February/March 1995 | Volume 46, Issue 1
How one of our most enlightened business leaders became the symbol of corporate ruthlessness
If you want to know how much the world can change—and stay the same—in half a lifetime, consider the United States Defense Department, the General Motors Corporation, and the man who, forty years ago, epitomized them both, Charles E. Wilson.
In 1955 the Defense Department ran by far the most powerful military operation in the world. But that power came at a fearful cost to the American taxpayer. The Pentagon consumed nearly 60 percent of the federal budget and one dollar out of every eight of gross national product. Today the Pentagon still commands unparalleled military power, but defense is only 20 percent of the budget and consumes one dollar of every twenty of GNP.
General Motors, meanwhile, was America’s largest industrial corporation. It dominated the American business with a market share of almost 50 percent and therefore dominated American business. Moreover, it was the very model of how a vast economic enterprise should be run.
Today it remains America’s largest company, but its market share of the automobile business is down to around 33 percent. And no one today would look to General Motors as a corporate exemplar.
Charles E. Wilson connects these two mighty organizations. From 1941 to 1953 he was president of General Motors and brought it to the peak of its economic power and reputation. From 1953 to 1957 he was Secretary of Defense and began the long, hard, bitterly fought campaign to get “a bigger bang for a buck” out of the military.
Wilson was born in Minerva, Ohio, in 1890. According to him his father had been a toolmaker, had organized a union local, and was a dedicated socialist. In college Wilson followed his family’s socialist traditions and supported Eugene V. Debs for President. He graduated from the Carnegie Institute of Technology (now Carnegie-Mellon University) when he was only eighteen, with a degree in electrical engineering, but because of his youthful political adventures, he had trouble getting a job as an engineer. For a while he worked as a patternmaker and became the business agent for the patternmakers’ local in Pittsburgh. (In later years he would keep his framed union card on his desk at General Motors. When he moved to the Pentagon, it was the only thing from his old office, other than family photographs, that he took with him.)
He soon went to work for Westinghouse, however, designed the company’s first starter motor and four years later was in charge of all Westinghouse automotive electrical products.
After World War I Wilson moved to the Remy Electric Company, a General Motors subsidiary, and soon became general manager. In 1926 Remy merged with Delco, another GM subsidiary that produced electrical automotive equipment, and Wilson became the new company’s president.
By restructuring the merged companies, Wilson was able to save five million dollars a year, no small sum in the 1920s. But effecting the reorganization immediately would have cost five thousand jobs in Dayton, where Delco was located. Wilson postponed moving the jobs out of Dayton until new production could replace what was lost.
Such concern would characterize the man throughout his career at General Motors. It was Wilson who, in charge of the company’s labor relations in the late 1930s, accepted the United Automobile Workers’ organization of GM’s work force, ensuring that the entire industry would be organized. But he didn’t stop there.
At this time the idea that “management” could be a formal discipline, one that could be taught and learned rather than a seat-of-the-pants affairs, was very new. In fact, the young Peter Drucker, today the grand old man of management science, began studying the structure of GM, a study that would result in his seminal book Concept of the Corporation , only in 1943.
By 1941 Wilson was president of General Motors (and soon was known as Engine Charlie, to distinguish him from Electric Charlie, the Charles E. Wilson who became president of General Electric at nearly the same time). When the war broke out, Engine Charlie threw his considerable energies into war production, making GM into one of the world’s great military powers. But the strain on Wilson, who never took a day off for two years, finally took its toll, and he collapsed with a stroke.
He was ordered to take six months off but took only three, and he spent the time thinking about the future of General Motors and its work force. He came to some startling conclusions.
When he returned to work, he met with Drucker, who later remembered that of all GM’s top executives, only Wilson took him and his study seriously.
“I’ve been thinking about GM’s future,” he told Drucker. “. . . To design the structure and develop the constitutional principles for the big business enterprise was the great achievement of the founding fathers of GM, the last generation. To develop citizenship and community is the task of the next generation. We are, so to speak, going to be the Jeffersonians to Mr. [Alfred P.] Sloan’s Federalists.”
This was exactly the conclusion that Drucker was heading toward, making the modern corporation a community of interests in a common cause, not the set of mutual antagonisms that was the legacy of the past.
Wilson and Drucker talked long about how to achieve that. And in the ensuing years Drucker and Wilson’s staff worked out what has come to be called SUB, or supplementary unemployment benefits. These would, in effect, guarantee workers against loss of income resulting from anything short of a major depression.
Drucker assumed that Wilson would implement such a scheme immediately. But Wilson was wiser in the ways of unions. He told Drucker: “ I am never going to put it into effect. I grudgingly yield to a union demand for it when I have to.”
“You mean your associates in GM management wouldn’t go along with it unless they had to?” Drucker asked.
“No,” Wilson answered, “my associates will accept my lead in labor relations. . . . But the union leaders won’t go along unless it’s a ‘demand’ we resist and they ‘win.’”
It would be 1955 before the seed that Wilson had planted with his contacts in the UAW turned into a full-fledged union demand for SUB. When it did, the company “reluctantly” agreed to a plan that its own president, in fact, had developed.
Likewise, Wilson developed plans for a pension system to supplement Social Security. Drucker warned him that such a system, if the funds were invested in the stock market, would result in workers’ being the owners of American business in a few decades. “Exactly what they should be,” Wilson told him.
At the Pentagon Wilson was fundamental in bringing the military fully into the atomic era and developing the doctrine of using “massive retaliation” to protect the country rather than the far more expensive conventional means. In his first year he slashed the budget by five billion dollars and trimmed forty thousand employees from the Pentagon payroll.
If life were fair, liberals would hail Charles E. Wilson as a hero. And yet he is today remembered largely for a remark he never really made.
On January 15, 1953, he testified at his confirmation hearing before the Senate Armed Services Committee. The hearing was closed to the public and press, a much more common occurrence in those days than now, and Wilson was expecting no trouble. “I’ve got a feeling that I’m going to be pretty pleased and surprised at how easily those boys can be handled,” he told reporters.
Well, welcome to Washington, Charlie.
Wilson was giving up a six-hundred-thousand-dollar salary to serve his country at twenty-two thousand dollars a year, and he probably thought that was sacrifice enough. He also owned forty thousand shares of GM stock, and selling it would cost him a small fortune in capital-gains taxes. But GM was the nation’s largest defense contractor, so keeping it would be a clear conflict of interest. Even Republican senators gave him a hard time about it.
Sen. Robert C. Hendrickson, Republican of New Jersey, asked Wilson if he could make a decision that would be in the interests of the country but extremely adverse to those of GM.
“Yes, sir,” Wilson replied briskly, “I could. I cannot conceive of one because 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. Our contribution to the nation is considerable.”
Wilson could hardly have imagined that this rather inelegant bit of Washington bomfog, uttered behind closed doors, would earn him a place in Bartlett’s Familiar Quotations . But thanks to liberals horrified to find themselves out of power after twenty years and largely replaced with businessmen, it did exactly that.
They simply twisted what Wilson had said, into “What is good for General Motors is good for the country,” leaked it to the press, and repeated the lie endlessly, making Wilson sound like some latter-day corporate version of Marie Antoinette.
As his story clearly shows, he was anything but.