This chapter discusses the evolution of the auto industry during the time between 1929 and 1945. Obviously in America, 1929 was the year the great depression began spelling economic hardship and adversity for years. However, Volti claims that irrespective of the depression; the auto industry continued to progress and improve. During the early years of the depression purchases of new cars dropped off, but returned to pre depression levels in 1936. On the contrary, it would seem the drop off in new car purchases may have been supplemented by more exhaustive use of already purchased cars because of the jump in fuel consumption. The depression also worked to squeeze out the small players in the auto industry as only the large stable companies could weather the dropping sales and tough business climate. The “big three”(Ford, GM, and Chrysler) , as they came to be known, survived and dominated the American auto industry after the depression controlling 85% of the market. The Great Depression did not have as severe economic consequences abroad as several European nations saw continued annual growth in car sales during the time. However, oligopolistic markets became the normal market variant among most automobile industries during the time (whether that be domestic oligopolies or the American “Big Three” dominating foreign markets).
Technology in cars over this period was not particularly innovative as most of the improvements stemmed from implementing preexisting technology into cars. Notably streamlining, single auto body, lights, hydraulic brakes, and windshield were all either implemented or improved during this time period. Further, Ford released the first mass produced low cost car with a V8 in his Model A. Also, until this point almost every car was a manual transmission requiring very strategic shifting that lead most people to simple get in a gear and stay there. However, new transmissions were invented during this period, which made shifting gears much easier or altogether eliminated shifting with GM’s introduction of the automatic transmission in 1939. The diesel engine, which had previously been designated to stationary machine, boats, and the likes was reintroduced to cars as its thermodynamic efficiency was superior to the otto engines used in automobiles during that time. Interstates and freeways started to make an appearance towards the beginning of world war II, though America did not make much progress (Germany and several European countries were farther ahead with infrastructural development). The workers of the auto industry first began to organize into unions and strike during this time. However, towards the end of the time spanned during this chapter WWII began, which lead led the government to rely on the auto industry and its manufacturing capacity to supply wartime materials and aid.
Discussion:
- To what extent did the great depression hinder/progress the automobile industry?
- How did the global culture and economies change during the time period, and what affect did this have on the automobile industry?
- Did the automobile industry stagnate during the 1930’s or was the implementation of preexisting technologies into cars a necessary step in the evolution of the industry?
- Did the oligopolistic nature of the auto industry that took over during this time period hurt automobile consumers or help them?
I don’t think the the Depression era can truly be marked by progress for the automobile. Although, comparatively the automobile industry was able to withstand the economic downturns better than many other industries, the level of production in 1929 of 5,337,087 cars was not eclipsed until two decades later. Even though automobile sales steadily climbed from 1932-1937, automobile dropped sales from 3,929,203 cars in 1937 to 2,019,566 cars in 1938 due to another recession. The automobile industry was definitely not immune to the great depression and the period of the great depression can definitely not be marked by progress. Although, there were new innovations in the design of cars as well as the development of new braking systems. These did not represent ground breaking achievements in engineering, but rather the application of existing technologies. Lastly, the Great Depression caused the failure of many long-established automobile manufacturers, leaving the leaders (GM, Ford, Chrysler) to control the majority of the market.
From an economic point of view, an oligopolistic market allowed automobile consumers to compare prices among a few players(in this case Ford and GM) in the market. Under the great depression background, oligopoly in car market helped the automobile consumers. On top of that, when consumers could compare prices between the two players, it would force them to set their prices competitively and that would be another advantage for consumers.
A follow up thought on my post yesterday. We talked about oligopoly pricing today and learned about price leadership. In that case, it seems that consumers would be harmed by the oligopoly and a higher price would attract new entries, which makes a lot of sense for the mass entering of firms in the auto industry after the Great Depression.
We have to be careful in assuming the strong (rather than the lucky) survived. This would be a question best posed to the collective membership of the Society of Automotive Historians – if you were sitting in 1929, not knowing the economy was about to fall off a cliff, which firms would you predict as “keepers”, in for the long haul? Maybe it would be the Detroit Three: GM had surpassed Ford, but Ford had a huge dealership network even if it had a paucity of product. Chrysler was there, not sure what it was that let them survive despite being a fairly new company. Lots of firms however had exited before 1929, so it was easier to call.
One major item not emphasized was the rise of the UAW, in part a result of the Great Depress. The 1920s in the US saw the rise of welfare capitalism, companies treating workers as core players, providing a variety of benefits and striving to offer job security. Ford’s $5 day is symptomatic – good for workers, but in an era when on-the-job, company-specific skill acquisition was becoming important, also good business. That implicit contract collapsed in the 1930s, and formerly good employers became truly nasty, retrogressive places to work. That the UAW gained strength in the Great Depression era was not an accident. A neat book on that is Sanford Jacoby, Employing Bureaucracy (Columbia University Press, 1985), which traces the rise of the Human Resource function and the regularization of the work environment, stimulated by unions such as the UAW but then diffusing across a wide array of firms in the US, including in sectors in which unions were never present.