THE GREAT DEPRESSION
|Water Cooled 3000W
History books call Oct. 24, 1929, "Black
Thursday". It was the beginning of the worst stock market crash ever
experienced in the U.S. It also was the
beginning of the Great Depression, the country's longest, deepest and darkest
economic period - an upheaval that lasted more than 10 years, not officially
ending until the United States entered World War II.
Black Thursday didn't go unnoticed by D. W. Onan,
his son, Bud, or their growing crew of workers at the Onan Company plant on
Royalston Avenue near downtown Minneapolis.
They heard reports of the stock market crash on the radio, and they saw
the screaming, black headlines in the newspaper.
But it wasn't a particularly significant event to
them. The Onans didn't own shares of
stock in any publicly owned corporation, although D. W. Onan had seriously
considered buying some stock a few years earlier in a rapidly growing Minnesota
company. The promising firm was
Minnesota Mining and Manufacturing Company, later to be known as the 3M Co.,
and its stock was considered a bargain.
Onan was tempted, but he needed his money for his own business.
The Onans certainly couldn't have known that Black
Thursday was the beginning of a long decline in the country's economy or that
the next ten years would be the toughest in history for most U.S.
businessmen. After all, 1929 was turning
out to be an excellent year for the Onan Company, and, except for the nation's
farmers, the U.S. economy was booming.
Sales of the new Onan generator sets were starting to take off with more
than $50,000 in orders already received that year. Sales of the Onan "Safty Saw," even
though down from previous years, had brought in more than $100,000, and there
was a smattering of sales of motor car tools and equipment. The Onans fully expected 1929 to be the best
year ever with total sales to exceed $175,000. There wasn't much reason to be
concerned about "Black Thursday" at the Onan company.
It wasn't long, however, before the seriousness of
the situation confronting all businesses in the country started to became
apparent to D.W. and Bud Onan. On Nov.
2, a few days after "Black Thursday," one of the leading businessmen
in Minneapolis, Wilbur Foshay, who had just built the fabulous 32-story Foshay
Tower in the center of downtown, went bankrupt.
The Onans and other owners of small businesses began to worry a
bit. If that can happen to a highly
successful man, what does the future hold for those still struggling to
Farmers, who then represented the biggest potential
market for the Onan generator sets, were among the first to feel the effects of
the Great Depression. They already had
been battered by the effects of several years of drought, and they had nothing
in reserve to cope with further problems.
From 1929 to 1932, the cash income of the nation's farmers plunged by
more than 75 percent. Wheat prices dropped from $1.21 a bushel in 1929 to 49
cents in 1932 and corn fell from 78 cents to 21 cents. Those farmers with a few spare dollars put a
high priority on adding electricity to their places now that it was available
with Onan generator sets, but many simply couldn't scrape together the small
amount of cash it took.
As the domino effect of the depression took place,
workers lost their jobs in industry after industry. More than 70 percent of the workers on the
Minnesota Iron Range were without jobs by 1932.
Across the country, there was an average of 100,000 people losing their
jobs each week until the mid-1930s when the unemployment total reached 20
million, or 25 percent of the work force.
During the trying years of the Great Depression,
the Onan Company suffered less than most businesses, but times were far from
easy. From the peak in 1929 when total
revenues were $172,605, Onan sales fell during each of the next three
years—$138,280 in 1930, $128,219 in 1931 and $111,980 in 1932.
D.W. Onan was a firm believer that when a worker
joined his company, he or she could expect 52 paychecks a year, and he was
determined they shouldn't have to worry day after day about losing their jobs.
Onan himself did most of the worrying.
There were many times when meeting the payroll was a very uncertain
proposition, but he managed it each and
every week. Both he and son Bud had to
take pay cuts along with most of their 40 workers, but even during the darkest
days of the depression everyone received a paycheck each week, and there is no
record of anyone losing a job.
There were times when the workweek was reduced to
four days, and there were other times when there simply wasn't enough for
everyone to do, but the plant stayed open. Paychecks of $12 -to $15 a week seem
paltry today, but back in the early 1930s that was the difference between
standing in a bread line or living relatively comfortably. Homes could be rented for $15 to $20 a month,
meat and other food items could be bought for pennies a pound, and a shirt cost
only 25 cents.
D.W. and Bud Onan spent much of their time in the
first few years of the depression assuring their small crew that times would
soon get better, and that at least they were assured of keeping their jobs.
Things did get better for the Onan company, starting in 1933 when total sales
for the year reached $114,280, only a couple thousand higher than the year
before, but it was the first gain since 1929.
In 1934, revenues reached $141,814, a healthy 24 percent increase over
the year before. They jumped to $221,494
in 1935, $289,128 in 1936, $373,941 in 1937, $429,305 in 1939 and jumped past
the half-million mark in 1939. As sales increased, additional workers were
needed and the total payroll exceeded 60 people by 1939.
It was during the 1930s that several key people
were added - people who later became instrumental in much of the future growth
of the Onan company. Tom Valenty, who went on to become president and chief
executive officer before retiring in 1982, joined Onan on Aug. 3, 1936, when he
was 16 years old, doing odd jobs. When
the summer was over, Valenty went back to finish his last year of high school, but
he continued to work part time at Onan, and after graduation, he resumed
Valenty recalls that his parents could not afford to
pay his college expenses, so if he were to go on to the University of
Minnesota, as he had hoped, he would have to convince D. W. Onan to allow him
to work part time for the next four years.
Onan enthusiastically agreed, and in the fall of 1937 Valenty enrolled
in the institute of Technology, working toward a degree in chemical
engineering. Working as many hours as he could spare from his busy college
schedule, Valenty put in some time practically every week day and often all day
Saturday, Sunday and holidays at the Onan plant. When he first started at Onan, Valenty was
paid 35 cents an hour, and by the time he received his bachelor's degree in
1941, he was earning 75 cents an hour. "As graduation approached, I
interviewed with a number of potential employers, finally accepting a position
as engineering trainee with the Caterpillar Tractor Co. in Peoria,
Illinois," Valenty remembers.
D. W. Onan was disappointed over the prospect of
losing Valenty, and he argued as convincingly as he could that there was a good
future for him at Onan, including a pay raise to $1 an hour. The real clincher, however, was the almost
certain fact that the U.S. soon would be involved in World War II and Valenty
probably would be drafted. He decided to
stay in Minneapolis, working at Onan, until military service beckoned.
Also joining the Onan company during the darkest
days of the Great Depression was a 19-year-old aspiring engineer, Jim
Hoiby. Hoiby started with Onan on April
13, 1934, becoming Chief Engineer at the start of World War II, and before he
retired in 1977 he had advanced to vice president of the company's Advanced
Design and Planning Department.
The Onan Company's James C. Hoiby Technical Center
in Minneapolis was named after him in recognition of the many valuable
contributions he made over the years.
But back in 1934 it was Hoiby who was the grateful
one - ecstatic, in fact, over being able to find a job when such an
accomplishment was mighty rare. Hoiby
was a friend of Bud Onan, and Hoiby's natural talents with mechanical and
electrical gadgets were well known to Bud. [ Jim was Bud’s brother in law. ]
Hoiby was in Long Beach, California, looking for work when the Onans decided
they needed an engineer to help them develop some new generator products. Bud Onan sent Hoiby a telegram offering him a
job, and Hoiby quickly accepted.
While in high school, Hoiby was more interested in
tinkering with machinery than he was in reading the classics or studying
geography. His father owned an
automotive repair shop, and Jim had ready access to tools he needed for his
hobbies. When he was 16, Hoiby designed
a two-cylinder engine in the drafting department of his high school. He made the patterns in the school's wood
working shop, machined the castings in the school's machine shop and then
assembled it in his father's garage. The
engine was used to power a propeller-driven ice boat. Hoiby also was interested
in electrical gadgets, building radio receivers and transmitters with rudimentary
tools and test equipment. When he joined
Onan, he was elated over having good electrical equipment at his disposal. He was especially impressed with Onan's
cathode ray oscillograph, one of the first ever marketed.
His first assignment at Onan was working in the
machine shop under Steen Ecklund, making parts for the company's first engine
for its own generator sets. Then he was
given a drafting table in the old house on Royalston next to the manufacturing
plant that had been added.
Hoiby not only loved his job, but he worshipped the
Onans, both father and son. At the time
of his retirement, Hoiby fondly described D. W. Onan: "He was an
entrepreneur with a remarkable combination of talents. He was endowed with the qualifications of a
marketing manager, a finance officer, an electrical engineer, a mechanical
engineer and a factory production manager. All combined with the initiative and
drive that it takes to start a business. His congenial, friendly personality
attracted other qualified people to help him."
It also was during the depression that another Onan
family member joined the company. Bob
Onan, the younger brother of Bud, came aboard in 1933, spending all of his
business career with the family-owned concern. Unlike his brother, who had all
the traits of his father, Bob Onan was not especially mechanically
inclined. His strong points were with
working out people problems. During his
nearly 30 years with the company. Bob served as personnel director, the public
relations representative and in various other administrative capacities.
One thing all three Onans had in common was a deep
concern for the community in which they lived and for their families. Although busy in running the company, all
three found more than enough time to devote to civic activities and to family
affairs. D. W. Onan was especially active in the Optimists International
organization, serving as District Governor, International Vice President and in
1932 being elected Optimists International President at the convention in San
Francisco. He also served as president
of the Minneapolis Civic and Commerce Association and was active in many
community projects throughout the years. Both sons likewise showed intense
interest in civic activities.
Their involvement in community problems probably
had much to do with the fact that the Onan Company was relatively successful in
the depression years when so many other businesses around them failed. Not that
the Onans breezed through those rough years of the 1930s, but the company never
was in serious danger of going bankrupt.
The closest Onan came to a financial crisis was in 1933 when the company
had extremely tight cash flow. D. W.
Onan hoped to correct the problem with help from bankers, but he was flatly
turned down. He had much better success,
however, with his suppliers. He
approached them with an honest assessment of his problems, and within 10 days
persuaded them to extend the Onan Company $30,000 worth of credit.
From the beginning, D. W. Onan's philosophy was to
treat suppliers, customers and employees with the same respect and honesty he
hoped they would show him. When his
suppliers cams through with the badly needed credit, he knew his philosophy was
right. Onan also didn't forget the
favor. In future years there were many
opportunities to change certain suppliers for promises of a better price or
faster service, but Onan refused to drop any of the suppliers who had helped
him out in 1933.
Survival of the Onan company during the Great
Depression can be attributed to many reasons, none more important, though, than
the great flexibility of the young firm.
Every time a problem arose—and there were many of them during the
1930s—the Onans quickly figured a way around it, often not only neatly solving
the dilemma at hand but opening up huge new opportunities for the future. When
it became obvious there was a tremendous market for Onan generator sets, it
also became obvious the engines and generators being purchased would not do the
job required. The Onans solved the
problem by designing both their own generators and engines. Once they had their own engineering
capabilities, they were able to constantly modify and improve their products,
vastly increasing their sales potential.
The stickiest problem of the 1930s was caused by
the U.S. government. With Onan generator sets finding wide acceptance in rural
areas of America, it appeared the huge market would keep things humming at the
Onan plant for many years. Then the REA
(Rural Electrification Administration) spoiled that prospect as electric power
from central utilities became commonplace among farmers. Instead of bewailing
this development, the Onans quickly turned to foreign markets where electric
power was available only in larger cities, with little prospect rural areas
there would be seeing any REA type project. Export trade was a rarity for small
companies back in the 1930s, but the Onans didn't worry about the
complexities. There was a huge market
overseas and the Onan company had a product in demand. To D. W. Onan and his sons, it merely was a
simple case of matching demand with supply.
There were no expensive foreign junkets to hunt out
prospects. The Onans just increased
their small ads in publications that were read in lesser developed countries,
did more direct mail promotion to those areas, and relied on word-of-mouth
referrals from satisfied customers. Within a few short years, Onan generator
sets were to be found in 49 foreign countries.
By 1936, foreign sales were exceeding domestic sales. Customers included
satisfied plantation owners in Jamaica, natives in Nigeria, rice farmers in
China, jukebox operators in Mexico, fishing boat operators in New Caledonia,
oil drillers in Venezuela and jungle dwellers in the Philippines—all using, and
praising, Onan generator sets.
There were no complicated foreign exchange problems
involved. The Onan Company asked for,
and received, U.S. dollars, usually in advance.
Orders were small but plentiful.
The simple approach was sought whenever possible. For instance, the
Onans received a $105 order from an individual in Alaska. The freight bill on
the order would have been $96. So the
Onans sent it by parcel post. The cost
There was no end to the applications for an Onan
generator set. A promotion piece used by
the company in 1937 stated, "Ideal for operating radios, portable sound
and public address systems, remote radio transmitters, private communications
systems, neon signs, motion picture equipment, portable medical and dental
clinics, geologist instruments, assayer equipment, sales demonstration
trailers, portable saws, flood lights and floor sanders. " The wide
variety of uses for the generator sets meant the company needed a product line
that would meet all of these different demands.
From a single 350-watt unit, the Onan generator set line quickly offered
1,500- and 2,000-watt models, then
modified the equipment until by the late 1930s there were units in the
The convenience of remote electric starting of the
generator sets was introduced in 1935.
By 1939 the Onans were
certain their small business was firmly established and they anticipated
steady, but moderate, growth for many years. They couldn't have dreamed,
however, of what World War II would do to their plans.
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