Page 101 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

GM aggressively cut prices by as much as 70 percent on its
expensive cars—a move that would have been unthinkable
under any other circumstances. Because GM had limited back-
ward integration (ownership of suppliers), it was able to keep
fixed costs low and transfer some volume risk to suppliers,
enabling GM to scale down production quickly when demand
collapsed. The company used the same engine and parts across
different brands to further reduce inventories and create flexible
capacity. And it merged its sales forces across middle-market
brands to make the sales force more effective and better use
sales capacity.
At the heart of GM’s success during the Great Depression
was its decision to realign its product offering to fit the needs of
a consumer base with less money to spend—creating “a car for
every purse and purpose,” as Sloan put it. GM expanded
aggressively into the low-priced car market by shifting produc-
tion from high-end brands to Chevrolet, its high-volume dis-
count brand. GM spent more on advertising for Chevrolet and
offered financing as a way to create an attractive package for
customers at a time when banks were not lending. As a result,
GM gained share and commanded a higher price than Ford
could for comparable products.

■ CHRYSLER: MAKING THE BIG THREE ■

The Chrysler story shows how a decisive attack strategy can
work even in the toughest of times. For Chrysler, the Great
Depression was a game-changing period during which it rose
from startup status to one of the “Big Three” U.S. automakers.
Founded in 1925, Chrysler had merged with Dodge, a much

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