William Knudsen was educated locally. He immigrated to the United States arriving in New York in February 1900.
Knudsen was working for the John R. Keim Company of Buffalo, New York, a bicycle and auto parts maker, when the Ford Motor Company bought it in 1911 for its steel-stamping experience and tooling. Knudsen worked for Ford from 1911 to 1921, a decade that saw the formative development of the modern assembly line and true mass production. Working first for the Ford Motor Company and later for General Motors from 1921, Knudsen became an expert on mass production and a skilled manager. Knudsen was president of the Chevrolet Division of General Motors from 1924 to 1937, and was president of General Motors from 1937 to 1940.
In 1940, President Roosevelt, at the recommendation of Bernard Baruch, asked Knudsen to come to Washington to help with war production. Knudsen was appointed as Chairman of the Office of Production Management and member of the National Defense Advisory Commission, for which he received a salary of $1 per year.
In January 1942, Knudsen received a commission as a lieutenant general in the U.S. Army, the only civilian ever to join the Army at such a high initial rank, and appointed as Director of Production, Office of the Under Secretary of War. In this capacity, he worked as a consultant and a troubleshooter for the War Department.
In both of these positions, Knudsen used his extensive experience in manufacturing and industry respect to facilitate the largest production job in history. In response to the demand for war materiel, production of machine tools tripled. Total aircraft produced for the US military in 1939 was less than 3,000 planes. By the end of the war, America produced over 300,000 planes, of which the Boeing B-29 Superfortress benefitted greatly from Knudsen's direction. Production of both cargo and Navy ships also increased astronomically. Knudsen's influence not only smoothed government procurement procedures, but also led companies that had never produced military hardware to enter the market. America outproduced its enemies. As Knudsen said, "We won because we smothered the enemy in an avalanche of production, the like of which he had never seen, nor dreamed possible."
He was appointed Director of the Air Technical Service Command when it was founded in July 1944 at Patterson Field, Ohio. He served in the Army until his resignation on June 1, 1945.
He was a member of Epiphany Lutheran Church (LCMS) in Detroit, and contributed greatly to LCMS projects around the Detroit area, including buildings for Epiphany Lutheran Church, Outer Drive Faith Lutheran Church, and the Evangelical Lutheran Institute for the Deaf.
Knudsen's son Semon "Bunkie" Knudsen was also a prominent automobile industry executive.