Fifties (20 page)

Henry Luce was the first to speak of the coming of the American Century: Some forty years later Naohiro Amaya, a Japanese intellectual and high-level civil servant, would say that the American Century was the same thing as the Oil Century—an era in which the economy was driven by oil instead of coal and in which, for the first time, the worker became a consumer as well. Daniel Yergin described this liberated worker-consumer as the Hydrocarbon Man. Unlike the worker who toiled in the coal age, the Hydrocarbon Man was the beneficiary of his own labor. He owned a car and a house and enjoyed a generally improved style of living. In the coal age, Amaya pointed out, many workers worked for small wages to produce giant machines like the steam engine; accordingly, the industrial process enriched only the owner of the factory. In the Oil Century people worked at Ford or GM plants, where they mass-produced machines whose price was so low they could be bought by the very people who made them. Karl Marx, Amaya liked to say, was the last great philosopher of the coal age; his workers were locked into a serflike condition. Had Marx witnessed the industrial explosion of the Oil Century and the rising standard of living it produced among ordinary workers, he might have written differently.

The Oil Century, Yergin said, was just beginning in 1949, and America, with its accessible, inexpensive domestic oil sources, was the first nation to enjoy it. During the war, vast new pipelines and great refineries were built to create even easier access to oil. So the price of oil (which was a far more efficient source of energy, anyway) remained low after the war. This was not just some abstract economic concept; it had tremendous impact, driving a surging economy at all levels. There were frequent gas-price wars among filling stations—which would advertise that their price at the pump was a half cent lower than that of the neighboring stations.

In addition most industrialists of the era saw oil as a means of fostering more stable social-political conditions. Digging coal out of the mines was a difficult, dangerous process, which made workers tough and resentful. They responded by organizing such unions as the United Mine Workers, led by John L. Lewis, probably the most
combative labor leader of his generation. Lewis feared no one—mine owners, media, or even such liberal Presidents as Franklin Roosevelt and Harry Truman; he was even immune to pleas that his tactics were impeding the war effort. Fear of men like him and their ability to block consistent production was a powerful incentive for industrialists to switch from coal to oil. It was to become an international trend in which America led the way. In the period from 1949 to 1972, American consumption of oil went from 5.8 million barrels per day to 16.4 million barrels per day. In 1949, coal accounted for two thirds of the world’s energy; by 1971, oil accounted for two thirds.

In America the years immediately after World War Two saw one of the great sellers’ markets of all time. There was a desperate hunger for products after the long drought of some fifteen years, caused first by the Depression and then by World War Two. At first there was actually a premium on buying a car; customers often had to pay something under the table to dealers in order to get on the waiting list for the relatively few new cars available. Like many returning veterans, William Levitt, who was soon to become America’s foremost builder of mass housing, found that he had to pay a thousand dollars extra, almost half the list price, to buy a Nash for his mother.

If ever there was a symbol of America’s industrial might in those years, it was General Motors, a company so powerful that to call it merely a corporation seemed woefully inadequate. It was the largest, richest corporation in the world and would, in the coming decade, become the first corporation in the history of mankind to gross a billion dollars. Its primary competitor, the Ford Motor Company, hovered near bankruptcy after the war, thanks to the madness and paranoia of its founder. Ford was rescued only after Henry Ford II was permitted to take a top management team from General Motors, a move encouraged privately by Alfred P. Sloan, the chairman of GM’s board, because he feared that if Ford went under GM would be vulnerable to antimonopoly charges by the Justice Department. General Motors dominated the market so completely that when one of its top executives, Charlie “Engine” Wilson, left GM to become Eisenhower’s defense secretary, he was widely quoted as saying that what was good for General Motors was good for the country. That is what he probably
thought,
but what he actually
said
was: “We at General Motors have always felt that what was good for the country was good for General Motors as well.” In good years GM made virtually as many as or more cars than all of its competitors combined.

The only thing standing between the corporation and virtually limitless profits was the possibility of labor unrest. During 1945–46, there was a bitter strike over wages at General Motors that lasted some one hundred days. The issue came down to a one-penny-an-hour difference, which GM could easily have afforded. Management held the line, as much as anything else, to teach the United Auto Workers (UAW) a lesson. At the same time, the strike had significantly reduced the corporation’s production and its profits, so it had been a lesson to GM executives as well. Wilson, the head of the corporation, and Walter Reuther, the head of the union, had an unusually good personal relationship, and Wilson, for a General Motors executive, was exceptionally sympathetic to the plight of the working man. Looking to the horizon and seeing nothing standing between him and unlimited sales and profits except labor unrest, Wilson signed a historic agreement with Reuther and the union in 1948, guaranteeing not only traditional wage increases but also raises tied to a cost-of-living index. In effect it made the union a junior partner of the corporation, tying wages not merely to productivity but to such other factors as inflation as well. The agreement reflected the absolute confidence of a bedrock conservative who saw the economic pie as so large that he wanted to forgo his ideological instincts in order to start carving it up as quickly as possible. Some conservatives in the industry were not thrilled with the agreement and its implications for the future, but in the short run, it had the desired effect; it brought GM virtually a generation of peace with its work force. “The treaty of Detroit,”
Fortune
called it, and added: “General Motors may have paid a billion for peace, [but] it got a bargain.” In those days GM was so mighty it knew it could simply pass on the burden of higher labor costs to the customers (and knew also that by signing such an agreement, it had set, as well, the basic labor rate for Ford and Chrysler, which with their lesser resources and smaller scales of production would find it far more burdensome. Ford and Chrysler would set their prices on their new models once they learned what GM was going to do).

General Motors, in the years after the war, made ever bigger cars. It moved in that direction because it was the nature of the beast. There had been one brief skirmish within the corporate hierarchy when Wilson wanted to do a low-price car at Chevy in the late forties. He had in mind a car that would cost under a thousand dollars. There was even a brand name for the new car—the Cadet—and engineering on it was pursued to a relatively advanced stage. Charles Kettering, the company’s most brilliant inventor, was one of
the few top executives sympathetic to Wilson’s idea, but it was Kettering’s invention of the high-compression engine using high octane gas that, as much as anything else, helped tip the balance away from small cars.

Small cars meant smaller profits, while basic production costs stayed the same. Producing a fender for a big car, the GM analysts liked to point out, was not much more expensive than producing a fender for a little car. The financial people reported that they would have to sell three hundred thousand Cadets a year for three years just to pay for its tools and dies. Worse, who was to tell how many Cadet sales might have gone instead to larger cars, where GM made a larger profit? By 1947 the Cadet was shelved. In December 1949 a reporter asked Wilson if there would ever be an inexpensive car priced under a thousand dollars again. No, he answered, that was in the past. “People don’t want the kind of car you would have to make in order to price it under a thousand dollars. You would have to take too much out to get the price down and there are too many things you couldn’t cut.”

General Motors had been waiting a long time for this market of abundance; in fact Alfred P. Sloan, the company’s corporate architect, had been planning for it for some twenty-five years, but his dream for a super corporation to exploit an affluent society was delayed first by the Depression and then the war. Sloan was seventy-five before the country’s affluence finally caught up with his vision for GM. It had been his belief since the mid-twenties that the American market could be broken down into a few essential niches, defined by economic and social status. Crucial to Sloan’s dream was the annual model change, designed to make car owners restless with the cars they owned and eager for newer products. But GM’s categories were the core of its success. They made car owners restless by playing off their broader aspirations. The Chevy was for blue-collar people with solid jobs and for young couples just starting out who had to be careful with money; the Pontiac was for more successful people who were confident about their economic futures and wanted a sportier car—one thinks of the young man just out of law school; the Olds was, in the beginning of the decade, a bit more sedate—for the white-collar bureaucrat or old-fashioned manager; the Buick was for the town’s doctor, the young lawyer who was about to be made partner, or the elite of the managerial class; the Cadillac was for the top executive or owner of the local factory. Typically, when two brothers, Dick and Mac McDonald, after floundering for most of their lives, finally succeeded in a big
way with a small hamburger stand in San Bernardino, the first thing each of them did was buy a new Cadillac. That signaled they had joined the proprietorial class, and like the other town leaders, they dutifully turned in their Caddies each year for the latest model. Caddies cost about five thousand dollars, and the price with the trade-in—for that was one of the advantages of a Caddy: it held its value—was seven hundred dollars annually.

It was hard to think of a more unlikely figure than Alfred Sloan to lead a revolution of consumer affluence. He had no love of cars. His employees could not conceive of him showing up at the company’s test track to drive the latest hot model. Cars, he had thought as a young man, were “impractical toys ... a dangerous nuisance.” Mr. Sloan, as he was always called, stayed indoors, behind his desk, suit jacket on, tie knotted, tall and ascetic. His manner was distant, for decisions were never to be influenced by friendship—that would be a weakness. Indeed it was hard to imagine him out of the office; he and his wife did not entertain much, and recreation was essentially an alien word to him. It was in his office that he was happiest, for there he could study his figures and organizational charts, seeking the truth that only they could reveal. The charts gave him pleasure; he could look at them and see the company with its complicated industrial tasks deftly and justly apportioned, not to mention the financial monitoring capabilities skillfully imbedded throughout it. To him these charts represented a beautiful harmony between corporate discipline and industrial dynamism. Product was important at a place like GM, but product was not Alfred Sloan’s primary impulse—the corporation would always produce plenty of talented young men who could create product. The system was Sloan’s love. He was a man of order, who had come to power at General Motors in the early twenties during a period of terrible chaos. Billy Durant, the founder of General Motors, had been brilliant; he had seen the advantages in binding together several smaller companies and had gone on a colossal buying spree, purchasing auto companies and suppliers alike, including a ball-bearing company headed by a young man named Alfred P. Sloan. Durant had created a potential automobile giant, but it was also a company loaded with debt, with too many of its companies vying for the same share of market. Of the seven car companies in Durant’s early United Motors Corporation, the forerunner of GM, only two were profitable—Cadillac and Buick—both with secure market niches. Sloan thought Durant’s fatal flaw was that he could create but not administer. When Sloan became president of the company, bankruptcy loomed just over the horizon.

Sloan later wrote, “I believe it is reasonable to say that no greater opportunity for accomplishment was ever given to any individual in industry than was given to me when I became president.... I determined right then and there that everything I had was to be given to the cause. No sacrifice of time, effort or my own convenience was to be too great. There were to be no reservations or alibis.” He was the prototype of all the managerial men to come later, and his rise at GM symbolized the rise of the new managerial class in America, leading some to bemoan the effect upon American entrepreneurship. Fearing that talented mavericks and tinkerers were being replaced by bookkeepers and bankers, Russell Leffingwell, a partner in J. P. Morgan, warned the Senate Finance Committee in 1935 that “the growth of corporate enterprise in America has been drying up individual independence and initiative. We are becoming a nation of hired men, hired by great aggregates of capital.”

Sloan’s first task was to challenge the powerful but stagnant Ford Motor Company. The era of mass car production had been inaugurated by the first Henry Ford, with his Model T. Before that, cars were exclusively the property of the wealthy. Ford figured out how to manufacture cars in such volume that the price dropped steadily—for every dollar I bring the price down, I can sell a thousand more cars, he bragged. In so doing, he changed the very nature of the American economy. Under Henry Ford that first era of auto production was, most assuredly, Puritan. The Model T was simple, boxy, functional. A buyer could choose a car in any color he wanted, Ford boasted, as long as it was black. There were no frills.