(Informal) History of GM Corp. - 1958

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A typewritten manuscript setting forth the history of General Motors. Supplied to attendees of GM Institute; circa 1958. 30 pps., including bibliography.

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  • (Informal) History of General Motors Circa 1958 Author: Unknown Source: Retired GM employee who received it while attending GM Institute.

  • THE DEVELOPMENT AND GROWTH OF GENERAL MOTORS

    INTRODUCTION

    General Motors Corporation is one of the largest and most widely knownindustrial enterprises in the world today. Its activities have acquired importance in many communities and among many individuals. General Motorscame into existence in 1908, several years after the invention of the automobile. With Buick, Oldsmobile, Oakland (now Pontiac), Cadillac, Cartercar,

    and Elmore passenger cars, and Reliance and Rapid truck as a nucleus,General Motors has had an illustrious history. General Motors entered this

    highly competitive field in the years when the future of the automobile wasnot yet assured, and has survived the high mortality rate which has plagued

    the industry. More than 2,500 different makes of motor cars have been produced in this country at one time or another, yet of all these only a handful

    (18 at this writing) remains today. The history of General Motors over thepast half century has been both colorful and interesting, but it is possible to.present only a brief outline in this text.

    The pages that follow present some of the highlights of the growth ofGeneral Motors during the period of America's greatest industrial develop

    ment, and of its contributions to that development. This pattern of events istypical of many successful manufacturing businesses that have grown from

    small beginnings, through the efforts and skills of individuals working together in a system of free competitive enterprise. Many events and detailsare necessarily omitted from this discussion. Students whose interest goesdeeper will find much additional information in the many excellent volumes

    available on the automotive industry.1

    EARLY DEVELOPMENTS

    In the year 1893 the first successful gasoline car in America coughedand wheezed its way down a side street in the quiet town of Springfield,Massachusetts, to the annoyance of the residents and the terror of their

    See "The Turning Wheel, " by Arthur Pound; "Concept of the Corporation. " by Peter F. Drucker; "TheAdventures of a White-Collar Man, " by Alfred P. Sloan, Jr.; and "The Story of General Motors, " amongothers.

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  • horses. This single-cylinder "horseless carriage," built by J. Frank Duryeaat the suggestion of his brother, incorporated for the first time in any American car, electric ignition and spray carburetion, both of which were designedand built by Duryea. It ran very uncertainly, but was the beginning of a great

    industry.

    In the years since 1893 the automobile has progressed from a falteringbuggy-like contraption to a safe, dependable, and efficient vehicle for econom

    ical transportation. As the motor car has improved, the industry itself hasgrown in social and economic significance.

    General Motors was organized in 1908, but its roots go back to the veryearliest days in the industry and even beyond to carriage and wagon building, stationary engines and bicycle bells; to the days when men like R. E.Olds,David Buick, and Henry Leland were experimenting and tinkering and forming

    companies to make the "horseless carriage" about which everybody joked.

    R. E. Olds and the Oldsmobile

    After having spent seven years in his father's machine shop working onstationary and marine gasoline engines, in 1892 young Ransom Olds took hissavings, bought his father's interest in the business, and incorporated theOlds Gasoline Engine Works for $30,000. He then experimented for five moreyears before completing his first Oldsmobile in 1897, having been authorized

    by the board of directors to "build one carriage in as nearly perfect a manneras possible." This first Oldsmobile had two seats holding four passengers

    and was powered by a five-horsepower gasoline engine which, under the bestconditions, could propel the car at a speed of about 18 miles an hour. Atpresent this first Oldsmobile is in the Smithsonian Institute in Washington.

    Because of the success of his first model, Mr. Olds built in Detroit thefirst factory in America especially designed for the production of automobiles in 1899. His first "deluxe" model priced at $1,250, including such im

    provements as "cushion tires," did not sell. He discarded his plans andstarted all over again, producing a one-cylinder car that weighed 700 poundsand sold for $650. Production figures of Oldsmobiles are 1901 - 425; 1902 -

    2,500; 1903 - 4,000; and 1904 - 5,000. These were the famous "curved-dash"

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  • runabouts. In addition 6,500 one-cylinder straight-dash runabouts were builtin 1905. This was a record of quantity production for this time; no other automobile manufacturer approached it.2 The success of Olds in Detroit fixed this

    city as the center of the new automobile industry. In 1905 Oldsmobile movedback to Lansing, where the continued success of this automobile was to prove

    a strong factor in the commercial and industrial development of that city.

    Buick

    The progress of Olds with his low-priced and dependable car causedmany engineers and designers to decide that the automobile field held greatpossibilities. Among them was David D. Buick, who had already been active

    in the manufacture of marine engines and plumber's supplies in Detroit.Having developed a method of fixing porcelain on metal, the key to low-pricedbathroom fixtures, he already had one substantial achievement to his creditwhen he entered the automobile field. In 1902 he organized the Buick Manu

    facturing Company in Detroit.

    The costs of putting together the first Buick had strained the resourcesof Buick and his partner Robert Sherwood. They had borrowed much moneyfrom Benjamin and Frank Briscoe, sheet metal manufacturers, who decided

    to sell the firm when the financial burden became too heavy.

    Late in 1903, the Flint Wagon Works, with James H. Whiting as president, bought Buick and moved operations to Flint. January 19, 1904, Buickwas incorporated with capital stock of &75,000. The name was changed to BuickMotor Car Company and Whiting, looking for a younger man, turned the firm's

    management over to W. C. Durant.

    After he took over operation of the infant Buick enterprise, Mr. Durant(who had become a millionaire in the Durant-Dort Carriage Company of Flint)saw that immediate expansion was necessary. Facilities in Flint were inad

    equate and he already had a large plant standing idle in Jackson.

    2Pound, p. 54.

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  • So Mr. Durant raised Buick's capitalization to a half-million dollars toput the firm on its feet and moved the assembly operation and main office toJackson. This division of work was unsatisfactory, and consolidation in one

    city was inevitable.

    Mr. Durant offered to consolidate Buick in Flint if capitalization couldbe raised to $1,500,000 so a suitable assembly plant could be built there.

    With Durant himself doing most of the soliciting the new figure was reached.

    Buick assembly operations were moved back to Flint in November, 1906,and business increased rapidly. Out of its success, other automobile manufacturing units were purchased, and the group later was consolidated to be

    come General Motors.

    Cadillac

    The Cadillac Automobile Company, organized under the direction ofHenry M. Leland in 1902, was named in honor of Antoine de la Mothe Cadillac,the French explorer whose expedition established a settlement at Detroit in

    1701.

    Cadillac built one car late in 1902 and furnished two in the spring of1902. In the following year, 1,895 finished automobiles were built andshipped. Although the first Cadillac gave little promise of what the car wasto become in later years, it was then the last word in superior workmanshipat the time. Practicing the highest standards of precision, Cadillac demon

    strated that automobiles could be made of interchangeable parts just aseffectively as firearms, the industry in which Mr. Leland received his earlytraining.

    Oakland

    About 1907 it became apparent that the automobile was a successfulmeans of individual transportation, and Edward M. Murphy, owner of the

    Pontiac Buggy Company of Pontiac, Michigan, decided that the buggy business was a thing of the past and that he had better get into the growing

    automobile field. He organized the Oakland Motor Car Company in August,1907, naming it after the county in which Pontiac is located. His car was

  • a two-cylinder model, designed by A. P. Brush, who had been with Cadillacas an engineer. This two-cylinder design did not prove successful and in

    1908 the company brought out a four-cylinder model, powerful for its time,which undersold all competitors. In 1926, eighteen years later, Oakland was

    to introduce the Pontiac car.

    BUILDING GENERAL MOTORS

    1908 - 1919

    From the time he reorganized Buick, Mr. Durant seems to have beenlooking toward wider horizons. Vehicle parts plants, some of them controlledby Mr. Durant, turned to making automobile wheels, axles, springs, paints andbodies. He induced Charles Stewart Mott to move the Weston-Mott Company

    to Flint from Utica, N. Y. to supply axles for Buick. Mr, Durant also persuaded Albert Champion to produce the famous AC Spark Plug in Flint.3 Healso organized the Janney Motor Company in Jackson, but this company was

    soon merged with Buick.

    Early Negotiations

    In May, 1908, Benjamin Briscoe of Maxwell-Briscoe Motor Company,who had sold Buick in 1903 for $10,000 advised Durant that George W. Perkins

    of J. P. Morgan & Co., already a major owner of Maxwell Briscoe, was exploring the idea of a giant automobile merger to save the industry from deathby co'mpetition. Also involved, in addition to Durant, Briscoe, and Perkins,were Henry Ford and R. E. Olds. Negotiations proceeded through the sum

    mer and had reached the final showdown stage when Henry Ford surprisedthe group by demanding cash rather than holding company stock. He would

    sell but not merge, and he supposed that everyone knew that all along. Oldssubscribed to the same idea, and from that point both he and Ford were outof the negotiations.. Disagreement finally caused the negotiations to disintegrate, but Mr. Durant was still undaunted.

    3Pound, p. 111.

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  • General Motors is Born

    Finally Mr. Durant had Curtis R. Hathaway draw up articles of incorporation for General Motors Company (a holding company) which were filedin New Jersey on September 16, 1908, the birthday of General Motors. Thishistoric event passed unnoticed for several weeks. Capital stock was only$2,000 and no name then famous in motordom appeared on the record.

    On September 28, 1908, capital was increased to $12,500,000. The nextday G.M. bought the Buick Motor Company. This transaction cost about$3,998,000, all in G.M. stock except for $1,500 in cash. Also G.M. boughtfrom Buick for $250,000 in stock the body plant of W. F. Stewart Companywhich was leased to Buick and finally sold back to Buick in 1909.

    Oldsmobile was the third G.M. acquisition. Negotiations lasted forabout a month and the deal was closed on November 12, 1908 for a total ofmore than $3,000,000.

    On October 20, 1908, the board was enlarged from the previous three toseven directors and W. M. Eaton, an influential Jackson business man, waselected president. Mr. Durant became vice president, a post he held untilNovember 16, 1915. Although Mr. Durant was actually the founder and active head of the organization, he chose not to accept the highest office,thereby leaving himself free for more active duties.

    Expansion

    The expansion was on. G.M. directors on January 20, 1909, authorized the purchase of a half interest in the Oakland Motor Car Company ofLansing. By the end of 1909 there were 22 institutions or plants combinedinto G.M.

    The highest price G.M. paid for an automobile firm was the $4,400,000cash and $275,000 in preferred shares of G.M. which Cadillac owners received July 29, 1909. This was the largest transaction Detroit had known upto that time, nearly all in cash. This purchase actually was backed by Buickwhich had the strongest financial position of any subsidiary.

    At the time he was forming General Motors, Mr. Durant broughtAlbert Champion to Flint, September 10, 1908, to make spark plugs for

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  • Buick. A year later he organized the Champion Ignition Company, now ACSpark Plug Division, with $100,000 capitalization of which General Motors acquired $75,000. A few years later, a youngster, Harlow H. Curtice by name

    and destined to become President of General Motors, started with Champion.

    Soon Mr. Durant was to miss a second chance to buy Ford Motor Company. Henry Ford was willing to sell in 1909 to devote himself to the farm

    tractor industry. On October 26, 1909, the G.M. board of directors approvedthe purchase of Ford at $8,000,000, payable $2,000,000 in cash and the balancein one to three years at five per cent interest. The $8,000,000 would pay forthe entire business, including the name Ford. Mr. Durant sought to borrowthe cash required at the National City Bank of New York. However, the bankers

    turned down the loan - the automobile industry was being criticized, its phenomenal growth was suspicious, it looked too much like speculation.

    By the end of 1910, General Motors had acquired entire ownership inmore than 30 firms and plants, and smaller holdings in numerous others.Among this number were 16 makes of cars, only four of which remained long

    in production after purchase by G.M. Collectively, these purchases wereworth the price paid. In the first two years G.M. realized a net profit of

    nearly $19,340,000, mostly from Buick. It reinvested $18,279,297 in expansion. When it was only five months old General Motors had declared its first

    semi-annual dividend of $3.50 on preferred stock. It has never since misseda preferred dividend. Since 1915 it has never missed a cash dividend on common stock.

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    Financial Crisis of 1910

    Up to the end of 1909 credit seemed to be unlimited. Suddenly thebankers began to tighten up, ask for their money, refuse further loans.Early in 1910 Buick sales had been phenomenal, nearly double the 1909

    total. But for months during the summer as the panic was being felt, Buickplants were almost deserted. Conditions were almost as bad elsewhere;workers were laid off by the thousands; factories were almost idle. G.M.

    shares fell from around $100 to $25.

  • At first Mr. Durant was not inclined to be alarmed, but soon he droppedeverything to search for money. So much was needed that it had to come fromthe largest banks. He visited them from coast to coast and the longer he tookto find the money, the more he needed. Nothing less than $12,000,000 wouldsave the day.

    Finally J. & W. Seligman & Co. of New York, and Lee, Higginson & Co.of Boston offered a loan of $12,750,000 onl...