LABOR HISTORY--The Founding of General Motors
1892--Henry Ford test drove the first car
GM was founded on September 16, 1908, two weeks before Henry Ford put the Model T on the market, a year when 65,000 cars were sold, by William Crapo (Billy) Durant, of whom Alfred P. Sloan said “He could create but not administer.”
Durant was the grandson of a MI Civil War governor, who had invested part of a family fortune derived from whaling in the lumber industry and became very wealthy--Durant was a high school dropout--started his own insurance agency and in 1880, on a sales trip through Coldwater, in southern MI, met a man who held a patent on a light, two-wheeled cart called a “road cart.”---made of wood, with a few parts, impossible to overturn, but did not sell--had been individually produced but Durant was convinced that with proper sales, financing and mass production, the road cart would be successful--bought the patent for $50 and convinced a Flint carriage maker to build the carts for $8 each, then sold them for $12.50 each, and within a few years, Durant and his partner, a hardware dealer named J. Dallas Dort, sold 100,000 carts
By 1895, they formed the Durant-Dort Carriage Co., sold 50,000 carriages a year, the leading manufacturer in the country and Durant, at age 40, was a millionaire!
By now autos were becoming better-known, and Durant heard that a small Detroit motorcar co. was for sale. Founded by a Detroit plumbing merchant who invented a process to bond porcelain to iron. That man was. . . David Buick.
Buick had been through a couple of companies and started building marine engines before starting in autos--produced a single-cylinder engine in
Durant bought the co., started production in 1904--sold $00,000 worth of stock to friends in Flint in one day. Opened plants in Flint and Jackson, producing 5-8 vehicles per week. Sold for $1,250., with an extra $125 for canvas top and lights. Set up national distribution/service network.
Also persuaded two other manufacturers to locate in Flint: Alfred Champion, a French racing car driver, made spark plugs and Charles S. Mott made axles, moving from Utica, NY
By 1908, Durant was selling 8,487 Buicks, more than Cadillac or Ford combined--the new Buick plant in Flint was the largest auto plant in the world
Durant tried to piece together a consortium, so that diversity could weather erratic markets--if one model failed, another one would succeed, and tried to pull together Reo, Buick, Ford and Maxwell-Briscoe--Ford wanted $3 million in cash, as did Ransom Olds, who owned Reo--Durant wanted to only deal in stock and the deal collapsed--Durant controlled 20 auto, parts, and accessory firms and almost took control of Ford
In 1909, Durant tried JP Morgan and was turned down for financial backing for a new company called International Motors--finally raised enough money on his own, but lawyers objected to name and Durant carelessly drew a line through International Motors and handwrote General Motors--incorporated with stocks and bonds of other companies, Durant incorporated GM in NJ, brought in Buick (1908), then Olds and Oakland and finally, in 1909, Cadillac, for $4.5 million in cash
Next few years were very rough--Durant had bought some plants that were worthless--the Heany Lamp Plant made tungsten lamps but the patent was thrown out and the company closed--Buick was best seller but ran short of cash as other divisions drained money--when Durant finally got financing, some came in suitcases of cash to make payroll, rather than being seized to apply to debts--by fall, 1910, bankruptcy seemed inevitable, but Durant cut a expensive deal with an eastern syndicate: borrowed $15 million for five years, but lenders took $2.5 million off the top, got 6 million in stock as commission and Durant had to resign as president, although he stayed as a member of the Board of Dir--”period of banker control”
Still looked like the co. Might fold but Henry Leland, head of Cadillac pledged his own and Cadillac’s resources to the corporation--the bankers created more efficient organizations: cash reporting and standardized accounting, started GM of Canada, GM Truck Co. And GM Export Co.--the myths: in 1910, Durant was asked to recommend a new head for Buick, and suggested Charles W. Nash, who used to cut Durant’s lawn. Nash was an orphan who was bound to an Illinois farmer, ran away at age 12, and did such a good job mowing the lawn that Durant gave him a job polishing headlamps in the carriage company for 75 cents/day. Moved up and was made president of Buick, then president of GM in 1912. Replaced as president of Buick by Walter P Chrysler, who had moved from the railroad industry at a 50% cut in pay because he was excited by the auto industry
Buick (under Chrysler) and Cadillac (under Leland) led the way in innovation: Caddy introduced the closed car(1910), and Buick brought the electric horn--Cadillac the self-starter(1911) which made it convenient for women to operate; invented by Charles Kettering--the story was that George Carter was killed by a motor crank after helping a woman whose car had broken down in Belle Isle, so Kettering combined an old storage battery for a self-starter--Kettering had invented the electric cash register for NCR
at the Sept., 1915, Bd of Dir meeting, GM declared a stupendous dividend of $50 cash, the highest in the history of the NY Stock Exchange
Durant was busy trying to reacquire control-joined Louis Chevrolet to create Chevy, started with a powerful, high-speed car and sold 3,000 cars in 1912, but Durant believed that the future of the industry lay in cheap, low-price cars, so he created a cheap car, which so maddened Louis Chevrolet that he sold out to Durant for cents on the dollar--then Durant began to exchange Chevy stock for GM stock, kept in bushel baskets in his office and by Sept., 1915, at the Bd of Dir meeting, Durant had enough stock power to become president once again
Durant brought in Dupont family, which not only saw a great investment but a major customer for chemical products like Fabrikoid, paint and varnish--Dupont had founded a powder plant on the Brandywine Creek in PA in 1807 and demanded 20% return on investment, an attitude carried over to GM 110 years later--by December, 1918, Dupont purchased $25 million of GM stock, increased to $49 million (12/1919), or 28.7%
October 31, 1916, GM was incorporated as a corporation in DE and the separate companies became divisions--capitalized at $100 million--Durant brought in more companies, like Dayton Engineering Laboratories (DELCO), Remy Electric Co., Hyatt Roller Bearing Co.--and finally, took over United Motors, whose president was Alfred P. Sloan in 1918, giving GM its own parts and accessory division--Sloan was an MIT graduate, fascinated by machines, who worked for John Wesley Hyatt, who invented celluloid, to be used as a substitute for ivory in pool balls--later used to make flexible ball bearings, where steel wore easily and wore out--Sloan had become wealthy convincing wagon manufacturers to use Hyatt Roller Bearings on axles rather than grease--later got a contract with Mott Axle Co. And with Ford--in 1916, Durant came to Sloan to buy up Hyatt--Sloan became a VP at purchase, member of the BdDir and became president in 1923--at the time of the sit-down strike, he was the highest paid executive in the US-
1918-20--Durant visited a dirty Detroit attic (1918) where a man named Alfred Mellowes had a few pieces of mechanical equipment-- and wrote a personal check for $56,366.50 for the Guardian Frigerator Co.--”like a car: a box with a machine”-- next year, sold the co. To G.M. for what he had paid and, 5 years later Frigidaire was selling 20,000 reefers/year--, created GMAC, and bough 3/5 of the Fisher Body Co. In 1919--run by the six Fisher Bros., old-time wagon makers--in 1910, had received an order from Cadillac for 150 closed bodies, the largest order--Fisher moved from Detroit to Flint and built a plant on Chevrolet Ave. That was Fisher Body No. 2--three years later, built Fisher Body No. 1, where Buick bodies were built, and No. 2 continued to make Chevy bodies--
INTRODUCE MICHIGAN MAP
Durant’s style antagonized some of the executives--Henry Leland left Cadillac in 1917 to start his own company, named after the first American president for whom he had voted in 1864--absorbed by Ford in 1922 and Walter Chrysler had retained the AO Smith in WI to build auto frames but Durant announced that GM would build an expensive new plant in Flint, so Chrysler quit and also started his own co
Recession of 1920 caught Durant trying to manipulate stocks and cash--saved by the Dupont Co., which joined with Morgan syndicate to buy his 2.5 million shares of GM stock for $23 million--as part of the deal, Dupont resigned and was replaced as president of GM by Pierre Dupont--as Exec. VP, Sloan began to reorganize the corporation,”decentralized divisions with centralized control”--some disputes over power but the organization of GM became an issue when the UAW demanded a national agreement starting in 1933
Sloan became the real power for more than 30 years--owned a 236-foot yacht with a crew of 43 after associates urged him to “find a hobby”--created cost center, each responsible for creating a profit--grouped in divisions, each with a manager--centralized cost-accounting--created a corporate model followed today
Co expanded until 1924 when the industry hit a plateau of sales that did not expand until 1947--except for 1929, when the Model A came out, sales not over 4 million/year until ‘47--
Sloan made Pontiac from the Oakland Co., and decided to capture all ranges of cars, expensive to cheap--created the annual model change--Harley Earl, who had been building custom cars for Hollywood stars ($25,000 Pierce-Arrow for Fatty Arbuckle) became design director--eliminated running board, wraparound window, no spare tire truck, two-tone paint job, hardtop, tail fin (after looking at P-38 fighter plane)--dealer system nationwide--massive advertising--Sloan also hired Wm S Knudsen, who made Chevy the best-selling car in the world--started working for Ford and was fired and came to GM in 1921--by 1927, Chevy had 42.5% of all new car registrations--was Ex VP during sit-down--a real mechanic who worked with his hat on because it made him think better and who refused to hire female secretaries--
Sloan also began to centralize labor relations in the 1920's--in 1919, John Raskob (former financial adviser to Pierre Dupont) started savings and investment plan for workers, which provided huge cushion when Depression started--had cafeterias, parking lots, locker rooms--in early 1930's, GM guaranteed workers with more than 5 years seniority 60% for regular 40-hour pay --when worker did not make 40 hours, co advanced him the difference-- when they worked more than 40 hours, workers repaid the advance--co built homes for workers and paid Xmas bonuses
12/1/26--offered $1,000. Of life/AD&D insurance---expanded in 1928, plan was expanded to include health benefits--by 1936, 98% of all GM workers participated in plan
Industrial Mutual Association (IMA) of Flint--whose slogan was “Somewhere to go in Flint”--for dues of .10/week, workers got bowling alleys, gyms, facilities for dancing, a summer resort--sports programs, and GM also sponsored dozens of other cultural(glee clubs) and social clubs--
Surprised by the strength of the union movement--blind paternalism--at time of strike GM was not big, but COLOSSAL: 69 plants in 35 cities and 14 states, with assets of $1.5 billion--rate of return was measure introduced by Donaldson Brown, who came to GM from Dupont in 1920, at 20%
WORKERS:
Auto plants were huge employment magnets; brought workers from lumber mills of MI, coal fields of PA and WVA, foreigners, especially Poles and Italians, and many blacks drifting up from the south--especially recruited by Ford to divide workers--with the exception of some miners, no union experience--
Continual deskilling so that, by 1935, 26.9% of all workers required no training at all, and only 9.8 required more than 1 year training--55% of GM’s 28,455 workers in Flint(1935) were semiskilled, 24% skilled, 8.9% unskilled--only 20% actually worked on assembly line jobs--
Major issues were the speed of the assembly line and the unreasonable production standards for individual machines--constantly timed, “straw men” were urged by company to work faster “The essence of Flint was speed,” said the NY Times--great deal of evidence gathered by NRA on standards--enormous toll of fatigue and accidents--”I ain’t got no kick on wages, but I don’t like to be drove” said “Red” Mundale, head of sit-down strikers of Fisher No.2--family tensions and general resentment--also though that GM got rid of older workers--Genora Johnson describes her husband, coming home and collapsing on the living room floor, where she fed him
Irregular employment was also a grievance--especially after 1929, when displaced auto workers couldn’t find other jobs--in 1933-34 period, 40% of GM’s 132, 169 hourly workers worked less than 29 weeks and more than 56% worked less than 40 weeks--in 1935, co switched to fall model change to even out employment
Layoffs were big issue--there was an Automobile Labor Board (ALB) under the NIRA(1932) which counted seniority only with skill/ability/marital status/number of dependents--the first hint of taking power away from the auto companies, but enforcement was a real problem--foremen really controlled recalls/layoffs, leading to enormous sucking/payoffs--the layoffs really skewed the apparent high wages--surveys showed low standard of living, with shacks and outdoor plumbing in Flint--
Complicated pay systems--some incentives so confused that workers never knew their correct rate--in Fisher Body No 1 and 2, there were group rates, rates set in fractions of cents, and group piece works which forced workers to drive “lazier” workers--also big problems of rates during “grooving in period” of new models, when work was done more slowly--also the 9-hour day was too long in the assembly plants like Fisher because workers were exhausted--
WORKERS ORGANIZATIONS
There had been a Carriage Workers Assembly under the Knights, and then small craft unions by the Carriage and Wagon Workers International Union(CWW)but it was already a fact that AFL unions which had no interest in organizing production workers also would not allow other unions to enter their jurisdiction--in 1910, CWW petitioned the AFL for a charter over all workers and was rechartered in 1911 as the Carriage, Wagon and Automobile Workers International Union (CWAW)--in 1914, however, the AFL ordered the CWAW to cease organizing efforts falling within the jurisdiction other unions and to drop the word ”auto” from title--since most of the members were auto workers, the demand was ignored--was suspended by the AFL on 4/1/1918--reorganized as the United Automobile, Aircraft and Vehicle Workers of America, proclaimed principle of industrial unionism and, by 1920, claimed a membership of 45,000--had some members in GM and in Flint but mostly in the small custom shops in the East--almost wiped out by the recession of 1920-21, a disastrous strike against Fisher Body, and the union was moribund until revived by the CP, which created the Auto Workers Union (AWU) affiliated with the TUUL--provided one of the most famous figures in UAW history, Wyndham Mortimer, son of a miner (and understood industrial unionism) who worked at White Motor in Cleveland--not only was politically dedicated and very smart, but had a real local, with a real contract and bargaining strength, providing a model for other UAW locals that were created--also gave Mortimer credibility over other political figures who attached themselves to the auto worker organizing effort--also Mort had “National Vision” which helped him work with John L Lewis for a National Agreement when others would have settled for less
The AFL passed a resolution in 1926 to organize auto “the question of jurisdiction {being} suspended for the time being”--Green wanted an industrial organization but other officers of the AFL ExCouncil, especially Arthur O. Wharton of the IAM, were completely opposed, out of principle and out of fear of losing members----in June, 1933, Green sent William Collins to Detroit to organize workers into Federal Labor Unions (FLU’s), with low dues (35 cents/month) and initiation fees--while Collins claimed to have enrolled 100,000 workers in the summer of 1933, he was not even present when the NRA Auto Code was negotiated--the code had an amendment to section 7(a) which allowed manufacturers “to select, retain, and promote employees on the basis of individual merit, without regard to their membership or non membership in any organization”--also Wharton attacked the campaign at the ExBd meeting on September 7, 1933, as a subterfuge for industrial organizing, demanding that the organizers not put toolmakers, die-sinkers, maintenance men and machinists into the federal locals--by January, 1934, Collins reported that the drive was dead: companies fired supporters and kept AFL out of plant, then denounced them as “otusiders”