Page 102 - Accelerating out of the Great Recession

EVEN IN THE WORST OF TIMES

larger company, in 1928. Although the merger improved its
scale, Chrysler still had just an 8 percent share of the market
when the Great Depression hit.
Like GM, Chrysler had chosen to undertake little backward
integration, giving it more flexibility than most of its rivals and
allowing it to cut costs rapidly when the Great Depression hit.
Chrysler also executed the sort of basic measures that compa-
nies still follow today: as sales declined in 1930, it closed plants,
laid off workers, and reduced administrative expenses by nearly
one-third that year.
Driving down costs, even in a crisis, is not easy. Indeed, exec-
utives often plead that their (or their department’s) needs are
special in order to get approval for a budget increase. This is
exactly what happened at Chrysler, and Walter Chrysler had to
take a creative approach—as the following story illustrates—to
get his senior managers to accept the seriousness of the com-
pany’s situation and to make realistic budget proposals.

Walter P. Chrysler met with his chief lieutenants in early
1930 and insisted that they reduce costs in their depart-
ments by 30 percent. Most of his executives, however, pro-
posed spending increases instead. Engineering wanted
budget increases to develop new products, the sales
department argued that it needed additional resources,
and K.T. Keller [president of the Dodge Division of
Chrysler] pleaded for funds to upgrade machinery and
equipment. Annoyed by their responses, Chrysler asked
B.E. Hutchison, the treasurer, to bring him the company
payroll book, which listed all of Chrysler’s employees.
Walter Chrysler then proposed, in a half-serious way, that
they lay off everyone in the last one-third of the book. His

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