How the Big Three survived Depression

Although the Ford Motor Company appears to be weathering the current economic storm somewhat better than General Motors and Chrysler, the situation was reversed during the Great Depression.

By Wheels Wheels.ca

May 9, 2009 4 min. read

Article was updated 15 years ago

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Although the Ford Motor Company appears to be weathering the current economic storm somewhat better than General Motors and Chrysler, the situation was reversed during the Great Depression.

While Ford lost money and saw its market share shrink in the 1930s, GM and Chrysler were profitable and increased market share. During the decade, Ford fell to the No. 3 spot in sales, Chrysler took over the No. 2 spot, and General Motors became the dominant automaker. They became known as the "Big Three."

While the Big Three were getting bigger, the market share for other carmakers dropped from 25 per cent in 1929 to just 10 per cent in 1939.

Many of the smaller automakers folded during the 1930s, including Cord, Durant, Franklin, Peerless, Pierce-Arrow and Stutz. Others survived the Depression, but were so damaged they eventually went out of business, including Graham-Paige, Hudson, Nash, Packard, Studebaker and Willys-Overland.

From 1929 to 1932, vehicle production in Canada and U.S. dropped from 5.6 million to about 1.4 million.

Of the Big Three, Ford experienced the most problems during the 1930s.

After a profit of $40 million in 1930, Ford lost $88 million in the 1932-1933 period. Ford had massive layoffs and halted most of its advertising.

Even though Edsel Ford, Henry's son, was president of the company, Henry still essentially ran the company, often overruling his son's decisions.

In the book The Public Image of Henry Ford author David L. Lewis says, "No man had done more than Henry Ford to concentrate industrial power and accelerate production. Yet no leader in manufacturing had clung more stubbornly to an antiquated administrative system totally unequal to the demands of the new era. Thus, in a sense, the Ford Company had to fight not only its competitors but also its own leader's outdated ways to doing business."

During the 1930s, it became obvious that Ford was no longer the dominant player that it had been in the teens and early 1920s; it was simply one of the Big Three.

Even though they increased their market share during the 1930s, GM and Chrysler also faced tough times.

GM production in North America dropped from 1.9 million units in 1929 to 526,000 in 1932.

Alfred Sloan was president of General Motors from 1923 to 1946. In his autobiography, My Years with General Motors, Sloan says, "Our share of the market increased from 34 per cent in 1929 to 38 per cent in 1932, the trough year of the depression. Our profits dropped from about $248 million in 1929 to $165,000 in 1932."

GM cut several models, including the Marquette, Oakland and Viking. GM was able to earn a profit by serious cost cutting, according to author David Farber in his book Sloan Rules.

"By late 1932, GM had laid off half its workers. Those that remained had seen two hourly wage cuts of about 10 per cent each. Their weekly hours had been cut from an average of around forty-five hours in 1929 to only about thirty-one hours in 1932."

To cut costs, Chevy and Pontiac manufacturing were combined, and the Buick, Oldsmobile and Pontiac sales divisions merged.

GM of Canada also made changes during the '30s. GM laid off some senior executives in Oshawa, and shut down an assembly plant in Regina, which had been built in 1928.

Chrysler also grew and prospered, moving into second place in sales ahead of Ford.

The main reason for the success was the best-selling product in the Chrysler lineup, the Plymouth.

Walter Chrysler started the company that bears his name in 1924. The Plymouth was introduced in July 1928 as a 1929 model to compete against Ford and Chevrolet. In its first year, about 50,000 Plymouths were sold compared to about 500,000 Fords and 1 million Chevs. By 1932, Plymouth was one of the "low-priced three" with just over 186,000 sold, compared to about 210,000 Fords and 313,000 Chevs. By the end of 1932, Plymouth moved into the No. 3 spot in sales, and one in four cars in the U.S. was a Plymouth.

As well as being profitable during the Depression, Chrysler was also able to pay off a huge debt. Chrysler borrowed $60 million in 1927 to buy the Dodge Brothers Company. Paying off that debt was a priority for Walter Chrysler, and every year that's where some of the profits went. Chrysler was debt-free by 1935.

Chrysler took some drastic measures in the early '30s to be profitable. In his 1937 autobiography Life of an American Workman, Walter Chrysler says, "Expenses of the Chrysler Corporation had to be cut during 1931, 1932 and 1933. We had to cut salaries, reduce operations, retrench in almost every way."

But Chrysler also believed in planning for the future, saying, "No matter how gloomy the outlook, I never cut one single penny from the budget of our research department. ... As the depression became worse, as people became more gloomy, we grew bolder in our research. The things that were developed in the laboratories in those dark days are the improvements that created a strong demand for cars in 1936 and 1937."

The auto industry changed dramatically during the 1930s.

Unions began representing workers. The miles of paved roads in the U.S. doubled. Parking meters and drive-in theatres were introduced.

Every automaker brought out smaller, cheaper models, with fewer features or less power. Ironically, some of the largest and most luxurious cars of all time – with V12 and V16 engines – appeared in the 1930s.

While the Great Depression claimed plenty of victims in the car industry, it also forced the survivors to change and adapt in ways they had never imagined.

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