Automotive News - September 15, 2008 - (Page 32)

General Motors Story 6 /100 Billy bought, bought — and then bought more New brands, suppliers created a broad, vertically integrated company Ronald Ahrens © GM Corp. eing double-crossed can lead to good things. The case of Billy Durant provides an example. Billy got the short end of the stick from a supplier in the late 1880s when he was in the carriage business. He vowed it wouldn’t happen again — and it didn’t. Not in the carriage business and not in the auto business. How do you keep your suppliers in line? Easy. You buy them. Back to the beginning: In 1886, Durant and his partner, Dallas Dort, founded Flint Road Cart Co. in Flint, Mich. They offered a softly sprung, two-wheeled cart and enlisted local carriage builder William Paterson for assembly. Paterson soon undercut Durant’s price to a key Chicago dealer. Billy was not pleased. He and Dort decided to manufacture every important part, even the whip socket. They bought makers of wheels, springs and axles, and the linseed oil used in making paints and varnishes. They bought a maker of wooden spokes, and they bought other carriage makers. They procured axle-making tools and established Flint Axle Works in 1901. B Buying spree Some of the companies Billy Durant acquired on the way to the vertical integration of General Motors Automakers: Rainier, Cartercar, Welch, Marquette, Ewing Suppliers: Weston-Mott Co., Albert Champion Co., Michigan Motor Castings, Jackson-Church-Wilcox, Michigan Auto Parts, Dow Rim, Heany Lamp, Brown-Lipe-Chapin More suppliers To feed his monster, Durant acquired a host of suppliers, usually by trading stock for equity. Sometimes the targeted company was desirable merely for its patents. For example, Elmore Manufacturing Co., of Clyde, Ohio, was considered useful for its two-cycle engine. Some of the new holdings were Seagar Engine Works, of Lansing, Mich.; Michigan Motor Castings Co., Flint; Jackson-Church-Wilcox Co., Jackson, Mich.; Michigan Auto Parts Co. and Northway Motor & Manufacturing Co., both of Detroit; and Dow Rim Co., New York. Durant grabbed all four units of Heany Lamp Co. While shopping for lighting, he also took Novelty Incandescent Lamp Co., which was formed in 1906 in St. Mary’s, Pa. Today, that factory, operated by Osram Sylvania, spits out 2 million light bulbs a day. Another member of the wedding, BrownLipe-Chapin Co., of Syracuse, N.Y., produced transmissions and differentials. The company’s ads claimed “40 Reasons for Superiority.” In 1908-10, GM’s assets grew to $54 million on a cash outlay of $7 million. It held 21 percent of the market, producing 21 models under 10 brands. Supplier coup: axle maker Weston-Mott, which Durant lured to Flint in 1907 to equip Buick. Buick and its satellites Their Flint Varnish Works also began operations that year. Since wood was a necessity, Durant and Dort bought southern forests. Longtime GM chief Alfred Sloan followed Billy’s lead. GM made just about everything it used until it spun off its Delphi operations in 1999. Late in 1904, Durant accepted the challenge of turning around Buick. He brought home 1,108 orders from the 1905 New York auto show and established 13 Buick distributorships nationwide. Then he purchased a 220-acre greenfield site just outside Flint. Before long, the huge new Buick factory enclosed 14 acres. By June 1905, Durant was pursuing axle maker Weston-Mott Co., of Utica, N.Y. His incentives lured C.S. Mott to locate beside the Buick factory. After meeting Buick’s needs, Mott was free to sell to other makers. The Weston-Mott factory was completed the next summer, and the axle maker moved to Flint Feb. 1, 1907. Further supporting his ambitious operation, Durant persuaded W.F. Stewart Co. to build a body plant at the Flint site. Subsidiaries of the carriage company such as Imperial Wheel Works, Flint Axle Works and Flint Varnish Works became automotive suppliers. J.B. Armstrong Co., also of Flint, remained independent but supplied springs to Buick. After entertaining former bicycle racer Albert Champion’s demonstration of his superior porcelain spark plug, Durant bought the patents and tools, moved Champion from Boston and set him to work in a corner of the Buick plant. Thus was the AC Spark Plug Division born. Durant formed General Motors in 1908 and added another manufacturer or supplier every 30 days or so for the next two years. © GM Corp. Forced out again Durant was forced out of the GM hierarchy in 1910. In 1916, he used his interest in Chevrolet Motor Co. to regain control at GM, and set up United Motors Corp., which included Sloan’s Hyatt Roller Bearing Co., Charles Kettering’s Dayton Engineering Laboratories Co., Remy Electric Co., New Departure Manufacturing Co. and others. In Billy, Alfred, and General Motors, William Pelfrey writes that with that move Durant “laid the foundation for the final and complete vertical integration of General Motors.” Chevrolet and United Motors were absorbed by GM in 1918 as a condition of the DuPonts’ $25 million infusion, which was to be followed by other stock purchases. By the end of 1918, DuPont had invested $43 million. By the end of 1919, it was $49 million, which represented 28.7 percent of GM common stock. The investment figures were quoted by Sloan in My Years with General Motors. Forced out a second and final time in 1920, Durant again felt double-crossed. “There was never any doubt in his mind that he was the victim of a plot,” his wife, Catherine, told biographer Lawence R. Gustin in Billy Durant: Creator of General Motors. Plot or not, Durant’s successors adopted and refined his methods. They capitalized on his farsighted purchase of Frigidaire, for one thing. And GM purchased controlling interest in Yellow Coach in 1925, the foundation of GMC truck. More would follow, including diesel and aviation engines. AUTOMOTIVE NEWS Cadillac, an early acquisition, patented the electric starter in 1912. To prove it was sturdy, the brand put a dozen men on a Cadillac chassis and drove around using only power from the starter motor. Putting GM together “I figured if I could acquire a few more companies like Buick, I would have control of the greatest industry in this country,” Durant wrote. He formed General Motors Co. in 1908, acquired Oldsmobile and added another manufacturer or supplier every 30 days or so for the next two years. Oakland (later Pontiac) and Cadillac broadened GM’s product offerings in 1909. Reliance Motor Truck Co., of Owosso, Mich., and 32 September 15, 2008 Rapid Motor Vehicle Co., of Pontiac, Mich., were combined in 1911 to form General Motors Truck Co. (later GMC). Other early speculative acquisitions included: Rainier Motor Co., Saginaw, Mich., produced the “Pullman of Motor Cars” and guaranteed “a year’s use without repair expenses.” Cartercar Co., Pontiac, briefly notable for its friction drive. “No clutch to slip, no gears to strip,” chimed the company’s slogan. Welch Motor Car Co., Pontiac, claimed an American industry first with its overhead- cam four-cylinder engine in the luxurious 1905 models that started at $4,000. For lowerpriced vehicles, Welch-Detroit Co. was established in Detroit. Marquette Motor Car Co., Saginaw, continued Rainier production and produced WelchDetroit parts. A large, expensive Marquette car was produced in 1912. Ewing Automobile Co., Geneva, Ohio, billed its 108-inch-wheelbase taxi as “The debutante of the season” at the 1908 New York auto show. GM dissolved the unit in 1911.

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