The Great Depression and the American Automobile Industry: An Introduction

In late October 1929, the Prosperity Decade of the 1920s came to an abrupt end. Stock prices collapsed, banks failed, businesses closed their doors, unemployment lines grew, and some committed suicide. There have been many explanations of why the Great Depression took place, including analyses that point to excessive stock speculation, depressed agricultural prices, and adverse monetary policy. Certainly the automobile industry figured into this prominently event. James Flink, in his Automobile Age, squarely places the automobile at the heart of the reasons for the downturn. Flink writes, “mass motorization played a key role in creating the most important necessary conditions underlying the Depression. The steep decline in aggregate spending evident by the late 1920s then, can be shown to have resulted from the economic dislocations that were an essential ingredient of the automobile boom, and from the inevitable drying up of that boom.”¹ Said another way, the industry had over-expanded, the market had become saturated, and, as it contracted, this leading sector pulled the economy downwards.

            The impact of the Depression on automobile production can be gleaned from Table 5, which shows General Motors annual production figures:

Table 5. General Motors Unit Sales By Divisions

Calendar Year	Buick/Marquette	Cadillac/LaSalle	Chevrolet	Oldsmobile/Viking
1926	267,991	27,340	692,417	57,862
1927	254,350	34,811	940,277	54,888
1928	218,779	41,172	1,118,993	86,235
1929	190,662	36,698	1,259,434	101,579
1930	121,816	22,559	825,287	49,886
1931	91,485	15,012	756,790	48,000
1932	45,356	9,153	383,892	21,933
1933	42,191	6,736	607,973	36,357
1934	78,327	11,468	835,812	80,911
1935	106,590	22,675	1,020,055	182,483
1936	179,279	28,741	1,228,816	186,324
1937	225,936	44,724	1,132,631	211,715
1938	175,369	28,297	655,771	94,225
1939	230,088	38,390	891,572	158,005

Source:  Alfred P. Sloan, My Years with General Motors (Garden City, NJ: Doubleday & Company, 1964), 446-7.

            Of more than 1,000 automobile manufacturers that had been active between 1900 and 1930, only 19 were in business in 1931, selling about 40 models of cars.² At the bottom rung were the cheap cars – Ford, Chevrolet, and Plymouth – selling for about $600. One step up were makes that included Pontiac, Dodge, Oldsmobile, Essex, Willys, DeSoto and Graham. The middle market segment was led by Buick, followed by Chrysler, Nash, Studebaker, Hudson, Hupmobile, Oakland, Willys-Knight, and REO. Upper-middle-class vehicles, which were priced between $1,800 and $2,500, were sold in much smaller numbers. For example, it was estimated that La Salle would add only 6,400 new registrations in 1931. Other cars in this class included Marmon, Franklin, Cord and Peerless, with the Jordan and Kissel already in receivership. Finally, Packard led the sales of the very top-of-the-line marques, with Cadillac in second place, Lincoln in third and Stutz and Duesenberg minor players. By the end of the decade of the thirties, this list would be considerably pared down, as times were so hard that the replacement cycle of the 1920s was significantly extended. For many, their only option was a used car.

            In 1931, Boss Kettering thought that the Depression was due to “boredom.” In his opinion, not enough new products had entered the market. That insight was ironic, perhaps, given that Kettering was the chief of a large research laboratory that was a part one of the world’s most powerful firms, and that its task was to develop the “new new” thing. There may well be truth, however, to Kettering’s perceptions. According to James Flink, the drop in demand due to over-production and market saturation was bad enough, but during the 1930s the industry entered a phase of technological stagnation that led to few major changes in the product or how it was made. In sum, the technologically dynamic industry of the 1920s gave way to a conservative one with no real gains in productivity. Flink claimed that:

By the late 1920s no manufacturing innovation was in sight of comparable importance to the continuing strip mill for rolling sheet steel or the continuous process technique for manufacturing plate glass, much less anything that could have the impact on investment in new plant and equipment that the moving assembly line had a decade earlier . . . Increasingly into the 1930s new investment in the automobile and ancillary industries was stimulated more by the demands of planned obsolescence and the dictates of style than by the basic innovations in automotive and manufacturing technologies.³

            Flink’s argument centered on the premise that 1930s was a decade characterized by continual refinement of the automobile as a technological system rather than radical changes. One may challenge this assertion, however. In terms of engine design, for example, Henry Ford’s flathead V-8, introduced in 1932, certainly revolutionized automobile power plants of that era. And there were dramatic changes at the top of the product ladder. Yet, only in a few rare cases did these innovations trickle down to the cars of the common person, and their cheap Fords, Chevrolets and Plymouths.