“But if its return on investment averaged 25 percent for 1950 through 1955, well above the corporation’s target and the highest return in American industry, why couldn’t General Motors reduce the prices on its cars, [a Senate subcommittee wondered]. . . .
General Motors set prices within the industry to suit its own arbitrary profit goal, heedless of the competition. There was little to worry about, as Ford’s embarrassment in 1956 proved.
Ford had introduced a new car in September 1956 to compete against a Chevrolet model that was three years old. Fearing General Motors would competitively shave the price of its three-year-old model — after all, the tooling had long since been paid for — Ford raised its prices only 2.9 percent, ‘no more than our actual costs for materials and labor have gone up.’ Two weeks later, Chevrolet announced its prices for the merely facelifted models, increasing them from $50 to $166. A week later, Ford responded by raising its prices $50 and within three months had adjusted all of its prices to bring them within $10 of Chevrolet. . . .
United Auto Workers president Walter Reuther contemptuously dismissed Ford’s ‘double shift’: ‘This is the first time in the history of a free enterprise economy where a company raised the price of their products in order to be competitive. . . . Why? Because prices in the automobile industry are set by General Motors.'”
— Ed Cray, Chrome Colossus (1980, p. 372-373)
RE:SOURCES
- Cray, Ed; 1980. Chrome Colossus: General Motors and its Times. McGraw-Hill Book Co., New York, NY.
ADVERTISING & BROCHURES
- oldcaradvertising.com: Chevrolet (1957)
Also see ‘Antitrust regulations: Lack of enforcement fueled U.S. industry’s decline’
There are two sides to this story. GM, with its greater efficiencies and economies of scale (at least in the 1950s), could have LOWERED prices to the point where it could have driven AMC out of business, backed Chrysler up against the wall and seriously hurt the Ford Motor Company. In some respects, by raising prices, GM was giving its weaker competitors some breathing room.
Ed Cray is correct, but General Motors was the 1904 equivalent of “The Standard Railroad1 of the World”, the mighty Pennsylvania Railroad, that owned Philadelphia and Pittsburgh, had total control of the U.S. Senate and wide influence in the Republican (McKinley) White House until his successor won re-election in his own name in 1904. Theodore Roosevelt went after the trusts and directly over the stranglehold the P.R.R. had on railroad supremacy between the Mississippi and New York City, in a way the U.S. Senate could not stymie. For the first time, the Pennsy was not fully in control of its own destiny and by 1918, still was the dominate railroad in the east, just not able to bulldoze the U.S. government to its way of thinking as it had done sine 1854.
So too, the re-election of Eisenhower in 1956, may have made G.M. corporate governance a sense of reinforced confidence, but 1956, in my opinion, marked the start of the erosion of the full support of “Engine” Charlie Wilson’s assertion that what what good for the country was good for G.M. and vice-versa…as more detractors began to question, (especially in the wake of the 1954 G.M.-Ford sales blitx that put the squeeze on Chrysler and the independents), the Democrats and some liberal Republicans began to question G.M.’s position of dominance and the erosion of General Motors began in little bites into the 1970s. While Alfred P. Sloan and Harlowe Curtice were preparing for retirement, the regimes of Fred Donner and James Roche faced stormier water sailing foreward. If only they knew what was ahead by the 1970s. This is where Ed Cray’s book, while critical is dead accurate in its tone.