April 2001 | Volume 52, Issue 2
OLDSMOBILE, GONE AFTER 107 YEARS
In December, General Motors announced that it would phase out its Oldsmobile line by 2004. Thus the oldest name in American automobiles will disappear, after 107 years. This is important, of course, only symbolically. The history of the American economy is littered with the once-great names of products and companies that have fallen victim to the creative destruction of capitalism. RCA, Pan American World Airways, Montgomery Ward, and TWA all have vanished in recent years. Of the 12 industrial companies that made up the first Dow Jones Industrial Average in 1896, the year before the first automobile manufactured by the Olds Motor Vehicle Company putt-putted down the road, only General Electric still exists and is on the list today.
But automobiles are not like other commercial products. Most people, I imagine, don’t know what brand of socks they are wearing, or wouldn’t drive half a block farther to buy a particular brand of gasoline. But automobiles engage the emotions, sometimes in intense ways. This is as true of the ordinary vehicles found in any commuter-railroad parking lot as it is of the Ferraris and such that most of us never get to ride in, let alone drive. It has been true of the Oldsmobile. A Google search on the Internet turned up 246,000 hits on the word Oldsmobile. Compare that with 1,000 for Perdue chicken. So, as Mrs. Loman says in Death of a Salesman after her husband has died, “Attention must be paid.”
The man for whom the car was named, Ransom E. Olds, was born in Geneva, Ohio, in June 1864, 10 months after Henry Ford. In 1880 his father opened a successful machine shop in Lansing, Michigan. Ransom, the youngest of five children, signed up for a six-month course at a local business college and took over the bookkeeping chores. His father made him a partner at the age of 21.
He not only handled the books. Ransom Olds was a consummate linkerer and doubtless spent much time in the shop itself, working on various devices. He would earn 30 patents in his lifetime, the first being for a new type of governor for steam engines. Like so many gifted mechanics of his generation, he was fascinated with the concept of a self-propelled carriage, an idea that was beginning to reach practicality as he came of age.
In 1886 Olds built his first automobile, a three-wheeled steam-powered car. Four years later he built another, larger steam-powered automobile and sold it to a British patent-medicine company for $400. The firm shipped the vehicle to Bombay, India, but it never arrived. The ship sank en route.
Like many other automotive pioneers, Olds soon shifted his attention from steam power to the new internal-combustion engine. He built his third automobile, this time gasoline-powered, in 1896. That was the year the Duryea brothers sold their first automobile and began the American automobile industry. The following year, Olds formed the Olds Motor Vehicle Company and the Olds Gasoline Engine Works, which took over the family machine shop, and began selling cars. He sold four that year.
The engine company was profitable, but the motor-vehicle one was not. In 1899, with the financial help of Samuel L. Smith, the Olds Motor Vehicle Company was taken over by a new firm, the Olds Motor Works. It moved from Lansing to Detroit and became the first to manufacture cars in the city that would soon be synonymous with the American automobile industry. Although Olds’s name was on the door, Smith owned 95 percent of the stock. Olds became vice president and general manager. In 1901, after several rather unsuccessful models, Olds designed one in which the floor curved up to form the dashboard.
This vehicle, which featured a seven-horsepower, single-cylinder engine with two forward gears and one reverse and was steered by a tiller, was the first to bear the name Oldsmobile. The vehicle was an immediate hit. There’s “nothing to watch but the road,” the advertising proclaimed, and a simple press of the foot on the gas pedal was all that was required to determine “whether your machine shall go at a snail’s pace or at varying speeds limited only by your desires.” Well, limited by the driver’s desires or 20 miles an hour, whichever came first.
Olds had a talent for publicity. On October 27, 1901, a well-known race driver named Roy Chapin set off from Detroit for the New York Auto Show—only the second of its kind. Manhattan overwhelmed him with press attention, generating vast free publicity. The Oldsmobile was on its way commercially, and a New York City dealer took orders for almost a thousand of the new vehicles. The next year, Ransom Olds himself accepted a challenge from Alexander Winton, another well-known auto racer, and ran against him on the beach at Daytona, Florida. It was the first race at what would become one of the country’s most famous tracks. The year after that, Olds sent a curved-dash Oldsmobile cross-country and commissioned a song that will likely outlast the car, “In My Merry Oldsmobile.”
The curved-dash Oldsmobile sold for $650, and by 1905 the company was selling 6,500 of them a year, an astonishing number by the standards of the day. But Samuel Smith and Olds disagreed about policy. Smith wanted to concentrate on luxury cars and Olds wanted to run with the success of the curved-dash Oldsmobile. Olds left the company that produced the car named for him, resigning in 1904. Olds had been right, though, for the company did not prosper in the luxury-car market. In 1908 William C. Durant, the founder of General Motors, made the Oldsmobile one of his many acquisitions. Ransom Olds went on to build the Reo, a car named for his initials that was manufactured into the 1930s, and never again had anything to do with the Oldsmobile.
Durant acquired a total of 13 automakers in the formation of General Motors, but only the names Buick, Cadillac, Oakland, and Oldsmobile survived the reorganization of his company that bankers forced on him in 1911. By the 1920s, Alfred P. Sloan, Jr., was running General Motors, and his now-legendary marketing concept turned it into one of the great capitalist success stories of all time.
First, he made Chevrolet a competitor to the Ford Model T, not by imitating it but by going it one better. Chevrolet, while slightly more expensive, offered frills (options, in other words), such as different colors. Sloan understood, as Henry Ford did not, that automobiles had become much more than simple transportation.
Second, Sloan developed a carefully crafted hierarchy of increasingly expensive and luxurious brand names for people to use to display their success as they moved up the economic ladder. At the bottom was Chevrolet; then came Pontiac, Oldsmobile, Buick, and finally, at the top, Cadillac. The success of this marketing concept can be measured by the fact that the word Cadillac in the American lexicon still means the ultimate in luxury. Another measure of its success, of course, was that by the 1950s General Motors had 55 percent of the American automobile market.
The three decades after the Second World War were the glory days of the old American automobile industry. Foreign competition was minimal, the domestic economy was flourishing, and the big-three auto companies were effectively a cartel led by GM. But cartels, like their more integrated cousins monopolies, tend to get fat, dumb, and lazy, because they can afford to be. Although the American automobile industry had led the world in innovation in its early days, it became stultified after the war. Automatic transmission, which had first appeared in the 1940 Oldsmobile, was the last major innovation. Except in appearance, there was little to distinguish the cars of 1973 from those of 1953.
Thus the twin shocks of the oil shortage and the Japanese-auto invasion of the early 1970s caught General Motors, Ford, and Chrysler off-guard. In seeking to meet the new challenges of the marketplace and new fashions in automobiles, such as the minivan and the SUV, the old marketing concept developed by Alfred Sloan broke down at GM. But no overarching concept for the entire company replaced it. Instead, each division of General Motors, jealous of its autonomy, fought independently to hold market share.
It was, so to speak, no way to run a railroad, and Oldsmobile simply lost out in this internecine commercial warfare. In the late eighties, seeking a new image, it began the “This is not your father’s Oldsmobile” campaign. It was a disaster, alienating the brand’s loyal supporters—the older generation that had been buying Oldsmobiles for 50 years—while merely amusing the younger generation.
General Motors has seen its American market share drop from nearly 50 percent in the early seventies to 27 percent today, as it has struggled to remake itself in the modern, global, highly competitive automobile marketplace. In its latest attempt, its president explained, “we [are] reluctantly parting with some of our proud past, as we rethink and improve the way we do everything at General Motors.” The particular part of its proud past he had in mind, of course, was the merry Oldsmobile.