Kaiser-Frazer and the Culture of Consumption

When Production Wasn't Enough' Kaiser-Frazer and the Culture of Consumption

Steve Adams JohnsHopMns University

The growing literature of American consumerhistory offers new perspectivesfor exploringissues of cultureand power,including corporate cultureand the power exerdsedby business.Consumers are depictedin manyways, from disenfranchisedvictims of an elite group'sdomination, to autonomousactors assigning meanings to goods[6, 9, 18, 24]. Industrialists and entrepreneurs,when they appear, are presentedin narrow terms: implicitlypulling stringsin the backgroundor wieldingclout in the open, businessfigures are consistentlydeemed the conductors,or at least the benefidariesof the emergingculture of consumption.Yet my ownresearch suggeststhat manytop business"leaders" struggled just to keep up with an evolvingconsumer culture, "scurrying where they appearedto stalk"[27, p. 18]. Suchwas the casewith Henry J. Kaiser and his experiencein the automotiveindustry. Kaiser created an empire embracinga "culture of production," reflectinghis personalwork ethic and composedof a seriesof enterprises devotedto filling basicneeds. A Californiaconstruction man in the 1920s and 1930s, Kaiser had branched into cement, shipbuilding,and steel productionby 1942. When Kaiser enteredthe automobileindustry in 1945, however,proven production skills would not suffice: the automobilehad already been the subjectof a cultural revolutionin the 1920s. Auto companieswere no longerconcerned just with practicaltransportation but had becomepurveyors of style and power,subjects of intenseconsumer marketing. Inexperiencein consumermarketing would severelyhandicap Kaiser'sfirst consumerproducts venture. His failure to make a successful transition to this new culture contributed to the demise of his automotive venture.

Kaiser and the Culture of Production

Many view the period from 1880 to 1920 as one involvinga crudal transitionfrom a culturalemphasis on scarcity,production, and the work ethic to one of abundance,consumption, and leisurepursuits. Consistent with that interpretationis the fact that decadeslater Henry Kaiser's obsessionwith work and productionwould seem old-fashioned: John Gunther wrote that Kaiser could be "your grandfather" [7, p. 64].

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"Productionas the Fifth Freedom" was Kaiser's rallying cry, and his November1942 speechwith that title would have been right at home in 1892America. Accordingto Kaiserredistribution of wealthand government interferencewere unnecessary: "The whole concept of humanwelfare, which means security,opportunities, the standardof living . . . are today dependenton the productionand conservationof wealth." Productionand conservationwere the "spiritualattributes of the AmericanWay" [14]. As timeschanged, both Kaiserand his organizationevolved, yet this businessmannever altered his attitudetowards work. Kaiserwould joyfully work twenty-hourdays, and his organizationoften stayedahead by simply outworkingthe competition[4, p. 235]. Longafter establishinga reputation for progressivelabor relationsand demonstratingconcern for the working man, Kaiserwould reject one of the centralfeatures of consumerculture, the shrinkingwork week [6, p. 103]. When Walter Reutherof the United Auto Workers proposeda 32-hour work week, Kaiser contendedthat, economicrealities and competitivenessaside, people wanted to work at least 40 hours[22]! It was not just Kaiser'spersonal values that were responsiblefor a seeminglyanachronistic company culture. Thirtyyears of experiencein the WestCoast's economically undeveloped infrastructure had deeplyreinforced his attitudesregarding scarcity. Rapid regionalpopulation growth in the 1930shad not been accompaniedby equivalenteconomic growth in basic industries.This gap createdtremendous opportunities in constructionand extractiveindustries, among others. Kaiser joined a WestCoast consortium called"The Six Companies"in buildingroads, pipelines, and dams,all of which were critical to Western economicdevelopment in the areas of transportation,oil and gas, and hydroelectricpower [19, p. 205]. The Westernenvironment rewarded the same production/scarcityculture that had prevailedin the East at the turn of the century. Kaiser'sintricate relationships with the U.S. governmentwere easily accommodatedin his cultureof production.A healthyrelationship with the governmentallowed Kaiser to ignoremarketing and publicrelations, which meantlittle to an organizationso relianton one customer.Instead, Kaiser becamea one-manspecial interest whose methods of persuasionranged from telegram"bombardment" to "personalflattery" aimed at government officials[5, p. 4]. MeanwhileKaiser's people mastered the art of material arrangingand handlingduring the constructionof Boulder,Bonneville, and GrandCoulee Dams, contributing to the completionof eachproject at least a year aheadof schedule.It wasthe organization'ssubsequent efforts in shipbuilding,however, that allowedKaiser both to demonstratehis firm's constructionacumen and to providehis peoplewith an introductionto mass productionindustry. When more experiencedshipbuilders could not keep up with the needsof the U.S. Maritime Commission,Kaiser seized the opportunityfor his men to learn assembly-lineskills. He formeda partnershipwith John Reilly of Todd Shipyards,a relationshipwhich would last abouta year [4, pp. 69-71]. At the outset,Kaiser dismissed those who were skepticalabout his inexperienced"sandhogs" learning shipbuilding from Reilly's"seadogs" [16, p. 464]. He assertedthat his organizationhad lessbuilt-in resistance 257 to adoptingnew methodsthan establishedfirms [16, p. 464]. Kaiser sent Clay Bedford,manager of the Richmond(California) shipyards, to observe the operationof a Ford plant in Detroit, where assemblersonly needed two days of training. Assemblyline principles,when applied to shipbuilding, allowedfor "jobbreakdown," where a craftsman'sjob--involving mastery of 40-70 operations--wassplit into a seriesof specializedtasks [16, pp. 237- 239]. Successfulemployment of suchinnovative methods allowed this novice to constructone-third of the nation'smerchant ships during World War II. Along the way, Kaiser became an internationalhero. His spectacular successin shipbuildinghelped convincehim that he could compete in anothermass production industry after the war. Though Kaiser's men had achievedbrilliance in mass production, entry into the auto industrywould require other skills the organizationhad not developed. An aide recognizedthe situationwhen in December 1944 he wrote: "Our real handicapis in the lack of marketingorganization with its essentialcorollaries, advertising and public relations"[12]. Kaiser was quite persuasivedealing face-to-facewith governmentofficials, but his organi?ationhad never done any advertising.This organizationwas the "lengthenedshadow of one man,"and that leader would fmd it painfully difficult to translate his personal magnetisminto effective consumer marketing.

Kaiser Meets the Culture of Consumption

During the same decadesthat the Kaiser organi?ationhad been honing its culture of production, the automotive industry had been experiencinga culturalrevolution. By the 1920s,Detroit was no longer devotedsimply to supplyingtransportation. Instead, cars had become"the mostsymbolically charged social emblem the averageconsumer was to buy" [6, p. 185]. Auto print advertisingevolved during this period from "presentationof technicaldetails" to the promiseof "style,status, or escape to an exotic'real life' far from the reader'sordinary experience" [6, p. 27]. Automotivedemand had leveledoff in 1927, encouragingGeneral Motors to establishnew industryinstitutions. Introduction of full "lines"of carsafforded buyers the opportunityto experienceupward mobility without changingauto companies.Also, the introductionof annualmodel changes establishedthe phenomenonof systematicobsolescence before dysfunction [2, p. 21]. By the late 1920s,production skills, a la Ford, couldnot insure successin the auto industry.This remainedtrue throughthe end of World War II. The war briefly restoreda "seller'smarket," with auto demandonce more exceedingsupply, returning pure productionskills to the critical positionthey had occupiedduring the heydayof the Model T. The "Big Three" automakershad ceasedproduction for four years, assistingthe nation'swar effortsinstead. Consequently,the numberof automobileson American roads declinedfrom twenty-ninemillion in 1942 to twenty-two million in 1945 [3, p. 232]. As the war ended,eager buyers were readyto gobbleup virtuallyanything on four wheels. An opportunityexisted for a newcomerwho couldact quickly. 258

True to his organization'sculture of production,Kaiser emphasized basic transportationwhen first hinting he would enter the automobile industry. During the war, he promisedto build a lightweight,small, $400 "workingman'scar," to be distributedat gas stations[21, p. 28]. Kaiser intendedto createan assemblyoperation, believing he coulddo so more efficientlythan the Big Three [1]. Just weeksbefore V-J Day, Henry Kaiser movedaggressively to achievehis new goal. He establisheda partnershipwith JosephFrazer, presidentof the tinyGraham-Paige Motor Company.Frazer was considered one of Detroit's top salesmen,having compiled an impressiverecord at Chryslerin the late 1920'sand early 1930's. In additionto his sales experienceand automotivebackground, Frazer would bring his 2000 Graham-Paigedealers to the venture [17, p. 233]. Frazer's dealerswere significantbecause Chrysler, the last successfulchallenger to Ford and GeneralMotors, had not achieveda "secure"industry position until its 1929 acquisitionof Dodge'snationwide dealer organization [23, p. 195]. In teaming up with Frazer, Henry Kaiser saw an opportunityto duplicatehis shipbuildingfeats: onceagain his menwould learn traditional methods of productionand then take off on an innovativetack. It apparentlydid not botherKaiser that in their hasteto establisha reputation before a "buyer'smarket" returned, the two agreed to produce the conventionalcar Frazer'speople were workingon: "That'show we started in shipbuilding.The first hundredships we built were made the way the other fellowsmade them. After that we cut loose"[26, p. 71]. Kaiser even selectedthe two men who ran his shipyards,his son Edgar and Clay Bedford, for top spotsat Kaiser-Frazer: "It was the shipyardsall over again"[15, p. 40]. If all youhad to do to succeedin the businesswas manufacture cars, Kaiser-Frazermight well havehad a dramaticimpact on the industry. The f'trm's first three years provided ample opportunityto develop mass productionskills, and in 1948the companymanufactured over 180,000cars, makingit the top independentautomaker [11]. Ten yearslater, George Romney, president of American Motors, estimated that a company producingbetween 180,000 and 220,000cars a year "will make a very good profit"and "nottake a backseat to anyonein productionefficiency" [25, pp. 2850-51]. Indeed,Kaiser-Frazer earned approximately $20 millionpre-tax, in both 1947 and 1948 [11]. But then camethe firm's real test. When the postwardemand was saturated,the "buyer'smarket" returned in the Summerof 1948. It quickly exposeda number of companyweaknesses. First of all was market research: as late as fall of 1947, Kaiser and Frazer believed there would be two yearsremaining in the "seller'smarket". Second,when pre-war outputlevels were attained,the industryexperienced a transitionback to annualmodel changesand "full lines"of cars. But Kaiser-Frazercould not clear this hurdle. A seriouscapital shortagecreated by a 1945 Kaiser miscalculation,and exacerbatedby a 1948 stock offering gone awry, preventeda smoothtransition for Kaiser-Frazer. This made 1949 a disastrousyear. While the companymade its bestcars after 1948,it could not sell them. 259

Throughoutthe brief life of the company,reviews of its carswere mixed,ranging from the enthusiasticresponse of independentreviewers Floyd Clymer and Tom McCahill to claimsof overpricingand poor trade- in valuesby the ConsumerResearch Bulletin [17, pp. 82-83]. Richard Langworthof AutomotiveQuarterly has argued that the quality of the company'scars was comparableto that of the competition[17, p. 82]. Regardless,by the time Kaiser-Frazer'sConsumer Research reviews began to improve,the companywas alreadyin serioustrouble. Post-1948events indicate that even an adequateinitial supplyof capitalmay not have enabledKaiser-Frazer to overcomeits marketing weakness.A chartprepared for Kaiserin 1943should have prompted him to pay more attentionto marketing.A summaryof costsrequired to build a car and get it into the customer'shands indicated that over one-thirdof thosecosts were marketingrelated [13]. GeorgeRomney went further, suggestingthat fifty percentof the initial capitalinvestment of an auto companyshould go to establishmentof its dealernetwork [25, p. 2884]. Kaiser,however, had little marketingexperience on whichto build in the postwaryears. Unfortunately,this facet of the businesscould make or break an auto maker. Acordingto Lee Iacocca,"It's the dealerswho have alwaysbeen the gutsof the car businessin thiscountry" [10, p. 33]. Henry Kaiserfailed to graspthat concept. The networkJoe Frazer assembledwas woefully inadequate, but that weaknesswas hidden during the company'sfirst two years,when dealers did not havemuch work to do in orderto sell cars. Duringthis period, Mevery car wassold at its list price--ifnot more"[10, p. 32]. Dealerswith the best locationswere alreadycommitted to the Big Three. In additionto inferior locations, Kaiser-Frazer dealers suffered from underinvestmentand inexperience.Kaiser-Frazer's chief engineer lamented: "e had dealersin northDetroit, where I lived,that I couldn'trecommend to my friends"[17, p. 2331. Dealer relationshipswith the parentcompany were alsoa problem. Accordingto Iacocca,dealers are oftennot treatedas part of the company family,not "invitedto eat at the head table"[10, p. 33]. Suchwas the casewith Kaiser-Frazerdealers interviewed by David Smith who spoke aboutthe company"as if it were somethingapart from their ownbusinesses" [23, pp. 222-231. Once the "buyer'smarket" returned, demand for Kaiser-Frazercars fell dramatically,more so than for any other auto company. In a tacit admissionthat the firm had failed to achieveits desiredlevel of goodwill at the dealerlevel, over fifteen hundred dealers were let go. The company was never a major factorin the industryafter the return of the "buyer's market." Kaiser-Frazer'scapital problems helped prevent the companyfrom returningto Kaiser'soriginal idea of the "workingman'scar" until 1950. Then,the "HenryJ" madea brief splashbut accumulatingpoor reviews, and demandfor the car quicklydissipated. What if the Henry J had comeout a little later, whengas prices were higher?What if Kaiser-Frazerhad had more moneyto allocateto the Henry J? The answerprobably lies in the experienceof Volkswagen. Just a few years later, Volkswagenwould make an inexpensive, functionalcar the first seriousforeign challengerin the American market. Accordingto Walter Nelson,Volkswagen's success in the United Stateswas as much a function of the establishmentof a superb dealer network, followedup with creativeadvertising, as anythingelse [20, p. 206]. Though Volkswagenhad all the physicalcharacteristics of a "workingman'scar," its advertisinginspired "reverse snobbery" in those "who prefer to display intellectualinstead of materialwealth" [20, p. 253]. It was not just basic transportation.This suggeststhat evena mechanicallysuccessful entrant embodyingKaiser's production culture would have failed without the sortof marketingexpertise that Volkswagenhad and Kaiserlacked.

Conclusion

Henry Kaisersaw the automotiveindustry as anotherarena in which to parlay his company'sproduction skills into success. The industry, however,had evolvedfrom one rewardingproducers of basictransportation to one rewardingpurveyors of statusand style. To make it in this industry you had to have sophisticatedconsumer marketing skills. Kaiser-Frazer didn't. Kaiser would try other consumergoods, most notablyhousehold appliancesand aluminumfoil, with similarresults. His organization,which thrivedfor thirtyyears in a productionculture, found it painfullydifficult to adjustto a consumerculture. In this case even a powerfulindustrialist failedto adjustto the new cultureof consumption,and I believeKaiser was not alone. Other businessmenfell to the waysidefor similarreasons, and they too deservea placein businesshistory and in the historyof consumer society.

References

1. Clay P. Bedford, letter to author, November 7, 1989. 2. Ronald Edsforth,Class Conflictand CulturalConsensus (London, 1987). 3. FortuneMagazine, (March 1946). 4. Mark Foster,Henry J. Kaiser.' Builderin •he ModernAmerican West (Austin,1989). 5. , "Giantof the West: Henry Kaiserand RegionalIndustrialization, 1930- 1950," BusinessHistory Review, (Spring 1985) 1-23. 6. Riohard Wightman Fox and T. J. Jackson Lears, The Culture of Consumption: DissentingEssays in American History 1880-1980 (New York, 1983). 7. John Gunther,Inside U.S.A. (New York, 1947). 8. Albert P. Heiner,Henry J. Kaiser,Amedcan Empire Builder: An Insider's View (New York, 1989) 9. Daniel Horowitz, The Morality of Spending: Attitudestoward •he ConsumerSociety in America, 1875-1940 (Baltimore,1985). 10. Lee lacocca,lacocca: an Autobiography(New York, 1984). 11. Kaiser-FrazerAnnualReport, 1947 & 1948. 12. KaiserPapers, Carton 28, Paul Cadmanto Kaiser,12/27/44. 13. KaiserPapers, Carton 143, W.G. Schulte,June 18, 1943 memo. 14. KaiserPapers, Carton 298. 15. The Kaiser Story (Oakland, 1968). 16. Frederic C. Lane, Ships for Victory (Baltimore,1951). 17. RichardLangworth, Kaiser-Frazer: The Last Onslaughton Detroit (Princeton,1975). 18. Nail McKendrick, The Birth of a Consumer Socieb/: The Commercializationof Eighteenth-CenturyEngland (Bloomington,1983). 19. Gerald Nash, The American West in the TwentiethCentury (EnglewoodCliffs, NJ, 1973). 20. Walter Henry Nelson, Small Wonder: The Amazing Story of Volkswagen(Boston, 1967). 21. New York Times, June 26, 1943. 22. New YorkTimes Magazine (March 29, 1944). 23. David KingsburySmith, "The Problemsof a New Firm in an OligopolisticIndustry, Kaiser-Frazer'sExperience in the Motor Vehicle Industry", Ph.D. diss., Harvard University,1950. 24. Warren I. Susman,Culture as History: The Transformationof AmericanSociety in the TwentiethCentury (New York, 1984). 25. United States Senate Committee on the Judiciary,Subcommittee on Antitrustand Monopoly, Eighty-FifthCongress, Second Session:Hearings, AdministeredPrices. 26. LesterVelie, "The Truth About Henry Kaiser,"Colliers, (August 3, 1946). 27. RobertJ. Wiebe, The Searchfor Order (New York, 1967).