Few aspects of American society reflect the cataclysm of the depression better than the automobile industry during this period. In 1941, Alfred P. Sloan Jr. of General Motors noted, “Between 1929 and 1932 car and truck production in the United States and Canada fell 75%, from 5.6 million units to 1.4 million.” He also noted that during this period, “…in dollar sales the decline was even more precipitous – from 5.1 billion at retail to $1.1 billion, or 78%.”
A graph of automobile production during the period from January of 1929 to the end of December, 1932, is almost a vertical line. Hudson produced just over 300,000 units in 1929. Never again would the company reach these numbers. For 1932 total production was a mere 57,550 units.
At Ford the situation was equally dire. Including Lincoln, sales plummeted 80% between 1929 and 1932 to 290,683 units.
Chrysler was the new kid on the block having organized in late 1924. Still, the company had shown steady growth through the production of quality and technologically advanced vehicles through 1930. In 1932, sales of all Chrysler vehicles, including De Soto, Plymouth, and Dodge, dropped to 215,056 vehicles.
Even the giant General Motors combine experienced a massive decline in sales, from 1,353,000 units to 432,830. This in turn led to a massive hemorrhaging of red ink.
These were the fortunate companies. Durant and Jordan, Peerless and dozens of smaller manufacturers closed their doors. Studebaker, recently merged with Pierce-Arrow entered into receivership.
Investors were not spared from the bloodbath. During the same period stock in General Motors dropped from 72 3/4 to 36, and in Hudson Motor Company from 93 1/2 to 2 7/8.
With the collapse of the auto industry the city of Detroit and surrounding communities plunged headlong toward financial ruin. In an eerily similar scenario as unemployment increased foreclosures mounted and owners abandoned properties. As property values decreased in a dramatic fashion banks found themselves holding mortgages worth a fraction of the financed amount. The loss of tax revenues brought municipalities to their news.
In the waning days of the Hoover administration, under mounting political pressure and the rising fear of societal unrest, President Hoover signed Reconstruction Finance Corporation Act, the depression version of the bail out in the second depression.
To be continued –