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"Sales in 1937 were excellent, both on new and used cars, and despite the handicap of the strikes were at a point where it looked as if 1936 figures would be reached or bettered. . . . During the last ten-day period in November, however, a severe drop in sales of both new and used cars took place. In fact, the total dropped to 70% of 1936. . . . When the second period in December showed a drop to 45% of 1936 it became necessary to adjust the working force, which was done by retaining all the men we could take care of on a 24-hour [a week] basis and laying off the balance. . . . The drop in sales in so short a period is the most severe experienced in the history of General Motors. It was wholly unexpected and entirely beyond our control."
Knudsen replies to committee questions :
Had he consulted any Government officials on the sales problems? "Senator, I don't think anybody in God's world could have told me that the outlook was going to drop 50% in two or three weeks."
Had it occurred to him that increased prices might have accounted for the fall? "No sir, it did not. It didn't for this reason: that if the used car sales back up, the reduction in new car prices isn't going to make them start up, and you have to get rid of the one before you start the other."
Why did not GM use the $50,000,000 it added last year to surplus to put men back to work? "If you have a pay roll of $400,000,000 a year, $50,000,000 a year is small change."
Had the Government's attitude had anything to do with the "fear psychology" mentioned by Witness Knudsen? "Yes."
"What would you have the Government do about it?" quickly interposed Senator Byrnes. Mr. Knudsen hesitated, while the room was suddenly silent, then took a slow drink of water before drawling: "I'm not in a position to know about that."
Wood. Mail-order houses have more direct contact with general public buying power than most big businesses. Last week General Robert E. Wood, president of Sears, Roebuck & Co., laid the depression to 1) overproduction last spring, 2) sterilization of a large gold supply, 3) increases in Federal Reserve requirements, 4) failure of private spending to pick up where the Government left off, 5) the fact that "business lacks confidence and is scared."
Senator Byrnes: "Why is private capital scared?"
General Wood: "I am supposed to be an economic royalist, but I supported most of the Administration's program. However, take the three speeches of two members of the Administration in the last ten days. They were calculated to scare businessmen. The President's speech was moderate, but which is the businessman to take—he has been clubbed over the head so many times."
His recommendations for improving business: i) modification (not repeal) of the undistributed profits and capital gains taxes, 2) stimulation of housing, 3) general reduction of prices. As evidence of Sears, Roebuck's faith in the last recommendation, he mentioned that his company had elected to "take a licking" by reducing an average of 12% the prices of goods produced at higher cost last year.