Alfred Sloan's Memoir II: Competing with Ford
In the spring of 1921, General Motors' Executive Committee created a special committee to study the company's de facto product policy and make any recommendations that might seem advisable for adjusting it. As Alfred Sloan explains in Chapter 4 of My Years with General Motors,The product policy we proposed is the one for which General Motors has now long been known. We said first that the corporation should produce a line of cars in each price area, from the lowest price up to one for a strictly high-grade quantity-production car, but we would not get into the fancy-price field with small production; second, that the price steps should not be such as to leave wide gaps in the line and yet ... great enough to keep their number within reason, so that the greatest advantage of quantity production could be secured
[. . .]
The core of the [GM] product policy lies in its concept of mass-producing a full line of cars graded upward in quality and price [with Chevrolet at the low end and Cadillac at the top]. This principle supplied the first element in differentiating the General Motors concept of the market from that of the old Ford Model T concept. Concretely, the General Motors concept provided the strategy for putting Chevrolet into competition with the Model T. Without this policy of ours, Mr. Ford would not have had any competition in his chosen field at that time.
In 1921 Ford had about 60 percent of the total car and truck market in units, and Chevrolet had about 4 per cent. With Ford in almost complete possession of the low-price field, it would have been suicidal to compete with him head on. No conceivable amount of capital short of the United States Treasury could have sustained the losses required to take volume away from him at his own game. The strategy we devised was to take a bite from the top of his position, conceived as a price class, and in this way build up Chevrolet volume on a profitable basis. In later years, as the consumer upgraded his [automobile] preference, the new General Motors policy was to become critically attuned to the course of American history.
[pp. 65, 69, 1990 edition]
posted by Karen Nelson @ 11:50 PM
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