William Knudsen, Production Czar
From Chevys to B-29s, Knudsen embraced capitalism and flexible mass production to forge the Arsenal of Democracy
In 1940, President Roosevelt asked his close friend and advisor Bernard Baruch to give him the names of the top three production men in the country. It was maybe the easiest question the financier had ever been asked. Baruch answered simply “First, Bill Knudsen; second, Bill Knudsen; third, Bill Knudsen.” World War II would only reinforce Knudsen’s already legendary reputation as a production czar. He coined the term “Arsenal of Democracy,” and then he made it a reality.
The Danish immigrant, like many immigrants, had humble origins. Upon arriving in America in 1900 with $30 in his pocket, Knudsen first worked menial jobs at a shipyard in the Bronx. He suffered injustices—the others workers called him “squarehead” (a slur for Scandinavian foreigners) and frequently beat up the 6’2“ Dane. But he learned to box, the beatings stopped, and he “never questioned whether I was born American or an American with a hyphen.”
Knudsen was an engineer before the discipline existed—and by definition, self-taught. His first engineering job was at Keim Mills in upstate New York making bicycles. When bike sales slowed, the company transitioned to things like steel axles for Ford’s Model Ts; eventually the company earned the honor of assembling the Model T itself in Buffalo, largely thanks to Knudsen. It was at Keim Mills that Knudsen derived mass production from first principles. He was fond of saying that “speed produces nothing in manufacturing. Accuracy is the only straight line to greater production.” He confiscated all hammers and files. Parts would be machined to fit the first time, or they wouldn’t be used at all.
When Ford acquired Keim Mills in 1912, Knudsen moved to Detroit and quickly won the favor of the highly particular Ford. Soon Knudsen was tasked with expanding the company’s production assembly lines around the country. He would go on to develop most of the 28 branch factories Ford was operating by 1916. From 1912-1916, Ford’s production increased from 78,440 cars to 533,921 cars. While Knudsen was pivotal to this growth, there was an irreconcilable issue between him and Ford. Knudsen wanted to build new models of cars. He was confident he could do this efficiently by retooling the factories. Ford disagreed, and Knudsen quit in 1920. The notoriously prideful Ford made overtures to retain Knudsen, but the Big Dane couldn’t be swayed.
General Motors (GM) was all too happy to pick up Knudsen. Alfred Sloan, the Executive Vice President of GM, gave Knudsen the challenging job of turning around Chevrolet. The division was performing so poorly that consultants had recommended shuttering it. Instead, when Knudsen was asked to give an impromptu motivational speech to Chevy dealers, he simply stood up and declared “one for one,” a reference that Chevy would achieve parity with Ford sales. But in his thick Danish accent, it came out as “vun for vun,” an instant classic and the new rallying cry of the division. Chevrolet would finally go vun for vun in 1929 thanks to the sensational ’29 Chevy, the first low-priced car with a six-cylinder engine. The secret was flexible mass production, the next evolution in continuous assembly lines. At Chevy, Knudsen realized his dream of churning out a new model of car every year by replacing single-purpose machines with multipurpose machines. Knudsen’s innovation foreshadowed what the car companies would be capable of during World War II.
When FDR tapped Knudsen at Baruch’s suggestion, there was never a question if Knudsen would go to Washington. He felt indebted to America and immediately resigned from GM, forgoing his $300,000 salary to become one of the first dollar-a-year-men. Knudsen emerged from the war a national hero and a 3-star general, but this was far from the inevitable outcome. It was a heretical thing to give up a powerful job and go to Washington in the middle of 1940. Sloan, like many Americans, did not believe the United States would soon be at war. Even if the country did go to war, it was crazy for a capitalist, Republican automotive executive to try and team up with labor-loving FDR and his administration. Sloan’s exact words were, “They’ll make a monkey out of you, down there in Washington.”
The Chevy turnaround would appear trivial in comparison to the challenges facing American production at that time. When Europe went to war in 1939, the U.S. Army Air Corps had fewer than 2,000 planes and Brigadier General George Patton had 325 tanks. Worse, the consensus view was that the economy was simply a switch to be flipped. The Army termed the conversion of the economy from peacetime to wartime “Mobilization Day,” or simply, M-day. Knudsen knew M-day was as mythical as a unicorn. While at Ford during World War I, Knudsen had led the effort to produce Eagle boats for the Navy (it was one of the United States’ only mass manufacturing success stories in an otherwise delayed and disorganized war production effort). Now, he estimated it would take eighteen months to tool and build factories and another six months to get those factories into full production.
Knudsen served first at the National Defense Advisory Committee (NDAC) in 1940, and when the NDAC was dissolved, as co-head of the Office of Production Management (OPM) in 1941. He brought to these jobs a very specific worldview. He had helped build iconic American businesses and deeply believed that capitalism was the engine for productivity and prosperity. Why should the war mobilization effort be any different? It would depend on the voluntary participation of American business, and that participation was predicated on proper capitalist incentives.
One of the first things Knudsen did in his new position was convince FDR to suspend or repeal three self-defeating government policies that were disincentivizing profits. First, FDR suspended Vinson-Trammel, a law which had required an advanced audit of every contract and then placed a profit limitation on the contract. (After this law was suspended, contractors would still be limited in how much profit they could make, but the government could now use the cost-plus fixed fee contract and make 30% advance payments to manufacturers.) Second, firms would be able to use a letter of intent with the government as an enforceable contract for any expenses incurred. This would incentivize firms to begin machine tool and factory expansion without worrying about being in the hole if the letter of intent didn’t turn into a contract. Third, the amortization period on newly constructed plants and equipment was reduced from 16 years to 5 years, which allowed manufacturers to write off their investments within a more reasonable time period.
While many believed the dollar-a-year men represented a gross conflict of interest for the government, barring them would only have made the United States act against its own interests. Knudsen ruled the automotive industry. He was not only friendly with every major player but also knew how warm their production lines were at any given moment. When the Army desperately needed a supplier to make what would become the M3 tank, Knudsen called up K.T. Keller at Chrysler. Keller agreed in part because he knew his old boss, Walter Chrysler, had great respect for Knudsen. And Knudsen wanted the M3 engine built not by Chrysler but by Continental because the company had fallen on tough times and had a dormant plant in Detroit. After Knudsen’s call with Continental’s president, Jack Reese, the company was in the business of Army engines. Knudsen’s relationships generated goodwill and trust that enabled these big decisions to happen quickly.
One of the legendary stories of World War II is how U.S. auto companies manufactured aircraft parts, but this too was a heretical idea at the start of mobilization. The Army Air Corps and the airplane manufacturers did not believe the auto companies were capable of such a feat. Knudsen, inventor of the flexible production he’d pioneered at Chevrolet, thought otherwise. In 1940, he convened the auto execs, the Air Force, and the aircraft manufacturers for a top secret meeting. After a few hours, auto industry rivals were teaming up left and right to make parts for bombers, like Briggs, GM’s Fisher Body, and the Murray Corporation agreeing to make parts for Boeing’s B-17. Knudsen, straddling industry and government, was uniquely capable of the convening and consensus-building required for such a revolutionary effort.
But as Sloan had predicted, Washington did indeed try and make a monkey out of Knudsen. The communist-dominated Congress of Industrial Organizations (CIO), one of the United States’ two largest unions, resented that Knudsen blocked Big Labor’s efforts to sideline industry and have the unions take over production. When Knudsen heard this plan, he quipped, “that idea belongs in Russia, and not over here.” In response, Philip Murray, president of the CIO, led a campaign to cast Knudsen as unfit for the critical job he occupied, an untalented former stooge of Sloan at GM and Henry Ford before that. Democrats excoriated the dollar-a-year-men and their corrupting influence. There was even a week termed “get Knudsen week.” And get him, they did.
Knudsen was aware of the accusations swirling around the Swamp. Close friends warned him he was on his way out. But Knudsen was not a political creature, and he naively believed that good and honest work at OPM would speak for itself, just as it had at his previous jobs. The 1941 production numbers had exceeded expectations: 19,209 planes, 50,684 aircraft engines, 97,000 machine guns, and more. Instead, he was fired without warning on the same day the OPM was abolished. It was only at the direct intervention of his good ally, Secretary of Commerce Jesse Jones, that he was commissioned as a 3-star general in the Army. He remains the only civilian ever to receive such a commission.
Knudsen approached his new role with equal gusto, rescuing production of the B-29 Superfortress, the world’s biggest bomber—and first nuclear bomber. It was the most expensive and complex machine ever built, manufactured at plants in four different cities and consisting of over 40,000 parts. The B-29 was one of Knudsen’s last acts before the war ended. He retired from the Army with a Distinguished Service Medal.
Knudsen never lost faith in American ingenuity or became cynical about the people who had tried to block manufacturing progress. After the war, he wrote that “American energy, when sufficiently aroused, will always take care of whatever threat is directed against our government, our people, or our institutions.”
Further Reading
Knudsen: A Biography by Norman Beasley (1947)
Freedom’s Forge by Arthur Herman (2012)