming majority were produced in the United States. The number of vehicles produced by American firms grew from approximately 2.3 million in 1920 to over 5 million in 1929. However, by the end of the decade, more cars were being made by fewer companies as the industry consolidated; the number of auto manufacturers dropped from several hundred near the turn of the century to a few dozen by 1929. At the same time, two companies, General Motors and Chrysler, emerged to challenge the Ford Motor Company’s long-held position of dominance in the market.

Ford Motor Company

Unquestionably, the dominant manufacturing firm in the United States in 1920 was the Ford Motor Company. In the previous decade, Henry Ford had transformed the automobile from a toy for the wealthy into a practical means of transportation for the average citizen. The centerpiece of that transformation was the Model T, introduced in 1908 and in continuous production until 1927. At the height of the car’s popularity in 1923, Ford produced 2 million Model Ts in a single year. Under the autocratic control of its founder, Ford Motor Company was able to improve techniques of mass production, including by introducing the moving assembly line, and leverage its tight control over the entire supply chain for parts and accessories to reduce costs and provide customers with a functional automobile at a remarkably low price, often several hundred dollars below that of competitors’ models. Ford also maintained a virtual stranglehold over its network of dealers, many of whom had signed on with the company to reap the benefits that came from selling the Model T.

Despite his professed belief that his company could survive by marketing a single model, Henry Ford was not averse to experimentation. In 1922, he acquired Lincoln Motors, providing his company entrée into the high-end market. Additionally, during the twenty years that Ford produced Model Ts, subtle changes were made to improve its performance and safety, although the company did little to advertise these improvements. In fact, Ford did little advertising at all, preferring to rely on word of mouth to bring people into dealers’ showrooms. Henry Ford was convinced that providing low-cost transportation would continue to make his company profitable well into the future.

Not everyone at Ford Motor Company agreed. Edsel Ford, installed by his father as president of the company in 1919, argued that survival depended on introducing new models to appeal to changes in the car-buying public’s tastes. Henry, still in control despite his son’s title, balked at this idea until 1927, when flagging sales of the Model T convinced him that change was necessary. The company was no longer the clear frontrunner in sales, having been overtaken by General Motors. From May until November of 1927, Ford shut down production and retooled plants to manufacture a new vehicle, the Model A. The public seemed to like the car, and by 1929 it was the best-selling vehicle in America.

General Motors

The principal competition for Ford was General Motors Corporation (GM), founded in 1908 by William Durant, who had merged several independent car makers into a manufacturing conglomerate. By the 1920s, GM included Buick, Cadillac, Oakland (later renamed Pontiac), Oldsmobile, and Chevrolet. At the beginning of the decade, GM was struggling to stay afloat, and its board of directors ousted Durant from the presidency, replacing him with Pierre du Pont, who became titular head of the organization. The real power at GM, however, rested with the company’s vice president, Alfred P. Sloan. During the two years he worked as du Pont’s deputy, and for more than thirty years as president and later chairman of the board, Sloan directed operations at GM, transforming the company into the largest auto manufacturer in the world.

Sloan became GM’s president in 1923. His management style was particularly suited to managing the sprawling corporation that his company was becoming. Instead of directing every activity himself, as Henry Ford tried to do, Sloan set goals for his subordinates and through constant reports managed to keep tabs on operations and hold those who worked for him accountable for their actions. Also, unlike Ford, Sloan surrounded himself with highly competent managers and gave them exceptional leeway to run operations as they saw fit. Sloan also made the most of GM’s diverse product lines, ensuring that customers would be able to find a GM car that would suit their needs and their pocketbooks. He instituted a sophisticated advertising campaign to make the public aware of what GM had to offer, and instead of stressing low cost, Sloan built demand for GM products by stressing style, comfort, and status, capturing his sales philosophy in the slogan “A car for every purse and purpose.”

Sloan coupled this marketing strategy with what was to become the most important innovation of the decade, and perhaps the most important in auto manufacturing history: the annual model change. Whereas Ford had done little to promote the changes made in the Model T, Sloan insisted that, beginning in 1925, all five of GM’s divisions introduce new models each year. Some changes were matters of style, others were technological improvements; in either case, GM’s advertisers built campaigns stressing the new features. Sloan also promoted trade-ins, suggesting that dealers might even take a small loss when accepting an older vehicle in order to get customers to continue to purchase new ones. Moves such as these were well received by an American public that saw its disposable income rise by 50 percent during the middle years of the decade. By 1925, GM’s Chevrolet division was competing head-to-head with the decreasingly popular Model T. By 1927, sales of General Motors cars passed those of the Ford Motor Company for the first time. The company was to retain this top position among American manufacturers for nearly a century.

Chrysler Corporation

The meteoric rise of the Chrysler Corporation, the last of the “big three” U.S. automakers to appear on the scene, during the 1920s is attributable to the energy and foresight of its founder, Walter Chrysler. A former railroad executive who had been lured to General Motors to run its Buick division, Chrysler struck out on his own in 1920 and became a turnaround specialist for several smaller motor companies. While at the struggling Maxwell Motors, Chrysler began planning for his own company, hiring engineers to design the first auto to carry his name. That vehicle came out in 1926, a year after Chrysler reorganized Maxwell as the Chrysler Corporation. The real breakthrough for Chrysler came in 1928, however, when he acquired Dodge Brothers Motors and introduced the Plymouth, a direct competitor to Ford and Chevrolet. Acquiring Dodge also gave Chrysler the diversified product line that was making General Motors a success. Chrysler was keen on developing efficient manufacturing processes so he could sell cars at a greater profit. The engineering innovations he supported allowed him to offer vehicles that had more options and more advanced technology than competitors’ products. Like Sloan at General Motors, Chrysler surrounded himself with competent lieutenants who provided sound management for the company’s complex operations.

Life for Auto Workers

By the 1920s, Americans had learned that working in the automotive industry could provide steady, if not lucrative, wages. Whereas in the previous decade the workforce had consisted largely of immigrants, during the postwar years many second- and third-generation Americans (including African Americans) joined the labor force at places such as Ford, GM, and Chrysler. There was some racial discrimination in factories, notably at Ford, where African Americans were treated benignly but were not allowed to advance to positions of real responsibility. There were no strong unions in the industry at that time, however, so workers did not enjoy the high salaries and generous benefits packages that their successors would, especially after World War II.

Instead, the auto companies paid living wages, but management practices made life on the assembly line difficult. The work was repetitive, and foremen watched to be sure no individual slowed down; breaks were strictly timed, and in some places the lunch period was reduced to fifteen minutes. Some facilities used group incentive measures to increase workers’ productivity, a practice that did not sit well with experienced workers, who were forced to train new employees on the job so that they would not lose pay due to reduced output. A handful of companies instituted more farsighted reforms to build worker loyalty; insurance plans, bonuses, savings plans (similar to modern-day individual retirement accounts), company housing, education and training programs, and recreational activities were all used to keep workers on the job. Despite continual protests from individual workers that the work was unrewarding and sometimes dangerous, the auto industry posted a remarkably good safety record during the 1920s, and work stoppages were almost unheard of.

Impact

The automobile industry of the 1920s accelerated the transformation of the United States from an agrarian to an urban-industrial society by offering automotive transportation that could be purchased by people of modest means. The increasing demand for automobiles was matched by a growing call for more and better paved roads across the country. The Federal Aid Highway Act of 1921 funded the construction of a network of routes connecting cities and towns across the nation, making everyday travel, as well as vacation travel, easier, and people were able to live farther from work and visit people and places at greater distances from their homes.

The automobile industry also became the economic lifeblood of a number of subsidiary industries. The orders automakers placed with manufacturers of machine tools, rubber (particularly rubber tires), glass, steel, and other metals kept those businesses afloat and workers at their factories employed. Of particular note is the impact the auto manufacturers had on the advertising industry. Advertisers helped sell cars by creating a desire for comfort and status that became an acceptable motive for making what was fast becoming Americans’ second-largest purchase after a home. The emergence of the big three U.S. automakers also created a strong, dynamic manufacturing base that would be ready when called on at the end of the next decade when the country needed to mobilize its industrial resources for World War II.

Bibliography

Brinkley, Douglas. Wheels for the World: Henry Ford, His Company, and a Century of Progress 1903–2003. New York: Viking, 2003. Comprehensive history of Ford Motor Company; contains an extended discussion of the company’s struggles to compete against the emerging threat posed by General Motors in the 1920s.

Farber, David. Sloan Rules: Alfred P. Sloan and the Triumph of General Motors. Chicago: University of Chicago Press, 2002. Analysis of Sloan’s career, describing how the management practices he put in place after becoming president of General Motors in 1923 enabled the company to overtake Ford as America’s top automobile manufacturer.

Hyde, Charles K. Riding the Roller Coaster: A History of the Chrysler Corporation. Detroit: Wayne State University Press, 2003. A history of Chrysler Corporation outlining Walter Chrysler’s philosophy for building cars that would compete with larger rivals in the industry; recounts his early successes during the 1920s.

Kuhn, Arthur J. GM Passes Ford, 1918–1938: Designing the General Motors Performance-Control System. University Park: Pennsylvania State University Press, 1986. A management-oriented study of techniques used at General Motors that allowed it to surpass Ford Motor Company during the 1920s and become America’s largest auto manufacturer.

Peyton, Joyce Shaw. American Automobile Workers, 1900–1933. Albany: State University of New York Press, 1987. Describes working conditions in U.S. automotive plants and outlines daily life for workers during the first three decades of the twentieth century.

Rae, John B. The American Automobile Industry. New York: Twayne, 1984. Overview of the industry, describing important innovations to engineering and sales practices, including information on the transformations that occurred during the 1920s.