The year 1908 has a special meaning for the automobile production in the USA. On the 16th of September, The General Motors Company was founded. The initiator was William Durant (1861-1947), who had been the director of Buick since 1904, who then brought his concern (Buick), as the most important part, into this holding company. Still in the same year he was followed by Ransom E. Olds (later Oldsmobile). In 1908 the Ford Model T also appeared on the worlds automobile stage. It was not the first connection to GM. Thus, in 1909 other companies were added to the GM holding company: Oakland motor car company (later Pontiac) and Cadillac, a company, which in 1901, was still called the Henry Ford Company, until, in 1902 he left the company with compensation and took his name with him.
The rivalry with Ford would accompany the newly founded concern right up into modern times. The Model T Ford held the first place for the global production of cars until 1927, only, at first for a short time, and some time later, to lose this place for good. However, also General Motors couldn't keep the crown forever, in 2008 they lost it to Toyota. There was yet another connection between the two groups, in 1909 Durant nearly bought Ford for 8 million dollars, however, for the banks, this price was too high...
William Durant was quite different to Henry Ford, he was a sort of all-rounder. E.g., both tried also to control the supplies to their car production. Ford produced everything itself, including the steel production, while Durant bought up suppliers, sometimes for more money than his principle companies had cost. He also foresaw the production of completely different vehicles, for various markets and customer circles, Ford, on the other hand, put his bets on a car for everybody and pushed this through in the market, through more and more rationalisation and with unbelievable price drops.
For many years the success of Ford proved that his idea was right, which did not make the situation for GM any easier. In 1910 it came to the first showdown. Durant had put 25 companies together, at least half of them suppliers. According to the laws of the market, he should have concentrated upon the principle brand Buick and at most perhaps also Cadillac, instead of, through overproducton, forcing competition from within. This is, by the way, a problem that GM would maintain. For the first time, Durant was given the push. However, to his defence, it must be said, that also the first saturation of the American automobile market had substantially contributed to these difficulties.
Now the consolidation under Charles W. Nash is the order of the day. Unprofitable companies were liquidated and assets were sold. At least thereby, a large amount of money came into the concern, an indication of the fact that the taken over companies, not only because of their range of products, were worth their money. On the run from Fords success results, GM started pushing their export, however, could only survive from 1915 onwards because of their solid financial resources. In 1915, seven years after the foundation, for the first time dividends were paid out, at the time, the highest ever paid on the New York stock exchange. In 1917 Chevrolet came into the concern, a company which had become, under Luis Chevrolet, with decisive assistance from Durant, a big deal in the compact car range.
In 1920 the concern took occupation of their new headquarters, four buildings, for the then gigantic sum of 20 million dollars. From the front and rear buildings the company name, in gigantic letters, could be seen far and wide across the flat countryside. The money for these transactions came through the market entry of the du Pont Company which had become rich through chemical factories and particularly the development of dynamite, and was, after the military contracts had run out, looking for other investment possibilities. In 1916 Durant was once again, with the help of the new chairman of the board, Pierre S. du Pont, appointed president, and with the substantial rise in capital of the company, this was also renamed the General Motors Corporation. Now the various makes of car were real subsidiaries, without however, being decisively under control.
All together, in the period after the First World War, between 1918 and 1920, GM was particularly successful with the Chevrolet marque, although these were, in fact, as far as price and quality were concerned, inferior to the Model T. In particular however, the missing guidance from the management level, at the latest after 1920, became dangerous for the concern. It is interesting, that in that time, after Walter P. Chrysler left the company, a second, and although smaller, nevertheless, serious competitor developed. Something similar happened when the president C.W. Nash retired in 1916.
All in all, in 1920 was not only GM moving towards a crisis similar to the one in 2008. The the whole automobile industry was also hit, however, Ford could absorbed it better, e.g., by the renewed lowering of the prices by over 20 percent. In autumn, many production lines were at a stand-still and the share prices went downhill. Strangely enough, the same as in 2008, a great deal of bad papers appeared, indeed, this time they came from William Durant who had established his empire, only in the rarest cases, through cash dealings, but rather through share exchange and unfortunately, often by lending on the basis of values which had not been sufficiently investigated. Durant was also accused of speculating with shares in big way.
As a logical consequence, Durant had to resign as president once more and was replaced by the chairman of the board, Pierre S. du Pont. He owned, also through the additional purchase of the Durant shares, the biggest portion by far, of GM stock, thus, he stood to lose, in case of failure, more than all the others. For the fresh start, possibly even more important, was an organisation plan, which, although maintaining the principle of decentralised management in GM, it introduce clear structures and principles, among other things, the profitability calculation of the individual subsidiary companies. It is said that parts of the plan were even trend setting for other industrial enterprises in the USA.
The new organisation also took a very close look at the weaknesses of the enterprise. Thus the clear differentiation signs of the single marques were absent. Only the Buick had the status of a traditionally mid-range product and the Cadillac as an upperclass marque. However, also Chevrolet was running at a loss, with the sales barely higher than Buick. All together the situation was very dissatisfactory for General Motors, as one can see, when looking at their total share, including all their marques, of 12 percent of the American market. Ford, on the other hand, offerring, apart from the Model T, only the flagging marque Lincoln, as competition against the Cadillac, held 60 percent of the market. 11/09