How GM almost bought Ford Motor Co.

12/08/2011

Today marks the 150th anniversary of the birth of one of America’s great entrepreneurs and the founder of General Motors, William Durant.

Durant gained famed as the founder of GM, a multi-brand holding company with different lines of cars designed to appeal to consumers of varying economic means.

Durant was the grandson of a former governor of Michigan and his chief interest was business. Instead of attending college he choose to go to work in his grandfather’s lumber business, one of the largest of the many large lumber mills in Flint, Mich, according to Arthur Pound’s book The Turning Wheel: The Story of General Motors Through Twenty-Five Years, 1908-1933.

He then branched out by opening his own insurance agency before he was 21.

“That suited him, because insurance was something you could go out and sell,” Pound writes. “No waiting around for customers to come to you, as in the store. An almost feverish activity possessed him. ‘Billy’ Durant above everything needed action. While possessed of a notable faculty for remaining calm in the midst of alarms, he seemed to require dramatic tension in business. Yet he had also the power of concentrating intently on work.”

He later paid $50 for the patent rights for a road cart and proceeded to contract with a manufacturer to produce the carts for $8 apiece. He then sold the carts for $12.50 each. With an annual production of 50,000, Durant was a millionaire before he was 40, Pound writes.

By the early years of the 20th century, Durant had turned his attention to motor vehicles. After putting a fledgling Buick through a series of rigorous tests, he invested in the company in 1904.

Durant began building his conglomeration by adding the high-profile Oldsmobile marque to his ensemble through the purchasing of the Olds Motor Works in 1908, the year he organized General Motors. That same year GM formally took over Buick, as well.

The following year, General Motors brought in Cadillac, Oakland – the brand which would begin manufacturing the Pontiac model in the 1920s – and several others. Also in 1909, GM acquired the Reliance Motor Truck Co. and the Rapid Motor Vehicle Co., predecessors of GMC Truck.

Durant nearly pulled off what would have been one of the greatest coups in American business history in 1909 when he came within a hair’s breadth of bringing Ford Motor Co. into the GM fold.

In late 1909, Durant approached Henry Ford with the idea of purchasing Ford’s company. Ford was smarting from a federal court decision in the Selden Patent Case that required all automobile manufacturers, importers and “unlicensed” users to pay license or royalty fees to the Association of Licensed Automobile Manufacturers, which owned a patent related to the internal-combustion-powered automobile.

Ford had been invited to join GM previously, but his asking price – $6 million – had been deemed too high.

Now, following the Selden decision, which irritated Ford to no end, Durant decided to try again.

Disheartened by the loss of the patent suit and the impact it would have on Ford’s finances, James Couzens – secretary and a quarter-owner of Ford – told Durant that Henry Ford was willing to sell his stock in Ford Motor Co. for $8 million – but Henry Ford wanted $2 million in cash up front as part of the deal, according to TheDetroitBureau.com, a website dedicated to the automotive industry.

Durant got the OK from GM’s board of directors in October 1909 to meet Ford’s asking price, including the $2 million cash stipulation.

However, when Durant approached his New York bankers for a loan, they deep-sixed the deal.

In November 1910, Ford appealed the Selden patent decision, and two months later a federal appeals court overturned the decision. That freed the auto industry from having to pay royalties on each car produced or imported.

Ford, along with GM and the rest of the auto industry flourished, according to TheDetroitBureau.com.

However, by then Durant had been forced out of General Motors because of the large amount of debt taken on in the company’s acquisitions coupled with a collapse in new vehicle sales. He remained a large shareholder, however.

In November 1911, he incorporated the Chevrolet Motor Car Company to compete with Ford and its low-priced Model T.

Had Durant’s efforts to land Ford been successful the “what ifs” are many, according to TheDetroitBureau.com:

It seems unlikely that strong-minded Henry Ford would have gone to work for GM or Durant, and that the moving assembly line and mass production would have been so readily accomplished as it was with Ford’s impetuous vision in 1913;

Henry would not have become the “first billionaire.” Ford’s legendary philanthropy – Company, Foundation and Family – thus would have been relatively meager;

Durant likely would not have developed Chevrolet, the early success of which enabled him to regain control of General Motors before the decade was over; and

The intense rivalry driving sales of Ford and Chevrolet for nearly the last 90 years – ever since former Ford manufacturing executive Big Bill Knudsen joined GM to build up Chevrolet production capacity to match that of Ford – would not have developed.

Durant didn’t exactly fade into obscurity after leaving GM in 1920, but he never again came close to the heights he achieved while building what became the largest car company in the world.

His end, however, was decidedly unfitting for a man who had accomplished so much.

After suffering a stroke in 1942, he was left “a semi-invalid” and spent the remainder of his life managing a bowling alley in Flint, likely catering to many of the individuals he’d once employed, until his death in 1947.

(Above: Billy Durant at work.)

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