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David Hayward's
Automotive History
This site has been established in order to publish various Working Papers for general study and comment on automotive history.
1: CARS AND POLITICS, 1.1: THE MYTH
THE IMPERIAL PREFERENCE ADVANTAGE REFUTED
General Motors Export Company : Location of Offices, 1925
The future of American cars in the British market looked poor in the 1920s. The so-called McKenna duties raised a formidable barrier to all foreign vehicles. In addition, motor car license fees were assessed per unit of horsepower': Alfred P. Sloan, Jr., President of General Motors to 1937. Sloan also claimed that the formula penalised the American engine, and since insurance costs were generally related to the licence fees, the owner of an American car was doubly penalised
Thus, the fees, insurance and garaging charges on a Chevrolet 4-door open touring car in 1925 came to came to £1 per week, £52 per year or approximately $250, all this before normal operating costs
However, Sloan alleged that an Austin had fixed charges of perhaps 11s. per week, or about $138 per year and the purchase cost was lower as well. [1]
However, Sloan alleged that an Austin had fixed charges of perhaps 11s. per week, or about $138 per year and the purchase cost was lower as well. [1]
However, this perpetuation of what was indeed a myth has resulted in it being accepted as a fact that because American cars were subject to a 33 1/3rd % import duty, they must have been far more expensive than Canadian cars, which had the benefit of a 1/3rd reduction in duties. This was simply not the case, and as mentioned below, although certain interested sections of society would have preferred that Canadian cars were purchased rather than American, this was more a question of politics and semantics rather than competitive pricing.
1.2 THE GREAT WAR BUDGET AS A PRECEDENT
Apart from concessionairy rates for imports from British Empire countries, the rates of duty imposed on imported cars and components [the McKenna or New Duties] was set at 33 1/3 rd % from 22 September 1915 as a result of the War Budget introduced by the then Chancellor of the Exchequer, The Right Honourable Reginald McKenna, MP on the 29 September] and all car imports were prohibited without a licence from March 1916 [The Automobile 23 March 1916] until relieved in stages from February to 31 August 1919. This was imposed to allow more room on ships for war-essential supplies and foodstuffs before the U.S.A. entered the war. This did not however apply to tyres, spare parts, tractors and essential commercial vehicles. The Motor in Australia of December 1915 contained a small article by a Horace Wyatt which precised the War Budget from a colonial viewpoint:
'The great war budget for the British Isles provides for fresh taxation of the purchasers and users of the motor vehicles. Those coming within the first category will be affected by import duties at the rate of 33 1/3 %. The possibilities of purchasing British cars at this time are of course extremely limited. The tax would probably prove sufficient to reduce materially the imports of the more expensive foreign cars and of heavy industrial vehicles. It is doubtful whether it will very much check the sale within Great Britain of light and cheap cars coming principally from America. So long as British manufacturers cannot offer their own cars as an alternative, the cheap American car has the field to itself, and an addition of 33 1/3 % on the price of the car f.o.b. at an American port will hardly prove sufficient to deter the majority of purchasers. Under the circumstances, the taxes will have the effect which the Chancellor of the Exchequer intended. They will produce revenue, and at the same time they will to some extent check imports and the corresponding export of gold.
British users of motors will be required to pay an extra threepence a gallon for petrol. This is rather a serious matter for the owners of considerable fleets of industrial motors. So far as these people are concerned, it is of course a tax on industry. Ultimately, the consumer-or in other words, the general public-will presumably have to bear the cost. Private motorists as a whole recognise the calls which they must meet in the interests of the Empire, and do not grumble in the least at the proposed tax.'
There was also a similar announcement in the U.S. in Horseless Age for 18 November 1915, which stated that this would have little effect on Chevrolets. The Duties were imposed by Section 13 of the FINANCE NO. 2 ACT 1915, as amended by the FINANCE (NEW DUTIES) ACT 1916 and further amended by the FINANCE ACT 1917 and the FINANCE ACT 1918.
The Motor in Australia stated that 60,000 Chevrolets [490's] were ordered from the head Office within two weeks of the cars being announced, and that the Dominion of South Africa, with 250,000 people had ordered 1,000 Chevrolets [ r.h.d.]. The Automobile of 30 November 1916 suggested that 10,000 Chevrolets were to be exported in the 1916 Calendar Year. It was this 'tide' of cheap American cars which the then Chancellor McKenna attempted to turn back, and then with the entry of the U.S.A. into the War in 1917, as many U.S. chassis as possible were imported for war work, which in turn, post-War had a profound effect on the motor industry in Britain just as the exchange rate between the Pound Sterling and the U.S. Dollar, and the Canadian and U.S. Dollars, was from 1919 until 1924 artificially tipped in favour of the U.S.
On 22 September 1915, Petrol duty was doubled from 3d, imposed 1909, to 6d per gallon though thoughtfully with the 50% rebate still for commercial vehicles. This was repealed by Section 12 of the Finance Act 1919 as from 1 May 1919.
The ban on importation of motor vehicles, chassis, and parts and accessories of motor cars other than tyres was imposed by THE PROHIBITION OF IMPORT (NO.3) PROCLAMATION, 1916 dated 21 March 1916, made by The King under Section 43 of the CUSTOMS CONSOLIDATION ACT 1876, save that it did not affect those vehicles, such as commercial vehicles, buses, ambulances, fire engines, tractors, exempt from import Duty under Section 13 (4) of the FINANCE NO.2 ACT 1915, and also tyres, and parts and accessories for those vehicles exempted from Duty and Prohibition. This Proclamation was amended and reaffirmed by THE PROHIBITION OF IMPORT (CONSOLIDATION AND AMENDMENT) PROCLAMATION 1917, dated 30 March 1917. This was cancelled by Section 4 of the INDEMNITY ACT 1920 as from 15 April 1920. However, all prohibited vehicles and parts and accessories therefore could be imported with a Licence from the Board of Trade, subject to conditions contained in the Licence.
The principle of Imperial Preference was instituted by Section 8 of the Finance Act 1919 which came into force on 1 September 1919 which reduced the tariffs on motor vehicles and components from British Empire countries by one-third to 22 2/3% Ad Valorem. This included Canadian exports.
The FINANCE ACT 1920 taxed cars taxed at the rate of £1 per R.A.C. Horse Power, effective 1 January 1921. Commercial vehicles and Hackneys were still assessed by carrying capacity or seating. Note that this ensured that commercials are taxed less harshly than cars with the same engine size. Also effective 1 January 1921, the 6d per gallon duty on petrol was abolished so the price per gallon of First Grade fuel is 3s 5d. It then fell to a low of 1s in 1928 when a levy of 4d was reintroduced.
Effective February 1921, the ROADS ACT 1920 required the issuing of Logbooks and that tax discs [formerly specifically for the funding of roads, and continually euphemistically referred to as the 'Road Fund Licence'] to be exhibited in the windscreens. The main principle was as a source of extra revenue for the Exchequer, with only a portion of the annual 'TAX DISC' being actually spent on roads. The Roads Act was responsible for a massive reappraisal of all motor vehicles still on the roads at that time, which meant that from 1920 to 1923, the County Councils or County Boroughs which had allocated to them vehicle and driver licensing until 1974, had to now keep Registers of cars, motor cycles, Hackneys [buses and taxis], heavy goods vehicles, steam locomotives, etc. and also had to issue vehicle logbooks which stayed with the vehicle and which had to be presented for stamping each year when the tax was paid, or if the vehicle was exempt, such as diplomatic vehicles, then the 'exempt' Disc was issued.
The practical effects of the Horse Power Rating were felt from 1921 with the assessment of motor insurance on the R.A.C. rating [also known as Treasury rating or 'T.R.' for tax purposes]. This, coupled with the assessment of tax was meant to favour domestic small-bore/long-stroke slow-revving cars, and the Model T Ford was effectively penalised by paying £23 per year for his 22.5 h.p. car, whereas a British car may only have been rated at 10 h.p. with possibly more power, and taxed at £10 per year. This penalty encouraged sleeve-down engine kits to reduce the tax and insurance costs for Model Ts.
By the FINANCE ACT 1925 the McKenna Duties of 33 1/3% were re-imposed as at the Dock 1 July 1925 by the incoming Stanley Baldwin Conservative Government, subject to the Imperial Preference again which benefited by a 1/3rd reduction to 22 2/3rds% on Canadian imports. These were re-imposed by the new Government in order to protect British manufacturing by Section 9 of the Finance Act 1925, bringing into force the provisions of the 1919 Finance Act again. However, commercial vehicles, buses, ambulances and the like were still exempt from duties until 30 April 1926 presumably as being essential to industry, when the exemption was lifted and Duty became payable for the first time at either 33 1/3rd% or 22 2/3rds% [Empire imports] from 1 May 1926. The 1925 Act provisions as regards the Imperial Preference were stabilised and confirmed by Section 7 of the FINANCE ACT 1926. Section 10 of the FINANCE ACT 1925 defined the value for the purposes of ad valorem Duty: the price was deemed to be the price at which an importer would give for the article, if it were delivered, freight and insurance paid, in bond at the port of importation, and duty was paid on that value as fixed by the Commissioners of Customs and Excise, provided that [until 12 May 1927] motor cars imported with tyres attached had the value of the tyres deducted from the value of the car for this purpose. Any dispute as to value was to be referred to a referee appointed by the Lord Chancellor. This is extremely relevant because of the fixing of the value of CKD motor car components so far as the re-imposition of either 33 1/3% or 22 2/3% import Duty was concerned.
Section 13 of the FINANCE ACT 1926 altered and increased the rates of excise duty [i.e. annual tax] which were imposed by the aforesaid Second Schedule to the FINANCE ACT 1920, duty being levied by Section 13 of the Act.
The exemption from duty on tyres was lifted on 12 May 1927, having been exempted continuously since 1915!. THE IMPORT DUTIES ACT 1932 imposed new rates of Duty on most imports, but on motor cars and cycles, only replacing the McKenna Duties as from 20 August 1938, subject to Empire Preference again, until the 1960's.
As mentioned above, with petrol at an all-time low cost, the Government felt free to set a levy of 4d on a gallon: this set a precedent which applies today as Government felt that the motorist could pay these indirect taxes for the Exchequer when the base price could allow a charge.
1.3 CANADIAN DUTIES
Canadian motor vehicle duty rates were set at 35% from 7 June 1904 though the Fielding Budget of 1896 initiated a tariff preference for British empire imports and in return other Empire countries applied Canadian preferences, so stimulating U.S. motor manufacturers to locate in Canada to take advantage of the reductions in tariffs. In November 1926, the import duties were reduced from 35% to 20% and a drawback of duty on imported parts was allowed provided that the vehicle had at least 50% Canadian content, though components' tariffs remained the same and averaged 30%.
Canadian goods were the subject of the Imperial Preference as established by Section 8 of the Finance Act 1919, but there was a proviso established that the Board of Trade could establish by regulations the percentage of labour within the British Empire to the proportion of value of the manufactured goods. However, where goods were manufactured in a bonded factory in the U.K., from dutiable material shown to Customs to have been consigned from Canada, then the Duty on the manufactured goods were charged at the preferential rate. This will explain why Canadian-sourced vehicle components could be imported at 1/3rd less Duty than U.S.-sourced components even though the assembly took place under bond in London.
1.4 BALDWIN vs. MacDONALD
Conservative Party M.P. Stanley Baldwin inherited his safe Conservative seat in Bewdley, Worcestershire from his father. After almost ten years his political career took an upward turn. Backed by Andrew Bonar Law, and old friend of Baldwin's father, Baldwin became a Parliamentary Private Secretary in the wartime Government, under Prime Minister David Lloyd-George [Liberal Party]. Six years after being elevated, Bonar Law resigned as Prime Minister because of his ill health. Baldwin had given a speech at the Carlton Club in 1922 which had helped crush Lloyd-George's coalition [Liberal and Labour coalition?]. Bonar Law became Prime Minister in 1922 in succession, and then the following year, Baldwin was asked to form a Government. He then held office as Prime Minister in 1923.
Ramsay MacDonald (1866-1937) was born in Lossiemouth on the Moray coast and became an organiser of the British Labour Party. He was elected as a Member of Parliament in 1906, becoming party leader in 1911 until the first year of the Great War. During the conflict his pacifist attitude led to him being discredited and he lost his seat in the election of 1918. Despite his defeat in the final year of the war he was returned to the House of Commons in the 1922 election. In late 1923 Stanley Baldwin resigned in favour of MacDonald, who became Prime Minister in January 1924 as head of the country's first Labour government. He was successful in settling the Franco-German dispute over war reparations but was defeated at the end of the year after allegations that the Labour party was pro-Communist.
In late 1923, the Labour Party were elected instead with the support of the Liberals again, and Ramsay Macdonald was appointed Prime Minister in place of Baldwin. However, the Liberals had had extracted a price for supporting Labour, the Liberals under Lloyd George still favouring the principle of Free Trade. As a consequence, the Labour Government scrapped the 33 1/3rd % 'McKenna Duties' as of 2 August 1924 [under the Finance Act 1924], thus providing that all passenger cars and chassis were duty-free, and therefore on the same basis as commercial vehicles, and immediately the economies of scale meant that the U.S. imports were far cheaper to deliver, landed, than Canadian: the 1/3rd reduction for the Imperial Preference as applied by S.8 of the Finance Act 1919, no longer applied and therefore there was no benefit financially in sourcing from Canada. As a result of the removal of the McKenna Duties, vehicle imports soared to 47,677 vehicles, which was not to be beaten until 1960
However, the abandonment of duties did not satisfy certain vociferous sections of British industry and agriculture, who then complained of unfair competition, especially from the U.S. Worries had been expressed in Canada that their preferential duty status was affecting their valuable export business as well. Many M.P's were elected in the 1925 General Election after the Macdonald Government fell, on the strength of their opposition to Free-Trade, and belief in Protectionism. Thus, the Conservatives were able to form a new Government under Stanley Baldwin, again, who in turn appointed Winston Churchill as Chancellor of the Exchequer, he who had at one time been a Liberal himself! Thus, Baldwin became Prime Minister for the second time and continued until 1929 [2]. In 1929 MacDonald once more became Labour Prime Minister but in 1931, as a result of increasing unemployment figures and a Sterling crisis MacDonald advocated austerity measures such as reducing unemployment benefits. The Labour Government was opposed to such a course of action and resigned on 24 August 1931 leaving MacDonald to form a coalition National government, which relied on Conservative support. In October he went to the polls and the National Government won a massive 554 seats while the opposition were reduced to a mere 56 seats. In June 1935 MacDonald resigned the premiership and was succeeded by Stanley Baldwin. Baldwin was in turn by Arthur Neville Chamberlain on 31 May 1937.
1.5 THE CHURCHILL BUDGET OF 1925
The wartime Budget of the Liberal Party free-trader Reginald McKenna had introduced the so-called 'McKenna Duties' on imported motor vehicles particularly, which was ameliorated to a large extent by the Finance Act 1919 which allowed Canadian cars in at a discounted rate to be levied at 22 2/3rds% ad valorem, compared with 33 1/3% before, and on all U.S.-sourced cars. Amongst other things, these measures were to bring in extra revenue, protect the exchange rate with the U.S. Dollar, and protect the U.K. from U.S. luxury goods of which motor cars were perceived to be the most visible example [all U.K. production having switched of course to wartime contracts leaving the market open to the U.S. manufacturers virtually exclusively with no import duties leviable].
Just before 5.00 p.m. on the 29 April 1925, Churchill read out his Budget Speech, and he referred to Mr McKenna's words which he used in the 1915 War Budget: ' The particular articles which we have chosen, primarily, upon the ground that their consumption is not required in this country; secondly, upon the ground of improving our fallen exchange; and, thirdly, on the ground that, in satisfying these two objects, we shall still obtain a certain degree of revenue'.[For this read: ' we do not want U.S. motor cars, they are not wanted, but if you have to buy one, then you will pay for the privilege'!]. This attitude was to change considerably by the end of 1916, and especially after the entry into the Great War of the United States in 1917, when U.S. car chassis adaptable to Ambulances, and other war-essential lorries, vans, etc. were very much welcomed!
As Churchill then said ' Those were his reasons in 1915, and every one of those reasons exists to-day. If those articles were luxuries then, they are luxuries now. If there was a need to diminish luxury importation from the United States of America then on account of the dollar exchange, has that need become any less urgent on the morrow of our return to the gold standard?' He then went on to comment that these duties would satisfy all Members, whichever stance they took, for several reasons. However, he made the point which is interesting, that he thought that a great majority of M.P.s won their seats on the basis that the voters thought that the duties should never have been taken off the previous year. He then went on to add ' ….They [the duties] are capable of annual review after all, and there may come another Chancellor of the Exchequer, in times when revenue is more abundant and when expenditure is less exacting, who may be able, once again, to roll away this hideous cloud of oppression, and wealthy and patriotic persons will once again be able to recreate their exhausted strength in untaxed foreign motor cars no longer burdened by a 33 1/3 per cent duty'. He conjected that the total yield of all these optional taxes would be £5,730,000 in the first year and £10,000,000 in a full year. He then added that in order to get the best yield from these duties, they would come into effect on 1 July [1925]. Note that the motor car was singularly highlighted, and of course they were 'untaxed American [my bold text] motor cars' which he implied.
The Finance Act 1925 was duly passed, and the relevant sections of the Finance (No. 2) Act 1915, Section 13 which imposed the McKenna Duties as a result of the War Budget referred to above, were brought into play again by the First Schedule of the 1925 Act, and Section 3 of the 1925 Act specifically provided that the rates of duty on Motor cars, accessories and component parts of motor cars other than tyres were subjected to a duty of 33 1/3% ad valorem, though again the Act provided for the Imperial Preference whereby Canadian and other Empire Goods were subjected to a discount of 1/3 rd, so that the rate of duty on Canadian cars and components was 22 2/3rds % ad valorem.
The First schedule to the 1925 Act, restated the Section 13 of the 1915 Act so that Section 13(1) provided for repayment or drawback of duty paid on an article which was not used in Great Britain and Northern Ireland. Section 13 (3) provided that if Customs and excise had proven to them that any article which was used mainly as a component or accessory which was liable to a new duty but which was imported for use for some other purpose, then the article could be brought in duty free, or had duty repaid. This will apply for a period [to 30 April] for instance for commercial vehicles.
Here is the most relevant subsection, which affected General Motors Limited:
Section 13 (4) specifically stated that Motor cars which Customs and Excise had had proved to them were …'constructed and adapted for the use and intended to be used solely as motor buses, motor ambulances, or in connection with the conveyance of goods or burden in the course of trade or husbandry, or by a local authority as fire engines or otherwise for the purposes of their fire brigade service, and chassis, component parts, and accessories, which are so proved to be intended to be used solely for any such motor cars, shall not be charged with the new import duty.
Provided that in such cases as the Commissioners of Customs and excise direct, cars, chassis, accessories, or parts as the case may be, shall not be exempted unless they are marked or stamped in such manner as the Commissioners direct or approve with some distinctive stamp or mark showing that they are only to be so used.
On any transfer of a motor car or chassis which has been exempted under this provision, the transferor shall give notice of the transfer and of the name and address of the transferee to the Commissioners of Customs and Excise.'
The subsection then went on to state that alteration or obliteration of that mark rendered the person liable to a fine of up to £100, or six months' imprisonment with or without hard labour. Further, some articles could be exempted if the amount of duty was too small to collect, and temporary imported vehicles could be exempted as well. However, it was also stated that:
' If it is shown to the satisfaction of the Commissioners of Customs and Excise that any motor car, chassis, component part, or accessory ahs been, and is being, exclusively used for purposes which entitle it to an exemption from duty under this provision, the Commissioners may, subject to such conditions (if any) as they think fit to impose, repay any duty paid on the car, chassis, part or accessory on importation.'
2. CANADA AS SOLE EXPORT PROVIDER?
2. 1 CONCENTRATION ON CANADIAN EXPORTS
After W.C. Durant had resigned as President of General Motors, in early-to-mid 1921 he was courted the McLaughlin family again, much as he had done in 1915. However, general opinion has it that General Motors Corporation awarded the export market to the McLaughlin boys 'to nip in the bud any danger that they might jump ship to Durant'.
In the autumn of 1921, R.S. 'Sam' McLaughlin sailed to England in order to try and sell Canadian cars to the
British and at the same time agreed details of what would later be called S.U.P. and C.K.D. shipments, with General Motors Limited. McLaughlin was a Director and Vice-President of General Motors Corporation at this time, as well as General Motors of Canada Limited. This was clearly a special deal that McLaughlin had by-passing General Motors Export Company, and selling directly to General Motors Limited in London. This direct salesmanship included the Model 490 Special, which was sold by Limited as the Chevrolet 'De Luxe', with nickelled radiator surround, and better equipment, at a higher and thus more profitable price. A few Tarrytown, N.Y.-assembled S.U.P. light delivery chassis were imported nevertheless, but, with the British standing by the Empire, and with the reduction in import duties to 22 2/3rds % for Canadian cars [commercial vehicles being duty-free], General Motors Limited emphasised the Canadian-sourcing from the November 1921 Olympia Motor Show onwards. The direct result was that 1922 Model Oshawa-assembled cars and light delivery chassis went into production from September 1921, and bulk deliveries of crated chassis and bodies started arriving in the U.K. in December 1921/January 1922. R.S. 'Sam' McLaughlin was in London when his father died on 23 November 1921', which proves that he was at the Motor Show in London in 1921.
Further, since 1914 the U.S. manufacturers had moved to concentrating production on left-hand drive vehicles, with Canada save for Newfoundland until 1947 gradually following suit. However, with few exceptions the market for right-hand drive cars was concentrated in the Empire, so it made commercial sense from then on to produce r.h.d. cars mainly from Canada. However, Canadian and U.S. magazines reflected the increased demand for exports, which required considerable investment in expanding production facilities. However, this investment was perceived to be endangered by the change in policy of the Lib-Lab coalition.
Canadian Motor, Tractor and Implement Trade Journal (October 1921): 'GENERAL MOTORS MAKE OSHAWA EXPORT CENTRE: New York-Manufacture of all export models with the exception of the Cadillac car and the General Motors truck will be concentrated by the General Motors Corp. at its Canadian plant, Oshawa, Ont. . . . Its purpose is to produce a line of cars more reliable and more thoroughly tested which for these reasons will be better fitted for foreign trade. Another purpose is to give greater flexibility to the manufacture of such cars, not only because of changes in the manufacturing programs but because of detail necessary to meet export needs'.
Canadian Motor, Tractor and Implement Trade Journal (February 1922): 'OAKLAND TO BE MADE IN CANADA: Another unit of the General Motors of Canada, Ltd., is being organised in Canada. The new company will be known as the Oakland Motor Car Co. of Canada, Ltd., subsidiary of General Motors of Canada Ltd. Operation will begin early in March. This will mean still more production for the Oshawa plants of General Motors, Ltd., which are at present turning out more cars per day than at any previous time in their history. In the course of an interview Mr. McLaughlin remarked that the company's reason for launching out in this venture under the present conditions was influenced by the fact that it already had on its files large orders for the new Oakland Six for export shipment.
Automotive Industries of 27 April 1922 stated that the General Motors Export Company announced that 2,239 passenger cars were shipped from Oshawa during March 1922, compared with 1,350 in February. Of that 2,239, 1,017 were exported to General Motors Limited, an increase of 500 to the U.K. in February 1922 [and thus 517 in February], and 400 or so to the rest of the world. These would have been a mixture of Buicks, Chevrolets and Oaklands. The 'rest of the world' was in fact so far as number of cars shipped, mainly to Australasia, then Pan-America secondly and Europe thirdly, Australia and Argentina being very strong markets for Canadian exports. Both these markets drove on the left at this time. This compares with the US equivalents from Tarrytown and other export Plants [Lansing, Pontiac, Flint] of 4,471 cars and 590 Trucks in March 1922, 3,096 cars and 454 Trucks in February 1922, and 2,019 cars and 610 Trucks in March 1921, which would have included exports to the UK at that time of Cadillacs, Oldsmobiles and G.M.C. trucks. Sam McLaughlin was in fact so thrilled at the expansion in production at Oshawa, that he commissioned the Pathé motion picture newsreel company to film the departure of 63 railroad box cars full of cars intended for England, which were filmed leaving Oshawa station [for St. John, New Brunswick]. This equates to several hundred cars in one shipment!.
Canadian Motor and Tractor Trade Journal: (April 1922): 'It is stated that the plants of the General Motors of Canada, Limited, at Oshawa and Walkerville, Ont., are running full time, and quite a number of the departments are working overtime in an endeavour to fulfil the demand for their products. The daily output for the past three months has been 150 finished automobiles, and the schedule for the next two months call for a daily output of from 175 to 200 finished automobiles'.
Canadian Motor and Tractor Trade Journal (May 1922): GENERAL MOTORS MAKES BIG SHIPMENT: Shipment of a solid train of sixty-one cars laden with automobiles en route to the United Kingdom from the Oshawa plants of General Motors Corporation recently is said to have been the largest single export shipment ever started from a Canadian automobile factory. The shipment is made via Canadian National line to St. John, whence the cars will be loaded on the Canadian Government Merchant Marine steamer Canadian Conqueror. This 8,500-ton vessel will have most of its cargo space taken by the General Motors shipment. The export shipments from Oshawa are averaging 100 cars per day to all parts of the world'. This shipment was made in March 1922, Sam McLaughlin was in fact so thrilled at the expansion in production at Oshawa, that he commissioned the Pathé motion picture newsreel company to film the departure of the railroad box cars full of cars intended for England, which were filmed leaving Oshawa station.
Canadian Automotive Trade July 1923: 'According to recent government reports, exports from Canada have grown to very large proportions. One of the chief factors in this big overseas business is General Motors of Canada Limited. Recently a train of 80 freight cars pulled out of the railroad yards at Oshawa for New York. This is the largest single trainload of any kind ever pulled out of a Canadian Railway yard. The 80 freight cars held 407 automobiles-234 McLaughlin-Buicks and 173 Chevrolets. From New York they were shipped by steamer to South Africa, Australia, British East Africa, Ceylon, Strait Settlements, Argentina, Denmark, Java, India, Portugal, New Zealand, Columbia, Rhodesia, Jamaica, Uruguay, Mexico, Belgium and Sweden'.
The Canadian Automotive Trade issue at the time of the London Motor Show in October 1924 expressed Canadian concern at the effect of the Labour free-trade Finance Act [3]: 'Sales of Canadian cars are increasing every year, but the removal of the McKenna tariff with its incidental preference to cars of Empire manufacture, has left it an open question whether the British market will continue to be supplied from Canadian plants or switch to the American. Manufacturing costs in the United States, it is pointed out, are considerably [sic] lower than those in Canada, and there now remains only a sentimental recommendation on behalf of the Canadian car. The probability is that the English market will be catered to from American factories, while to Canadian factories will be left the task of supplying the rest of the Empire, which, by the way, affords a much larger market than the Isles alone. This wider market, however, is partially affected by the Australian dictum that cars obtaining preference must have 75 per cent. of the labour and materials involved strictly British'.
3. IMPERIAL PREFERENCE DEBUNKED?
3.1 THE OSHAWA, ONTARIO F.O.B. RETAIL PRICE
Please refer to the table below. The 'OSHAWA' price column is based on the advertised 1922 Oshawa f.o.b. price of Canada $785 that was found in the May 1922 McLean's Magazine. Also picture in this ad is the 1922 490 Special Touring at $895, which was not sold in the U.S., but was sold in Canada and exported overseas. The standard Touring represents a C$250 increase over the equivalent Flint f.o.b. price of Canada $535, and this gives this Canadian Touring a 46.7% higher retail price then the same Flint 490 Model. This higher price, C$785 is a whopping 96% price increase from the Flint plant estimated inter-company 25% discount price of Canada $401.25, is due in part to the imposed C$25 freight and C$50 duty paid on imported components from the U.S.A., but these cost represents only 30% of this total price increase.
Therefore, it must be the higher Canadian manufacturing costs were because of a less established supply inter-structure in place, plant inefficiencies caused by lower production levels, and more extreme business cycles caused by a shorter warm weather selling season. Perhaps the biggest factor was a protected home market that restricted global competition - hence artificially raised costs, overheads, and sales margins to the detriment of the Canadian consumer?
The other estimated Oshawa f.o.b. prices are based on this 1922 mark-up of 46.7%, which admittedly might have been lowered in later years because of increased Oshawa plant production and switching back to cheaper Flint manufacture engines for 1925 instead of the higher cost Walkerville built engines.
The second 'DUTY' column is the protective tariff Great Britain imposed, that was figured at 1/3 tax on the U.S.A. port, f.o.b., actual transaction cost. This was the discounted wholesale price the factory sold the S.U.P. Touring or S.U.P. [4] Touring Chassis to General Motors Limited at the Tarrytown dock, with this duty collected by customs when every these cars or chassis were released from a bonded warehouse in London. The duty on Touring and Touring Chassis shipped by the Oshawa plant was discounted by 1/3, and therefore paid at a slightly move favourable rate of 22 2/3% on the Oshawa f.o.b. port inter-company transaction cost.
The 'SHIPPING' cost column is the estimate ocean freight paid the steamship company and also includes the export boxing expenses, dock loading and unloading charges, lighter transfer charges, and customs inspection.
Since a S.U.P. chassis crate is one half the size of a S.U.P. Touring crate, the shipping cost is estimated at one half cost for $75 each. Later, to further reduce these costs, two chassis were boxed together in a D.U.P. [5] that was the same size and same cost as the Touring S.U.P. To be conservative in his estimates, Ken has indicated that the ocean freight from Oshawa as the same as from New York, the largest port in the world. Lake Ontario is about 250 ft. above sea level, but is ice-free, and the steamship would take longer to navigate the St. Lawrence Sea Way when open, some additional charges would be expected in the ocean shipment of units from Oshawa to London. However, evidence has shown that vehicles were despatched in various ways: by train to St. John, New Brunswick, or Halifax, Nova Scotia, or railed to New York and then shipped from there.
3.2 THE FLINT, MICHIGAN F.O.B. RETAIL PRICE
The prices listed under the 'FLINT' column are the factory retail delivery price for the standard 490 Touring, or starting in the chart for 1924, for the 490 Touring Chassis which typically was available for $100 to $115 less. It should be noted that during the short recession of 1920-21, when production was halted for a few months, and Chevrolet offered it's first cash rebate plan of $50 for the touring, prices dropped four times in seven months, from a 1921 high of $820, then to $795 on March 1, down to $645 on May 7, then to $625 on July 15, and ending with the bargain price of $525 for the improved 1922 490 Touring that when into effect September 6, 1921. This was a free fall of 36% in just a little over a half year! Think what this did to the resale value of the previous 1918-21 490 model, whose mechanical reliability did not live up to expectations. But it sure put the fire under the 1922 model sales! These lower price incentives started the tremendous Chevrolet production gains during the rest of the Twenties.
The 'FREIGHT' column list the approximate railroad freight charges between Flint and the Tarrytown or Oshawa plants. For Oshawa, freight charges are estimate to cost half as much as a complete Touring, since only partial parts and components were imported.
3.3. THE TARRYTOWN, NEW YORK F.O.B. RETAIL PRICE
The 'TARRY' column represents the Tarrytown plant retail delivery price for the Tarrytown assembled standard 490 Touring or Touring Chassis, and it includes the freight differential charge. This price does not include export boxing charges.
3. 4 THE LONDON RETAIL PRICE & COST CALCULATIONS
The 'COST/SALE LONDON' columns show the estimated landed prices in London after any and all duties were paid. This wholesale 'COST' is stated in either U.S. dollars or Canadian dollars, depending on the county of origin, at the average exchange rate for the years listed. During the period of 1922 to 1928, the Canadian dollar was very strong and was almost equal to the U.S. dollar (several month it was) with an average of better that C$.99, and never less that C$.98 to the U.S. dollar.
The 'SALE' prices are the advertised retail prices in £ Sterling, with the corresponding conversion to U.S. dollars to the left. It should be noted that the £ Sterling was weakened by the post war recession in 1920-21, where it was valued at $3.66 dollars to the £1, to $4.574 to the £1 by 1924, and back up to a more respectable $4.86 to the £1 in 1926. Part of this weak pound problem was cause by the English imbalance of trade with the U.S.A. because of importing too many cheap American car.
3.5 THE SALES MARKUP %
The next % column is the sales mark-up percentage calculated by subtracting the estimated COST from the SALE price in dollars, divided by the COST, times 100%, which equals the sales mark-up. The actual sales margins would be slightly less, since it would include unpacking and new car prep and sales expenses. In the case of the S.U.P. chassis that were imported from both Canada and the U.S.A., the cost of the English build body, assembling it at the Hendon Works, final paint and prep, is conservatively estimate to cost slightly less then $100 (£20) or about 20% more then the Tarrytown body deletion credit of $75.
It is estimated that General Motors Limited, working as the Chevrolet importer, assembler, and distributor from August 1921, worked on an average wholesale sales margin of 8 to 10%. Bennett as Sole Concessionaire tried for the same 20% margins as its dealers. General Motors Limited dealers, whose selling agreement probably called for a sliding dealer discount, that varied between 15 to 20% based on its cars and commercials purchase volume, average 16 to 22% sales margins
The 'NOTES' at the end of each row list the possible country of origin of either the S.U.P. Touring car or DUP Touring Chassis, the source of the body, and whether or not the Canadian paid duty on parts and components imported from the U.S.A. was rebated. Since it is not known at this time if this rebate was in effect for all years during this period, a few both cases are shown for fair comparisons.
3.6 TABLE OF BRITISH CHEVROLET ESTIMATED ASSEMBLY AND IMPORTATION COSTS
By Ken Kaufmann [6]
YEAR FLINT FREIGHT TARRY DUTY OSHAWA DUTY SHIPPING COST/ SALES LONDON % NOTES
1920 $820 $50 $870 $222 $143 $1030 $1593 £435 54.7% U.S.A.
1921 $795 $50 $845 $215 $143 $1005 $1520 £395 51.2% U.S.A.
1922 C$535 C$25 C$50 C$785 C$134 C$150 C$873 $1150 £260 31.7% CAN duty paid
C$535 C$25 C$ 0 C$735 C$125 C$150 C$826 $1150 £260 39.2% CAN duty rebate
$525 $50 $575 $148 $143 $735 $1150 £260 56.5% U.S.A.
1923 C$535 C$25 C$50 C$785 C#134 C$150 C$873 $1075 £235 25.0% CAN duty paid
$525 $50 $575 $148 $143 $735 $1075 £235 46.3% U.S.A.
1924 C$400 C$25 C$ 0 C$535 C$ 90 C$ 75 C$660 $839 £190 28.5% AN Ch GB body
$510 $50 $560 $144 $143 $720 $839 £190 16.5% U.S.A.
C$400 C$25 C$ 0 C$535 C$ 0 C$ 75 C$570 $707 £160 25.6% CAN ChGB body
$495 $50 $545 $ 0 $143 $565 $707 £160 25.1% U.S.A.
$395 $25 $420 $ 0 $ 75 $495 $707 £160 42.8% U.S.A. ChGB body
1925 $525 $50 $575 $ 0 $143 $587 $748 £155 27.4% U.S.A.
$425 $25 $450 $ 0 $ 75 $520 $748 £155 43.8% U.S.A. ChGB body
$425 $25 $450 $115 $ 75 $610 $748 £155 22.6% U.S.A. ChGB body
1926 $395 $25 $420 $107 $ 75 $600 $802 £165 33.7% U.S.A. ChGB body
$395 $25 $420 $107 $ 75 $600 $899 £185 49.8% U.S.A. ChGB body
C$400 C$25 C$ 0 C$535 C$ 91 C$ 75 C$660 $899 £155 36.2% CAN ChGB body
1927 $395 $25 $420 $107 $ 75 $600 $900 £185 50,0% U.S.A. ChGB body
1928 $395 $25 $420 $107 $ 75 $605 $804 £185 49.4% U.S.A. ChGB body
The above chart has been prepared for 1920 to 1928, to help explain and clarify the estimate cost and pricing structure that was practised between the Chevrolet Motor Co., General Motors of Canada Ltd., and General Motors Export Co., and the F.S. Bennett Ltd. (sole Chevrolet concessionaire till August 1921) and General Motors Limited in London, who from August 1921 was responsible for the importation and later assembly of Chevrolet cars for British Isles.
The first 'DUTY' column estimates the C$50 duty that was paid on parts and component imported into Canada at the 35% parts rate. In the case where zero duty is shown, it represents the more likely situation where this duty was rebated to the Oshawa plant at the time a Touring or Touring chassis S.U.P. crate was exported out of Canada
3.7 OSHAWA BUILT TOURINGS COST MORE!
Let us take 1922 as an example. For the calendar year the Canadian dollar averaged U.S.$0.985. The Flint Touring price of $525 was 1.9% more, or $10, in Canadian $'s, for a total of Canada$535. The Touring cost C$785 in Oshawa, which is C$250 more! My understanding, is the tariff was 35% on component parts imported from the U.S., and with engines, transmissions, front and rear axles sourced from Walkerville, I wouldn't think over C$145 worth of components would be required to be imported. After all, the dealer cost of a chassis was only $312 f.o.b. Flint. So the most the 35% component/parts duty would have been is C$50. I figure the Oshawa built 1922 Touring should of cost C$535 plus C$50 parts duty, plus C$50 freight, equal C$635 cost, so it can be compared to a Tarrytown port cost of Canada $585 (U.S.$575).
That is, the Oshawa sourced Touring priced at C$785 was at least C$200 more then a Tarrytown sourced Touring at C$585 retail price. If the $50 duty was rebated to Oshawa for export sales, there would still be a $150 price differential on the retail level, or about $120 at the dealer's wholesale cost. So it can be seen, that because of limited volume and smaller supplier inter-structure, the Oshawa build Touring, export retail price at the factory, was at least 25% more then the comparable Tarrytown built Touring in 1922.
3.8 TARRYTOWN WAS A LOW COST PLANT
So in 1922, when the cost of the 490 Touring was $525 Flint, and about $575 Tarrytown with approximately $50 freight, with the maximum direct dealer discount of 21%, I would guess General Motors Limited, along with General Motors Export and General Motors of Canada, received an even larger volume or inter-company discount of 25% off the Flint f.o.b. list price of $525. So the invoice cost to General Motors Limited at the Tarrytown dock would be: $525 less 25% = $393.75, plus the approximately $50 railroad freight shipping differential, which was the cost of shipping a complete car from Flint to Tarrytown, figured on a railroad box car that doubled decked six touring cars (which was always added on to the Tarrytown plant invoiced price of $525). This gives a cost at the dock of $443.75. So added to this is the 1/3 duty of $147.92, plus shipping to London of say, $143.33, gives a $735 cost to General Motors Limited after customs was paid in GB. This S.U.P. touring was made ready for the road and then was put up for sale in GB at £260. With an exchange rate of about $4.43 to the £, this would work out to $1150, for a possible 56.5% mark-up on complete S.U.P. touring cars, if these cars had been imported from the U.S.A. at this time, instead of the cars from the higher cost Oshawa plant.
3.9 ESTIMATING OCEAN SHIPPING CHARGES
The Chevrolet Review for December 1920 had and interesting article that reported 'the S.S. Minnesota carried the biggest shipment of automobiles on one steamer to one consignee [FS Bennett Ltd.] at one destination ever recorded. The amount paid the steamship line was also probably the largest sum ever charged on one freight bill of lading -$37,310.12. The cargo consisted of 300 Chevrolets motor cars and the destination was London, England.'
A picture was printed that showed 100 boxed cars being loaded aboard the Minnesota from the lighter Melbourne. It was noted that the cases were uniform throughout, that 'the packing of the Chevrolet cars being efficiently standardised as is their manufacture.' From this report we can determine that the average unit cost paid was $124.37. I would guess that about 50 of these cars being shipped to London were the larger and heavier FB model, with freight costing about $150 each or 25% more then the more compact 490 model.
Therefore a fair ocean shipping cost for the 490 would be $120 each. I have added another $23 to the steamship cost for the miscellaneous charges associated with ocean shipments such as the inland waterway cost for the lighter service (looks like what I would call a barge push by a tug boat).
In order to receive the lowest available shipping rate, it was necessary to ship in fairly large quantities. These large ocean shipments of 300 Touring cars or 600 Touring chassis at a time, explains why large batches of close serial numbers and engine casting dates, in approximately monthly consignments, were imported into Great Britain.
3.10 THE BOTTOM LINE!
Looking at this another way, if the $735 cost to General Motors Limited at the dock price was marked up only to 26.5%, the Tarrytown sourced car could sell retail at $930 or £210 London. However, since it was decided to import the complete S.U.P. touring from Oshawa, the General Motors Limited cost in the equivalent U.S.$ was $860, even with the lower 22 2/3 % duty charged against the Oshawa port cost. This illustrates the Oshawa built Touring at $860 cost General Motors Limited 17% more then the $735 touring from Tarrytown. It is more then likely the Oshawa plant was rebated the Canadian C$50 custom duty that was at a 35% rate on parts and components imported from the U.S.A., since the finish value added product was subsequently exported to Great Britain. If this was the case, the Oshawa sourced S.U.P. Touring would have cost General Motors Limited $59 less for a total of $814. This is still 10.7% higher then the cost of the Tarrytown Touring.
3.11 THE PREFERENTIAL DUTY MYTH
It has widely been believed and reported that the reason that Canadian manufactured cars and chassis were shipped and sold to the overseas British market, which includes the colonies of Australia, South Africa, and India, was based solely on the lower Empire preferential duty of 22 2/3 on the Canadian cars as compared to the larger 33 1/3 paid on the U.S.A. made cars. I question this long standing theory!
Calculations on the duty on a U.S.A. Touring would have been $148, and the duty on a Canadian Touring at C$125, which at the average 1922 exchange rate of $.985 to the C$1.00, is $123 - only a $25 difference. It can be seen that this duty differential on a 1922 490 S.U.P. complete Touring, that sold in Great Britain for £260, or the equivalent $1150, was merely $25! This extra $25 duty amounts to only 2% of the GB selling price, and would have little bearing on determining the country of exportation. The very efficient, high volume, Tarrytown assembly plant demonstrated a 12% to 15% cost advantage over the higher overhead Oshawa plant during the early Twenties.
Ken believes that the additional cost for ocean shipments from Oshawa would more then offset the higher $25 duty differential charged for the Tarrytown imports!
3.12 WHY IMPORT FROM OSHAWA?
We believe it was something other then the lowest duty cost as to why General Motors decided to source its export models out of Canada for most of 1922-24. One explanation is the Canadian products had a better quality reputation, especial for the body building fit and finish, and the British market was willing to pay a premium price for this 'Made in Canada' data plate. The quality aspect at least applied in the case of the more upscale Buick, which in some years, outsold Chevrolet passenger car models 10 to 1.
3.13 BUY BRITISH AND CANADIAN?
Perhaps there were the first signs of a 'Buy British' or 'Buy from the Colonies' mood, since the cheap U.S.A. built cars were overwhelming the British automotive market. The U.S.A. imports were hurting the pound and the economic growth of this important business segment, both at home and in the traditional British colonial export market. It was not that there was a anti-American sediment across the land, it was more of a pro-British and Canadian feeling of not biting the hand that feeds you.
3.14 PRODUCTION SMOOTHING AT OSHAWA?
Since the Oshawa plant had higher production costs then Tarrytown, because of its wide seasonal business cycle, General Motors wanted to lower the cost at Oshawa by giving General Motors of Canada the manufacturing responsibility of the export r.h.d. and l.h.d. models that could be built during the long Winter months to help smooth out production. This might be a good reason, but I think it is the result of what then took place.
3.15 LACK OF TARRYTOWN PRODUCTION SLOTS
During the sales boom period of 1922-23, it appears General Motors Limited and General Motors Export were forced to import the higher unit cost Oshawa's product because of the great demand the Tarrytown Zone dealers had for every production slot. The Order Board was closed and overbooked!
In the September 6, 1921 Automotive Industries, the same issue that Chevrolet announced the price cut of the Touring down to $525, effective September 3rd, and the 'Change in specifications,' General Motors announced that all export models would be manufactured in Canada.
What I think happened was, with the dealer's announcement of the 'improved' 1922 490 Model, with spiral bevel gear rear axle and hand controlled brake lever, the dealers signed order contracts that exceeded Tarrytown's production capacity. It should be noted that it was not until 1923 that the Norwood, Ohio (plant code, Buffalo, N.Y. and Janesville, Wisconsin could be started up to fill all the dealers' orders. So it appears that General Motors made a policy decision at the start of the 1922 model year to shift the production of the relative lower volume export models to the higher cost Oshawa plant.
I am sure that General Motors decided that the export market could bear the higher Canadian cost difference. After all, it was not that obvious that retail prices overseas were not reduced the same deep price cuts as in the U.S.A.
The painful solution to the pricing and distribution problems in Great Britain, was for General Motors Limited to cancel the Sole Concessionaire Agreement with F.S. Bennett Ltd. And directly take charge of the Chevrolet importation (Bennett who made his name in England promoting the Cadillac, probably didn't relate to selling Chevrolet commercial chassis or vehicles to the common tradesmen, and he never sold any Chevrolet Trucks!), assembly (it established the Hendon plant), and distribution (General Motors Limited work on a much narrower margin than Bennett, who obviously wasn't willing to reinvest his easily made profits in the business and expand his dealer base).
Besides, most of the export market was shifting away from U.S.A. built touring bodies, with the large Australian and British market ordering mostly S.U.P. chassis in which locally built bodies were mounted. It doesn't take an accountant long to figure out, that starting in the U.S.A. in 1922, with the demand for the very desirable Fisher Closed Bodies, that up to double the profits could be made by assembling one Sedan, then one S.U.P. chassis. It was smart to allotted scarce Tarrytown production space to assemble Fisher Closed Bodies cars rather then bare S.U.P. Touring chassis.
4. AVOIDING DUTIES
4.1 SAVINGS BY INDIGENOUS PRODUCTION?
General Motors Corporation attempted to buy Austin, Morris and then Wolseley, but only succeeded in purchasing Vauxhall Motors Limited, arguably on the rebound from failing to purchase the first two. James D. Mooney, President of General Motors Export Company supervised the acquisition of Vauxhalls after having failed to acquire Austin in 1925, but just as the negotiations for acquiring Vauxhall Motors Limited were coming to the fore, and a few days before the acquisition was completed, Mooney addressed the American Chamber of Commerce in London on 17 November 1925, his speech entitled 'The future of the motor vehicle in the British Empire',. This makes his comments all the more poignant. Mooney was also present alongside the King and Prince of Wales in April 1924 when the British Empire Exhibition was opened, as the Canadian exhibition was the largest, and contained the Canadian building contained G.M. of Canada's display, the largest Canadian stand. This display had several G.M. of Canada cars on view. Mooney states in his memoirs that he knew Prime Minister Baldwin very well. However, Mooney's comments outline why General Motors decided to reduce their importation costs still further with local assembly, requiring far less importation of components.
Mooney's speech ambles on, what the most relevant points which he proposed, and which were of relevance even ten years later were:
1. Labour: 'our British workmen are always willing and have always been willing to do a good day's work for a fair day's pay'.
2. Economic background:
a) The raw materials were always available, and the industrial and production facilities that had to provide the general background for producing cars in quantities existed readily and within a comparatively limited area.
b) The mental approach to manufacturing a high-grade complex product like a motor car was readily available, with a complete industrial tradition and background including elements of personnel, management, engineering, mechanical craftsmanship, which supported a broad manufacturing programme.
c) The UK was faced with the economic necessity of capitalising to better advantage manufacturing high-grade, complex, fine quality products. Motor car assembly fitted into this requirement as one of the UK's economic necessities.
3. The rising costs of raw materials which were endangering competitiveness in world markets could be remedied by increasing the amount of labour on the products that were exported, so that less items shipped in a raw or semi-finished state, and an increase in manufactured goods, i.e. by increasing the degree of fabrication of UK manufactures for export would be considerably advantageous.
4. General Motors found that the UK had the general elements that provided a sound basis for investment in the motor industry, with high character values, the amount and character of labour needed, the fundamental production facilities, and an expanding market. The UK provided the entire background that was needed to support the manufacture of motor cars that could compete on the world's markets.
The reduction in the amount of components inevitably caused a reduction in import duties. As a consequence, General Motors reduced importation of Canadian components, and at Oshawa's expense brought in cases of components from the Bloomfield, New Jersey Chevrolet boxing plant which could supply them at a much lower cost, freight included, than Oshawa could export at, and thus Imperial Preference had no effect.
4.2 DUTIES FOR REVENUE-EARNING
In the Customs Year [7] 6 April 1925 to 5 April 1926, there were 5,427 complete cars, worth £983,634 imported, which brought in net, Duty of £273,358, plus there were Parts & Accessories to the value of £1,269,978 which brought in net, £385,002 in Duty. In the 'full year' 1926 to 1927, the figures were 15,334 cars {including commercials} worth £2,483,218 which brought in £770,383 and Parts & Accessories worth £3,370,086 which brought in £1,060,713. With Motor cycles, the net Duty receipts for 1925-26 were £660,856 and for 'the full year' 1926-27 were £1,833,770 which seems to suggest that the Chancellor, Churchill, was correct in his forecasting
The World's Carriers 15 February 1929 stated that the General Motors Limited Hendon factory employed over 1,000 employees, and salaried and wages totalled nearly £200,000 per annum, and around £40,000 per year was paid in freight of which 96 % was carried in British ships. General Motors Limited paid around £300,000 in Import Duty in 1928.
Import Duty figures from H.M. Customs and Excise [8] show that in the Customs Year 1927-28, 16,801 vehicles were imported worth £3,150,273, earning £973,987 in net customs duties, and £5,171,749 in Parts & Accessories which brought in £1,557.665 net, and for 1928-29, 14,721 vehicles were imported, value £2,794,799 earning £851,200, and Parts & Accessories worth £5,131,737 bringing in £1,607,089. Thus can be seen the percentage of the Import Duty that Chancellor of the Exchequer Winston Churchill had legislated for with the reintroduction of the McKenna Duties in 1925. To bring the story 'full circle', the figures for the very important April 6 1929 to April 5 1930 period were: 10,355 vehicles, worth £1,908,524, net duties £592,779, and Parts and Accessories: £5,679,084-worth bringing in £1,808,458 of duty! As can be expected, post Wall Street Crash, these figures were to drastically drop for 1930-31, with the loss of something over £1 million in duty as a result of the fall-off in demand for imported chassis and components, and the replacement by British-built chassis and components.
Here therefore was the real reason why General Motors Limited aimed for as near 100% British construction as possible: to save a huge amount of money being paid to the Exchequer each year on duties: a rough calculation shows that total sales of the Chevrolet 30 cwt. LQ chassis alone must have been in the order of £2.5 million gross, perhaps a turnover of £2 million for General Motors Limited alone! In October 1929 General Motors took this one step further with the production of the first all-British built Chevrolet engine for the forthcoming 1930 Models. Eventually, Vauxhall Motors Limited at Luton, to whom Chevrolet production had switched in January 1930, achieved 95% British content. The remaining 5% were all U.S.-sourced items, and not Canadian.
5. POST WALL STREET
5.1 THE 1932 OTTAWA AGREEMENT
The Canada-United Kingdom Trade Agreement ['the Ottawa Agreement'] was signed in Ottawa 20 August 1932 and effective 13 October 1932 allowed free entry of motor vehicles into Canada under the preference, and may have provided for preferential rates in the reverse direction as covered by the U.K.'s Import Duties Act 1932. The Ottawa Agreement was effective in British law by virtue of the Ottawa Agreements Act 1932, chapter 53.
On 1 January 1935, as a result of the changes in the Finance Act 1934, the Horsepower Tax was reduced since there were many anomalies with large engines being designed with small engine bores and long strokes to save on the tax, which was argued stifled development. Instead of £1 per h.p. unit or part thereof, the rate was set at 15 shillings, a reduction of 25%, per 1 h.p. unit. Although General Motors' New York office started to export Canadian McLaughlin-Buicks [badged as 'Buicks'] from 1932, with a few U.S. cars as well, all other G.M. imports were U.S.-sourced though Chevrolets were only imported from late 1934 mainly from Canada again, as the New York office decided that the reduction in horsepower tax, and upturn in the economy, was conducive towards the re-introduction of larger North American cars again.
The Import Duties Act 1932 Section 3, established the Import Duties Advisory Committee. The Committee were empowered to recommend that additional Duty should be charged on goods which in their opinion were either articles of luxury or articles of a kind which are being produced or are likely to be produced in the U.K. in quantities which were substantial in relation to the U.K. consumption. Section 3 (2) of the Act set out 'in deciding what recommendation, if any, to make for the purposes of this Section, the Committee shall have regard to the advisability in the national interest of restricting imports into the United Kingdom and the interest generally of trade and industry in the United Kingdom, including those of trades and industries which are consumers of goods as well as those of trades and industries which are producers of goods'. An elaborate procedure was however laid down for this purpose involving many stages. Representations had to be made to the Committee, advertisements by the Committee of such applications as they receive had to be made and the Committee had to have time to consider the recommendations and take evidence. They then had to decide whether or not to make a recommendation to the Treasury or to suspend action or reject the application. The Treasury, when making an Order under the Act had to consult the appropriate Department, e.g. the Board of Trade. The Committee intended to try and foster British trade and to develop new industries in the U.K. In this respect, the Committee could request that the Treasury grant exemptions with the Board of Trade from customs duties in the case of machinery, iron and steel gods, and certain other imports. However, it must be made clear that the intention was to protect the home market, inasmuch as this did not conflict with the Ottawa Agreements. Similar Committees were also established in Australia and Canada, and in due course the thorny problem of duty on motor vehicles had to be settled: the second Ottawa Agreement as a result of the Ottawa Conference seems to have resolved this problem.
5.2 THE 1937 OTTAWA AGREEMENT
By early 1935, there were serious concerns in Australia that the local automotive industry was not being protected sufficiently, and the answer appeared to be to introduce a licensing system for imports which would favour those countries with whom Australia had a favourable balance of Trade. The Minister in Charge of Trade Treaties, Sir Henry Gullett consequently announced in the House of Representatives, along with his colleague, the Minister for Customs, Lieut.-Colonel White, the new prohibitions and also a new increased level of tariffs. Gullett had hoped that these would promote trade with Britain and other countries that were good customers of Australia: The Advertiser, Adelaide. The thought was that the U.S. would be affected by the determination of the Ministry to establish the motor chassis manufacturing industry in Australia. Talks were also held with Canada to ensure that supply of goods subject to the import control were not diverted to Canada, in view of the large adverse balance of trade with Canada, which would defeat the Ministry's object of diversion. Gullett had in fact spent some time overseas researching the tariff policies in other countries, and it is believed, had met the British Government representatives as well, because of the provisions of the Ottawa Agreement, 1932.
The Australian threat of action on import tariffs on chassis resulted in an immediate reaction in Canada, a major exporter to the Antipodes. The Report of Canada's Import Duties Advisory Committee of 2 July 1935 which reviewed not only Canadian import duties but also all Empire duties, especially Australian, and also the United States', investigated amongst other things the considerable price differential between Canadian and U.S. automobiles. The Committee made a number of recommendations to the Canadian Government as a result of their detailed assessments. The response from the then Prime Minister, the Honourable Charles Dunning was a report to the Ottawa Parliament on 1 May 1936 and consequently to the Canadian people, that the existing tariffs on cars and trucks were to be reduced down to 17.5% except those from British countries, which would be free. Negotiations had taken place in London between the Canadian and British Governments in the summer of 1936 in advance of an Imperial Conference in Ottawa. As a consequence, and because of concerns at the practical effects of the 1932 Agreement, the trade negotiations resulted in the second Canada-United Kingdom Trade Agreement ['the Ottawa Agreement'] signed in Ottawa on 23 February 1937, and which was put into effect in the U.K. by the Import Duties Act 1938. The Agreement provided that as regards Motor Cars which were covered by Article 2, 'The Government of the United Kingdom undertake that the goods the manufacture of Canada enumerated in Schedule I appended hereto when consigned from any part of the British Empire shall not on importation into the United Kingdom be subjected to duties of customs higher than those specified in that Schedule'. In relation to Motor Cars and accessories and component parts, [but not commercial vehicles note] the rate of duty was 22 2/3rds% ad valorem. Automobiles and motor vehicles of all kinds and stated component parts set out in Schedule IV were able to be imported into Canada by virtue of Articles 6 and 7 as being subject to a discount, which was stated to be 'free', i.e. duty-free as before. The 1937 Agreement replaced the 1932 one when it came into force, but was limited to 20 August 1940, unless terminated by six months' notice by either Government.
In practice, the second Agreement was to be totally over-ridden as a result of the entry into the War by the Dominion of Canada on 3 September 1939 which drastically affected the exchange rate of the Pound Sterling, whereas the Canadian Dollar remained 'hard currency', and the problem was then to import sufficient vehicles for military use by both countries' forces and also to 'sell' British vehicles to the Canadian Government in exchange for Dollars which could be used to purchase food with.
The Import Duties (Emergency Provisions) Act 1939 replaced the Import Duties Act 1932, and all Statutory Instruments made thereunder. This was repealed by parts of the Import Duties Act 1958. There were in fact various Statutory Instruments made under the 1939 Act, the Import Duties (Exemptions) No. 4 Order 1939 being the relevant one, and this permitted certain vehicles to be imported duty-free, e.g. from Canada for military purposes. In the Debate on the Bill, Sir Percy Harris MP said 'As to luxuries, I agree that in the interests of the exchange and the economy of cargo space they should be discouraged. I remember the much maligned McKenna Duties. They have been made the excuse for all sorts of policies since they were initiated. They were put on for the definite purposes of assisting the exchange position and economising cargo space, both excellent purposes in time of war. It would be a good thing if the Government would take the opportunity of making clear to traders, merchants and shipowners exactly what their policy is, so that the business world can co-operate with the government in discouraging the importation of goods which do not help the prosecution of the war and permitting the import of such goods, irrespective of whether they come under the category of goods manufactured in this country, which in the national interest should be imported on as large a scale as possible.'
The Finance Act 1947 introduced by the Labour Government of 1945 repealed the Finance Act 1920 h.p. rating as reduced in 1935, and instead substituted a new flat rate for all cars at £10 per year.
5.3 SOUTHAMPTON
General Motors Overseas Division in New York must have taken comfort in the resolution of the Imperial import duty question. Canadian and U.S. imports of cars, commercial vehicles and parts continued apace, and expanded from 1936 with the 'resuscitation' of General Motors Limited, and the placement of the company under G.M. Continental in Antwerp. However, apart from the Canadian [McLaughlin-]Buicks, supply of which, as with U.S.-sourced Cadillacs and La Salles was dealt with by the New York office to concessionaires Lendrum & Hartman Limited, Limited were free to import from the U.S. or Canada. Thus, Chevrolet cars were imported from Canada, and GMC trucks, Oldsmobile cars and trucks, and Pontiac cars were imported from the U.S. Savings on duty were possible if all Limited's supplies were reduced in size by knocking down the units into components. This would require an assembly operation, and so in late 1937 the construction of a new assembly plant was announced.
In late 1938, the first U.S.-sourced Chevrolet trucks arrived in the U.K., the advance guard for British-assembled trucks. It seems that commercial vehicles were largely immune from the vagaries of import duties, probably because chassis only were imported and cabs and bodies, the high-cost items, were added after importation. Thus Chevrolet, GMC, Opel and Oldsmobile trucks were competing with a whole host of other U.S. manufacturers who were well-established by 1935: White, Diamond T, REO, Stewart, all achieved substantial sales in the heavyweight market, and General Motors wanted their piece of the market, even though their subsidiary Vauxhall Motors were offering Bedford trucks in various capacities.
The announcement of the assembly of Chevrolet trucks from the beginning of December 1939, followed by cars from Chevrolet, Pontiac and Oldsmobile the following month may seem to be a concerted effort at firstly saving on import duties through the reduction down to components of vehicles and chassis for assembly, and secondly arranging supply from the U.S. to take advantage of lower unit costs than Canada. Although the latter point was correct, the former was definitely not: truck and bus chassis prices were largely unaffected by import duties, but were by factory gate unit prices and the U.S. factories outclassed the Canadians on sheer production numbers before the war. The cars mentioned were all 'luxury' models, and the same principle applied, except that the idea for assembly of Pontiacs and Oldsmobiles was rapidly dropped as the limited numbers that could be sold did not warrant component shipping from Pontiac and Lansing, Michigan Plants respectively, and so S.U.P. cars were imported instead at prices that Oshawa could not compete with even with 1/3rd less duty allowance. With Chevrolet cars, G.M. was able to take advantage of their dedicated Bloomfield Boxing Plant fairly near New York, which had had considerable efficiency improvements from 1935 onwards to reduce packing sizes and therefore costs. Bloomfield could supply and ship components at costs that Oshawa could only dream of, and again the preference on duty counted for nothing. Southampton's new plant was not a duty-avoidance plan, rather a concept of taking advantage of G.M.'s U.S. plant efficiencies.
6. CONCLUSION
The scenarios of 1921, 1924 and 1925 applied equally from 1935 to 1939 and thus prove that the legend of 'Canadian was cheaper' was just that, a legend, with no basis in fact. The Americans could always compete on price through sheer market forces and economies of scale. Having said that, this was to change to a dramatic degree: from 1940 when General Motors of Canada expanded production for war orders, in their four plants, they worked in tandem with the counterparts at Ford and for the first time economies of scale arguably outweighed that of the U.S because of, for instance, sharing componentry. By 1945 the production per head of population far exceeded that of the U.S. and Canada was able to take advantage of the investment in volume production in the post-war period. Thus, with the coming of peace Canada could equal if not better the U.S. in unit costs. No duty preference was required: Canada, and then Australia from 1955, had grown up and could compete by themselves on the world stage.
David Hayward, December 2001
Apart from concessionairy rates for imports from British Empire countries, the rates of duty imposed on imported cars and components [the McKenna or New Duties] was set at 33 1/3 rd % from 22 September 1915 as a result of the War Budget introduced by the then Chancellor of the Exchequer, The Right Honourable Reginald McKenna, MP on the 29 September] and all car imports were prohibited without a licence from March 1916 [The Automobile 23 March 1916] until relieved in stages from February to 31 August 1919. This was imposed to allow more room on ships for war-essential supplies and foodstuffs before the U.S.A. entered the war. This did not however apply to tyres, spare parts, tractors and essential commercial vehicles. The Motor in Australia of December 1915 contained a small article by a Horace Wyatt which precised the War Budget from a colonial viewpoint:
'The great war budget for the British Isles provides for fresh taxation of the purchasers and users of the motor vehicles. Those coming within the first category will be affected by import duties at the rate of 33 1/3 %. The possibilities of purchasing British cars at this time are of course extremely limited. The tax would probably prove sufficient to reduce materially the imports of the more expensive foreign cars and of heavy industrial vehicles. It is doubtful whether it will very much check the sale within Great Britain of light and cheap cars coming principally from America. So long as British manufacturers cannot offer their own cars as an alternative, the cheap American car has the field to itself, and an addition of 33 1/3 % on the price of the car f.o.b. at an American port will hardly prove sufficient to deter the majority of purchasers. Under the circumstances, the taxes will have the effect which the Chancellor of the Exchequer intended. They will produce revenue, and at the same time they will to some extent check imports and the corresponding export of gold.
British users of motors will be required to pay an extra threepence a gallon for petrol. This is rather a serious matter for the owners of considerable fleets of industrial motors. So far as these people are concerned, it is of course a tax on industry. Ultimately, the consumer-or in other words, the general public-will presumably have to bear the cost. Private motorists as a whole recognise the calls which they must meet in the interests of the Empire, and do not grumble in the least at the proposed tax.'
There was also a similar announcement in the U.S. in Horseless Age for 18 November 1915, which stated that this would have little effect on Chevrolets. The Duties were imposed by Section 13 of the FINANCE NO. 2 ACT 1915, as amended by the FINANCE (NEW DUTIES) ACT 1916 and further amended by the FINANCE ACT 1917 and the FINANCE ACT 1918.
The Motor in Australia stated that 60,000 Chevrolets [490's] were ordered from the head Office within two weeks of the cars being announced, and that the Dominion of South Africa, with 250,000 people had ordered 1,000 Chevrolets [ r.h.d.]. The Automobile of 30 November 1916 suggested that 10,000 Chevrolets were to be exported in the 1916 Calendar Year. It was this 'tide' of cheap American cars which the then Chancellor McKenna attempted to turn back, and then with the entry of the U.S.A. into the War in 1917, as many U.S. chassis as possible were imported for war work, which in turn, post-War had a profound effect on the motor industry in Britain just as the exchange rate between the Pound Sterling and the U.S. Dollar, and the Canadian and U.S. Dollars, was from 1919 until 1924 artificially tipped in favour of the U.S.
On 22 September 1915, Petrol duty was doubled from 3d, imposed 1909, to 6d per gallon though thoughtfully with the 50% rebate still for commercial vehicles. This was repealed by Section 12 of the Finance Act 1919 as from 1 May 1919.
The ban on importation of motor vehicles, chassis, and parts and accessories of motor cars other than tyres was imposed by THE PROHIBITION OF IMPORT (NO.3) PROCLAMATION, 1916 dated 21 March 1916, made by The King under Section 43 of the CUSTOMS CONSOLIDATION ACT 1876, save that it did not affect those vehicles, such as commercial vehicles, buses, ambulances, fire engines, tractors, exempt from import Duty under Section 13 (4) of the FINANCE NO.2 ACT 1915, and also tyres, and parts and accessories for those vehicles exempted from Duty and Prohibition. This Proclamation was amended and reaffirmed by THE PROHIBITION OF IMPORT (CONSOLIDATION AND AMENDMENT) PROCLAMATION 1917, dated 30 March 1917. This was cancelled by Section 4 of the INDEMNITY ACT 1920 as from 15 April 1920. However, all prohibited vehicles and parts and accessories therefore could be imported with a Licence from the Board of Trade, subject to conditions contained in the Licence.
The principle of Imperial Preference was instituted by Section 8 of the Finance Act 1919 which came into force on 1 September 1919 which reduced the tariffs on motor vehicles and components from British Empire countries by one-third to 22 2/3% Ad Valorem. This included Canadian exports.
The FINANCE ACT 1920 taxed cars taxed at the rate of £1 per R.A.C. Horse Power, effective 1 January 1921. Commercial vehicles and Hackneys were still assessed by carrying capacity or seating. Note that this ensured that commercials are taxed less harshly than cars with the same engine size. Also effective 1 January 1921, the 6d per gallon duty on petrol was abolished so the price per gallon of First Grade fuel is 3s 5d. It then fell to a low of 1s in 1928 when a levy of 4d was reintroduced.
Effective February 1921, the ROADS ACT 1920 required the issuing of Logbooks and that tax discs [formerly specifically for the funding of roads, and continually euphemistically referred to as the 'Road Fund Licence'] to be exhibited in the windscreens. The main principle was as a source of extra revenue for the Exchequer, with only a portion of the annual 'TAX DISC' being actually spent on roads. The Roads Act was responsible for a massive reappraisal of all motor vehicles still on the roads at that time, which meant that from 1920 to 1923, the County Councils or County Boroughs which had allocated to them vehicle and driver licensing until 1974, had to now keep Registers of cars, motor cycles, Hackneys [buses and taxis], heavy goods vehicles, steam locomotives, etc. and also had to issue vehicle logbooks which stayed with the vehicle and which had to be presented for stamping each year when the tax was paid, or if the vehicle was exempt, such as diplomatic vehicles, then the 'exempt' Disc was issued.
The practical effects of the Horse Power Rating were felt from 1921 with the assessment of motor insurance on the R.A.C. rating [also known as Treasury rating or 'T.R.' for tax purposes]. This, coupled with the assessment of tax was meant to favour domestic small-bore/long-stroke slow-revving cars, and the Model T Ford was effectively penalised by paying £23 per year for his 22.5 h.p. car, whereas a British car may only have been rated at 10 h.p. with possibly more power, and taxed at £10 per year. This penalty encouraged sleeve-down engine kits to reduce the tax and insurance costs for Model Ts.
By the FINANCE ACT 1925 the McKenna Duties of 33 1/3% were re-imposed as at the Dock 1 July 1925 by the incoming Stanley Baldwin Conservative Government, subject to the Imperial Preference again which benefited by a 1/3rd reduction to 22 2/3rds% on Canadian imports. These were re-imposed by the new Government in order to protect British manufacturing by Section 9 of the Finance Act 1925, bringing into force the provisions of the 1919 Finance Act again. However, commercial vehicles, buses, ambulances and the like were still exempt from duties until 30 April 1926 presumably as being essential to industry, when the exemption was lifted and Duty became payable for the first time at either 33 1/3rd% or 22 2/3rds% [Empire imports] from 1 May 1926. The 1925 Act provisions as regards the Imperial Preference were stabilised and confirmed by Section 7 of the FINANCE ACT 1926. Section 10 of the FINANCE ACT 1925 defined the value for the purposes of ad valorem Duty: the price was deemed to be the price at which an importer would give for the article, if it were delivered, freight and insurance paid, in bond at the port of importation, and duty was paid on that value as fixed by the Commissioners of Customs and Excise, provided that [until 12 May 1927] motor cars imported with tyres attached had the value of the tyres deducted from the value of the car for this purpose. Any dispute as to value was to be referred to a referee appointed by the Lord Chancellor. This is extremely relevant because of the fixing of the value of CKD motor car components so far as the re-imposition of either 33 1/3% or 22 2/3% import Duty was concerned.
Section 13 of the FINANCE ACT 1926 altered and increased the rates of excise duty [i.e. annual tax] which were imposed by the aforesaid Second Schedule to the FINANCE ACT 1920, duty being levied by Section 13 of the Act.
The exemption from duty on tyres was lifted on 12 May 1927, having been exempted continuously since 1915!. THE IMPORT DUTIES ACT 1932 imposed new rates of Duty on most imports, but on motor cars and cycles, only replacing the McKenna Duties as from 20 August 1938, subject to Empire Preference again, until the 1960's.
As mentioned above, with petrol at an all-time low cost, the Government felt free to set a levy of 4d on a gallon: this set a precedent which applies today as Government felt that the motorist could pay these indirect taxes for the Exchequer when the base price could allow a charge.
1.3 CANADIAN DUTIES
Canadian motor vehicle duty rates were set at 35% from 7 June 1904 though the Fielding Budget of 1896 initiated a tariff preference for British empire imports and in return other Empire countries applied Canadian preferences, so stimulating U.S. motor manufacturers to locate in Canada to take advantage of the reductions in tariffs. In November 1926, the import duties were reduced from 35% to 20% and a drawback of duty on imported parts was allowed provided that the vehicle had at least 50% Canadian content, though components' tariffs remained the same and averaged 30%.
Canadian goods were the subject of the Imperial Preference as established by Section 8 of the Finance Act 1919, but there was a proviso established that the Board of Trade could establish by regulations the percentage of labour within the British Empire to the proportion of value of the manufactured goods. However, where goods were manufactured in a bonded factory in the U.K., from dutiable material shown to Customs to have been consigned from Canada, then the Duty on the manufactured goods were charged at the preferential rate. This will explain why Canadian-sourced vehicle components could be imported at 1/3rd less Duty than U.S.-sourced components even though the assembly took place under bond in London.
1.4 BALDWIN vs. MacDONALD
Conservative Party M.P. Stanley Baldwin inherited his safe Conservative seat in Bewdley, Worcestershire from his father. After almost ten years his political career took an upward turn. Backed by Andrew Bonar Law, and old friend of Baldwin's father, Baldwin became a Parliamentary Private Secretary in the wartime Government, under Prime Minister David Lloyd-George [Liberal Party]. Six years after being elevated, Bonar Law resigned as Prime Minister because of his ill health. Baldwin had given a speech at the Carlton Club in 1922 which had helped crush Lloyd-George's coalition [Liberal and Labour coalition?]. Bonar Law became Prime Minister in 1922 in succession, and then the following year, Baldwin was asked to form a Government. He then held office as Prime Minister in 1923.
Ramsay MacDonald (1866-1937) was born in Lossiemouth on the Moray coast and became an organiser of the British Labour Party. He was elected as a Member of Parliament in 1906, becoming party leader in 1911 until the first year of the Great War. During the conflict his pacifist attitude led to him being discredited and he lost his seat in the election of 1918. Despite his defeat in the final year of the war he was returned to the House of Commons in the 1922 election. In late 1923 Stanley Baldwin resigned in favour of MacDonald, who became Prime Minister in January 1924 as head of the country's first Labour government. He was successful in settling the Franco-German dispute over war reparations but was defeated at the end of the year after allegations that the Labour party was pro-Communist.
In late 1923, the Labour Party were elected instead with the support of the Liberals again, and Ramsay Macdonald was appointed Prime Minister in place of Baldwin. However, the Liberals had had extracted a price for supporting Labour, the Liberals under Lloyd George still favouring the principle of Free Trade. As a consequence, the Labour Government scrapped the 33 1/3rd % 'McKenna Duties' as of 2 August 1924 [under the Finance Act 1924], thus providing that all passenger cars and chassis were duty-free, and therefore on the same basis as commercial vehicles, and immediately the economies of scale meant that the U.S. imports were far cheaper to deliver, landed, than Canadian: the 1/3rd reduction for the Imperial Preference as applied by S.8 of the Finance Act 1919, no longer applied and therefore there was no benefit financially in sourcing from Canada. As a result of the removal of the McKenna Duties, vehicle imports soared to 47,677 vehicles, which was not to be beaten until 1960
However, the abandonment of duties did not satisfy certain vociferous sections of British industry and agriculture, who then complained of unfair competition, especially from the U.S. Worries had been expressed in Canada that their preferential duty status was affecting their valuable export business as well. Many M.P's were elected in the 1925 General Election after the Macdonald Government fell, on the strength of their opposition to Free-Trade, and belief in Protectionism. Thus, the Conservatives were able to form a new Government under Stanley Baldwin, again, who in turn appointed Winston Churchill as Chancellor of the Exchequer, he who had at one time been a Liberal himself! Thus, Baldwin became Prime Minister for the second time and continued until 1929 [2]. In 1929 MacDonald once more became Labour Prime Minister but in 1931, as a result of increasing unemployment figures and a Sterling crisis MacDonald advocated austerity measures such as reducing unemployment benefits. The Labour Government was opposed to such a course of action and resigned on 24 August 1931 leaving MacDonald to form a coalition National government, which relied on Conservative support. In October he went to the polls and the National Government won a massive 554 seats while the opposition were reduced to a mere 56 seats. In June 1935 MacDonald resigned the premiership and was succeeded by Stanley Baldwin. Baldwin was in turn by Arthur Neville Chamberlain on 31 May 1937.
1.5 THE CHURCHILL BUDGET OF 1925
The wartime Budget of the Liberal Party free-trader Reginald McKenna had introduced the so-called 'McKenna Duties' on imported motor vehicles particularly, which was ameliorated to a large extent by the Finance Act 1919 which allowed Canadian cars in at a discounted rate to be levied at 22 2/3rds% ad valorem, compared with 33 1/3% before, and on all U.S.-sourced cars. Amongst other things, these measures were to bring in extra revenue, protect the exchange rate with the U.S. Dollar, and protect the U.K. from U.S. luxury goods of which motor cars were perceived to be the most visible example [all U.K. production having switched of course to wartime contracts leaving the market open to the U.S. manufacturers virtually exclusively with no import duties leviable].
Just before 5.00 p.m. on the 29 April 1925, Churchill read out his Budget Speech, and he referred to Mr McKenna's words which he used in the 1915 War Budget: ' The particular articles which we have chosen, primarily, upon the ground that their consumption is not required in this country; secondly, upon the ground of improving our fallen exchange; and, thirdly, on the ground that, in satisfying these two objects, we shall still obtain a certain degree of revenue'.[For this read: ' we do not want U.S. motor cars, they are not wanted, but if you have to buy one, then you will pay for the privilege'!]. This attitude was to change considerably by the end of 1916, and especially after the entry into the Great War of the United States in 1917, when U.S. car chassis adaptable to Ambulances, and other war-essential lorries, vans, etc. were very much welcomed!
As Churchill then said ' Those were his reasons in 1915, and every one of those reasons exists to-day. If those articles were luxuries then, they are luxuries now. If there was a need to diminish luxury importation from the United States of America then on account of the dollar exchange, has that need become any less urgent on the morrow of our return to the gold standard?' He then went on to comment that these duties would satisfy all Members, whichever stance they took, for several reasons. However, he made the point which is interesting, that he thought that a great majority of M.P.s won their seats on the basis that the voters thought that the duties should never have been taken off the previous year. He then went on to add ' ….They [the duties] are capable of annual review after all, and there may come another Chancellor of the Exchequer, in times when revenue is more abundant and when expenditure is less exacting, who may be able, once again, to roll away this hideous cloud of oppression, and wealthy and patriotic persons will once again be able to recreate their exhausted strength in untaxed foreign motor cars no longer burdened by a 33 1/3 per cent duty'. He conjected that the total yield of all these optional taxes would be £5,730,000 in the first year and £10,000,000 in a full year. He then added that in order to get the best yield from these duties, they would come into effect on 1 July [1925]. Note that the motor car was singularly highlighted, and of course they were 'untaxed American [my bold text] motor cars' which he implied.
The Finance Act 1925 was duly passed, and the relevant sections of the Finance (No. 2) Act 1915, Section 13 which imposed the McKenna Duties as a result of the War Budget referred to above, were brought into play again by the First Schedule of the 1925 Act, and Section 3 of the 1925 Act specifically provided that the rates of duty on Motor cars, accessories and component parts of motor cars other than tyres were subjected to a duty of 33 1/3% ad valorem, though again the Act provided for the Imperial Preference whereby Canadian and other Empire Goods were subjected to a discount of 1/3 rd, so that the rate of duty on Canadian cars and components was 22 2/3rds % ad valorem.
The First schedule to the 1925 Act, restated the Section 13 of the 1915 Act so that Section 13(1) provided for repayment or drawback of duty paid on an article which was not used in Great Britain and Northern Ireland. Section 13 (3) provided that if Customs and excise had proven to them that any article which was used mainly as a component or accessory which was liable to a new duty but which was imported for use for some other purpose, then the article could be brought in duty free, or had duty repaid. This will apply for a period [to 30 April] for instance for commercial vehicles.
Here is the most relevant subsection, which affected General Motors Limited:
Section 13 (4) specifically stated that Motor cars which Customs and Excise had had proved to them were …'constructed and adapted for the use and intended to be used solely as motor buses, motor ambulances, or in connection with the conveyance of goods or burden in the course of trade or husbandry, or by a local authority as fire engines or otherwise for the purposes of their fire brigade service, and chassis, component parts, and accessories, which are so proved to be intended to be used solely for any such motor cars, shall not be charged with the new import duty.
Provided that in such cases as the Commissioners of Customs and excise direct, cars, chassis, accessories, or parts as the case may be, shall not be exempted unless they are marked or stamped in such manner as the Commissioners direct or approve with some distinctive stamp or mark showing that they are only to be so used.
On any transfer of a motor car or chassis which has been exempted under this provision, the transferor shall give notice of the transfer and of the name and address of the transferee to the Commissioners of Customs and Excise.'
The subsection then went on to state that alteration or obliteration of that mark rendered the person liable to a fine of up to £100, or six months' imprisonment with or without hard labour. Further, some articles could be exempted if the amount of duty was too small to collect, and temporary imported vehicles could be exempted as well. However, it was also stated that:
' If it is shown to the satisfaction of the Commissioners of Customs and Excise that any motor car, chassis, component part, or accessory ahs been, and is being, exclusively used for purposes which entitle it to an exemption from duty under this provision, the Commissioners may, subject to such conditions (if any) as they think fit to impose, repay any duty paid on the car, chassis, part or accessory on importation.'
2. CANADA AS SOLE EXPORT PROVIDER?
2. 1 CONCENTRATION ON CANADIAN EXPORTS
After W.C. Durant had resigned as President of General Motors, in early-to-mid 1921 he was courted the McLaughlin family again, much as he had done in 1915. However, general opinion has it that General Motors Corporation awarded the export market to the McLaughlin boys 'to nip in the bud any danger that they might jump ship to Durant'.
In the autumn of 1921, R.S. 'Sam' McLaughlin sailed to England in order to try and sell Canadian cars to the
British and at the same time agreed details of what would later be called S.U.P. and C.K.D. shipments, with General Motors Limited. McLaughlin was a Director and Vice-President of General Motors Corporation at this time, as well as General Motors of Canada Limited. This was clearly a special deal that McLaughlin had by-passing General Motors Export Company, and selling directly to General Motors Limited in London. This direct salesmanship included the Model 490 Special, which was sold by Limited as the Chevrolet 'De Luxe', with nickelled radiator surround, and better equipment, at a higher and thus more profitable price. A few Tarrytown, N.Y.-assembled S.U.P. light delivery chassis were imported nevertheless, but, with the British standing by the Empire, and with the reduction in import duties to 22 2/3rds % for Canadian cars [commercial vehicles being duty-free], General Motors Limited emphasised the Canadian-sourcing from the November 1921 Olympia Motor Show onwards. The direct result was that 1922 Model Oshawa-assembled cars and light delivery chassis went into production from September 1921, and bulk deliveries of crated chassis and bodies started arriving in the U.K. in December 1921/January 1922. R.S. 'Sam' McLaughlin was in London when his father died on 23 November 1921', which proves that he was at the Motor Show in London in 1921.
Further, since 1914 the U.S. manufacturers had moved to concentrating production on left-hand drive vehicles, with Canada save for Newfoundland until 1947 gradually following suit. However, with few exceptions the market for right-hand drive cars was concentrated in the Empire, so it made commercial sense from then on to produce r.h.d. cars mainly from Canada. However, Canadian and U.S. magazines reflected the increased demand for exports, which required considerable investment in expanding production facilities. However, this investment was perceived to be endangered by the change in policy of the Lib-Lab coalition.
Canadian Motor, Tractor and Implement Trade Journal (October 1921): 'GENERAL MOTORS MAKE OSHAWA EXPORT CENTRE: New York-Manufacture of all export models with the exception of the Cadillac car and the General Motors truck will be concentrated by the General Motors Corp. at its Canadian plant, Oshawa, Ont. . . . Its purpose is to produce a line of cars more reliable and more thoroughly tested which for these reasons will be better fitted for foreign trade. Another purpose is to give greater flexibility to the manufacture of such cars, not only because of changes in the manufacturing programs but because of detail necessary to meet export needs'.
Canadian Motor, Tractor and Implement Trade Journal (February 1922): 'OAKLAND TO BE MADE IN CANADA: Another unit of the General Motors of Canada, Ltd., is being organised in Canada. The new company will be known as the Oakland Motor Car Co. of Canada, Ltd., subsidiary of General Motors of Canada Ltd. Operation will begin early in March. This will mean still more production for the Oshawa plants of General Motors, Ltd., which are at present turning out more cars per day than at any previous time in their history. In the course of an interview Mr. McLaughlin remarked that the company's reason for launching out in this venture under the present conditions was influenced by the fact that it already had on its files large orders for the new Oakland Six for export shipment.
Automotive Industries of 27 April 1922 stated that the General Motors Export Company announced that 2,239 passenger cars were shipped from Oshawa during March 1922, compared with 1,350 in February. Of that 2,239, 1,017 were exported to General Motors Limited, an increase of 500 to the U.K. in February 1922 [and thus 517 in February], and 400 or so to the rest of the world. These would have been a mixture of Buicks, Chevrolets and Oaklands. The 'rest of the world' was in fact so far as number of cars shipped, mainly to Australasia, then Pan-America secondly and Europe thirdly, Australia and Argentina being very strong markets for Canadian exports. Both these markets drove on the left at this time. This compares with the US equivalents from Tarrytown and other export Plants [Lansing, Pontiac, Flint] of 4,471 cars and 590 Trucks in March 1922, 3,096 cars and 454 Trucks in February 1922, and 2,019 cars and 610 Trucks in March 1921, which would have included exports to the UK at that time of Cadillacs, Oldsmobiles and G.M.C. trucks. Sam McLaughlin was in fact so thrilled at the expansion in production at Oshawa, that he commissioned the Pathé motion picture newsreel company to film the departure of 63 railroad box cars full of cars intended for England, which were filmed leaving Oshawa station [for St. John, New Brunswick]. This equates to several hundred cars in one shipment!.
Canadian Motor and Tractor Trade Journal: (April 1922): 'It is stated that the plants of the General Motors of Canada, Limited, at Oshawa and Walkerville, Ont., are running full time, and quite a number of the departments are working overtime in an endeavour to fulfil the demand for their products. The daily output for the past three months has been 150 finished automobiles, and the schedule for the next two months call for a daily output of from 175 to 200 finished automobiles'.
Canadian Motor and Tractor Trade Journal (May 1922): GENERAL MOTORS MAKES BIG SHIPMENT: Shipment of a solid train of sixty-one cars laden with automobiles en route to the United Kingdom from the Oshawa plants of General Motors Corporation recently is said to have been the largest single export shipment ever started from a Canadian automobile factory. The shipment is made via Canadian National line to St. John, whence the cars will be loaded on the Canadian Government Merchant Marine steamer Canadian Conqueror. This 8,500-ton vessel will have most of its cargo space taken by the General Motors shipment. The export shipments from Oshawa are averaging 100 cars per day to all parts of the world'. This shipment was made in March 1922, Sam McLaughlin was in fact so thrilled at the expansion in production at Oshawa, that he commissioned the Pathé motion picture newsreel company to film the departure of the railroad box cars full of cars intended for England, which were filmed leaving Oshawa station.
Canadian Automotive Trade July 1923: 'According to recent government reports, exports from Canada have grown to very large proportions. One of the chief factors in this big overseas business is General Motors of Canada Limited. Recently a train of 80 freight cars pulled out of the railroad yards at Oshawa for New York. This is the largest single trainload of any kind ever pulled out of a Canadian Railway yard. The 80 freight cars held 407 automobiles-234 McLaughlin-Buicks and 173 Chevrolets. From New York they were shipped by steamer to South Africa, Australia, British East Africa, Ceylon, Strait Settlements, Argentina, Denmark, Java, India, Portugal, New Zealand, Columbia, Rhodesia, Jamaica, Uruguay, Mexico, Belgium and Sweden'.
The Canadian Automotive Trade issue at the time of the London Motor Show in October 1924 expressed Canadian concern at the effect of the Labour free-trade Finance Act [3]: 'Sales of Canadian cars are increasing every year, but the removal of the McKenna tariff with its incidental preference to cars of Empire manufacture, has left it an open question whether the British market will continue to be supplied from Canadian plants or switch to the American. Manufacturing costs in the United States, it is pointed out, are considerably [sic] lower than those in Canada, and there now remains only a sentimental recommendation on behalf of the Canadian car. The probability is that the English market will be catered to from American factories, while to Canadian factories will be left the task of supplying the rest of the Empire, which, by the way, affords a much larger market than the Isles alone. This wider market, however, is partially affected by the Australian dictum that cars obtaining preference must have 75 per cent. of the labour and materials involved strictly British'.
3. IMPERIAL PREFERENCE DEBUNKED?
3.1 THE OSHAWA, ONTARIO F.O.B. RETAIL PRICE
Please refer to the table below. The 'OSHAWA' price column is based on the advertised 1922 Oshawa f.o.b. price of Canada $785 that was found in the May 1922 McLean's Magazine. Also picture in this ad is the 1922 490 Special Touring at $895, which was not sold in the U.S., but was sold in Canada and exported overseas. The standard Touring represents a C$250 increase over the equivalent Flint f.o.b. price of Canada $535, and this gives this Canadian Touring a 46.7% higher retail price then the same Flint 490 Model. This higher price, C$785 is a whopping 96% price increase from the Flint plant estimated inter-company 25% discount price of Canada $401.25, is due in part to the imposed C$25 freight and C$50 duty paid on imported components from the U.S.A., but these cost represents only 30% of this total price increase.
Therefore, it must be the higher Canadian manufacturing costs were because of a less established supply inter-structure in place, plant inefficiencies caused by lower production levels, and more extreme business cycles caused by a shorter warm weather selling season. Perhaps the biggest factor was a protected home market that restricted global competition - hence artificially raised costs, overheads, and sales margins to the detriment of the Canadian consumer?
The other estimated Oshawa f.o.b. prices are based on this 1922 mark-up of 46.7%, which admittedly might have been lowered in later years because of increased Oshawa plant production and switching back to cheaper Flint manufacture engines for 1925 instead of the higher cost Walkerville built engines.
The second 'DUTY' column is the protective tariff Great Britain imposed, that was figured at 1/3 tax on the U.S.A. port, f.o.b., actual transaction cost. This was the discounted wholesale price the factory sold the S.U.P. Touring or S.U.P. [4] Touring Chassis to General Motors Limited at the Tarrytown dock, with this duty collected by customs when every these cars or chassis were released from a bonded warehouse in London. The duty on Touring and Touring Chassis shipped by the Oshawa plant was discounted by 1/3, and therefore paid at a slightly move favourable rate of 22 2/3% on the Oshawa f.o.b. port inter-company transaction cost.
The 'SHIPPING' cost column is the estimate ocean freight paid the steamship company and also includes the export boxing expenses, dock loading and unloading charges, lighter transfer charges, and customs inspection.
Since a S.U.P. chassis crate is one half the size of a S.U.P. Touring crate, the shipping cost is estimated at one half cost for $75 each. Later, to further reduce these costs, two chassis were boxed together in a D.U.P. [5] that was the same size and same cost as the Touring S.U.P. To be conservative in his estimates, Ken has indicated that the ocean freight from Oshawa as the same as from New York, the largest port in the world. Lake Ontario is about 250 ft. above sea level, but is ice-free, and the steamship would take longer to navigate the St. Lawrence Sea Way when open, some additional charges would be expected in the ocean shipment of units from Oshawa to London. However, evidence has shown that vehicles were despatched in various ways: by train to St. John, New Brunswick, or Halifax, Nova Scotia, or railed to New York and then shipped from there.
3.2 THE FLINT, MICHIGAN F.O.B. RETAIL PRICE
The prices listed under the 'FLINT' column are the factory retail delivery price for the standard 490 Touring, or starting in the chart for 1924, for the 490 Touring Chassis which typically was available for $100 to $115 less. It should be noted that during the short recession of 1920-21, when production was halted for a few months, and Chevrolet offered it's first cash rebate plan of $50 for the touring, prices dropped four times in seven months, from a 1921 high of $820, then to $795 on March 1, down to $645 on May 7, then to $625 on July 15, and ending with the bargain price of $525 for the improved 1922 490 Touring that when into effect September 6, 1921. This was a free fall of 36% in just a little over a half year! Think what this did to the resale value of the previous 1918-21 490 model, whose mechanical reliability did not live up to expectations. But it sure put the fire under the 1922 model sales! These lower price incentives started the tremendous Chevrolet production gains during the rest of the Twenties.
The 'FREIGHT' column list the approximate railroad freight charges between Flint and the Tarrytown or Oshawa plants. For Oshawa, freight charges are estimate to cost half as much as a complete Touring, since only partial parts and components were imported.
3.3. THE TARRYTOWN, NEW YORK F.O.B. RETAIL PRICE
The 'TARRY' column represents the Tarrytown plant retail delivery price for the Tarrytown assembled standard 490 Touring or Touring Chassis, and it includes the freight differential charge. This price does not include export boxing charges.
3. 4 THE LONDON RETAIL PRICE & COST CALCULATIONS
The 'COST/SALE LONDON' columns show the estimated landed prices in London after any and all duties were paid. This wholesale 'COST' is stated in either U.S. dollars or Canadian dollars, depending on the county of origin, at the average exchange rate for the years listed. During the period of 1922 to 1928, the Canadian dollar was very strong and was almost equal to the U.S. dollar (several month it was) with an average of better that C$.99, and never less that C$.98 to the U.S. dollar.
The 'SALE' prices are the advertised retail prices in £ Sterling, with the corresponding conversion to U.S. dollars to the left. It should be noted that the £ Sterling was weakened by the post war recession in 1920-21, where it was valued at $3.66 dollars to the £1, to $4.574 to the £1 by 1924, and back up to a more respectable $4.86 to the £1 in 1926. Part of this weak pound problem was cause by the English imbalance of trade with the U.S.A. because of importing too many cheap American car.
3.5 THE SALES MARKUP %
The next % column is the sales mark-up percentage calculated by subtracting the estimated COST from the SALE price in dollars, divided by the COST, times 100%, which equals the sales mark-up. The actual sales margins would be slightly less, since it would include unpacking and new car prep and sales expenses. In the case of the S.U.P. chassis that were imported from both Canada and the U.S.A., the cost of the English build body, assembling it at the Hendon Works, final paint and prep, is conservatively estimate to cost slightly less then $100 (£20) or about 20% more then the Tarrytown body deletion credit of $75.
It is estimated that General Motors Limited, working as the Chevrolet importer, assembler, and distributor from August 1921, worked on an average wholesale sales margin of 8 to 10%. Bennett as Sole Concessionaire tried for the same 20% margins as its dealers. General Motors Limited dealers, whose selling agreement probably called for a sliding dealer discount, that varied between 15 to 20% based on its cars and commercials purchase volume, average 16 to 22% sales margins
The 'NOTES' at the end of each row list the possible country of origin of either the S.U.P. Touring car or DUP Touring Chassis, the source of the body, and whether or not the Canadian paid duty on parts and components imported from the U.S.A. was rebated. Since it is not known at this time if this rebate was in effect for all years during this period, a few both cases are shown for fair comparisons.
3.6 TABLE OF BRITISH CHEVROLET ESTIMATED ASSEMBLY AND IMPORTATION COSTS
By Ken Kaufmann [6]
YEAR FLINT FREIGHT TARRY DUTY OSHAWA DUTY SHIPPING COST/ SALES LONDON % NOTES
1920 $820 $50 $870 $222 $143 $1030 $1593 £435 54.7% U.S.A.
1921 $795 $50 $845 $215 $143 $1005 $1520 £395 51.2% U.S.A.
1922 C$535 C$25 C$50 C$785 C$134 C$150 C$873 $1150 £260 31.7% CAN duty paid
C$535 C$25 C$ 0 C$735 C$125 C$150 C$826 $1150 £260 39.2% CAN duty rebate
$525 $50 $575 $148 $143 $735 $1150 £260 56.5% U.S.A.
1923 C$535 C$25 C$50 C$785 C#134 C$150 C$873 $1075 £235 25.0% CAN duty paid
$525 $50 $575 $148 $143 $735 $1075 £235 46.3% U.S.A.
1924 C$400 C$25 C$ 0 C$535 C$ 90 C$ 75 C$660 $839 £190 28.5% AN Ch GB body
$510 $50 $560 $144 $143 $720 $839 £190 16.5% U.S.A.
C$400 C$25 C$ 0 C$535 C$ 0 C$ 75 C$570 $707 £160 25.6% CAN ChGB body
$495 $50 $545 $ 0 $143 $565 $707 £160 25.1% U.S.A.
$395 $25 $420 $ 0 $ 75 $495 $707 £160 42.8% U.S.A. ChGB body
1925 $525 $50 $575 $ 0 $143 $587 $748 £155 27.4% U.S.A.
$425 $25 $450 $ 0 $ 75 $520 $748 £155 43.8% U.S.A. ChGB body
$425 $25 $450 $115 $ 75 $610 $748 £155 22.6% U.S.A. ChGB body
1926 $395 $25 $420 $107 $ 75 $600 $802 £165 33.7% U.S.A. ChGB body
$395 $25 $420 $107 $ 75 $600 $899 £185 49.8% U.S.A. ChGB body
C$400 C$25 C$ 0 C$535 C$ 91 C$ 75 C$660 $899 £155 36.2% CAN ChGB body
1927 $395 $25 $420 $107 $ 75 $600 $900 £185 50,0% U.S.A. ChGB body
1928 $395 $25 $420 $107 $ 75 $605 $804 £185 49.4% U.S.A. ChGB body
The above chart has been prepared for 1920 to 1928, to help explain and clarify the estimate cost and pricing structure that was practised between the Chevrolet Motor Co., General Motors of Canada Ltd., and General Motors Export Co., and the F.S. Bennett Ltd. (sole Chevrolet concessionaire till August 1921) and General Motors Limited in London, who from August 1921 was responsible for the importation and later assembly of Chevrolet cars for British Isles.
The first 'DUTY' column estimates the C$50 duty that was paid on parts and component imported into Canada at the 35% parts rate. In the case where zero duty is shown, it represents the more likely situation where this duty was rebated to the Oshawa plant at the time a Touring or Touring chassis S.U.P. crate was exported out of Canada
3.7 OSHAWA BUILT TOURINGS COST MORE!
Let us take 1922 as an example. For the calendar year the Canadian dollar averaged U.S.$0.985. The Flint Touring price of $525 was 1.9% more, or $10, in Canadian $'s, for a total of Canada$535. The Touring cost C$785 in Oshawa, which is C$250 more! My understanding, is the tariff was 35% on component parts imported from the U.S., and with engines, transmissions, front and rear axles sourced from Walkerville, I wouldn't think over C$145 worth of components would be required to be imported. After all, the dealer cost of a chassis was only $312 f.o.b. Flint. So the most the 35% component/parts duty would have been is C$50. I figure the Oshawa built 1922 Touring should of cost C$535 plus C$50 parts duty, plus C$50 freight, equal C$635 cost, so it can be compared to a Tarrytown port cost of Canada $585 (U.S.$575).
That is, the Oshawa sourced Touring priced at C$785 was at least C$200 more then a Tarrytown sourced Touring at C$585 retail price. If the $50 duty was rebated to Oshawa for export sales, there would still be a $150 price differential on the retail level, or about $120 at the dealer's wholesale cost. So it can be seen, that because of limited volume and smaller supplier inter-structure, the Oshawa build Touring, export retail price at the factory, was at least 25% more then the comparable Tarrytown built Touring in 1922.
3.8 TARRYTOWN WAS A LOW COST PLANT
So in 1922, when the cost of the 490 Touring was $525 Flint, and about $575 Tarrytown with approximately $50 freight, with the maximum direct dealer discount of 21%, I would guess General Motors Limited, along with General Motors Export and General Motors of Canada, received an even larger volume or inter-company discount of 25% off the Flint f.o.b. list price of $525. So the invoice cost to General Motors Limited at the Tarrytown dock would be: $525 less 25% = $393.75, plus the approximately $50 railroad freight shipping differential, which was the cost of shipping a complete car from Flint to Tarrytown, figured on a railroad box car that doubled decked six touring cars (which was always added on to the Tarrytown plant invoiced price of $525). This gives a cost at the dock of $443.75. So added to this is the 1/3 duty of $147.92, plus shipping to London of say, $143.33, gives a $735 cost to General Motors Limited after customs was paid in GB. This S.U.P. touring was made ready for the road and then was put up for sale in GB at £260. With an exchange rate of about $4.43 to the £, this would work out to $1150, for a possible 56.5% mark-up on complete S.U.P. touring cars, if these cars had been imported from the U.S.A. at this time, instead of the cars from the higher cost Oshawa plant.
3.9 ESTIMATING OCEAN SHIPPING CHARGES
The Chevrolet Review for December 1920 had and interesting article that reported 'the S.S. Minnesota carried the biggest shipment of automobiles on one steamer to one consignee [FS Bennett Ltd.] at one destination ever recorded. The amount paid the steamship line was also probably the largest sum ever charged on one freight bill of lading -$37,310.12. The cargo consisted of 300 Chevrolets motor cars and the destination was London, England.'
A picture was printed that showed 100 boxed cars being loaded aboard the Minnesota from the lighter Melbourne. It was noted that the cases were uniform throughout, that 'the packing of the Chevrolet cars being efficiently standardised as is their manufacture.' From this report we can determine that the average unit cost paid was $124.37. I would guess that about 50 of these cars being shipped to London were the larger and heavier FB model, with freight costing about $150 each or 25% more then the more compact 490 model.
Therefore a fair ocean shipping cost for the 490 would be $120 each. I have added another $23 to the steamship cost for the miscellaneous charges associated with ocean shipments such as the inland waterway cost for the lighter service (looks like what I would call a barge push by a tug boat).
In order to receive the lowest available shipping rate, it was necessary to ship in fairly large quantities. These large ocean shipments of 300 Touring cars or 600 Touring chassis at a time, explains why large batches of close serial numbers and engine casting dates, in approximately monthly consignments, were imported into Great Britain.
3.10 THE BOTTOM LINE!
Looking at this another way, if the $735 cost to General Motors Limited at the dock price was marked up only to 26.5%, the Tarrytown sourced car could sell retail at $930 or £210 London. However, since it was decided to import the complete S.U.P. touring from Oshawa, the General Motors Limited cost in the equivalent U.S.$ was $860, even with the lower 22 2/3 % duty charged against the Oshawa port cost. This illustrates the Oshawa built Touring at $860 cost General Motors Limited 17% more then the $735 touring from Tarrytown. It is more then likely the Oshawa plant was rebated the Canadian C$50 custom duty that was at a 35% rate on parts and components imported from the U.S.A., since the finish value added product was subsequently exported to Great Britain. If this was the case, the Oshawa sourced S.U.P. Touring would have cost General Motors Limited $59 less for a total of $814. This is still 10.7% higher then the cost of the Tarrytown Touring.
3.11 THE PREFERENTIAL DUTY MYTH
It has widely been believed and reported that the reason that Canadian manufactured cars and chassis were shipped and sold to the overseas British market, which includes the colonies of Australia, South Africa, and India, was based solely on the lower Empire preferential duty of 22 2/3 on the Canadian cars as compared to the larger 33 1/3 paid on the U.S.A. made cars. I question this long standing theory!
Calculations on the duty on a U.S.A. Touring would have been $148, and the duty on a Canadian Touring at C$125, which at the average 1922 exchange rate of $.985 to the C$1.00, is $123 - only a $25 difference. It can be seen that this duty differential on a 1922 490 S.U.P. complete Touring, that sold in Great Britain for £260, or the equivalent $1150, was merely $25! This extra $25 duty amounts to only 2% of the GB selling price, and would have little bearing on determining the country of exportation. The very efficient, high volume, Tarrytown assembly plant demonstrated a 12% to 15% cost advantage over the higher overhead Oshawa plant during the early Twenties.
Ken believes that the additional cost for ocean shipments from Oshawa would more then offset the higher $25 duty differential charged for the Tarrytown imports!
3.12 WHY IMPORT FROM OSHAWA?
We believe it was something other then the lowest duty cost as to why General Motors decided to source its export models out of Canada for most of 1922-24. One explanation is the Canadian products had a better quality reputation, especial for the body building fit and finish, and the British market was willing to pay a premium price for this 'Made in Canada' data plate. The quality aspect at least applied in the case of the more upscale Buick, which in some years, outsold Chevrolet passenger car models 10 to 1.
3.13 BUY BRITISH AND CANADIAN?
Perhaps there were the first signs of a 'Buy British' or 'Buy from the Colonies' mood, since the cheap U.S.A. built cars were overwhelming the British automotive market. The U.S.A. imports were hurting the pound and the economic growth of this important business segment, both at home and in the traditional British colonial export market. It was not that there was a anti-American sediment across the land, it was more of a pro-British and Canadian feeling of not biting the hand that feeds you.
3.14 PRODUCTION SMOOTHING AT OSHAWA?
Since the Oshawa plant had higher production costs then Tarrytown, because of its wide seasonal business cycle, General Motors wanted to lower the cost at Oshawa by giving General Motors of Canada the manufacturing responsibility of the export r.h.d. and l.h.d. models that could be built during the long Winter months to help smooth out production. This might be a good reason, but I think it is the result of what then took place.
3.15 LACK OF TARRYTOWN PRODUCTION SLOTS
During the sales boom period of 1922-23, it appears General Motors Limited and General Motors Export were forced to import the higher unit cost Oshawa's product because of the great demand the Tarrytown Zone dealers had for every production slot. The Order Board was closed and overbooked!
In the September 6, 1921 Automotive Industries, the same issue that Chevrolet announced the price cut of the Touring down to $525, effective September 3rd, and the 'Change in specifications,' General Motors announced that all export models would be manufactured in Canada.
What I think happened was, with the dealer's announcement of the 'improved' 1922 490 Model, with spiral bevel gear rear axle and hand controlled brake lever, the dealers signed order contracts that exceeded Tarrytown's production capacity. It should be noted that it was not until 1923 that the Norwood, Ohio (plant code, Buffalo, N.Y. and Janesville, Wisconsin could be started up to fill all the dealers' orders. So it appears that General Motors made a policy decision at the start of the 1922 model year to shift the production of the relative lower volume export models to the higher cost Oshawa plant.
I am sure that General Motors decided that the export market could bear the higher Canadian cost difference. After all, it was not that obvious that retail prices overseas were not reduced the same deep price cuts as in the U.S.A.
The painful solution to the pricing and distribution problems in Great Britain, was for General Motors Limited to cancel the Sole Concessionaire Agreement with F.S. Bennett Ltd. And directly take charge of the Chevrolet importation (Bennett who made his name in England promoting the Cadillac, probably didn't relate to selling Chevrolet commercial chassis or vehicles to the common tradesmen, and he never sold any Chevrolet Trucks!), assembly (it established the Hendon plant), and distribution (General Motors Limited work on a much narrower margin than Bennett, who obviously wasn't willing to reinvest his easily made profits in the business and expand his dealer base).
Besides, most of the export market was shifting away from U.S.A. built touring bodies, with the large Australian and British market ordering mostly S.U.P. chassis in which locally built bodies were mounted. It doesn't take an accountant long to figure out, that starting in the U.S.A. in 1922, with the demand for the very desirable Fisher Closed Bodies, that up to double the profits could be made by assembling one Sedan, then one S.U.P. chassis. It was smart to allotted scarce Tarrytown production space to assemble Fisher Closed Bodies cars rather then bare S.U.P. Touring chassis.
4. AVOIDING DUTIES
4.1 SAVINGS BY INDIGENOUS PRODUCTION?
General Motors Corporation attempted to buy Austin, Morris and then Wolseley, but only succeeded in purchasing Vauxhall Motors Limited, arguably on the rebound from failing to purchase the first two. James D. Mooney, President of General Motors Export Company supervised the acquisition of Vauxhalls after having failed to acquire Austin in 1925, but just as the negotiations for acquiring Vauxhall Motors Limited were coming to the fore, and a few days before the acquisition was completed, Mooney addressed the American Chamber of Commerce in London on 17 November 1925, his speech entitled 'The future of the motor vehicle in the British Empire',. This makes his comments all the more poignant. Mooney was also present alongside the King and Prince of Wales in April 1924 when the British Empire Exhibition was opened, as the Canadian exhibition was the largest, and contained the Canadian building contained G.M. of Canada's display, the largest Canadian stand. This display had several G.M. of Canada cars on view. Mooney states in his memoirs that he knew Prime Minister Baldwin very well. However, Mooney's comments outline why General Motors decided to reduce their importation costs still further with local assembly, requiring far less importation of components.
Mooney's speech ambles on, what the most relevant points which he proposed, and which were of relevance even ten years later were:
1. Labour: 'our British workmen are always willing and have always been willing to do a good day's work for a fair day's pay'.
2. Economic background:
a) The raw materials were always available, and the industrial and production facilities that had to provide the general background for producing cars in quantities existed readily and within a comparatively limited area.
b) The mental approach to manufacturing a high-grade complex product like a motor car was readily available, with a complete industrial tradition and background including elements of personnel, management, engineering, mechanical craftsmanship, which supported a broad manufacturing programme.
c) The UK was faced with the economic necessity of capitalising to better advantage manufacturing high-grade, complex, fine quality products. Motor car assembly fitted into this requirement as one of the UK's economic necessities.
3. The rising costs of raw materials which were endangering competitiveness in world markets could be remedied by increasing the amount of labour on the products that were exported, so that less items shipped in a raw or semi-finished state, and an increase in manufactured goods, i.e. by increasing the degree of fabrication of UK manufactures for export would be considerably advantageous.
4. General Motors found that the UK had the general elements that provided a sound basis for investment in the motor industry, with high character values, the amount and character of labour needed, the fundamental production facilities, and an expanding market. The UK provided the entire background that was needed to support the manufacture of motor cars that could compete on the world's markets.
The reduction in the amount of components inevitably caused a reduction in import duties. As a consequence, General Motors reduced importation of Canadian components, and at Oshawa's expense brought in cases of components from the Bloomfield, New Jersey Chevrolet boxing plant which could supply them at a much lower cost, freight included, than Oshawa could export at, and thus Imperial Preference had no effect.
4.2 DUTIES FOR REVENUE-EARNING
In the Customs Year [7] 6 April 1925 to 5 April 1926, there were 5,427 complete cars, worth £983,634 imported, which brought in net, Duty of £273,358, plus there were Parts & Accessories to the value of £1,269,978 which brought in net, £385,002 in Duty. In the 'full year' 1926 to 1927, the figures were 15,334 cars {including commercials} worth £2,483,218 which brought in £770,383 and Parts & Accessories worth £3,370,086 which brought in £1,060,713. With Motor cycles, the net Duty receipts for 1925-26 were £660,856 and for 'the full year' 1926-27 were £1,833,770 which seems to suggest that the Chancellor, Churchill, was correct in his forecasting
The World's Carriers 15 February 1929 stated that the General Motors Limited Hendon factory employed over 1,000 employees, and salaried and wages totalled nearly £200,000 per annum, and around £40,000 per year was paid in freight of which 96 % was carried in British ships. General Motors Limited paid around £300,000 in Import Duty in 1928.
Import Duty figures from H.M. Customs and Excise [8] show that in the Customs Year 1927-28, 16,801 vehicles were imported worth £3,150,273, earning £973,987 in net customs duties, and £5,171,749 in Parts & Accessories which brought in £1,557.665 net, and for 1928-29, 14,721 vehicles were imported, value £2,794,799 earning £851,200, and Parts & Accessories worth £5,131,737 bringing in £1,607,089. Thus can be seen the percentage of the Import Duty that Chancellor of the Exchequer Winston Churchill had legislated for with the reintroduction of the McKenna Duties in 1925. To bring the story 'full circle', the figures for the very important April 6 1929 to April 5 1930 period were: 10,355 vehicles, worth £1,908,524, net duties £592,779, and Parts and Accessories: £5,679,084-worth bringing in £1,808,458 of duty! As can be expected, post Wall Street Crash, these figures were to drastically drop for 1930-31, with the loss of something over £1 million in duty as a result of the fall-off in demand for imported chassis and components, and the replacement by British-built chassis and components.
Here therefore was the real reason why General Motors Limited aimed for as near 100% British construction as possible: to save a huge amount of money being paid to the Exchequer each year on duties: a rough calculation shows that total sales of the Chevrolet 30 cwt. LQ chassis alone must have been in the order of £2.5 million gross, perhaps a turnover of £2 million for General Motors Limited alone! In October 1929 General Motors took this one step further with the production of the first all-British built Chevrolet engine for the forthcoming 1930 Models. Eventually, Vauxhall Motors Limited at Luton, to whom Chevrolet production had switched in January 1930, achieved 95% British content. The remaining 5% were all U.S.-sourced items, and not Canadian.
5. POST WALL STREET
5.1 THE 1932 OTTAWA AGREEMENT
The Canada-United Kingdom Trade Agreement ['the Ottawa Agreement'] was signed in Ottawa 20 August 1932 and effective 13 October 1932 allowed free entry of motor vehicles into Canada under the preference, and may have provided for preferential rates in the reverse direction as covered by the U.K.'s Import Duties Act 1932. The Ottawa Agreement was effective in British law by virtue of the Ottawa Agreements Act 1932, chapter 53.
On 1 January 1935, as a result of the changes in the Finance Act 1934, the Horsepower Tax was reduced since there were many anomalies with large engines being designed with small engine bores and long strokes to save on the tax, which was argued stifled development. Instead of £1 per h.p. unit or part thereof, the rate was set at 15 shillings, a reduction of 25%, per 1 h.p. unit. Although General Motors' New York office started to export Canadian McLaughlin-Buicks [badged as 'Buicks'] from 1932, with a few U.S. cars as well, all other G.M. imports were U.S.-sourced though Chevrolets were only imported from late 1934 mainly from Canada again, as the New York office decided that the reduction in horsepower tax, and upturn in the economy, was conducive towards the re-introduction of larger North American cars again.
The Import Duties Act 1932 Section 3, established the Import Duties Advisory Committee. The Committee were empowered to recommend that additional Duty should be charged on goods which in their opinion were either articles of luxury or articles of a kind which are being produced or are likely to be produced in the U.K. in quantities which were substantial in relation to the U.K. consumption. Section 3 (2) of the Act set out 'in deciding what recommendation, if any, to make for the purposes of this Section, the Committee shall have regard to the advisability in the national interest of restricting imports into the United Kingdom and the interest generally of trade and industry in the United Kingdom, including those of trades and industries which are consumers of goods as well as those of trades and industries which are producers of goods'. An elaborate procedure was however laid down for this purpose involving many stages. Representations had to be made to the Committee, advertisements by the Committee of such applications as they receive had to be made and the Committee had to have time to consider the recommendations and take evidence. They then had to decide whether or not to make a recommendation to the Treasury or to suspend action or reject the application. The Treasury, when making an Order under the Act had to consult the appropriate Department, e.g. the Board of Trade. The Committee intended to try and foster British trade and to develop new industries in the U.K. In this respect, the Committee could request that the Treasury grant exemptions with the Board of Trade from customs duties in the case of machinery, iron and steel gods, and certain other imports. However, it must be made clear that the intention was to protect the home market, inasmuch as this did not conflict with the Ottawa Agreements. Similar Committees were also established in Australia and Canada, and in due course the thorny problem of duty on motor vehicles had to be settled: the second Ottawa Agreement as a result of the Ottawa Conference seems to have resolved this problem.
5.2 THE 1937 OTTAWA AGREEMENT
By early 1935, there were serious concerns in Australia that the local automotive industry was not being protected sufficiently, and the answer appeared to be to introduce a licensing system for imports which would favour those countries with whom Australia had a favourable balance of Trade. The Minister in Charge of Trade Treaties, Sir Henry Gullett consequently announced in the House of Representatives, along with his colleague, the Minister for Customs, Lieut.-Colonel White, the new prohibitions and also a new increased level of tariffs. Gullett had hoped that these would promote trade with Britain and other countries that were good customers of Australia: The Advertiser, Adelaide. The thought was that the U.S. would be affected by the determination of the Ministry to establish the motor chassis manufacturing industry in Australia. Talks were also held with Canada to ensure that supply of goods subject to the import control were not diverted to Canada, in view of the large adverse balance of trade with Canada, which would defeat the Ministry's object of diversion. Gullett had in fact spent some time overseas researching the tariff policies in other countries, and it is believed, had met the British Government representatives as well, because of the provisions of the Ottawa Agreement, 1932.
The Australian threat of action on import tariffs on chassis resulted in an immediate reaction in Canada, a major exporter to the Antipodes. The Report of Canada's Import Duties Advisory Committee of 2 July 1935 which reviewed not only Canadian import duties but also all Empire duties, especially Australian, and also the United States', investigated amongst other things the considerable price differential between Canadian and U.S. automobiles. The Committee made a number of recommendations to the Canadian Government as a result of their detailed assessments. The response from the then Prime Minister, the Honourable Charles Dunning was a report to the Ottawa Parliament on 1 May 1936 and consequently to the Canadian people, that the existing tariffs on cars and trucks were to be reduced down to 17.5% except those from British countries, which would be free. Negotiations had taken place in London between the Canadian and British Governments in the summer of 1936 in advance of an Imperial Conference in Ottawa. As a consequence, and because of concerns at the practical effects of the 1932 Agreement, the trade negotiations resulted in the second Canada-United Kingdom Trade Agreement ['the Ottawa Agreement'] signed in Ottawa on 23 February 1937, and which was put into effect in the U.K. by the Import Duties Act 1938. The Agreement provided that as regards Motor Cars which were covered by Article 2, 'The Government of the United Kingdom undertake that the goods the manufacture of Canada enumerated in Schedule I appended hereto when consigned from any part of the British Empire shall not on importation into the United Kingdom be subjected to duties of customs higher than those specified in that Schedule'. In relation to Motor Cars and accessories and component parts, [but not commercial vehicles note] the rate of duty was 22 2/3rds% ad valorem. Automobiles and motor vehicles of all kinds and stated component parts set out in Schedule IV were able to be imported into Canada by virtue of Articles 6 and 7 as being subject to a discount, which was stated to be 'free', i.e. duty-free as before. The 1937 Agreement replaced the 1932 one when it came into force, but was limited to 20 August 1940, unless terminated by six months' notice by either Government.
In practice, the second Agreement was to be totally over-ridden as a result of the entry into the War by the Dominion of Canada on 3 September 1939 which drastically affected the exchange rate of the Pound Sterling, whereas the Canadian Dollar remained 'hard currency', and the problem was then to import sufficient vehicles for military use by both countries' forces and also to 'sell' British vehicles to the Canadian Government in exchange for Dollars which could be used to purchase food with.
The Import Duties (Emergency Provisions) Act 1939 replaced the Import Duties Act 1932, and all Statutory Instruments made thereunder. This was repealed by parts of the Import Duties Act 1958. There were in fact various Statutory Instruments made under the 1939 Act, the Import Duties (Exemptions) No. 4 Order 1939 being the relevant one, and this permitted certain vehicles to be imported duty-free, e.g. from Canada for military purposes. In the Debate on the Bill, Sir Percy Harris MP said 'As to luxuries, I agree that in the interests of the exchange and the economy of cargo space they should be discouraged. I remember the much maligned McKenna Duties. They have been made the excuse for all sorts of policies since they were initiated. They were put on for the definite purposes of assisting the exchange position and economising cargo space, both excellent purposes in time of war. It would be a good thing if the Government would take the opportunity of making clear to traders, merchants and shipowners exactly what their policy is, so that the business world can co-operate with the government in discouraging the importation of goods which do not help the prosecution of the war and permitting the import of such goods, irrespective of whether they come under the category of goods manufactured in this country, which in the national interest should be imported on as large a scale as possible.'
The Finance Act 1947 introduced by the Labour Government of 1945 repealed the Finance Act 1920 h.p. rating as reduced in 1935, and instead substituted a new flat rate for all cars at £10 per year.
5.3 SOUTHAMPTON
General Motors Overseas Division in New York must have taken comfort in the resolution of the Imperial import duty question. Canadian and U.S. imports of cars, commercial vehicles and parts continued apace, and expanded from 1936 with the 'resuscitation' of General Motors Limited, and the placement of the company under G.M. Continental in Antwerp. However, apart from the Canadian [McLaughlin-]Buicks, supply of which, as with U.S.-sourced Cadillacs and La Salles was dealt with by the New York office to concessionaires Lendrum & Hartman Limited, Limited were free to import from the U.S. or Canada. Thus, Chevrolet cars were imported from Canada, and GMC trucks, Oldsmobile cars and trucks, and Pontiac cars were imported from the U.S. Savings on duty were possible if all Limited's supplies were reduced in size by knocking down the units into components. This would require an assembly operation, and so in late 1937 the construction of a new assembly plant was announced.
In late 1938, the first U.S.-sourced Chevrolet trucks arrived in the U.K., the advance guard for British-assembled trucks. It seems that commercial vehicles were largely immune from the vagaries of import duties, probably because chassis only were imported and cabs and bodies, the high-cost items, were added after importation. Thus Chevrolet, GMC, Opel and Oldsmobile trucks were competing with a whole host of other U.S. manufacturers who were well-established by 1935: White, Diamond T, REO, Stewart, all achieved substantial sales in the heavyweight market, and General Motors wanted their piece of the market, even though their subsidiary Vauxhall Motors were offering Bedford trucks in various capacities.
The announcement of the assembly of Chevrolet trucks from the beginning of December 1939, followed by cars from Chevrolet, Pontiac and Oldsmobile the following month may seem to be a concerted effort at firstly saving on import duties through the reduction down to components of vehicles and chassis for assembly, and secondly arranging supply from the U.S. to take advantage of lower unit costs than Canada. Although the latter point was correct, the former was definitely not: truck and bus chassis prices were largely unaffected by import duties, but were by factory gate unit prices and the U.S. factories outclassed the Canadians on sheer production numbers before the war. The cars mentioned were all 'luxury' models, and the same principle applied, except that the idea for assembly of Pontiacs and Oldsmobiles was rapidly dropped as the limited numbers that could be sold did not warrant component shipping from Pontiac and Lansing, Michigan Plants respectively, and so S.U.P. cars were imported instead at prices that Oshawa could not compete with even with 1/3rd less duty allowance. With Chevrolet cars, G.M. was able to take advantage of their dedicated Bloomfield Boxing Plant fairly near New York, which had had considerable efficiency improvements from 1935 onwards to reduce packing sizes and therefore costs. Bloomfield could supply and ship components at costs that Oshawa could only dream of, and again the preference on duty counted for nothing. Southampton's new plant was not a duty-avoidance plan, rather a concept of taking advantage of G.M.'s U.S. plant efficiencies.
6. CONCLUSION
The scenarios of 1921, 1924 and 1925 applied equally from 1935 to 1939 and thus prove that the legend of 'Canadian was cheaper' was just that, a legend, with no basis in fact. The Americans could always compete on price through sheer market forces and economies of scale. Having said that, this was to change to a dramatic degree: from 1940 when General Motors of Canada expanded production for war orders, in their four plants, they worked in tandem with the counterparts at Ford and for the first time economies of scale arguably outweighed that of the U.S because of, for instance, sharing componentry. By 1945 the production per head of population far exceeded that of the U.S. and Canada was able to take advantage of the investment in volume production in the post-war period. Thus, with the coming of peace Canada could equal if not better the U.S. in unit costs. No duty preference was required: Canada, and then Australia from 1955, had grown up and could compete by themselves on the world stage.
David Hayward, December 2001
[1] Alfred P. Sloan Junr. Ed. John McDonald and Catherine Stevens 'My Time With General Motors' P.313-4: Doubleday, New York 1963
[2] Sir Robert Vansittart was Principal Private Secretary to Stanley Baldwin, and then for a short while to MacDonald as well, from 1928-30.
[3] Volume 6, no. 11 (November 1924): P.65
[4] 'Single Unit Pack', i.e. fully built-up.
[5] 'Dual Unit Pack', with two units inside.
[6] Per Ken Kaufmann, Automotive Historian, Monrovia, California.
[7] H.M. Customs and Excise Library.
[8] Customs' Library, ibid
[2] Sir Robert Vansittart was Principal Private Secretary to Stanley Baldwin, and then for a short while to MacDonald as well, from 1928-30.
[3] Volume 6, no. 11 (November 1924): P.65
[4] 'Single Unit Pack', i.e. fully built-up.
[5] 'Dual Unit Pack', with two units inside.
[6] Per Ken Kaufmann, Automotive Historian, Monrovia, California.
[7] H.M. Customs and Excise Library.
[8] Customs' Library, ibid
