Did Sales to Blacks Save Cadillac During the Depression?

Nicholas Dreystadt

Apparently to celebrate Juneteenth, a holiday that I’m quite certain nobody working at Jalopnik today knew about 10 or 15 years ago, that publication posted an article by Lawrence Hodge titled Cadillac Would Not Have Survived The Great Depression Without Black People.

It’s based on the documented story about how in 1932 Nicholas Dreystadt, then in charge of Cadillac’s nationwide service network, a middle management position at General Motors, decided to crash a meeting of GM’s top executives. As the Great Depression deepened in 1932, Cadillac sales had dropped by 84% and the meeting discussed the possibility of killing the brand.

As he traveled around the United States visiting Cadillac dealers, Dreystadt noticed the phenomenon of affluent Blacks getting their Cadillac cars serviced at those dealers. At the time, Cadillac as well as most of the American automobile industry had either formal or informal policies of not marketing or selling to Black people. The cars getting serviced, though, were new and late model cars. Dreystadt looked into it and found out a couple of things. Cadillacs were popular with affluent blacks, who were restricted from buying other valuable assets and status symbols like nice homes in exclusive neighborhoods, and to buy Cadillacs they were using white folks as paper buyers.

Dreystadt suggested that Cadillac start marketing directly to Blacks and to encourage their dealers to racially integrate their customer base. Cadillac and its dealers apparently started advertising in Black newspapers like the Chicago Defender and New York’s Amsterdam News.

The way the story goes, Dreystadt promised to turn the brand around in 18 months, but within a year, sales had already increased 70%, saving the brand. Dreystadt was appointed brand manager for Cadillac and did so well at that job that he was later made head of Chevrolet, GM’s most important and largest division.

It’s a great story and it appears to be based on an actual event. I’m just not sure that it’s the entire story. It seems that most of the articles relating it in the past 30 years have been based on an anecdote documented in business management guru Peter Drucker’s 1979 book, Adventures of a Bystander.

In his chapter on Alfred Sloan, the executive most responsible for making General Motors into the industrial giant that it became in the mid 20th century, Drucker relates how he was commissioned by GM in 1943 to produce a study of the corporation’s policies and structures for use by the company’s top executives. One of the executives that he got to know was Nicholas Dreystadt, who unfortunately died of cancer at the age of 48, just six months after being put in charge of Chevrolet in 1946. Presumably, Drucker got the story directly from Dreystadt. This is how Drucker tells it in Adventures of a Bystander:

Dreystadt was Cadillac’s service manager when the Depression hit, and likely to stay forever in middle management. Chevrolet did all right despite the Depression. But the three medium-priced GM cars - Buick, Oldsmobile, and Pontiac - had to be merged into one division for several years; there wasn’t enough business to carry three managerial overheads. Cadillac could not sell its high-priced cars at all and was about to be liquidated. The only question was whether it would be abandoned altogether or whether the nameplate should be kept alive, with the majority of the GM executive committee, including Alfred Sloan and Donaldson Brown, in favor of giving up. It was then that Nick Dreystadt - whom none of the members had ever met - gate crashed the meeting of the executive committee, pleaded to be given ten minutes, and presented a plan for making Cadillac profitable again within eighteen months. And he did so by marketing it as a “status symbol.” In charge of Cadillac service throughout the country, Dreystadt had come to realize that the Cadillac was the most popular car in the very small community of wealthy Negroes. An amazing number of big new Cadillac brought in for service were owned by black entertainers, black boxers, black doctors, black realtors. It was company policy not to sell Cadillacs to Negroes - the Cadillac saleman aimed at the white “prestige” market. But the wealthy Negro wanted a Cadillac so badly that he paid a substantial premium to a white man to front for him in buying one. Dreystadt had investigated this unexpected phenomenon and found that Cadillac was the only success symbol the affluent black could buy; he had no access to good housing, to luxury resorts, or to any other of the outward signs of worldly success. And so Dreystadt, in the depths of the Depression, set out to save Cadillac by developing the Negro market - and sold enough cars to make the Cadillac division break even by 1934.

While the part about Dreystadt crashing the meeting and Cadillac selling cars to Blacks surely happened, and Dreystadt undoubtedly convinced GM executives to not kill the Cadillac brand, there are things in Drucker’s story that don’t make sense to me. Cadillac was already a status symbol before Dreystadt started marketing the brand to Blacks. As Drucker says, it was already aimed at the white prestige market. Cadillac introduced the V16 in 1930, the most powerful car in its day. Also with the racial attitudes prevalent in the 1930s it’s possible that overtly marketing to Blacks might have lowered the value of Cadillac as a status symbol to wealthy whites.

In any case, I’m a bit skeptical that there were enough wealthy Blacks to have bought enough Cadillacs to have been a significant part of that 70% increase in sales.

Yes, Cadillac started selling cars directly to Blacks, and yes sales at the brand went up dramatically, but correlation is not necessarily causation. To begin with, in the early 1930s Blacks made up just 9.6% of the American population, and wealthy Blacks far less so. The idea that affluent Blacks, whom Drucker himself described as “a very small community,” were responsible for a 70% increase in sales at Cadillac just doesn’t sound mathematically feasible to me.

More importantly, 1932 was literally the depths of the Depression, and by 1933 things had started to improve rather dramatically and sales at many car brands increased significantly, not just at Cadillac.

In 1933, Chevrolet sales were up 55%, Ford was up 58%, Plymouth was up 60%, and Pontiac was up an astounding 98%. As a contra-factual I have to say that Buick sales were down 18% but I think it’s not unreasonable to assume that if the mass market brands were up 55% or more, than a luxury brand like Cadillac might benefit even more from an overall improvement in the economy. As the saying goes, a rising tide lifts all boats (well, as long as they aren’t taking on water). Sales to Blacks might have attributed to some of the 70% increase, but most of it seems likely to have been the result of the economy improving.

People like to exaggerate for a good cause. Actress Hedy Lamarr was brilliant, beautiful, and talented, but her WWII era invention concerning controlling torpedoes with frequency hopping radio transmissions was not foundational to the invention of cellphones no matter what you might read. It’s nice to encourage girls to pursue STEM if that interests them, but stretching the truth hardly seems consistent with technical knowledge.

Nicholas Dreystadt was undoubtedly a compassionate man ahead of his times but it seems to me that he saved Cadillac by making it profitable, not just by selling cars to Blacks. In Adventures of a Bystander, Drucker points out that while Cadillac had sold plenty of cars before the Depression, it had never been profitable under the GM umbrella. Before Dreystadt took over the division, Cadillac was more like Packard than like Chevrolet, with its luxury cars requiring considerable handwork. Dreystadt was convinced that mass production methods could be applied to luxury cars. As head of Cadillac, Dreystadt invested heavily in design, tooling, and even more on quality control and service. Within three years Cadillacs were GM’s most profitable models.