Worth Another Look ; General Motors Betrayed Its Founding Genius
Originally Published December 15th 2008
By Bernard A. Weisberger
On Cutting Edge
As GM staggers towards either bailout or bankruptcy, I am reminded that the big financial meltdown of 2008 began just around September 16th, the 100th anniversary of its founding.
The giant corporation's present misery has a personal resonance for me as thirty years ago I completed a biography of its founder, William C. Durant, the very antithesis of the GM leadership of recent years—unimaginative, stodgy, wedded to old ways of doing things, and fiercely resistant for the last 20 years to all efforts to nudge it in the direction of smaller, fuel-efficient, pollution-reducing cars instead of heavyweight gas-guzzlers.
Durant was no ordinary entrepreneur, but a strange combination of supersalesman, visionary, and risk-loving long shot gambler. Already a millionaire carriage builder in 1904, he saw the revolutionary potential of the dawning auto age and got into the motor game by buying into and reorganizing a struggling little Flint, Michigan concern called the Buick Corporation. His first action was dashing off to a New York auto show and securing immediate orders for some 1,100 Buicks, thirty times more than the company's entire previous year's production.
In 1908 Durant started GM by combining Buick with his newly acquired merry Oldsmobile. He soon added what became the Pontiac and Cadillac lines—along with a long list of companies who were makers of various experimental cars that had flopped.
Durant foresaw that in a few years there would be two million cars on America's roads. Although he was considered crazy, he looked beyond that, correctly and virtually alone, to the day when the mere possession of an auto would be commonplace, and buyers would want variety. He meant to produce cars for every purse and preference, "getting every car in sight."
Explaining Cartercar, one of the bad acquisitions, Durant said, "How was anyone to know that Cartercar wasn't going to be the thing? It had the friction drive and nobody else had it."
Durant financed these purchases by paying the buyers with newly issued GM stock, always convincing them that with their addition to the firm, the stock was certain to rise.
A chaotic manager and always short of operating cash, Durant had GM drowning in unpaid bills by 1910. His board of directors removed him from the chairmanship, installing a cautious, creditor-friendly regime much to his disgust.
Not giving up on his dream, Durant created the Chevrolet Company and brought it to the number one position on auto sales charts. In 1916, he was able to use his winnings to buy back control of "his baby," GM. Another four-year wild ride of sprawling growth and frenzied financing ensued until Durant got himself into a personal hole that also threatened a catastrophic fall in the value of GM stock and his corporate partners once again threw him out.
Although Durant started a rival company, he had lost his touch, and turned increasingly to Wall Street operations as one of the biggest bulls in the Great Bull Market. When the crash came he lost everything and died broke.
Alfred P. Sloan, Durant's successor at GM's helm, successfully rationalized and reorganized the corporation. By the 1950s it became a thriving empire, the monarch of the Big Three American automakers, who together accounted for a gigantic share of America's industrial profit and prowess.
There's no knowing how Durant would have reacted to today's collapse of his brain-child. But as an incorrigible optimist and rock-ribbed believer in the free market, I suspect he would have disapproved of the automakers' rush to Washington with begging bowls extended. Given his almost childlike excitement over new technologies however, I am relatively certain that if he had been running GM for the last thirty years, there would been a heavier investment in experiments with at least a few companies making hybrid cars, electric cars, biofuel-run cars, and for all I know, cars run by sails or pedals.
And one of those cars might have been "the thing." Durant was not one to sit on a lead. That kind of boldness might have given GM's bookkeepers temporary headaches—but it also might have saved the entire industry more lasting ones.
Bernard Weisberger taught history at Antioch, Wayne State, the University of Chicago, the University of Rochester, and Vassar before becoming a freelance historian. His latest published book is When Chicago Ruled Baseball: The Cubs-White Sox World Series of 1906 . In 1979 Little Brown published his biography of William C. Durant, the founder of GM. This article was adapted from one originally published by History Network News.