Topics: Labor Unions

Even the Big Three's boom years had to end

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Sean Higgins,Labor unions,Labor,Detroit,Corruption,Analysis,Michigan labor special series

Second installment of a five-part series, "Working Man's Blues: Michigan's journey from Big Labor fortress to right-to-work state." See the entire series, with previous installments and multimedia, at this link.

Charles E. Wilson could not understand what the fuss was about. As President Eisenhower's nominee for secretary of defense, he was being pushed hard to sell the stock he acquired as General Motors' chief executive.

Wilson refused, even though doing so was undermining his chances for Senate confirmation. Wilson's shares were worth $2.5 million at the time -- about $20 million today. Senators were understandably concerned that retaining such a stake in the company might sway his contracting decisions.

During a January 1953 hearing, Wilson was asked what he would do as secretary in a situation where the best outcome for the country might hurt GM's bottom line. Could he still decide in the country's favor?

The hearing was closed to the press, but a senator told the Detroit Free Press that Wilson replied: "Certainly. What's good for General Motors is good for the country."

The actual quote according to the transcript was: "For years, I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country."

Wilson would eventually give in and divest his stock, but his off-the-cuff answer came to symbolize, for good or ill, the mindset of 1950s corporate America, especially in the auto industry.

In the years after World War II, U.S. industry rapidly outpaced the rest of the world. Two decades of pent-up consumer demand held back first by the Great Depression, then by wartime rationing, and finally by postwar recession, suddenly burst forth.

Foreign competition was virtually nonexistent. Europe and Japan were in ruins and rebuilding. The Cold War's Iron Curtain prevented trade with much of the industrialized world. Detroit and the auto industry boomed.

Working Man's Blues: Michigan's journey from Big Labor fortress to right-to-work state
A five-part special series by the Washington Examiner
 
Monday: Big Labor and one-party government drove Detroit into the ditch
Tuesday: Even Detroit's boom years had to end
Wednesday: Detroit downsizes as Japan builds in the right-to-work South
Thursday: The Bush and Obama bailouts "save" the UAW
Friday: How the UAW made Michigan a right-to-work state
 
See the complete series, along with video and related media, at this link.

The number of cars registered in the United States soared from 25 million to 40 million between 1945 and 1950. Annual auto sales reached 9 million by 1955. That year, General Motors became the first corporation to pay $1 billion in taxes. In 1956, Eisenhower signed legislation creating the interstate highway system.

The "two-car family" became the norm. Detroit record producer Berry Gordy had a car radio speaker set up in his Motown studio. He would release records only if they sounded good coming out of that speaker.

Demand for automobiles was so great that the Big Three manufacturers -- GM, Ford and Chrysler -- could afford to be generous without undermining profits. Union membership hit its all-time peak in the United States in 1953 at 35.7 percent. The United Auto Workers was the largest.

The industry gave into most UAW demands -- higher wages, generous health insurance, pensions -- after Chrysler lost an estimated $1 billion in sales due to a strike.

High labor costs were passed on to consumers, but sales kept soaring. Demand was stoked by annual new model introductions. Styling accounted for about a fourth of a car's cost.

As almost always happens in booms, people began thinking it would never end. The Big Three let labor costs climb until by the end of the decade the average car's price had tripled from two decades before. Two-car families began to look for a cheaper, no-frills purchase for that second car.

Their solution came in a funny-looking but economical and reliable German car, the Volkswagen Beetle. By 1960, annual foreign car sales in the United States jumped tenfold to nearly 500,000 as Detroit exports fell by 100,000. The loss of those sales to foreign competition gave the auto industry its first jolt in a decade. Detroit lost 50,000 jobs by 1960. Smaller domestic manufacturers like Packard and Hudson went under.

Even the Big Three were affected. The workforce at Chrysler's four Detroit plants dropped by half to 23,000 by the end of decade. The boom was over.

COMING WEDNESDAY: Detroit downsizes as Japan builds in the right-to-work South.

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