I am sure we all realize that this struggle that is going on though the World is really nothing more or less… — Alfred Sloan

Competition is the final price determinant and competitive prices may result in profits which force you to accept a rate of return less than you hoped for, or for that matter to accept temporary losses. And, in times of inflation, the rate-of-return concept comes up against the problem of assets undervalued in terms of replacement. Nevertheless, no other financial principle with which I am acquainted serves better than rate of return as an objective aid to business judgment. This principle had governed the thinking of the Finance Committee of General Motors since 1917.

The transformation of the automobile market was essentially complete in 1929. If Mr. Ford, in that pivotal year in the modern economy, still held stubbornly to his old concept in his new Model A, he was counterbalanced by Mr. Chrysler, who had come up from nowhere with tremendous vitality and with a market policy similar to General Motors'. The fact that Mr. Ford built nearly two million of the five million U.S.-produced cars and trucks sold that year was only incidental from the long-term point of view. it was a splurge, not the sign of a trend.

It was not, however, a matter of interest to me only with respect to my divisions, since as a member of the Executive Committee, I was a kind of general executive and so had begun to think from the corporate viewpoint. The important thing was that no one knew how much was being contributed — plus or minus — by each division to the common good of the corporation. And since, therefore, no one knew, or could prove, where the efficiencies and inefficiencies lay, there was no objective basis for the allocation of new investment. This was one of the difficulties with the expansion program of that time. It was natural for the divisions to compete for investment funds, but it was irrational for the general officers of the corporation not to know where to place the money to best advantage. In the absence of objectivity it was not surprising that there was a lack of real agreement among the general officers. Furthermore, some of them had no broad outlook, and used their membership on the Executive Committee mainly to advance the interests of their respective divisions.