Alfred Sloan's Memoir IV: Introduction of the PontiacThe post from day before yesterday quoted Alfred Sloan's explanation of how General Motors formalized its policy of producing "a line of cars in each price area, from the lowest price up to one for a strictly high-grade quantity-production car."
As Sloan goes on to explain in Chapter 9 of My Years with General Motors, the corporation's management recognized in 1924 that there was too big a price gap between their $510 Chevrolet touring car and their $750 Olds touring car. GM decided to introduce a new make, the Pontiac, to fill this gap.
[The gap] was big enough to constitute a volume demand [from prospective auto buyers] and thereby to accommodate, on top of Chevrolet, a competitor against whom we then had no counter. It was therefore an important gap to fill both offensively and defensively; offensively because there was a market demand to be satisfied there, and defensively because competitive cars could come in there and come down on Chevrolet as we planned for Chevrolet to come down on Ford. On this reasoning, we made one of the most important decisions in the history of General Motors, namely to fill the gap above Chevrolet with a brand-new car with a new six-cylinder engine. We had come to believe from an engineering standpoint that the future favored sixes and eights. However, to make the strategy effective, it would be necessary to fill the gap with a car that also had some volume economies. Otherwise, because the new car would draw some volume away from Chevrolet, reducing its economies, a loss would result for both cars. We concluded, therefore, that the new car must be designed in physical co-ordination with Chevrolet so as to share Chevrolet's economies and vice versa.
[. . .]
... the Pontiac represented the first important advance in co-ordinating the physical product in manufacturing. Physical co-ordination in one form or another is, of course, the first principle of mass production, but at that time it was widely supposed, from the example of the Model T, that mass production on a grand scale required a uniform product. The Pontiac, co-ordinated in part with a car in another price class, was to demonstrate that mass production of automobiles could be reconciled with variety in product. This was again the opposite of the old Ford concept, which we persistently met and opposed at every turn. For General Motors, with its five basic price classes by car makes and several subclasses of models, the implication of the Pontiac idea was very great for the whole line. If the cars in the higher-price classes could benefit from the volume economies of the lower-price classes, the advantages of mass production could be extended to the whole car line.
[. . .]
The Pontiac went on the market on schedule for the model year 1926 with the coach priced at $825, that is, about halfway between the Chevrolet coach, priced at $645, and the Olds coach, priced at $950; and the gap in our car line was closed.
[pp. 155, 158, 160, 1990 edition]
Note that Sloan also briefly addresses the gap in 1924 between the $1295 Buick "6" touring car and the $2985 Cadillac touring car. This gap was filled by the Cadillac La Salle, which was introduced in 1927, its base model priced at $2685, or about $700 less than the Cadillac seven-person sedan.
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