291. Memorandum by John J. McCloy1
Some time after President Johnson assumed office I was asked by him to examine into the possibilities of having the American automobile industry produce a car which would offset the drain on the U.S. balance of payments situation by the large sales of the Volkswagen in this country.
[Page 745]The President told me that he could not believe that we could not make as efficient and as economical a car as the Volkswagen once we set our minds to it. He said that he understood that if all the companies set about doing this there would be little money in it for anyone as the margins would be so small. He accordingly suggested that I explore the possibility of the leaders of our automobile industry getting together perhaps in a sort of composite corporation pooling their brains and resources to make such a car.
The President indicated that this was something which he did not wish to appear as pressing on the companies but he thought I might as a private citizen take a reading as to the possibilities for him. He said that for the moment at least I could ignore the anti-trust aspects for, though he had not approached the Attorney General on this matter, what he wanted was a judgment as to the practicability of such a project free of the legal considerations.
I talked separately with Fred Donnor, Henry Ford, and Lynn Townsend about it and, after putting the problem to each of them,2 I asked them to give the matter more than cursory consideration since the inquiry made to me was a serious one and from a responsible government source.
Each of them came back to me in due course, I feel certain without consulting each other, and all were quite negative toward the idea.
The point was made that the margins were too small if all were in the field but, more importantly, they all resisted the thought of a joint effort almost as a matter of principle. They had difficulty envisaging a constructive cooperative effort in a commercial area; it ran against the grain of their competitive instincts and the entire basis on which our commercial system operated. This was not like making a tank for the Army during the war and, even in that case, there was great difficulty in joint efforts. Besides they said they could not envisage any sufficiently assuring pronouncement coming from the Department of Justice.
They said they had individually studied this problem of a small cheap Volkswagen-type car and periodically reviewed it. Thus far they had come to the conclusion that unless one company alone were in the field the thing would not work out on a profitable basis. At the same time each said if anyone entered the field the chances were that the others would have to follow along, if only from a point of prestige. This would bring them right back where they started from. In the case of General Motors they seemed to have made some serious researches in this field recently. After they had completed their costing and calculated the duties [Page 746] they would run into on exports which would have to be part of their market, they had not been able to arrive at an affirmative conclusion as to its feasibility. Both Ford and General Motors were building small cars abroad which were competing with Volkswagens in Europe and they were worried about the possibility of some counter-action abroad if it was clear that the United States was entering into some extraordinary efforts to restrict the sales of Volkswagen here.
I have in the past talked with Bob McNamara about this matter and he told me that he had, when at Ford, given thought to the possibility of putting an American competitor to the Volkswagen on the market. He was somewhat doubtful about some of the negative arguments which were used at the Motor Company against this but that he had gone to Washington and lost track of it.
- Source: Washington National Records Center, RG 40, Secretary of Commerce Files: FRC 71 A 6617, White House, September–October. No classification marking. A covering letter from McCloy to Secretary of Commerce Connor, August 27, states, among other things, that he was sending this memorandum in accordance with their telephone conversation. The letter and the memorandum are attached to Document 294.↩
- Frederic G. Donnor, Chairman of the Board, Chief Executive Officer, General Motors Corporation; Henry Ford II, Chairman, Ford Motor Company; and Lynn A. Townsend, President, Chief Operating and Administrative Officer, Chrysler Corporation.↩
- Printed from a copy that bears these typed initials.↩