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| William C. Durant |
In 1904, William C. "Billy" Durant, owner of America's largest horse-drawn wagon manufacturer Durant-Dort Carriage Company, bought the ailing Buick Motor Car Company from a Flint, Michgan businessman. Durant was not keen on the new horseless carriage craze, but having an eye on the future, he knew automobilies were the future of personal transportation. Durant partnered up with Charles Steward Mott and Frederic L. Smith to create General Motors (GM) on September 16, 1908.
Durant already owned Buick which became the first nameplate in the new corporation's stable with Oldsmobile soon to follow later that year. In 1909 with the corporation's profits and line-of-credit, Durant bought Cadillac and Oakland [which later became Pontiac Motors]. Durant continued on a spending spree and acquired four other fledgling automakers and a truck company. Durant even considered buying GM's archrival Ford Motor Company, but he fell two million dollars short on the funding.
By 1910, GM was struggling. The country was in a period of recession from 1910 through 1911. The banks tightened up their lending policies and car sales dropped. Because Durant's aggressive expansion of GM left the corporation over-leveraged and vulnerable to bankrupcy, stockholders voted Durant out of the chairmanship, but he continued to hold a large share of GM stock.
In 1911, Durant lured popular Swiss racecar driver Louis Chevrolet away from GM for whom he raced Buicks. Durant wanted to capitalize upon Chevrolet's international fame, and he knew that the automobile-buying public wanted to drive something glamorous and exciting. Durant sweetened the business offer for the racecar driver
by naming the new company after him--the Chevrolet Motor Company. Durant merged three small automobile manufacturers, Little Motor Company,
Mason Motors, and Republic Motor Company to form the new company.
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| Louis Chevrolet |
Two years into the partnership, the two men battled over design issues and the direction the company was taking. Chevrolet wanted to design a car for the high-end market while Durant wanted to produce an affordable car for the low-end market to compete with Henry Ford's obsolete Model T. Chevrolet chose to return to racing and sold his stock to Durant in 1913.
The dissolution agreement allowed Durant to continue using Chevrolet's name for the car's nameplate. If the gear-jammer had any business sense, he would have negotiated a licensing agreement to use his name. The Chevrolet heirs would still be earning royalties if he had. The following year, Chevys were branded with its modified Swiss Cross bowtie logo.
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| Original Chevrolet Bowtie Branding |
Billy Durant offered a four-cylinder engine in 1912 which outperformed Ford's four-cylinder in every way and came with a magneto starter rather than a crank. Women especially appreciated that. The car had cutting-edge styling and came in grey, green, blue, or red. The Chevy, as it was soon called, was an instant success cutting into Ford's low-priced market. Chevys were a little more expensive, but consumers were willing to pay a little more to be seen in a snappy-looking car.
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| 1913 Chevy Model |
Durant wisely used the profits he made from Chevy to buy GM stock. The Chevrolet quickly became so popular with the public that Durant offered GM a five-for-one stock trade in a reverse merger. On May 2, 1918, Durant regained controlling interest of GM as the corporation's largest stockholder. Billy Durant was back in the driver's seat as corporation president. He brought Chevrolet into GM's product line in 1919, as well as Fisher Body and Frigidaire.
As co-owner of Frigidaire, Durant essentially sold his company to himself as president of GM, an example of financial sleight of hand and a clear conflict of interest. The corporation was once again debt-heavy and flirting with bankrupcy.
In the background, Pierre S. DuPont and his family-owned chemical company had opened a line of credit with Wall Street financier J.P. Morgan. By 1919, DuPont invested 50 million dollars in GM stock. The following year, DuPont and the board of directors forced Durant out of GM for the last time because of his reckless speculation and dubious management ability.
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| Pierre S. DuPont |
GM was the largest consumer of DuPont automotive finishes and artificial leather [vinyl] fabrics. GM's possible failure would hurt DuPont Chemical's business interests. Pierre S. DuPont stepped up and paid off Durant's debt to buy him out.
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| Alfred Pritchard Sloan |
Alfred P. Sloan was elected president in 1923 to reorganize and manage the sprawling corporation. Under Sloan's management, GM established annual model changes which ushered in the age of planned obsolescence creating a vigorous used car market.
To prevent GM brands from competing with themselves, a pricing structure was established with Chevrolet as their most affordable brand followed by Pontiac, Oldsmobile, Buick, and their luxury brand Cadillac. As soon as buyers could afford a more expensive car, GM had an upgrade ready for them which inspired customer loyalty.
To help car buyers finance a new car or buy more car than they could otherwise afford, GM formed the General Motors Acceptance Corporation (GMAC) which introduced consumer installment credit ensuring the company's long-term financial success. When the stock market crashed on October 29, 1929, ushering in the Great Depression, GM was well-positioned to survive it.
