From Business History: Hitler's Gift to the Hippies: The VW Beetle Story Part I

Pushkin too quick. No, it's perfect push kid stuff. You

got it.

Where are we gonna start this story, Jacob. The place

is Hollywood, The time is the late nineteen sixties. We

are on the lot of a big Hollywood studio. They're

making a racing picture and they need to figure out what car the hero is going to drive. They know

it's going to be something small, sporty foreign. That's what

they do is they get a bunch of candidate It's a bunch of possible cars.

So maybe an Aston Martin, like a little Fiat yeah, Volkswagen Beetle, and they park them on the studio lot right outside the commissary and they just let like the ordinary people who work at the studio check out the cars as they're coming and going, and they watch how the people react to the cars.

And with most of the cars, people do what you expect.

Maybe they kick the tires. Is that actually a thing?

Is it just a metaphor? No?

I think it's like back when rubber was bad, like your foot would go through.

Is that what it was? I don't know. You want

a little bounce on the time, Okay, they like, you know, play with the steering wheel whatever. But when the people

get to the Volkswagen Beetle, they act in an entirely different way. They treat it not so much like a

car as like a cute little puppy. They're like petting it, tapping.

They and the producers see this and they think, oh, this car is different, This car has charisma, this car is a star. And they were originally going to call

the movie Carboy Girl. Why not sixties? Yeah, sure, but

they loved the Beatle so much that they ended up calling the movie The love Bug, Herbie the love Bug.

I remember this from my childhood. I remember Herbie Goes Bananas,

the sequel. It had the novelization, which I bought at

the book fair and liked. The movie was a hit,

I think, the second biggest grossing movie of nineteen sixty nine, right behind Butch Cassidy and The Sun Dance Kid. Not

a classic, and of course, so was the Beatle late sixties peak Beetle. The car is in fact about to

become in a few years the best selling car of all time, a record that it still holds. And maybe

my favorite thing about the Beatle in a perverse way, this cute little puppy dog hippie car was dreamed up by Adolf Hitler in part to conquer and subjugate his European neighbors. I'm Jacob Goldstein and I'm Robert Smith. And

This is Business History, otherwise known as boy Boy Podcasts, otherwise known as a show about the history of business.

These days, we talk a lot about industrial policy, the rule of government in commerce. When should a government intervene

in the free market and decide what to manufacture? You know,

pick winners and losers, determine the prices of things. Even

Hitler tried to do all three and it was a disaster.

Except for the car itself, it turned out to be pretty successful, the.

Most successful car in the history of cars.

In the nineteen thirties, Germany was a wreck. It had

lost World War One, had unsustainable reparations put on it, the three year Versailles. It had the inflation of the

nineteen twenties and the violation of all inflations, wheelbarrels full of money, you've seen the pictures. And then coming in

the nineteen thirties, there is a global depression and Germany is just hitting the skids. It's got thirty percent unemployment,

utter poverty, and Adolf Hitler comes in with his promises.

Yeah, so nineteen thirty three, Hitler comes to Power, of course, promising that he's gonna, you know, make Germany the greatest nation on earth. And one important part of his promise

is material prosperity. Right Germany is it's not just a

country in the depression, not just a country that has been burned with reparations. It is much poorer than France,

the United Kingdom, and much much poorer than the United States.

And so part of Hitler's program, his promise is to figure out how Germans can get the kind of mass produced goods that ordinary people in the United States are now buying. And that's exactly what the Germans wanted to

hear at this time. Sure, and in particular, you know,

mass production and mass consumption is built on this idea of sort of the people, the mass of people, right, and the mass of people is really important for Hitler and the not There is this German word vulcan like folk, and it can mean people or it can mean nation.

The Nazis have this term. And I will say, now

I don't speak German, as you will hear in this show, but the Nazis have this term Volksga mind shaft, which means people's community, and it is their dream of the Vulcan as a nation. And of course, crucially right for Hitler,

the Volcan doesn't mean all the people in Germany. No,

it means the Aryans and not the Jews and not all the other undesirables. So Hitler comes to power with

this promise of prosperity, and he starts promising all this Volk's stuff. There's the you can do it, you can

volks kim Fonger Radio, the People's radio, volkskul Schrank people's refrigerator, that's the volks Fractor tractor factor. Yeah, and then maybe

the fewer's favorite, in fact, the Volk's vagin.

And it's interesting because that Hitler really prioritizes this, you know, just a few weeks after it takes power in nineteen thirty three, he goes to the Berlin Motor Show, which is amazing, right, but I mean, I guess at the time is right, it's not a lot to do.

Yeah, and he's like, what do we need to do? First?

A car?

And maybe because of the similar prosperity, or maybe because he's already thinking about what a car can do. And

it's at that motor show nineteen thirty three that he announces this dream of the Volkswag.

Yeah, and this dream for him, like it means a lot of things, right. There is also this idea that

like when the vulcan have cars, it will help unite them as a people. Right if you think of traditional

rural poverty, like you don't have a car, it's hard to go from town to town. But if everybody has

a Vagan, then all the vulk they can go and see the beautiful countryside, they can go and visit their neighbors.

They are distinct regions and in fact we're separate countries at one point long before this, Yes, so it brings them together as a country. And then there's another part

of the plan, which is at this point, because there are not a lot of cars in Germany, not a lot of Germans know how to drive, and Hitler has this desire to take new territory and in order to do that, he is going to need young men with guns who can drive somewhere, and Germany.

Really is far behind here, right Like in the US at this point, there's something like one car truck for every five people and in Germany it's more like one car truck for every one hundred and fifty people. Amazing.

And it's interesting because Germany invented the car. They invented

the car, and there were other small cars for sale, but they were really expensive. They're almost just bespoke hobby vehicles.

Right, Yeah, Like even a cheap car in Germany at this point costs something like two thousand reichs marks, which is around two year salary for a typical worker, and much more expensive, I should say, than basic cars in the US were at this point. Right, Germany had not

mastered the mass production of the good cheap car the way for it and GM had in the United States.

So Hitler's dream car manufacturing and that it be cheap enough that the German people can afford it. So Hitler says, no,

it cannot be two thousand reich marks. It should be

nine hundred and ninety rex marks. I love this, like

he's at a ninety nine sided Star nine hundred and ninety rex marks, which is less than half the price of the going car. And according to Hitler, like he

has all these ideas for it, it should seat four or five people. So a German family can travel around, right,

it should go at least fifty miles an hour, you know, that way you can get to Moscow in a timely way.

Put the Blitz in the Blitz Creek exactly right. And

he says you should be able to mount machine guns on it. Sure not for the family vacation, but you know,

for other things.

Never other plans. Right. And now there are German car

makers in Germany, right, there's still a private industry at this point in the country. And they look at Hitler's

specs and price and they say, no way, you know.

They they are of course aware that that cheaper cars are made in the US. But the German market is

way smaller than the US. There are fewer Germans. Germans

are much poorer. So even if the automakers could get

all of the knowledge, could build a factory like the ones in the United States, there just isn't a German market big enough to get the economy of scale to sell a car this good at a price this low.

And the car makers, you know, they get together and they're like, so, who's going to tell the fuer Adolf Hitler that we can't do it?

We have some some notes on s Volkswagen on your big plan. You've told everybody at the auto show. No,

nobody's gonna do that.

So what does a company do when it doesn't want to deliver the bad news.

They hire a consultant. Yes, that's what they're for.

Yeah, they're going to have the consultant write a report to the far that says, as an independent observer, it is not possible to make the car and sell for nine hundred ninety rex marks.

And pretty soon they find their man, an automotive engineer by the name of doctor Ferdinand Porsche. We'll talk about

him after the break, we will. Okay, that's the end

of the ad. When we left, the German automakers had

just decided to hire as their consultant one doctor Ferdinand Porsche.

I'm guessing he is not a medical doctor. He's not

even an engineering doctor. He's an honorary engineering doctor. But

the doctor's important.

Maybe it gets the respect to the fer He can lay the truth to him and just say that it is not economically possible to build a cheap car.

Well, yeah, and certainly Porsche is like legit at this point, he's been working in the auto industry for decades. He's

in his mid fifties, he designed cars for Daimler. He

worked on racing teams, and at this point he is in fact a consultant. He's running a consultancy and he

gets this call from the automakers to be the you know, bad news consultant, and he takes the job. He says, yeah, sure,

I'll study this, I'll write a report. But he's like, no,

I'm not gonna tell the fuer No, I'm gonna tell him yes, hell yeah, hell yes, And I'll be the man to make his Volkswagen dream come true German hero.

And so he gets to work designing the people's car of Hitler's dreams and pretty quickly comes up with this little scale model. And there are these amazing photos of

Porsche and Hitler looking at a model that's like, I don't know a foot long of what will become the Beatle described this car, except you have seen it. It

looks exactly like every Volkswagen Beetle you have ever seen from the very beginning. It's that round, little hedgehog looking car.

And in this photo you can see Porsche is on the left and Hitler like full on Hitler swastika armband mustache slick down here. He's like petting the bumper.

Just like the people at the movie studio that thirty years later.

Yeah yeah, And so I we can talk about the design itself for a sec because it is so iconic as an over us word, but it really is, and they just nail it from the jump.

Remember at the time, American cars in the nineteen thirties are long and sort of flat. I mean, if you

picture it right, there is a flat radiator grill on the front, and then a long flat hood where the engine is, and then the top tends to be flat and long. It looks those cars look like a coffin

if you can imagine the kind of boxiness of them.

Right Yeah. Whereas the Beatle it's incredibly round. And so

there are a few things going on here, right. One

is at the time this roundness, I mean, it is in fact aerodynamic. It conveyed modernity, right and in design,

the Germans loved modernity.

There's also a fact about a circle, which is a circle has the most area inside it for the least amount of circumference. So if you're building a car and

you're trying to make it cheap, you can use less metal to make it circular and make it feel inside like there's more space.

There's one other photo here that's amazing and it goes with what we're talking about. Same scene. In this instance,

Porsche is like lifting up the back what would be the trunk in a normal car, and Hitler is like eeezing over to look, and he's delighted. And I have

to say, I find happy Hitler scarier than angry Hitler.

He is kind of laughing his ass off because when you open the trunk of the car, what you see, in fact is the engine. And I know if you've

ever seen this in Volkswagen Beetle, but the engine is in the back, which is an innovation at the time and.

Well, and also the putting the engine in the back is part of what allows the front to be so round, right, and other cars at the time the engine was in the front, the radiator was in the front, so you needed that big rectangle and the air cooled piece of this is key because there's not like modern anti freeze yet.

The Germans don't have garages, and so it would basically freeze in the winter, particularly if you were like driving.

Say to Moscow or just outside of Moscow if ten miles outside of it, yes, exactly. Let's do one more picture.

This one is from a few years later. Portia has

now built a full sized prototype of the Volkswagen Beetle.

It is a convertible and you can see in this photo Hitler is sitting in the back. And this is

a detail I just love about this photo. There are

bars behind the front seat, the sort of bars that you might see on a roller coaster, right, And these were made so that Hitler could ride in the back of a Volkswagen and stand up and hold onto the bar with one hand and with the other hand, well, you know, you know what's gonna happen with the other hand.

Yeah, heile me sieg, heile. I don't know what Hitler

says when he does the Heil Hitler. Yes, so it's

the hil Hitler Mobile. And of course he loves it.

He of course he loves it. But a prototype does

not mean that you can actually build this car or build it cheaply. That's what Porsche is not telling it. Well, right,

and this is like one of the great lessons of manufacturing, right, Like, it's actually not that hard to build a prototype, right, to design a car. What they have to do now

is build a factory, which really means kind of invent a factory, right Like, optimizing a factory to build quality products at scale cheaply is a profoundly hard problem. And

this is the problem that the German auto industry knew all along was going to be there. They knew all

along that sure you could design a prototype, but you can't build it profitably and sell it at the price Hitler insists on selling it at We have some some SUTs about see folks fagin. Yeah, they basically drag their

feet right there because they know, like to try and build this factory and make this car and sell it at the right price would drive them out of business.

So Hitler sees this happening and he's like, no, we're going to make this car.

And so he goes back to.

His favorite place, the Auto Show in nineteen thirty six and gives another speech. I have to say, I just

never knew this part of Hitler's obsession.

But he did give a lot of speeches. Yeah, but

we knew that. I just didn't know the Auto show

part of it, right.

And so here is what he says to the assembled auto manufacturers I have given orders to pursue the preparations for the creation of the German People's Car with relentless determination, and I will bring them to a conclusion. And that, gentleman,

will be a successful conclusion.

No, I have successful seclusion.

Notes that quote, by the way, comes from bernharder Reich, gives a great book, The People's Car, a global history of the Volkswagen Beetle.

So we're at this stalemate, right. Hitler wants the car,

none of the companies that build cars in Germany want to build it. And into this stalemate steps the Deutsche

arbites Front, which is the Nazis' national labor organization. And

by this point mid thirties, they are rich and powerful because when Hitler took power, what they did was they threw the heads of Germany's unions into concentration camps and took all the money from the unions. And instead of

using that money for the benefit of their union workers, they decide they're going to use this money to get the Furei's favor right to do what he wants, and to put money into a factory. Yeah, they are going

to build the factory to build the People's Car, and to run the project. They pick some kiss ass they

found off the street, doctor Ferdinand Porsche. Yes, yes, so

where are we now? Porsche has his design, Yes, he

has this source of capital. He has money, but he

lacks human capital. Right, this very important piece of industrialization

of progress. Right, Nobody in Germany knows how to build

the factory that's efficient enough to make cars at the scale that Hitler is dreaming of, and as efficiently as Hitler is dreaming of. Like, nobody knows how to do it.

This is one of those unappreciated facts about industrialization and the Industrial revolution.

You think it's just the machines. It is not the machines.

It is people who can run the machines in a really productive, effective way. And the way you set up

the machines and the way they all communicate with each other is something that is proprietary knowledge.

It takes years to do. Yeah, I mean the classic

framework for economic growth was land, labor and capital, and then like one hundred years in somebody Paul Rumer actually I think, was like no, no, it's land, labor, capital and knowledge.

So who knows how to build a big factory with an assembly line to make cars by the hundreds of thousands for the masses.

Henry Ford, who literally invented mass production of cars, kind of invented modern mass production.

He has perfected this in an amazing way. Yeah, of course,

Henry Ford is really famous for two things. That assembly

line you mentioned and hating the Jews, famous anti semi yeah.

And like not just like oh everybody used to hate the Jews. Like he really put his heart into it,

really did. He industrialized the jew hating. He paid for

this newspaper, the Dearborn Independent that published this series called The International Jew. Was that pro or con International Jew?

Let me clarify. They consolidated the series into a book,

and the book was called The International Jew, The World's Foremost Problem. Hitler was a fan of the book. He

actually had copies of it in his office in the twenties, translated into German, and he also had on his wall a portrait of Mainheinrich of Henry Ford.

You know, it's bad if you have a picture of Adolf Hitler on your wall, But even worse is if adaf Hitler has a picture of you on the wall.

Like that's as bad as it's peak, that's peak. So yes,

so doctor Portia and a few of his colleagues are able to travel to Michigan to see Henry Ford's incredible plant, incredible sort of temple of mass production and efficiency, learn from it and go back to Germany to build the factory.

And what they saw really was a miracle at the time.

The River Rouge plant where raw materials like ross seel would go in one end. They had power plants, transformational

all of the all of the industrial machinery.

They had a foundry and cars roll at the other end.

Yeah, Like it is a miracle at the time, and they think, uh.

We got to build this for the funera. Yeah, And

so they go out to basically the countryside where nothing exists, and they start building. They build, you know, the factory,

but they also build a power plant and a foundry and houses where the workers are going to work. And

the workers, by the way, are not just anybody. The

workers themselves are going to be the Vulcan. It's going

to be the car by the Vulcan for the vult So everybody they're recruiting are like Hitler youth.

It is a fascinating experiment in a way, right because the Henry Ford plant was the product of the free market. Competition.

Workers came and learned it the plant, but could work in other car manufacturers or bring back skills from other car manufacturers to the Henry Ford plant. Here's Hitler saying, well,

I know what it should look like, so let's just do it without competition. Let's not bring the best workers,

but the most loyal workers. The arean youth like, let's

bring them. Let's set the price, let's make this happen.

The dream was to build one hundred and fifty thousand cars in the first year, going up to one point five million cars a year, which is like more cars than there are in all of Germany at this point.

And so in nineteen thirty eight, Hitler goes to this ceremony to lay the cornerstone at the factory, and he gives wait for it, a speech defending the idea and talking about the haters. Actually he says something like, you know,

people told me this was a terrible idea, impossible. But

here they are breaking ground on the factory. Hitler says,

in fact, I hate the word impossible. And around this

point they decide to rename the car they've just been calling it the Volkswagen, like the Volks everything else. But

around this time they decide they're going to call it the the coughed dersh Freude, the Strength through Joy Wagon Katie for short. It's amazing.

I just want to say it again, Strength through Joy.

And this is nineteen thirty eight, so there's not a lot of joy left these days in Germany. That's how

you know when they start to name the car the Strength Through Joy.

I mean, it is so like amazingly Orwellian, and they're like, oh, right, this is what Orwell was right, this is what he was talking about, is right. And in fact KDF Strength

through Joy was like a brand for the Nazis at this point. There was like KDF cruise ships and the

r BYTES front this labor group that remembers bankrolling the factory.

They're like into KDF, and part of the idea, I think is they are basically underpaying the workers but trying to like kind of make it up or keep them happy enough by giving them these little bobbles, like little KDF vacations and hopefully a car.

So at the end of this ceremony where they're going to start building the factory, Hitler drives off in one of these KDF cars for Nan Porsche sat beside him.

Porscha's sun is the crowd of fifty five thousand people goes wild. The New York Times says this is a

public relations coup, and they call the car when they're describing it in New York Times the in language a shiny little beetle ah, which is the first time we hear this referred to as an adorable bug.

So they've just laid the cornerstone. The factory is not

built yet, but uh, doctor Porsche, not a real doctor.

And the our bites front, they have this clever sales model, actually a model that Henry Ford had used earlier, and that is this ordinary Germans could sign up for like a savings plan where they pay in five reichs marks a week, which is like, you know, a typical German makes maybe twenty five reis marks a week, so like a significant chunk. And once they'd saved seven hundred and

fifty reichs marks or so, so this is like a few years of savings, they would get an order number for their brand new strength through joy Vagin.

I can see the advertising campaign I'm assuming at this point in nineteen thirty eight, it's a little encouraged by authorities to give up your wages for this car that may or may not come.

I mean, it is certainly good business. Let's set aside

at the point of the gun for a moment, just to say, if you can get people to pay for a thing where you haven't even built the factory, that is good for you, right, because now they are providing the capital that you need to build the factory to deliver the car, and in fact, through compulsion or otherwise, people do sign up. They have something like two hundred

and fifty thousand orders come in, which is a lot, although to be clear, not nearly enough to make the car economically feasible. Right, They're gonna need to build so

many more if they ever want to sell it at the nine hundred and ninety Reichs marks that Hitler said, and not go bankrupt.

If you're taking notes at this point saying well, I mean, it seems like a good idea. You're taking all this

money from people building the factory promising the cars. They're

actually creating construction jobs. You know, you had this economically

devastated Germany, which now is seeing action. Right, people have jobs.

Money is flowing all this sort of stuff. I should

say that if you have a command and control economy like this, you can make the economy.

Have a sort of sugar high very quickly.

Right, you can get people to work in all of this, But long term, you are producing a car that costs more than you're going to sell it for like eventually, like I think Germany could have come up with a great cheap car, but it would have required a lot of different companies competing and finding you know, incremental progress rather than this.

We're going to lay out the whole plan and do it immediately. But you know, as it happens, long term

economic growth is not going to be the main question in Germany in the years following nineteen thirty eight.

Yes, because in nineteen thirty nine, I know what happens Germany, and it's Poland, it's World War two.

Let's take a quick break and then we'll continue with the story.

And so initially this KDF factory starts making just very sort of classic war things like aircraft wings and fuel tanks.

But it's not going well. You know, it wasn't built

to build whatever aircraft wings and so doctor Porsche not a real doctor says, Remember, Fury, you had the idea of like the machine guns and like building it to say, invade Poland. Why don't we do that? Why don't we

take this cute little round Volkswagen and turn it into like a attack Wagan.

And I've seen a picture of it, and it's amazing.

You can still see the beetle shape under it, but it looks as if a hedgehog is sort of wearing medieval armor. It's much more boxy. The car is jacked

up a little bit higher, you know, so that it could drive over I don't know, the fields of Poland and attack people.

They call it the kubel Wagan, the bucket car. And

there's one modification that's just interesting to me that they make, which is they actually have to make it so that it can drive slower, I guess without stalling out right, because it has to drive at the speed that the army marches. So now they have the model of the

car they're going to build to further the war effort.

But all those Hitler youth who were working in that KDF factory are now off fighting the war. They are gone.

And so here is where it starts to get much worse. Frankly,

this is a story about the Nazis. Perhaps unsurprisingly, it's

gonna get bad right now. So the Nazis arrange for

basically enslaved Polish women. Poland has been conquered by this point,

enslaved Polish women to be sent in to be forced laborers at this factory, hundreds of them, three hundred of them.

But it's not going that well. Of course. You know,

these women are being forced to make a car that is being used to subjugate their own country, and they're untrained and it's just not working out. So they fire

the guy who's running the factory and they bring in Portia's son in law, a guy named Anton Piech, and he just brings in all of the enslaved workers that he can. He goes from hundreds to thousands. There are

Soviet soldiers who had been taken prisoner, but they are like so badly treated and starved by the time they get there that they can't do much and they start to literally die off. There are Dutch students who refuse

to sign a loyalty pledge they are delivered to the factory, and more and more they're bringing in Jews from concentration camps along with their SS guards who are making them work.

At this point, the workers are making the Kubler Wagens, right, They're also making military stoves, weapons parts for missiles. This

is a pure military industrial complex at this point, and it is a profitable one, you know, the Porsche family they are charging the Nazis to do all of this and making a huge profit because they're not paying their workers.

Right. And there's one detail from the official history of

Volkswagen that I want to mention about what happens at the factory around this time, and that is this some of the enslaved women brought to the factory were pregnant when they arrived, or became pregnant later. And what they

started doing was taking the babies from their mothers, you know, right after they were born. And they said they were

putting them in a nursery, but really the nursery was just abandoning them to die. Like here, vote from the

official history, it says by the end of the war, three hundred and sixty five children died as a result of neglect and inadequate nutrition. Basically every baby sent to

this facility died. It's late nineteen forty four.

At this point nineteen forty five, early nineteen forty five, and the Allies are closing in on Germany. They are

starting to bomb the plant, the Volkswagen plant. They're moving

closer and closer to Germany itself.

So Portia and his son in Lapierre, they've actually been like squirrelling away millions of reichs Marks this whole time, and they flee to Austria.

And this is the chance, as the plant is falling apart that the prisoners there have been waiting for. They

take over what's left to the factory and they start to hunt down the worst of their oppressors, the guards and the management that were like enslaving them.

And then finally, sometime around April fifteenth of nineteen forty five, the Americans occupy the Volkswagen factory. They find the starving,

enslaved workforce and the nursery where the babies had died.

You know, they see everything. The Nazis have lost. The

Allies have won.

And one of the reasons the Allies won was what Hitler wanted. The Allies outproduced the Germans, largely using factories

owned by GM, Chrysler and even Henry Ford main Heinrich. Right,

they built the bombers and the tanks and the jeeps that allowed the US the Allies to win the war.

Yeah, I mean there is this there's this phrase people use the arsenal of democracy, right, And it's really interesting, like the American industrial economy, and in particular the car makers that had developed in this competitive private market for decades when the war came were turned to basically government production to make military vehicles. But because of what they'd

honed in the private market, they were amazing at it and they outproduced the Nazis and that was key to the war. So how does this.

Utter failure of a plan by Adolf Hitler, no People's car, destroyed factory a legacy of evil? How does that company

go on to make a cute car beloved by Americans.

That is the story for the next time, part two of The Beatle.

When we bring this story to a conclusion, and that, gentlemen, will be a successful conclusion.

Appreciate the commitment to the bet Yeah, tran.

Our producer is Gabriel Hunter Chang, our engineer is Sarah Bruguier, and our showrunner is Ryan Dilly. I'm Jacob Goldstein and

I'm Robert Smith. We'll be back next week with another

episode of Business History, a show about the history, wait for it, of business

Volkswagen Beetle

Original notes