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Rise and Fall of General Motors

The automobile has been part of the fabric of American life for more than a century. As in Europe, there were individual inventors and entrepreneurs who experimented with vehicles propelled by internal combustion engines. But, the first commercially viable automobile produced in the United States is credited to Ransom E. Olds, the son of an Ohio blacksmith.

In 1897, he founded a motor works in Lansing, Michigan that soon was producing 425 cars a year. In 1908, it was purchased by the newly organized General Motors which continued production of the Oldsmobile for the next 96 years, ultimately building more than 35 million cars, half of them in Lansing.

Interestingly, General Motors did not begin as a manufacturer, but as a holding company to acquire existing concerns. Until then, each auto maker had been a unique, small scale business. The idea of bringing several automakers under one roof to achieve economies of scale that would benefit each brand was the brainchild of William Durant, a high school dropout who happened to be the grandson of a respected former Michigan governor. After several jobs in the fledgling automobile industry, he was hired in 1904 by an investor, who had helped finance a company started a year earlier by Scottish immigrant David Buick.

Durant proved to be a brilliant promoter as well as a visionary businessman and soon Buick was the largest selling automobile in America. But, he didn’t stop there. He formed and sold stock in a holding company to first acquire Buick, then Oldsmobile and several other small automakers, among them such brands as Pontiac and Cadillac. He also acquired several truck makers that would eventually be consolidated under the GMC label. But, his rapid spree of acquisitions plunged the nascent General Motors deeply into debt and, when a recession hit in 1910, the resulting downturn in vehicle sales prompted the banks who had financed the company’s growth to take it over and fire Durant.

Undeterred, he teamed up with inventor Louis Chevrolet and within five years had made such a success of the new company that he was able to buy out his partner and wage a winning proxy battle for control of General Motors. He reinstated himself as president, bringing his Chevrolet brand with him, where it remains to this day.

But, four years later Durant found himself in another proxy fight, this time losing to the Duponts of chemical company fame and wealth, who owned 43 percent of GM’s shares and eventually rallied the handful more needed to take control. The once high-flying William Durant was out again, this time for keeps.

He would try a third time to build another auto conglomerate by, again, bringing several small manufacturers under one roof. However, the stock market crash of 1929 put an end to Durant’s newest company and his long-cherished dream. He spent the last eighteen years of his life living on a small pension from General Motors and managing a bowling alley in Flint, Michigan. Meanwhile, one of his protégés, Alfred P. Sloan, took the helm of General Motors and, over the next 33 years, built it into the world’s largest auto maker with a quarter million employees in 34 countries. But times have changed.

Last year, Japan’s Toyota surpassed General Motors as the world’s largest producer of automobiles. GM’s $50- a share “blue chip” stock was selling for less than a dollar when trading was suspended in early June. As it emerges from a brief stay in bankruptcy court, GM’s biggest shareholder now is the United States government. Oldsmobile, Pontiac and other of its brands, along with some overseas acquisitions, have been shut down or sold. The rest of the General Motors story remains to be written.