Automotive News GM 100 Supplement

General Motors Story 30 /100 Planes, trains were also part of GM’s grand plan For decades, company was a major player in rail, aviation industries April Wortham © GM Corp. By rail and by air GM’s history doesn’t involve just cars and trucks. The company also was involved heavily in rail transportation . . . 1930: GM acquired Winton Engine and Electro-Motive Engineering. 1934: Burlington Zephyr used GM diesel in Denver-Chicago dash. 1938: Electro-Motive opened plant in LaGrange, Ill. 2005: GM sold Electro-Motive Division. . . . and aviation 1919: GM bought airplane maker Dayton Wright Co. 1929: GM bought stake in Bendix Aviation and Fokker Aircraft. 1933: GM acquired control of North American Aviation. 1934: Air Mail Act passed by Congress. 1948: GM divested Bendix and North American Aviation. destined to succeed him in the GM hierarchy. But Breech’s talents caught the eye of a desperate Henry Ford II, who in 1946 persuaded Breech to switch sides to help rebuild Ford Motor Co. Breech took with him Lewis Crusoe, whom Breech had snagged from Fisher Body in 1944 to be his assistant at Bendix. o view General Motors as just a car and truck maker is to overlook important chapters in its history — and some crucial turning points for the U.S. aviation and railroad industries. GM’s interest in railroads dates from 1930, when the company purchased Winton Engine Co. and Electro-Motive Engineering Co., both of Cleveland. Electro-Motive designed and sold gasoline-electric rail cars that were powered by Winton engines. The dawn of the Depression may have seemed an odd time for a company, even one as successful as GM, to invest outside its core business. But as longtime CEO Alfred Sloan noted in his memoir, the company never doubted that Winton was a “good buy.” “For one thing, we were not at this point certain about the future of the U.S. automobile market, which had not been expanding during the late 1920s,” Sloan wrote in My Years with General Motors. “Consequently, we had a natural interest in any enterprise within our scope that offered us a reasonable opportunity to diversify.” T The Zephyr engine, built by GM in the 1930s for the Burlington Railroad, is a classic example of American modernist design. One is on display at Chicago’s Museum of Science and Industry. From steam to diesel In addition to the gasoline-electric engines it supplied to Electro-Motive, Winton also built diesel engines, primarily for the marine industry. But it was struggling to apply the technology to railroads. Enter GM, which assigned its prize engineer, Charles “Boss” Kettering, to the task. Kettering and his team answered with a lightweight, eight-cylinder, two-stroke diesel. The prototype made headlines in 1934 when it powered the Burlington Zephyr stainless steel streamlined train in its much-publicized “dawn-to-dusk dash” from Denver to Chicago. That brought GM’s new diesel engine to the attention of every railroad in America, nearly all of which still were running on steam. By 1938, GM was building entire locomotives at a new factory in La Grange, Ill. By 1962, America’s railroads had converted from steam to diesel, and GM’s Electro-Motive Division was the world’s leading manufacturer of diesel locomotives. Along the way, GM’s philosophy changed, says John Jarrell, the GM vice president responsible for the locomotive group from 1989 to 1995. Instead of viewing its nonautomotive businesses as a hedge, GM succumbed to analysts who thought the corporation was spreading itself too thin. In 2005, GM sold ElectroMotive Division to private equity partners. “There are far different financial pressures now,” says Jarrell, 73 and retired. “When GM was the largest industrial corporation in the world, they had money to put into those things. That’s all changed.” Jarrell says GM had nine nonautomotive divisions when he joined the company in 1955. Electro-Motive was one of the last to go. “It just didn’t fit then because it was the only orphan in the group,” he says. Taking to the air GM had dabbled in aviation as early as 1919, when it bought Dayton Wright Co., one of the earliest airplane manufacturers. But the automaker got serious about building airplanes in the late 1920s, when public interest in air travel was at a fever pitch. There was even talk that small personal planes, called “flivvers,” could replace automobiles for much personal travel. In 1929, GM bought a stake in two of the most prominent aircraft manufacturers of the day: Bendix Aviation Corp. and Fokker Aircraft Corp. The Fokker purchase was illtimed; the stock market crash a few months later dealt Fokker a deadly blow. By 1931, the company was out of business. In 1933, GM put more chips on the table by buying a controlling interest in North American Aviation, a holding company that bought and sold interests in airlines and aviation-related companies. North American Aviation owned all of Eastern Air Transport (later called Eastern Air Lines) and minority stakes in Transcontinental Air Transport and Western Air Express Corp. Transcontinental, in turn, owned Transcontinental and Western Air Inc., which later became Trans World Airlines. That same year GM tapped Ernest Breech, an assistant treasurer, to be president of North American Aviation. In 1942, he took the same post at Bendix and is credited with introducing GM management techniques there. Breech was a favorite of Sloan’s and seemed Bad timing GM’s aircraft timing was not good. In 1934, Congress passed the Air Mail Act — which prohibited companies that engaged in aircraft manufacturing, either directly or through a subsidiary, from owning stock in an airline company. “Almost immediately, GM was at a disadvantage because people were looking at it not as a corporate enterprise seeking to expand the economy but as another voracious monopoly feeding at the public trough,” says Bob van der Linden, chair of the Smithsonian Institution’s aeronautics division. “It wasn’t true, but perception is reality.” So GM, he says, “gradually backed off.” GM sold Bendix and North American Aviation in 1948, and North American’s remaining assets and operations eventually became part of Boeing Co. But van der Linden says GM already had left its mark. “It validated aviation as an industry, particularly from the perspective of Wall Street, and I can’t overemphasize how important that was,” van der Linden says. “It was as clear a symbol as you can get that aviation as an industry had come of age.” Frigidaire kept GM’s bottom line cool he Frigidaire brand would not have become part of General Motors had it not been for Billy Durant, who purchased the fledgling Guardian Frigerator Co. in 1915 from inventor Alfred Mellowes with $56,366.50 of his own money. Mellowes was attempting to rid the world of the icebox with hand-built, electrified cabinets — with little luck. But GM quickly repaid Durant when it became apparent that automotive-style assembly lines could make refrigerators at a fast clip. GM made the Frigidaire business part of its Delco-Light subsidiary and moved it to Dayton, Ohio. Frigidaire initially lost money but by 1926 had contributed $15 million to GM’s net earnings. The cost to build a refrigerator had dropped from $750 in 1921 to $96 in 1933. Frigidaire expanded its business to include air conditioning, electric ranges and self- T By the 1960s, Frigidaire’s complex in Dayton, Ohio, had grown to the size of 125 football fields. cleaning ovens. For those who could not pay cash, General Motors Acceptance Corp. provided financing. For World War II, Frigidaire changed its assembly lines to build .50-caliber machine guns and B-29 propeller assemblies. After the war, Frigidaire expanded its home appliance business to feed America’s consumer craze. New products included clothes washers and dryers, dishwashers and food-waste disposers. In 1953, Frigidaire began building air-conditioning compressors for GM automobiles. By the mid-1960s, the Frigidaire manufacturing complex in Dayton had grown to the size of 125 football fields — just as the company had sold its 50 millionth appliance. But the 1970s economic malaise took its toll. GM had to divest some of its holdings to free up cash. Appliances had stayed a maddeningly low-margin business, especially when UAW wages were factored into the bottom line. In 1975, GM split off the automotive airconditioning unit into Delco Air Conditioning. In 1978, Frigidaire’s appliance business lost $40 million on $450 million in sales. In January 1979, GM announced it had sold Frigidaire to giant White Consolidated Industries of Cleveland for about $120 million. That purchase completed a White trifecta of also buying American Motors’ ailing Kelvinator and the remnants of Ford’s Philco units at huge markdowns from book value. Frigidaire firsts 1915: Cabinet refrigerator 1929: Home food freezer 1931: Freon refrigerant 1937: Electric range 1938: Window air conditioner 1947: Agitator clothes washer 1952: Automatic refrigerator-freezer defroster 1965: Ice-making freezer Source: The Frigidaire Story The Frigidaire name, product line and distribution system were given to White. GM held on to the sprawling facilities at Dayton. Within two years, Chevrolet was using the site to build diesel engines and the S10 compact pickup. — Mark Rechtin AUTOMOTIVE NEWS September 15, 2008

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