On this day in economic and business history…
William C. Durant founded General Motors Company (NYSE:GM) on Sept. 16, 1908.
Durant entered the auto industry with a solid record of transportation entrepreneurialism — but of the wrong type: He had headed the world’s largest horse-drawn-wagon manufacturer in the late 1800s. His anti-auto predilections were well known. Compared to horses, Durant found cars to be noisy, smelly, and dangerous — which were all fair accusations to make against the few primitive vehicles then on the roads. But Durant was, above all, a businessman, and he knew which way the winds were blowing. Dr. Burton Folsom of the Mackinac Center explores the events that led up to GM’s creation:
In 1904, after test-driving a Buick over the potholes in Flint and the mud of the countryside, he took the challenge of building the car industry almost from scratch. Durant the salesman sprang into action. He entered the Buick in a New York auto show — and came home with orders for 1,108 cars: not bad considering that only 37 Buicks had ever been made. In 1908, after just four years making cars, he had the best-selling car in the business. The carriage king had become the auto genius.
Durant and his main rival, Henry Ford, both envisioned mass appeal for the car. Ford , however, thought his company should be built around one standard car, his low-priced, no frills Model T. Durant, from his years in the carriage business, knew that if he were to prevail as the auto leader he needed many different types of vehicles to cater to different incomes and tastes. He scoured the country with the idea of having Buick merge with other companies that could carve out a niche in the auto market. He bought Cadillac for its luxury cars. He formed General Motors in 1908 by consolidating thirteen car companies and ten parts-and-accessories manufacturers.
Within days, the company’s share offerings had raised $12 million, which was a pretty impressive show of investor confidence for a company begun with only $2,000 in working capital. Buick, the early centerpiece of Durant’s budding empire, produced almost 9,000 vehicles in 1908 — 3,000 more than Ford.
General Motors Company (NYSE:GM)’s strategy of building diverse brands, while initially successful in a very small industry, took time to catch on with the mass market. Durant’s shareholders soon pushed back against his overly aggressive acquisition strategy, and a failed effort to buy Ford itself led to his ouster in 1911. That year, Durant founded Chevrolet, and in 1918 he engineered a masterful “buy-in” that brought Chevy into GM’s stable and also gave him enough shareholder control of the company to call the shots once again. General Motors Company (NYSE:GM)’s shares peaked in 1919 with the rest of the auto industry, but after a moderate recession the company began to grow rapidly throughout the 1920s.
The Roaring ’20s became General Motors Company (NYSE:GM)’s coming-out party. Durant lost control of the company in 1920, but its new leadership guided GM through many notable milestones during this time. GM produced its 1 millionth Chevy in 1923. Two years later, the company joined the Dow Jones Industrial Average for what would become an 84-year tenure. In 1927 it surpassed Ford in total sales for the very first time, and by 1931 it would claim the sales lead for good. GM remained atop the auto industry until the debt-fueled financial crisis of the 2000s, which forced the century-old company into bankruptcy (and out of the Dow) in 2009.