Monday, May 20, 2013

Magaddino: The Big Three


The Big Three

Brandon Magaddino


Throughout the twentieth century the “Big Thriee” automobile companies based in Detroit Michigan have gone through several revolutionary changes from their humble beginnings in the 1900’s and 1920’s, to the “too big to fail” super-giants that can be observed today.1 By name these three automobile companies are General Motors, Chrysler, and Ford which even in the 1920’s were of the worlds top seven largest automobile companies2. During the mid-twenties the concept that sold cars was luxury, and although the employees assembled high-class vehicles they couldn’t afford themselves; the three companies especially Ford gave high wages in relation to the area, and adequate treatment3. The great success of the 1920’s followed suit through the muscle car era of the 1970’s but sadly all American Auto Industry suffered a major recession in the 1980’s that has still left it in recovery even to this day4.

In 1903, with nothing more than $28,000 to invest (which would be around $704,523 today5), Henry Ford started the Ford Motor Company, and by using the idea of assembly line had a mass production car by for the American public by 19086. This however was only the first of many milestones in the span of Ford, another major milestone was the “$5 a day program”. As one looks at the tattered flyer in figure 1.0 from 1914, screaming the words “FOR TO OWN SHIPS, MAKE TIRES, EXTEND $5
Figure 1.0 – Ford flyer from 1914
A DAY SCHEDULE-- GARDEN FOR EVERY WORKMAN WITH BIG LOT… OAKWOOD MAY BE BUSINESS”. This flyer was the result of a program by Ford that paid individuals more than double the commonly accepted rate of $2.34 for 8 hours of work. This however was only gilded generosity in that they sent out enough fliers to attract the interest of 15,000 people, but only had enough work for 3,000 men7. Due to the major success of Fords Model-T, the Detroit based factory need to import much more work, but since Heiinry Ford was a cunning capitalist, he set up the ruse to attract many people to Detroit to make the workers more abundant to discourage unions and strike. With this being said, his plan did workout seeing how there was no union activity until 1941. Although Henry Ford had reputation of anti-unionism, he surprisingly was a fair employer—he “instituted programs to teach his employees how to spend their new high wages responsibly, cut an hour off the standard workday and provided on-the-job educational facilities. He also insisted on stringently high standards of cleanliness and safety, especially for the time, in the working environment”8. These education programs not only taught workers how to do their job more efficiently, but increased their basic knowledge almost like an optional
Figure 1.1 – Frankenstein being beaten in 1937
secondary schooling. Despite the above average treatment of workers, tensions boiled over after the passing of the legislation commonly known as the “Wagner Act”, which lead to a crisis called the “Battle of the Overpass” in late-May of 1937. The Wagner act gave employees the right to collect bargain and established the National Labor Relations Board to settle problems between employers and employees—essentially everything a large company like Ford wouldn’t want. With the creation of this bill, union representatives from the United Auto Workers union matched into Ford demanding the right to have a sit-down with the leaders of the company, when this requesting was denied, a large protest demonstration began. The protestors chose to flood gate 4, which was an area on an overpass created for the purpose of not “disrupting traffic” when shifts change because Ford hired such a large population of Detroit that it would cause traffic jams. Soon after the protestors arrived at the gate they were assaulted by a makeshift army including “Angelo Caruso, boss of the Down River gang, wrestlers Warshon Sarkisien and Ted Gries, boxer Oscar Jones, and Ford servicemen”, which attacked one man in particular, Richard T. Frankensteen9. The image in figure 1.1 depicts the defenseless man Frankensteen being beaten while his jacket was pulled over his head. Ford was only able to hold a grip of intimidation over their employees for roughly four before they finally settled with the United Auto Workers. After the second recession in the early twenty-first century, Ford was the only one of the Big Three to avoid a government bailout, and instead took a $5.9 Billion loan. This investment lead to their 2009 fuel efficiency line of vehicles, but was the beginning of an even larger recession for Ford because General Motors started winning-out all the government contracts Ford once held10.
General Motors was established in 1909, with revolutionary ideas about performance, luxury, and profit. During the 1920’s General Motors made much of their money off their major luxury line the Cadillac, but the iconic spoked rim that is still desired today in high end cars comes from the original concept the creator had for a automobile based off of German racing bicycles. This success followed General Motors into the 1960’s where they became the second largest automobile manufactured5 in the world because they were one of the kings of the muscle car era. General Motors relates much of their success in the 1960’s and 1970’s on the innovations they made not only on horse power, but also in safety and environmental. During this era they redesigned the motors in there cars to be more fuel efficient, and to not require lead in the fuel; leading to a revolution in pressure and size that made these engines radically more powerful. Aside from the new powerful engines that General Motors was producing, that also redesigned the interior so that they had electric windows, airbags, and an actually concern for the safety of the driver. Although American cars were at an all time high in performance, and price there were “storm clouds on the horizon” due to the recovery of the post-World War II Europe. During much of the 1960’s and 1970’s Europe was in a state of duress because of their bout with the Axis power in World War II, in particular Germany’s bombing raids on automobile industry to try to cripple the allied forces being created in Europe. Although the damage after European companies rebuilt their automobile factories America had an unanticipated amount of competition, which lead to the 1980’s recession of the auto industry, General Motors in particular had major sales decreases even though they were state of the art for the time11.iii These poor sales followed them well into the beginning of the twenty-first century, and they had to file for bankruptcy due to deficit spending, much like the United States at that time. The government deemed General Motors “too big to fail” due to the 96,000 employees they had based out of Detroit, but working across America. The United States government eventually agreed to give General Motors $6 billion, in exchange for the company to refinance, and fire almost half their staff. With the money from the bailout General Motors14 redesigned their Chevelle line, and discontinued their Saturn, Hummer, and Saab divisions which turned out to be very profitable seeing that General Motors earned over $7 billion in profits in 201212.
To look at the beginning of Chrysler isn’t to look at the time in which the company was established, but Walter P. Chrysler’s worked for Buick, now part of General Motors. Walter P. Chrysler eventually left General Motors to start up Chrysler with an eye for business, and a small team of designers with revolutionary ideas like the Chrysler Six a new a powerful engine premise13. Unlike ford, during the 1940’s Chrysler quickly gave into pressure from unions, but never established any programs to help employees like Ford—mainly because Chrysler has always lived in the shadow of Ford and General Motors14. Although Chrysler never became larger than the 17th largest automobile company in the world, they still had a significant presents in the 1970’s muscle car era, by producing the Daytona series for the Dodge Charger and Dodge Challenger, which were extremely high performance vehicles that put Chrysler on the map, but still ivcouldn’t protect them from the unavoidable fait of the 1980’s recession15. Chrysler held hardly their head above water so to speak until 2009, in which they followed the approach of General Motors and requested a $1.4 billion bailout from the government, in which they were granted in exchange for a 40% decrease in executive bonuses16.
All of the Big Three automobile companies in Detroit, Michigan have benefited from there innovative starts, boost in sales in the post-World War II market, and inevitable recessions in the 1980’s and 2000’s. This however doesn’t mean they didn’t have long lasting effects on the market, automobile history, and created many different milestones of vehicles. These eras in the auto industry lead to more fair payment of employees, unionization of the auto workers, and an increase in market in Detroit.

1 Sorkin, Andrew R. "G.M. Speeds Hat in Hand to Treasury." New York Times. http://dealbook.nytimes.com/2008/10/28/gm-speeds-hat-in-hand-to-treasury/. Ford. "Form Motor Company Heritage - History." http://corporate.ford.com/our-company/heritage. Chrysler. "Chrysler Iconic-Vehicles." http://www.chryslerhistory.com/IconicVehicles/Content.aspx?topic=Iconic-Vehicles. GM. "General Motors | History & Heritage."
2 Wang, Kung, Clifford Winston, and Ann F. Friedlaender. The Bell Journal of Economics. Vol. 14. N.p.: RAND Corp., 1983, p.1-2.
4 Singleton, Christopher J. Auto industry jobs in the 1980's: a decade of transition. N.p.: Bureau of Labor Statistics, 1993, p.2.
5 Friedman, Morgan S. Inflation Calculators. www.calvin.edu/library/knightcite/index.php.
6 Ford. "Form Motor Company Heritage - History." http://corporate.ford.com/our-company/heritage.
7 NPR. "A Timeline of Ford Motor Company." http://www.npr.org/templates/story/story.php?storyId=5168769.
9 Henry Ford Museum. "The Henry Ford." http://www.hfmgv.org/exhibits/fmc/battle.asp.
10 Amadeo, Kimberly. "The Auto Industry Bailout ." About. http://useconomy.about.com/od/criticalssues/a/auto_bailout.htm.
Miller, Steve. "Will Ford Benefit From Federal Contracts Given Government Stakes in GM, Chrysler?." CBS.
12 Gilbert, Jeffery. "Solid GM Earnings Lead To Large Profit Sharing Checks." CBS Detroit.
13 Chrysler. "Walter P. Chrysler: A Machinist Visionary." http://www.chryslerhistory.com/WalterPChrysler/Content.aspx?topic=Walter-P-Chrysler.
14 Henry Ford Museum. "The Henry Ford." http://www.hfmgv.org/exhibits/fmc/battle.asp.
Wang, Kung, Clifford Winston, and Ann F. Friedlaender. The Bell Journal of Economics. Vol. 14. N.p.: RAND Corp., 1983, p.1-2.
15 Singleton, Christopher J. Auto industry jobs in the 1980's: a decade of transition. N.p.: Bureau of Labor Statistics, 1993, p.2.
16 Amadeo, Kimberly. "The Auto Industry Bailout ." About. http://useconomy.about.com/od/criticalssues/a/auto_bailout.htm.
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