A Ghost’s Memoir: The Making of Alfred P. Sloan’s My Years with General Motors by John McDonald

Summary

  1. McDonald wrote Sloan’s biography and was barred from releasing it for a long time because of GM’s fears of revealing too much about their being a monopoly

Key Takeaways

  1. Far from being the legendary crisp man of decision, Mr. Sloan was, when he chose to be, a master of ambivalence. He had described himself remarkably well in his testimony in the Du Pont suit: “It is generally my custom, when I get some resistance, to back out of it and try to do a selling job rather than to force the issue.” And he said: “I have never had much respect for my own ability as a negotiator. I am too apt to look at two sides of the question.”
  2. Its twenty-eight pages, replete with organization charts, set forth the future design of the corporation now known in the famous corporate aphorism “decentralization with coordinated control.”
  3. Mr. Sloan’s genius, as far as I could see, was in a complex of corporate arrangements and activities; his skill was in the internal strategies of the automobile industry and in the market: He could hold that industry, so to speak, in the palm of his hand.
  4. The project had something useful about it for his state of mind after his wife died. On the occasion of his previous birthday, he had written me a thank-you note for noticing it, saying that at eighty “there is little to look forward to … but I have much to look backward on. And, in a way, that’s consolation.”
  5. John J. Raskob was Pierre Du Pont’s mentor and guide in matters of finance, as Charles Kettering came to be in technology-both very good in their fields but with flaws that would endanger the survival of General Motors. With great foresight into the future of the automobile business, Raskob wrote down several good reasons for the Du Pont company to invest in General Motors. Among these reasons, which he numbered, was that together with Durant they could secure joint control of the company and “assume charge and be responsible for the financial operation of the company.” His Point Five would later bring big trouble. He wrote: “Our interest in the General Motors Company will undoubtedly secure for us the entire Fabrikoid, Pyralin, paint, and varnish business of those companies, which is a substantial factor.” The Du Ponts were persuaded, and in1917 the Du Pont company made the large investment in General Motors that gave them about a twenty-three percent interest in the company.
  6. Before considering the subject of particular products it is advisable to outline the controlling purposes that presumably underlie the organization and proposed operations of the Corporation. That is, the whole picture should first be clearly drawn in order that the present particular subject may be considered, not just alone, but in its essential relations to the chief objectives of the General Motors Corporation.It is to be presumed that the first purpose in making a capital investment is the establishment of a business that will both pay satisfactory dividends and preserve and increase the capital value. The primary object of the General Motors Corporation, therefore, is to make money, not just to make motor cars.How is it proposed to earn satisfactory dividends on the investment? And how does the earning purpose of the General Motors Corporation differ from the business objectives of other manufacturers of automobile vehicles?A monopoly is not planned. It is recognized that there will always be competing cars. But it is believed that by “covering the market for all grades of automobiles that can be produced and sold in large quantities” the Corporation will be able to secure many advantages over manufacturers of but one or two grades; even if General Motors cars in the respective grades are no better than the best competing automobiles of the same grade. . . .(Ajs soon as practicable the following grades shall constitute the entire line of cars,(a) $450.00 – $600.00(b) $600.00 – $900.00(c) $900.00 – $1200.00(d) $1200.00 – $1700.00(e) $1700.00 – $2500.00(f) $2500.00 – $3500.00It is recognized that there will always be a considerable market for cars priced above $3500.00, but the demand for any one type will be limited to such a number as would not permit of “quantity” production. These might almost be called custom-built cars, and it is not recommended that the General Motors Corporation attempt to cover that field.
  7. The field of cars of the first grade is now practically monopolized by the Ford. At present it is being invaded by Chevrolet. It is not recommended that the General Motors Corporation attempt to build and sell a car of the Ford grade, as the Ford sells at the lowest price within the first grade. Instead it is recommended that the General Motors Corporation market a car much better than the Ford, with a view to selling it at or near the top price in the first grade. It is not proposed to compete with the Ford grade, but to produce a car that will be so superior to the Ford, yet so near the Ford price, that demand will be drawn from the Ford grade and lifted to the slightly higher price in preference to putting up with the Ford deficiencies.It is believed that the converse of this effect will be produced when the new General Motors first grade car, selling at approximately $600.00, is compared with cars of competitors in the next highest grade, selling at $750.00 or slightly below. Even though the new General Motors (a) grade car may not be quite as good as competing cars selling at approximately $750.00, it should be so near the grade of competing cars selling at the middle of the second price range, that prospective buyers will prefer to save $150.00 and to yield the comparatively slight preference they might have for the competing car if the prices were nearly equal …
  8. There should be absolutely no duplication within the Corporation of any car planned to cover a particular grade field, since a sufficientselection of models will be offered by the overlapping sales scopes of each model, above and below the limits of its planned price range. All competition within the Corporation itself should be eliminated.It is recognized that the future of the Corporation and its earning power depend on its ability to design and produce automobiles of maximum utility value and attractiveness of appearance, in such quantities and by such coordinated methods of efficiency as will result in a minimum cost for the models required to supply all the markets of greatest demand for automobiles….The core of the policy, as we wrote in My Years with General Motors, lay “in its concept of mass producing a line of cars graded upward in quality and price. This principle supplied the first element in differentiating the General Motors concept from the old Ford Model T
  9. Frank Donovan, a lifetime close friend and a lawyer from Detroit. He was known among his friends and clients as a brilliant legal analyst with a nonaggressive temperament. No litigator. When we were both twenty, I remember him saying: “When there’s a fight, I pick up my hat and go home.” He had a large head, somewhat out of proportion to his medium build, and the kind of languid grace that was great for sitting around talking, as we had since our teens. Altogether these characteristics did not quite account for his having been captain of Notre Dame’s tennis team under Knute Rockne’s athletic directorship and three times tennis champion of Detroit.

What I got out of it

  1. A bit boring and too much legal background but gave some good insights into Alfred Sloan and GM