Alfred P. Sloan’s Vision … and Legacy
In the beginning, there was Henry Ford. His two brilliant ideas: the Model T (standardization for the masses) and the River Rouge assembly line (mass production of that standard product, now known as “Fordism”) – both symbolize the start, early in the 20th century, of a technological economy aiming for the betterment of society. Or so it seemed.
But techno-idealism is something we’ve seen since Ford’s time as well. Indeed, even when he was first implementing his ideas, many others in that 19-aughts version of Silicon Valley (centered then around Detroit) thought they could beat him at his own game. One daring transactional speculator from nearby Flint, William C. Durant, having achieved some financial success in luxury carriage making, decided to search for all the promising entrepreneur/engineers he could find in the area who were exploring the new internal combustion powered wheeled vehicles. Starting with David Buick’s garage in Flint, he went on a binge of buyouts – forming General Motors the same year the Model T Ford was introduced to the public, 1908. While Durant struggled to place multiple competing cars under one roof (Buick, Oakland, Oldsmobile, Cadillac, later Chevrolet), seemingly lacking any unified vision matching his eagerness to invest, he did hire some executives with the goal of “managing” his new corporation – acknowledging management was a challenge for him. Perhaps the most outstanding example was Alfred P. Sloan, brought in first as a supplier of bearings for the various GM brands.
Sloan went on to create the largest industrial corporation ever known to the world – from his perch in its executive suite (by then located in its own building in downtown Detroit). The General Motors that Sloan designed (though first chartered by Durant) lasted for a hundred years – only to descend into Chapter 11 bankruptcy itself some four decades after Sloan’s death, having lost its direction (and values?) gradually over that time … what happened?
Perhaps 100 years is long enough for any technology-based manufacturing corporation to survive. Sloan’s original plan was to beat Ford. He succeeded at that within a few years of his ascent to the helm of GM in the early 1920s. Ford, as Sloan put it in his memoir My Years with General Motors, had mastered efficiency of production, but failed to keep in touch with the evolving market for cars, and more importantly, really had no sense of what people actually wanted from this new technological marvel. It wasn’t basic transportation (at first there weren’t enough roads to take them anywhere), it was status, excitement, adventure – at prices they could afford (Americans were getting more prosperous through the ‘20s, Sloan admits). Hence, both market segmentation (different price points for each brand, different body styles for different preferences) and planned obsolescence (annual model changeover, including planned investment in retooling at regular intervals) became hallmarks of the Alfred P. Sloan management philosophy at GM. It worked … for at least 60 years. But after regular 40-50% shares of the domestic automobile market, things began to slip. Perhaps it was the imports – providing consumers even greater variety, more market segmentation. It wasn’t Ford, or Chrysler, or Nash – although they feverishly tried to copy GM’s style from the 1930s on. GM continued to dominate with its collaborative management structure. Sloan emphasized what he called “coordinated decentralization” among the various GM brand divisions. But gradually it all changed. Those divisions no longer competed internally, because their own management became too comfortable with generous bonus plans – lower executive turnover than competitors – and, yes, newer competitors weren’t even from America. Domestic market share for GM slipped to only 35% by the 1990s and has continued to drop since. Today, the only reliable market segment for GM products seems to be trucks.
Was the bureaucratic, committee-centered, management structure really the ideal corporate form for the 21st century? Sloan was quite proud of being called a “committee man” in his early ascendance in the board room. There were overlapping memberships on his Finance Committee, Engineering Committee, Operations Committee, but each committee seemed to be required for any production or design decisions to be made. Sloan credits this structure for a large part of its success in beating Ford – known for a much more autocratic management style devolving from its founder (and later, his progeny). But it could have been externalities in the marketplace instead. Ford, for sure, failed to anticipate the growth of the middle class in the 1920s and, with major changes in the New Deal era, the post-depression ‘30s. What would this mean for the domestic automobile market? However, don’t discount the “great man” theory; Harley J. Earl was a true genius, an artist, and a seminal figure at General Motors for at least twenty years. Those executive retention rates of which Sloan was so proud worked well for him in styling – he created a Styling Committee too, for Earl. Sloan was an engineer, first and foremost, but the creative spirit which drove GM marketing in those key decades of its dominance may well have been the corporation’s secret sauce. By the time these outstanding leaders were gone, there apparently were no suitable replacements at GM. The best the corporation could do in the ‘70s, ‘80s, ‘90s, and aughts, was try its best to maintain that past glory. Ultimately, it got old – the geniuses retired, then died.
Reorganization from Chapter 11 bankruptcy came in 2009; there was no longer cash to maintain the corporate behemoth that had been inherited from 100 years of Alfred P. Sloan’s vision. It had run its course. Mary Barra has been CEO of the “New GM” for the last decade plus. She may retire soon as well but looks like yet another of the Sloan-styled corporate lords that have always navigated the General Motors ship. She is an alum of Kettering University in Flint – formerly the “General Motors Institute” – a thoroughly GM-engineering-pilled loyalist. Charles Kettering, for whom the university is named, was Sloan’s best buddy in those early days at the fledgling corporation, and collaborated with Sloan in philanthropy establishing the Sloan-Kettering Cancer Center. He was a consummate technocrat – Sloan’s personal choice to head the GM Research Committee. Will Barra’s Cruise Division succeed in bringing us reliable self-driving cars? Will her Ultium battery technology initiative succeed in bringing EVs to the masses where others fail? These are big engineering projects. Their ultimate success remains to be judged, but my faith in technocracy, especially regarding the auto industry, is waning these days. General Motors now seems more like a desperate teenager trying to establish itself in the adult world than a scion of industrial greatness from the previous century – perhaps that’s a good thing.
— William Sundwick
Warp and Woof 