Ford and GM Scrutinized for Alleged Nazi Collaboration Firms Deny Researchers' Claims On Aiding German War Effort

                  By Michael Dobbs
                  Washington Post Staff Writer
                  Monday, November 30, 1998; Page A01

                  Three years after Swiss banks became the target of a worldwide furor
                  over their business dealings with Nazi Germany, major American car
                  companies find themselves embroiled in a similar debate.

                  Like the Swiss banks, the American car companies have vigorously denied
                  that they assisted the Nazi war machine or that they significantly profited
                  from the use of forced labor at their German subsidiaries during World
                  War II. But historians and lawyers researching class-action suits on behalf
                  of former prisoners of war are busy amassing evidence of collaboration by
                  the automakers with the Nazi regime.

                  The issues at stake for the American automobile corporations go far
                  beyond the relatively modest sums involved in settling any lawsuit. During
                  the war, the car companies established a reputation for themselves as "the
                  arsenal of democracy" by transforming their production lines to make
                  airplanes, tanks and trucks for the armies that defeated Adolf Hitler. They
                  deny that their huge business interests in Nazi Germany led them, wittingly
                  or unwittingly, to also become "the arsenal of fascism."

                  The Ford Motor Co. has mobilized dozens of historians, lawyers and
                  researchers to fight a civil case brought by lawyers in Washington and
                  New York who specialize in extracting large cash settlements from banks
                  and insurance companies accused of defrauding Holocaust victims. Also, a
                  book scheduled for publication next year will accuse General Motors
                  Corp. of playing a key role in Hitler's invasions of Poland and the Soviet

                  "General Motors was far more important to the Nazi war machine than
                  Switzerland," said Bradford Snell, who has spent two decades researching
                  a history of the world's largest automaker. "Switzerland was just a
                  repository of looted funds. GM was an integral part of the German war
                  effort. The Nazis could have invaded Poland and Russia without
                  Switzerland. They could not have done so without GM."

                  Both General Motors and Ford insist that they bear little or no
                  responsibility for the operations of their German subsidiaries, which
                  controlled 70 percent of the German car market at the outbreak of war in
                  1939 and rapidly retooled themselves to become suppliers of war materiel
                  to the German army.

                  But documents discovered in German and American archives show a much
                  more complicated picture. In certain instances, American managers of both
                  GM and Ford went along with the conversion of their German plants to
                  military production at a time when U.S. government documents show they
                  were still resisting calls by the Roosevelt administration to step up military
                  production in their plants at home.

                  After three years of national soul-searching, Switzerland's largest banks
                  agreed last August to make a $1.25 billion settlement to Holocaust
                  survivors, a step they had initially resisted. Far from dying down, however,
                  the controversy over business dealings with the Nazis has given new
                  impetus to long-standing investigations into issues such as looted art,
                  unpaid insurance benefits and the use of forced labor at German factories.

                  Although some of the allegations against GM and Ford surfaced during
                  1974 congressional hearings into monopolistic practices in the automobile
                  industry, American corporations have largely succeeded in playing down
                  their connections to Nazi Germany. As with Switzerland, however, their
                  very success in projecting a wholesome, patriotic image of themselves is
                  now being turned against them by their critics.

                  "When you think of Ford, you think of baseball and apple pie," said
                  Miriam Kleinman, a researcher with the Washington law firm of Cohen,
                  Millstein and Hausfeld, who spent weeks examining records at the
                  National Archives in an attempt to build a slave labor case against the
                  Dearborn-based company. "You don't think of Hitler having a portrait of
                  Henry Ford on his office wall in Munich."

                  Both Ford and General Motors declined requests for access to their
                  wartime archives. Ford spokesman John Spellich defended the company's
                  decision to maintain business ties with Nazi Germany on the grounds that
                  the U.S. government continued to have diplomatic relations with Berlin up
                  until the Japanese attack on Pearl Harbor in December 1941. GM
                  spokesman John F. Mueller said that General Motors lost day-to-day
                  control over its German plants in September 1939 and "did not assist the
                  Nazis in any way during World War II."

                  For GIs, an Unpleasant Surprise

                  When American GIs invaded Europe in June 1944, they did so in jeeps,
                  trucks and tanks manufactured by the Big Three motor companies in one
                  of the largest crash militarization programs ever undertaken. It came as an
                  unpleasant surprise to discover that the enemy was also driving trucks
                  manufactured by Ford and Opel -- a 100 percent GM-owned subsidiary
                  -- and flying Opel-built warplanes. (Chrysler's role in the German
                  rearmament effort was much less significant.)

                  When the U.S. Army liberated the Ford plants in Cologne and Berlin, they
                  found destitute foreign workers confined behind barbed wire and company
                  documents extolling the "genius of the Fuehrer," according to reports filed
                  by soldiers at the scene. A U.S. Army report by investigator Henry
                  Schneider dated Sept. 5, 1945, accused the German branch of Ford of
                  serving as "an arsenal of Nazism, at least for military vehicles" with the
                  "consent" of the parent company in Dearborn.

                  Ford spokesman Spellich described the Schneider report as "a
                  mischaracterization" of the activities of the American parent company and
                  noted that Dearborn managers had frequently been kept in the dark by
                  their German subordinates over events in Cologne.

                  The relationship of Ford and GM to the Nazi regime goes back to the
                  1920s and 1930s, when the American car companies competed against
                  each other for access to the lucrative German market. Hitler was an
                  admirer of American mass production techniques and an avid reader of the
                  antisemitic tracts penned by Henry Ford. "I regard Henry Ford as my
                  inspiration," Hitler told a Detroit News reporter two years before
                  becoming the German chancellor in 1933, explaining why he kept a
                  life-size portrait of the American automaker next to his desk.

                  Although Ford later renounced his antisemitic writings, he remained an
                  admirer of Nazi Germany and sought to keep America out of the coming
                  war. In July 1938, four months after the German annexation of Austria, he
                  accepted the highest medal that Nazi Germany could bestow on a
                  foreigner, the Grand Cross of the German Eagle. The following month, a
                  senior executive for General Motors, James Mooney, received a similar
                  medal for his "distinguished service to the Reich."

                  The granting of such awards reflected the vital place that the U.S.
                  automakers had in Germany's increasingly militarized economy. In 1935,
                  GM agreed to build a new plant near Berlin to produce the aptly named
                  "Blitz" truck, which would later be used by the German army for its
                  blitzkreig attacks on Poland, France and the Soviet Union. German Ford
                  was the second-largest producer of trucks for the German army after
                  GM/Opel, according to U.S. Army reports.

                  The importance of the American automakers went beyond making trucks
                  for the German army. The Schneider report, now available to researchers
                  at the National Archives, states that American Ford agreed to a
                  complicated barter deal that gave the Reich increased access to large
                  quantities of strategic raw materials, notably rubber. Author Snell says that
                  Nazi armaments chief Albert Speer told him in 1977 that Hitler "would
                  never have considered invading Poland" without synthetic fuel technology
                  provided by General Motors.

                  As war approached, it became increasingly difficult for U.S. corporations
                  like GM and Ford to operate in Germany without cooperating closely with
                  the Nazi rearmament effort. Under intense pressure from Berlin, both
                  companies took pains to make their subsidiaries appear as "German" as
                  possible. In April 1939, for example, German Ford made a personal
                  present to Hitler of 35,000 Reichsmarks in honor of his 50th birthday,
                  according to a captured Nazi document.

                  Documents show that the parent companies followed a conscious strategy
                  of continuing to do business with the Nazi regime, rather than divest
                  themselves of their German assets. Less than three weeks after the Nazi
                  occupation of Czechoslovakia in March 1939, GM Chairman Alfred P.
                  Sloan defended this strategy as sound business practice, given the fact that
                  the company's German operations were "highly profitable."

                  The internal politics of Nazi Germany "should not be considered the
                  business of the management of General Motors," Sloan explained in a letter
                  to a concerned shareholder dated April 6, 1939. "We must conduct
                  ourselves [in Germany] as a German organization. . . . We have no right to
                  shut down the plant."

                  U.S. Firms Became Crucial

                  After the outbreak of war in September 1939, General Motors and Ford
                  became crucial to the German military, according to contemporaneous
                  German documents and postwar investigations by the U.S. Army. James
                  Mooney, the GM director in charge of overseas operations, had
                  discussions with Hitler in Berlin two weeks after the German invasion of

                  Typewritten notes by Mooney show that he was involved in the partial
                  conversion of the principal GM automobile plant at Russelsheim to
                  production of engines and other parts for the Junker "Wunderbomber," a
                  key weapon in the German air force, under a government-brokered
                  contract between Opel and the Junker airplane company. Mooney's notes
                  show that he returned to Germany the following February for further
                  discussions with Luftwaffe commander Hermann Goering and a personal
                  inspection of the Russelsheim plant.

                  Mooney's involvement in the conversion of the Russelsheim plant
                  undermines claims by General Motors that the American branch of the
                  company had nothing to do with the Nazi rearmament effort. In
                  congressional testimony in 1974, GM maintained that American personnel
                  resigned from all management positions in Opel following the outbreak of
                  war in 1939 "rather than participate in the production of war materials."

                  However, according to documents of the Reich Commissar for the
                  Treatment of Enemy Property, the American parent company continued to
                  have some say in the operations of Opel after September 1939. The
                  documents show that the company issued a general power of attorney to
                  an American manager, Pete Hoglund, in March 1940. Hoglund did not
                  leave Germany until a year later. At that time, the power of attorney was
                  transferred to a prominent Berlin lawyer named Heinrich Richter.

                  GM spokesman Mueller declined to answer questions from The
                  Washington Post on the power of attorney granted to Hoglund and Richter
                  or to provide access to the personnel files of Hoglund and other wartime
                  managers. He also declined to comment on an assertion by Snell that Opel
                  used French and Belgian prisoners at its Russelsheim plant in the summer
                  of 1940, at a time when the American Hoglund was still looking after GM
                  interests in Germany.

                  The Nazis had a clear interest in keeping Opel and German Ford under
                  American ownership, despite growing hostility between Washington and
                  Berlin. By the time of Pearl Harbor in December 1941, the American
                  stake in German Ford had declined to 52 percent, but Nazi officials argued
                  against a complete takeover. A memorandum to plant managers dated
                  November 25, 1941, acknowledged that such a step would deprive
                  German Ford of "the excellent sales organization" of the parent company
                  and make it more difficult to bring "the remaining European Ford
                  companies under German influence."

                  Documents suggest that the principal motivation of both companies during
                  this period was to protect their investments. An FBI report dated July 23,
                  1941 quoted Mooney as saying that he would refuse to take any action
                  that might "make Hitler mad." In fall 1940, Mooney told the journalist
                  Henry Paynter that he would not return his Nazi medal because such an
                  action might jeopardize GM's $100 million investment in Germany. "Hitler
                  has all the cards," Paynter quoted Mooney as saying.

                  "Mooney probably thought that the war would be over very quickly, so
                  why should we give our wonderful company away," said German
                  researcher Anita Kugler, who used Nazi archives to trace the company's
                  dealings with Nazi Germany.

                  Even though GM officials were aware of the conversion of its Russelsheim
                  plant to aircraft engine production, they resisted such conversion efforts in
                  the United States, telling shareholders that their automobile assembly lines
                  in Detroit were "not adaptable to the manufacture of other products" such
                  as planes, according to a company document discovered by Snell.

                  In June 1940, after the fall of France, Henry Ford personally vetoed a
                  U.S. government-approved plan to produce under license Rolls-Royce
                  engines for British fighter planes, according to published accounts by his

                  Declaration of War Alters Ties

                  America's declaration of war on Germany in December 1941 made it
                  illegal for U.S. motor companies to have any contact with their subsidiaries
                  on German-controlled territory.

                  At GM and Ford plants in Germany, reliance on forced labor increased.
                  The story of Elsa Iwanowa, who brought a class-action suit against Ford
                  last March, is typical. At the age of 16, she was abducted from her home
                  in the southern Russian city of Rostov by German soldiers in October
                  1942 with hundreds of other young women to work at the Ford plant at

                  "The conditions were terrible. They put us in barracks, on three-tier
                  bunks," she recalled in a telephone interview from Belgium, where she now
                  lives. "It was very cold; they did not pay us at all and scarcely fed us. The
                  only reason that we survived was that we were young and fit."

                  In a court submission, American Ford acknowledges that Iwanowa and
                  others were "forced to endure a sad and terrible experience" at its Cologne
                  plant but maintains that redressing such "tragedies" should be "a
                  government-to-government concern." Spellich, the Ford spokesman,
                  insists the company did not have management control over its German
                  subsidiary during the period in question.

                  Ford has backed away from its initial claim that it did not profit in any way
                  from forced labor at its Cologne plant. Spellich said that company
                  historians are still researching this issue but have found documents showing
                  that, after the war, American Ford received dividends from its German
                  subsidiary worth approximately $60,000 for the years 1940-43. He
                  declined a request to interview the historians, saying they were "too busy."

                  The extent of contacts between American Ford and its German-controlled
                  subsidiary after 1941 is likely to be contested at any trial. Simon Reich, an
                  economic historian at the University of Pittsburgh and an expert on the
                  German car industry, says he has yet to see convincing evidence that
                  American Ford had any control over its Cologne plant after December
                  1941. He adds, however, that both "Opel and Ford did absolutely
                  everything they could to ingratiate themselves to the Nazi state."

                  While there was no direct contact between American Ford and its German
                  subsidiary after December 1941, there appear to have been some indirect
                  contacts. In June 1943, the Nazi custodian of the Cologne plant, Robert
                  Schmidt, traveled to Portugal for talks with Ford managers there. In
                  addition, the Treasury Department investigated Ford after Pearl Harbor for
                  possible illegal contacts with its subsidiary in occupied France, which
                  produced Germany army trucks. The investigation ended without charges
                  being filed.

                  Even though American Ford now condemns what happened at its Cologne
                  plant during the war, it continued to employ the managers in charge at the
                  time. After the war, Schmidt was briefly arrested by Allied military
                  authorities and barred from working for Ford. But he was reinstated as the
                  company's technical director in 1950 after he wrote to Henry Ford II
                  claiming that he had always "detested" the Nazis and had never been a
                  member of the party. A letter signed by a leading Cologne Nazi in
                  February 1942 describes Schmidt as a trusted party member. Ford
                  maintains that Schmidt's name does not show up on Nazi membership lists.

                  Mel Weiss, an American attorney for Iwanowa, argues that American
                  Ford received "indirect" profits from forced labor at its Cologne plant
                  because of the overall increase in the value of German operations during
                  the war. He notes that Ford was eager to demand compensation from the
                  U.S. government after the war for "losses" due to bomb damage to its
                  German plants and therefore should also be responsible for any benefits
                  derived from forced labor.

                  Similar arguments apply to General Motors, which was paid $32 million by
                  the U.S. government for damages sustained to its German plants.
                  Washington attorney Michael Hausfeld, who is involved in the Ford
                  lawsuit, confirms GM also is "on our list" as a possible target.

                           © Copyright 1998 The Washington Post Company