HISTORY: GENERAL MOTORS' 90TH BIRTHDAY
by Bob Hagin
January 02, 1998
General Motors is unquestionably the largest and most successful corporation of any kind in the world, and its banner flies in all corners of the globe. GM profits were up 19 percent in 1997 and its cars enjoyed an upswing in North America. This year, the company celebrates its 90th birthday and like most other nonagenarians, the celebration will no doubt be a calm, staid affair, as befits its advanced age.
But the birth of General Motors in 1908 was anything but placid, uneventful and calm. It was in the days of almost-unbridled venture capitalism when almost anything went and there was plenty of "new" money around that could be channeled into 20th century technology. Fortunes had been made in railroading, shipping and merchandising, and the stock market was the playground of the rich, famous and notorious. The auto had just turned the corner from being a curiosity built by tinkerers and was being viewed by the investors as something to look into.
Which made it a perfect playing field for William Crapo Durant.
"Billy" Durant was a self-made man-of-means and a compelling and persuasive salesman. The son of a failed Boston investment banker and grandson of Henry Howland Crapo, the governor of Michigan, Durant was born into fairly high social standing. In later life, this was to give him access to the rich and powerful of the state.
But it was Durant's unbridled energy and drive that made him a success at an early age. After several sales jobs and a stint as the manager of a near-defunct public utility company, in 1886 Durant had occasion to take a demonstration ride in a horse-drawn, lightweight, two-wheeled carriage that featured a suspension system designed by a friend. He was so impressed by the device that he borrowed enough money to buy the patent and with another friend, J.D. Dort, went into the carriage business. Durant sold over 500 of his carriages before the first one had even been assembled by an outside contractor, and 18 years later the Durant-Dort Carriage Company was the largest in the country. It owned 14 factories and tree farms in the South as well as subsidiary companies to make its own carriage hardware, paint and varnish. At 43, Durant had a reputation as an entrepreneur who could get things done.
It was this reputation that got him into the auto manufacturing business. David Buick had started the auto-building business that bore his name in 1902, and through a series of managerial missteps and blunders, the company was on the brink of ruin in 1904. Buick stockholders convinced Durant that he was the man who could reorganize the company, a challenge he gleefully accepted.
Being a "horse guy," Durant was not enthralled with the automobile, considering it "...noisy and smelly," according to later reports. But he saw its potential as an industrial giant and under Durant's driving direction, the Model C Buick was introduced to the public in 1905. With Durant handling the promotion, it became an instant success.
In 1908, the four biggest auto-making companies in America were Ford, Buick, Reo (named for R.E Olds) and Maxwell-Brisco, which would later become Chrysler. Durant had a plan to merge all four into a super-corporation and to that end, he contacted the banking house of J. P. Morgan. Early that year, talks between the four companies began under a cloud of mutual suspicion and within a short time, the talks collapsed. Not easily thwarted, Durant decided to press on with his own plan for an automotive super-corporation that was to encompass a string of auto manufacturers that would cover all segments of the market. To that end, he incorporated General Motors on September 16, 1908. It was capitalized at $2000, but in less than a month, it was recapitalized through venture capital investors to $12.5 million. Needless to say, the first auto company to be purchased by General Motors was Buick, which makes that company the oldest continuing subsidiary of G.M.
Durant immediately began an expansion program that included the acquisition of Oldsmobile, Cadillac and Oakland (which later became Pontiac) as well as a string of auto parts companies and lesser car and truck makers.
But due to Durant's wild speculations and machinations involving stock swaps and blue-sky investments, General Motors ran out of operating capital in 1910. G.M. underwent a reorganization controlled by Wall Street bankers, and in the ensuing corporate struggle, Durant was ousted from the company to which he had given birth.
But being unflappable, Durant almost immediately formed six auto companies to compete with General Motors. The most notable among them was Chevrolet, a company formed by Louis Chevrolet, a famous racer of the day whose name had public recognition. Through the acquisition of Chevrolet and his ability to raise capital from investors, Durant was able to regain control of General Motors again in 1916.
But the turbulence of the time finally caught up with Durant and he lost General Motors for the last time in 1920.
General Motors is 90 this year, but few, if any, in its corporate headquarters will give a passing thought, much less even pay lip service to William C. Durant, the visionary who made the company come to life.