The corporate triumvirate responsible for the introduction of lead into the world’s gasoline supply would not be complete until William Crapo Durant’s upstart General Motors came under the control of the duPont family. Explosive (no pun intended) growth at the carmaker had come about in spite of its haphazard management, but with the increasing duPont stake in its affairs, a measure of order was instilled, along with a clear institutional mandate – profit at any cost, no matter the price in human life and safety.
This isn’t the story of how the three companies introduced leaded gas—that’ll be in the next one—but to tell that story, we have to understand how GM emerged from its topsy-turvy early days and came under the control of DuPont.
Thanks to those new owners, GM would become not just a more regular business, anxious to keep its mind on its money, but a notably ruthless one, prepared ultimately to poison not just its customers but the world at large, to keep the cash flowing. The founders of the world’s first auto companies all had grandiose dreams, but unlike the rest, GM started with the express idea of controlling the car market. It wanted to be a trust, the auto industry’s monopoly. In DuPont it found a perfect partner. And while the two corporations never succeeded in completely dominating the car market, together they devised an even more fiendish plan, with the help of Standard Oil: creating and then controlling the market for leaded gasoline.
“You must recognize that I am essentially, or at least believe and hope I am, a member of the du Pont family.”
Alfred P. Sloan, to Irénée duPont, 1926.
When the big recession of 1914 touched down, General Motors’ shares skittered off the table, swiftly shedding forty percent of their value to trade down around $37. But the guns of war stayed its decline, as the New York Stock Exchange closed its doors from July through November of that year following the outbreak of World War I.
Hard times seemed to lie ahead, but when the exchange reopened, it turned out that the international conflagration –the one that began when Austria-Hungary sent a pissy demand letter to Serbia in the summer of 1914 following the assassination of Archduke Ferdinand — had been good news for the fledgling carmaker’s fortunes, as it would be for our story’s other star players, Standard Oil and DuPont. By December, GM shares were trading at a considerably less sickly $81½, a level that would be forgotten a year later when GM shares hit $510.
Among those profiting from the wild run-up in the price of General Motors’ stock was Pierre S. duPont, who had begun buying shares secretly early in 1915, joining his deputy John Jakob Raskob, who’d taken the plunge the previous year. William Crapo Durant, who’d been relieved of GM’s presidency in 1910, only two years after he’d formed the corporation, was also quietly moving to pad his still considerable holding in the company. By December 1915, as the New York Times reported, he was understood to hold with associates more than 100,000 of GM’s outstanding 165,000 shares, worth more than $50 million.
These were the days when executives put their money where their mouths were, diversification be damned, and Durant remained a committed GM man even after the embarrassing loss of his command position. In years to come, he’d trade heavily in the company’s shares, buying on margin if necessary to prop his holding up, exposing himself to unreasonable, even ridiculous, risk. He’d make big plays to support the leviathan he’d begun to assemble in 1903, but they didn’t always work, the last time they failed to deliver being the worst for a man who was said by the end of his career to have squandered a fortune worth over $120 million.
In Durant’s view, GM was to have been the brand name of the automobile trust, the emergent industry’s introduction to the vertically integrated holding company, like those established by earlier great trusts in other areas, like oil and sugar. He had previously brought his eye for consolidation along with a first-class acquisitive streak to the carriage-making trade as a successful partner in Durant-Dort Carriage Co. America’s largest carriage maker, Durant-Dort was the reason Flint came to be known as “The Vehicle City,” even before automobiles filled the northern outpost’s factories.
Still relatively youthful, Durant eased comfortably into motorized transport with the purchase in 1903 of Buick, to which he’d add the Oldsmobile and Oakland brands, consolidating three of the auto industry’s more respectable names in the span of less than three months. No shrinking violet, Durant then set his sights on the two of the very best firms, Ford and Cadillac. But Ford wanted $3 million — and later $8 million — in cash. Not yet wise to an automotive future where not just the rich but working men and women would own (and frequently replace) automobiles, no bank would lend Durant the money.
While Durant’s mega-merger schemes played out, the J.P. Morgan banking interests hovered closely in the background, as they were anxious to finance the creation of an American automobile trust, not unlike the great steel trust J.P. Morgan himself helped to create in 1901. Trusts were Morgan’s specialité. But for funds organized they had a strict list of conditions, chief among them their insistence on obtaining, for their trouble, effective control of any new giant being created as well as a large equity stake, free of charge, neither of which set easily with Wall Street-hating individualists like Ford and Durant. They weren’t about to hand over the keys to the bankers yet.
Durant did acquire Henry Leyland’s Cadillac in the end, though, and — following the old racer’s adage, “run what you brung” — consolidated it in 1908 with Oldsmobile, Buick, Oakland, a Canadian distributor and a few truck makers to form the original General Motors Company. But not for long. Durant now had GM stock to play with, which he dispensed liberally to almost anyone who would accept it in exchange for their businesses. Using GM shares, he’d acquire: Champion Ignition Co., Weston-Mott Company, Reliance Motor Truck Co., Rainier Motor Co., Michigan Motor Castings Co., Welch Motor Car Co., Welch-Detroit Co., Jackson-Church-Wilcox Co., Michigan Auto Parts Co., Rapid Motor Vehicle Co., Cartercar Co., Ewing Automobile Co., Elmore Manufacturing Co., Dow Rim Co., Northway Motor & Manufacturing Co., and National Motor Cab Co., with additional interests taken in Maxwell-Briscoe, United Motors Company and Lansden Electric.
Sadly, for Durant, much of this buying was misguided. Upon closer inspection, many of the firms proved of no value — incompetent, insolvent, incorrigible or some useless combination thereof. Of course, the market and the press didn’t know that. For the year ending Oct. 1, 1909, GM’s revenue was $29 million with an income of $9.1 million, which sounded astonishingly good, causing GM to be “hailed at the end of its first year as the lustiest industrial infant ever born in America.” Delighting traders and holders alike, it paid a dividend of 150 percent on its common stock.
Behind the scenes, however, GM was a mess, its cost-control apparatus and central planning function both non-existent. By 1910 this hastily assembled hodge-podge of unrelated, often overlapping brands and parts makers was heavily indebted to its banks. Durant, more ideally suited to corporate shopping sprees and public relations broad strokes than rational management or the careful ordering and integration of major purchases, was muscled from the presidency. The outside suppliers to whom GM owed millions agreed to defer debt, but only in exchange for the dapper chief executive’s agreement to walk the plank and his assent to putting Eastern bankers in charge. A $15-million loan was arranged through financiers Lee, Higginson and Company, who installed a senior partner, Boston investment banker James J. Storrow, to run the show. (The Storrow name will be recognized by modern Bostonians for the well-known artery running alongside the Charles River, Storrow Drive.)
Durant remained a major shareholder and chair of GM’s Finance Committee, but this key committee posting would not last; he was given the broom after yet another catastrophic failure, the Heany subsidiary, a recently acquired maker of electric car lights which saw its patents rendered worthless by lawsuits, sinking the firm and short-sheeting GM to the tune of between $5 and $12 million… in valuable 1911 dollars.
While making a policy decision to concentrate on its existing holdings, GM’s sober new management also moved now to have the corporation listed on the New York Stock Exchange, the first automobile securities ever to be listed by that body. Durant, meanwhile, set out to plot his return to power.
An inveterate risk-taker, Durant was well-liked, in spite of himself, and after casting around he soon find salvation in a small firm he’d secured backing for his son-in-law to form in 1911 with Louis Chevrolet, a French-born racecar driver of some repute who made his name besting (in his Buick) America’s first most beloved wheelman, the famous Barney Oldfield.
Chevrolet’s design for the new company, which featured a large, six-cylinder engine, was not especially impressive, nor was it well received by the car-buying public. But when the company reorganized in 1913, Chevrolet had revised its goal. As James Flink writes in The Automobile Age, it wanted to build a simple, light car to compete at popular prices with the Model T made by the Ford Motor Co. Though it wouldn’t unseat the Model T for more than a dozen years, Chevrolet then released a pair of four-cylinder cars which struck a nerve with the American motorist, earning its principals millions and ultimately supplying Durant with a ticket back to GM’s highest ranks. Where GM once concentrated on premium-priced cars — its Oldsmobile sold for $5000 in 1911 (or about $144,000 in today’s market) – Durant was now on a course to meet the mass market where it lived.
In September of 1915 the Chevrolet Motor Company of Delaware was floated, comprising all Durant’s post-GM holdings, including the Chevrolet Motor Company of Michigan in Flint and several less well-known brands he’d also acquired since his involuntary separation from GM five years earlier. Among them, Republic, in Tarrytown, New York, was quickly folded into Chevrolet, where it had proven especially useful to his comeback. For, unlike many Midwestern auto enterprises, its proximate location to the New York media and Wall Street investment community made it an easy-to-visit proof of the company’s solvency and smarts. Better yet, Durant set up a Chevrolet demonstration factory in Manhattan, with parts shipped in from the Midwest to New York City to be assembled into cars that would then be shipped back to the Midwest for sale. It was the purest form of show business.
With steady profits and his well-known name attached, the $6.8 million Chevrolet issue went off quickly. Durant then quickly traded his remaining shares (including those he’d bought from Louis Chevrolet, who was not pleased with the new cars bearing his name) to reacquire control of GM. Five years after he’d been unceremoniously invited to leave, Durant was back in charge of the company he founded.
Arthur Pound, a historian recalling this Miracle on Wall Street from the vantage point of the 1930s, had no trouble capturing that earlier era’s sense of Durant’s awesome genius. “In all American industrial history there has never been anything equal to the rise of Chevrolet,” he wrote in The Turning Wheel: The Story of General Motors through Twenty-Five Years, 1908-1933. “It had made $6,000,000 in six years and had amazed the automobile world by securing control of General Motors Company of New Jersey.”
While the duPont interests looked on in silence — stunned but bemused, one imagines – the Storrow banking axis was turned out on its ear in 1916. GM was, once again and for the time being, Durant’s show. When he assumed the presidency, his immediate predecessor Charles Nash left to form the Nash Motor Company with Storrow, while Cadillac’s Henry Leland departed to form Lincoln, (which Henry Ford would later purchase.)
But the duPont interests planned to stick around. “Even though Durant had won control without any active help from Pierre du Pont,” historians Alfred D. Chandler (D for duPont; he was a distant cousin) and Stephen Salsbury wrote in Pierre S. duPont and the Making of the Modern Corporation, “he was obviously not willing to lose an ally of Pierre’s stature and financial resources. He urged the Wilmingtonian and his associates to remain on the board; he asked Pierre to continue as chairman when he, Durant, took over the presidency in June on Nash’s retirement.”
For the time being, the DuPont men made their peace with Durant. Raskob was a friend and even Barksdale — DuPont’s resident stickler for accurate records, tight controls and rational management – counted himself a fan. An early Chevrolet board member and GM shareholder, he’d counsel the eccentric Durant on occasion and, as Ernest Dale and Charles Meloy wrote in Hamilton MacFarland Barksdale and the DuPont Contributions to Systematic Management, Durant was heard to say later that he regretted not taking more of Barksdale’s advice.
With nearly a billion dollars in war sales, representing in the contemporaneous estimation of one DuPont executive some 276 years of business, along with earnings in the previous four years of $232,000,000, the DuPont board voted on Dec. 21, 1917, to approve the acquisition of $25 million in GM common stock in the corporation’s name. These holdings — combined with the personal stakes held by duPonts Pierre and Irénée, as well as Raskob and Barksdale — would achieve co-equal status for DuPont with Durant.
Pierre found his newly empowered partner’s penchant for risky side dealing troubling, though, and he intended that his people would instill in General Motors and its founder his family’s philosophy of vigorous cost accountancy, the wisdom of expanding through earnings and above all the need to reverently honor and monitor the central indicator in all that is “business,” return on investment or ROI. But he didn’t follow through.
In furtherance of its stated insistence on financial probity, DuPont would from now on dominate GM’s finance committee. “The financial management of General Motors Corporation is thrown very largely up to us and plans are under way to bring us into intimate contact with that end of the business,” Raskob reported to the Du Pont Finance Committee. With Raskob as its chairman, and Irénée, Pierre, Henry F. duPont, and J. Amory Haskell all there to represent the Wilmington viewpoint, the impetuous Durant was outnumbered comprehensively. But reflecting his major holding, the company’s Executive Committee remained organized so as to leave him in charge, making it as bullish and impulsive as the man himself.
In spite of his own more cautious temperament, Pierre duPont admired Durant, too, and, though it might serve him later to say otherwise, his intended controls notwithstanding, he was also largely on the same page as the swashbuckling entrepreneur when it came to attempting to attain a vertical monopoly for General Motors by a policy of aggressive acquisition.
With his mind focused on DuPont business as well, Pierre at first delegated the responsibility for running GM largely to Raskob. But neither as the ranking DuPont representative on the executive committee or as GM’s vice president of finance, was Raskob inclined to curb Durant. The hard-charging DuPont factotum had a fundraiser’s sort of mind, not that of a systems wizard or operations manager. And Durant was forever needing funds raised, as he engaged in a hyperactive capitalist’s four-dimensional chess game in which he sought not only to preside over an incredibly complicated business in a messy industry while endeavoring to continue rapid expansion, and surreptitiously gin the market in his own shares. DuPont, in the person of Raskob, brought to these tasks their shrewdest manipulator.
Restored to GM’s highest office, the thrill-seeking Durant was thus able to carry on as before, only with more ready funding. Practically as a sidelight, he assembled United Motors, a huge parts making conglomerate. Established in his preferred fashion almost entirely through stock transfers, United would be incorporated in New York in May of 1916, and would soon encompass Charles Kettering’s Dayton Engineering Laboratories (DELCO,) Remy Electric and the New Departure bearings companies, along with Perlman Rim Corporation, Harrison Radiator and the Klaxon Company, famous makers of horns. Durant had begun the vertical integration that GM (and the industry’s largest players) would continue to pursue for more than half a century to come.
Among the important suppliers of parts Durant would acquire for United around this time was the Hyatt Bearing concern of Newark, New Jersey. It was perhaps the most significant of his many purchases, for along with the successful parts maker, he obtained the services of its 42-year-old owner/proprietor, an MIT graduate named Alfred Pritchard Sloan, Jr. Born in Connecticut, raised in Brooklyn, Alfred Sloan had founded Hyatt with $5000 of his father’s capital in 1898, and it had become quite successful. Durant rather liked this tall, somber, mainline Methodist with the heavy New York accent, selecting him to run United Motors. He was clear-headed and efficient and he didn’t talk back.
While Durant worked his magic, DuPont was using bountiful war profits to expand its own holdings in the automobile business. In 1916, it laid claim to a rubber-coated fabrics business (used in automobile roofs) by purchasing the Fairfield Rubber Company, which became DuPont’s Fabrikoid division. This supplemented its 1915 acquisition of the Arlington Company, one of the nation’s largest makers of celluloid; in 1917, it would expand further in this direction by buying Harrison Brothers & Company, paint and varnish suppliers to General Motors, and in 1918, it would pick up another, Flint Varnish & Chemical Works, GM’s primary paint supplier.
DuPont was foursquare in the automobile business now and as Raskob suggested in 1917, it wanted for itself as much of GM’s business as it could profitably assume.
The consolidation of United Motors was completed in 1918, as Arthur Pound wrote in his history The Turning Wheel, bringing it into the new General Motors Corporation re-founded in 1916 with the addition of Chevrolet. Sloan, who had quickly proven an able manager, adept at bringing a semblance of order to chaos, was named Vice President in Charge of Accessories and made a member of GM’s Executive Committee, as the Alfred P. Sloan Foundation itself notes.
With DuPont closely following events yet uttering nary a word of protest, Durant continued the charge, completing the buyout of the Frigidaire Corporation (formerly Guardian Frigerator Corp.) in 1919, while also acquiring two more companies affiliated with Charles Kettering, Dayton-Wright Airplane Co. and Dayton Metal Products Co. A major stake in car body builder Fisher Body was acquired and in a bit of heavy spending that couldn’t be attributed to Durant, (who kept an estate in New Jersey and preferred New York to Michigan,) General Motors went forward with plans for the construction of lavish, Albert Kahn-designed office towers in downtown Detroit, at the southwest corner of West Grand and Cass.
As DuPont’s first point man at GM, John Jakob Raskob brought much to the car company, serving as a vice president and director, as well as chairman of its Finance Committee. A slight, wiry, energetic sort with 13 children evidencing his energy, Raskob may be credited with having supercharged the great engine of modern industrial prosperity when, in 1919, he implemented Durant’s inchoate idea for captive finance in the form of the General Motors Acceptance Corporation. By providing finance for installment purchase of automobiles, it helped the public consume today that which it could not afford outright. The modern practice of consumer finance was born, an innovation that would not only earn DuPont and GM billions but also change forever the very nature of consumption in the United States. By 1925, 75% of all automobiles sold in the United States were sold on credit, as Richard Wright notes in his book West of Laramie - A Brief History of the Auto Industry, a figure that has remained remarkably constant ever since.
Crucially, Raskob also helped to institute the Managers Security Company, the mechanism by which GM, like DuPont, rewarded loyalty among its top executives, by making them stakeholders without reducing the family’s own control. Far from it. By making tying top managers’ stake in the company and level of compensation to the company’s performance, the corporation held out to its most trusted lieutenants the prospect of becoming rich. That is, assuming they worked long and loyally for DuPont or GM and accepted its aims and decisions without question, as Raskob explained in a report to the du Pont finance Committee used as a government exhibit in the 1957 Federal antitrust case against DuPont and GM.
Of the Managers Security Company, Raskob said: “Mr. (Pierre) du Pont feels that the best manner in which to attain the greatest success possible in the conduct of the affairs of the General Motors Corporation is for the Corporation to interest its principal men in the corporation as substantial stockholders or partners. He not only feels this very keenly, but feels too that the du Pont Company with its large and controlling interest in the General Motors Corporation has now a splendid opportunity to enhance the value of its own investment in the General Motors Corporation through giving to the General Motors Corporation an opportunity to interest its important employees as managing partners in this great enterprise.”
As Hamilton Barksdale had earlier written, describing his view of ideal management practice, “Continuous linkage of ownership to management would be provided” as “those who have a stake in the business are likely to make better decisions than those who do not.” Then again, while such impulses initially led GM to share the wealth with its workers, when Social Security was launched in 1935, GM did away with its workers savings and investment program. But not its executive compensation arrangement.
Through the years, this sort of executive compensation arrangement delivered favored managers personal wealth in spades, though, as became clear, it was not always the case that better decisions were being made. GM manufactured some 247,000 cars and trucks in 1918, employing 50,000 workers. The next year, production rose to 400,000 and its payroll swelled to 86,000. By 1920, GM would be capitalized at over $100 million. Between 1914 and 1920, its share price had increased 5,500 percent, (a figure discussed in a 2007 report “New Economy Will Pick Up Again—With Higher Productivity” by economist Laurence Meyer.) But the bubble that formed would soon burst. Durant’s days were numbered.
The general business recession that began in September 1920 spread quickly to autos. Market leader Ford was compelled to slash its prices 20% to 30%. GM, unable to hold the line, was forced to follow suit and one of the industry’s first price wars was under way. Cheaper cars or no, sales in November 1920 were down to only 13,000 units, one-quarter what they’d been in early summer. By January 1921, production sagged to a mere 6,150 units. Almost $85 million in parts inventory had to be written off, per Chandler and Salsbury. It was a shock GM’s newly constituted, far-flung and ever shape-shifting system could ill afford.
Durant was rumored, correctly, to be in trouble. While the entrepreneur secretly organized a buying syndicate to prop them up, GM shares continued to sink. Working multiple telephones lined up on his desk, he guaranteed to personally underwrite losses of syndicators. His sense of loyalty seems quaint, almost sweet, by today’s standards, but it was hopeless. At the age of sixty, William Crapo Durant was now suddenly drowning in debt. Before long, GM would have lost two-thirds of its value, having experienced near fatal cash flow issues that summarily ended the Age of Durant. The psychological effect on the corporation and its owners was profound, too, leading it to change its ways both good and bad.
Addressing automobile editors of American newspapers at the company’s Milford (Michigan) Proving Ground in 1927, Sloan, who would become GM’s president, recounted the problem. “I liken our position then to a big ship in the ocean. We were sailing along at full speed, the sun was shining and there was no cloud in the sky that would indicate an approaching storm…yet what happened? In September of that year, almost over night, values commenced to fall…Inventory commenced to roll in, and, before it was realized what was happening, this great ship of ours was in the midst of a terrific storm. As a matter of fact, before control could be obtained General Motors found itself in a position of having to go to its bankers for loans aggregating $80,000,000 and although as we look at things from today’s standpoint, that isn’t such a very large amount of money, yet when you must have $80,000,000 and haven’t got it, it becomes an enormous sum of money, and if we had not had the confidence and support of the strongest banking interests our ship could never have weathered the storm.”
Sloan referred surely, if obliquely, to the ministrations of the J.P. Morgan bank. That it was hugely powerful then was no secret. In the period between the wars Morgan was at the peak of its great mastery of governments, influencing and, on occasion, openly directing world events, through its control of the world’s purse strings. Only Morgan could raise the really big money needed to make really big things happen. As Bertrand Russell and others amusingly pronounced in subsequent years, “God made the world in 4004 B.C., but it was reorganized in 1901 by James J. Hill, J. Pierpont Morgan and John D. Rockefeller.”
An Anglo-American institution of the very first order, the private bank founded by Junius Pierpont Morgan in the 19th century brokered the creation and operation of many of the world’s great trusts. As Russell would observe wryly but with little exaggeration:
“The ramifications of Morgan’s power were endless. He controlled Armour’s of Chicago, through whom he held power of life and death over the cattle of the Argentine. His shipping Combine contained most of the Atlantic liners. Edward VII, the Kaiser, and the Pope, entertained him as if he were a visiting monarch.”
Where industry was concerned, Morgan’s purview was everything and anything, everywhere and anywhere, and there could be no wondering if the bankers’ path would cross with General Motors, but only when. Durant, who’d tried his hand at trading stocks in New York before first getting involved in the automobile business with Buick, had become amply familiar with the House of Morgan following their earlier, failed attempt to assemble an automobile trust around Henry Ford’s sprawling empire. The conditions attached to Morgan’s loans had killed it for the headstrong Durant in the early 1900s, and with good reason. When a new opportunity for an industry trust presented itself back then Morgan started making moves, as George Perkins, a Morgan partner, explained, quoted in the 2006 history Billy, Alfred, and General Motors:
“Morgan and Company would investigate, consulting and questioning the various producers in the field as to their interests and opinions. Then the firm would prepare a plan and submit it to the chief corporations in the industry. If approved, the House of Morgan would estimate the working capital necessary to organize the new concern, and form a syndicate to raise the money. If $10,000,000 were needed, the syndicate would issue $15,000,000 in stock, the extra millions representing the syndicate’s ‘bonus’...Morgan would also insist upon choosing all the officers and directors of the new company. This point Morgan and Co. have found indispensable in making their combination.”
This time around, however, Durant was in no position to reject Morgan’s terms. In collegial consultation with the still very solvent duPont interests and in exchange for six seats on the GM board, J.P. Morgan was now induced to underwrite a $78 million stock offering, saving GM’s hide, filling its own pockets amply and, to a great extent, accessioning some part of the car maker’s future decision-making and income for itself. All, of course, after taking a moment to show Billy Durant the door.
On Dec. 1, 1920, with no cards left to play, William Crapo Durant resigned, never to return to General Motors. He would die penniless in New York City in 1946, having finally run a chain of Michigan bowling alleys. Ironically, with the Chevrolet experience still seared in their memory, the duPont family had for many years worried that Durant would rise phoenix-like to effect a hostile takeover, but DuPont by now was too big and too rich for the likes of any individual. DuPont was a fact of life now and while it had gone along with Durant’s reckless ways, it had the extraordinarily deep pockets needed to weather the storm.
(What scared DuPont, at least at first, was the Durant Motors Corporation, established by its indefatigable former partner in 1921 for some quick boom and bust stock manipulations before the Depression intervened to finally sink the company, along with the famous fellow himself — so far as wealth and prominence were concerned — in 1932, for good. Durant was not, however, the only fellow with GM ties and his own name to exploit. E. Paul duPont had built luxury cars under the name duPont Motors from 1919 through 1931. With only 537 duPonts made, they are highly prized by some collectors today, chief among them duPont family members*. Hardly finished, E.P. duPont went on to own the fondly remembered Indian Motorcycle Co. through his death in 1950, shortly before its 1953 bankruptcy.)
By 1921, DuPont increased its stake in GM to 38 per cent — “much against its will,” Raskob would write in 1923, again presented as evidence in the Federal antitrust case in 1957. DuPont took advantage of low share prices — allowing it to place approximately 15% of all GM shares into the security company for its executives, buying their fealty while still retaining overall control in Wilmington.
Underscoring the complete harmony at the top levels of GM’s retooled, fully-DuPont-aligned management, was the invitation to join the General Motors board at this time tendered to the family’s longtime gunpowder ally, Alfred Nobel. Living in England, his company, Explosives Trades Ltd., was also bursting with war profits.
The Morgan representatives were many, too, but there was no longer any mistaking whose company this now was. Pierre S. DuPont, reluctantly coaxed from retirement, he said, was made General Motors president, while Alfred P. Sloan, Jr., who’d curried favor with the duPonts preaching a doctrine of tight controls, consistent returns, and utter fealty to the family, was made executive vice president.
While a lack of documentary evidence prevents us from relating the many kind words undoubtedly shared between Sloan and Durant when the latter was still in power at General Motors — Sloan deliberately kept no records of his years at GM — Sloan wasted no time accommodating the wishes of the newly empowered Wilmingtonians. Presenting a plan for action that called for the explosives and chemical maker to more fully overlay its systems and batteries of controls on the GM empire, Sloan was only too happy to leave any memory of his association with Durant behind.
“You must recognize that I am essentially, or at least believe and hope I am, a member of the du Pont family,” Sloan would write to Irénée duPont in 1926 and he appears to have meant it.
Pierre duPont, meanwhile, shared “an implicit agreement” with his brothers that he would run GM while they took care of DuPont, as Chandler notes in his biography. Both companies would be controlled by the family’s Christiana Securities company, while its people were liberally installed inside GM as executives and officers. To say GM and DuPont worked closely together from hereon in would be gross understatement.
In 1921, however, GM sustained a rude shock, Wright notes in West of Laramie: its first annual loss as a corporation, $38.6 million. From its inception, GM had been a holding company, overseeing, in a disorganized and not always hard-nosed fashion, the activities of several unrelated car and car parts makers. Sloan termed the operational reality “management by crony, with divisions operating on a horse-trading basis.”
The 1920 recession left GM — a relatively small company compared to Ford, holding but 13% of the market versus Ford’s 61% — reeling, with sales faltering and inventories bulging. But with Sloan’s elevation, stricter controls would be enacted. New, smaller committees introduced greater centralization, as Roland Marchand lays out in Creating the Corporate Soul: The Rise of Public Relations and Corporate Imagery in American Big Business, especially in purchasing.
It had quickly become clear that the corporation only had the most tenuous grips on its inventories and the activities and accounts of its component firms. Recognizing that order had to be instilled, Sloan was encouraged to install the system of controls he’d presented to Pierre duPont when Durant was on the ropes. They clearly differentiated him from the failed leadership for whom he’d toiled.
To help Sloan, DuPont shipped in some young talent from its financial offices to report to GM’s new treasurer, DuPont’s Raskob. Donaldson Brown and Albert Bradley were there to help get GM running right, then, keep it that way.
A duPont and Barksdale relation by marriage, (he married Greta duPont Barksdale,) Brown, as a senior assistant in Raskob’s office at DuPont, devised in 1912 the basic return on investment formula the DuPont corporation used and worshipped, and he and Bradley brought his insight, the “standard volume” concept that endures through the present, to academic treatises and papers as well as GM.
Brown’s contribution to GM’s organizational clarity — which included the introduction of the industry’s once ubiquitous 10-day sales report and the use of independently verified sales figures — was informed by his years at DuPont’s Eastern Dynamite property under the guidance of the seminal DuPont executive (and, still more providentially, his future father-in-law) Hamilton Barksdale. His system called for a 20 percent return on investment, based on an average year’s sales. When sales were better than average, profits would be huge. When they were off, there would still be some profit, thanks in no small measure to the company’s ready willingness, in those days, to let workers go whenever demand slackened.
Brown’s coldly factual financial side endeared him to his superiors, though the dry graphs and charts with which he would communicate would often alienate his counterparts, leaving one associate to suggest that he “didn’t speak any known language.” They also led the companies it might be argued into some less than savory enterprises.
If Sloan was a DuPont man, GM was now a DuPont company. It is worth pausing briefly to contemplate the dramatic extent of the old powder maker’s control over General Motors and the sheer number of hats top executives simultaneously wore at the two companies. Though differences would arise, as George Stocking, a Vanderbilt University law professor enumerated, after examining documents in the government’s 1957 antitrust suit against DuPont, the ties could scarcely have been any tighter:
“J.A. Haskell, who became a director and vice president of duPont in 1915, also became a director of General Motors in 1917 and a vice president and member of General Motors’ executive and finance committees in 1918. He retained all these positions until his death in 1923. Donaldson Brown, who has been a director of du Pont continuously since 1918 and a member of its finance committee since 1920, has been a director of General Motors since 1920 and a member of first its finance committee and then its financial policy committee since 1921. He was chairman of its finance committee from 1929 to 1937, vice chairman of its financial policy committee from 1937 to 1946, and a member of the General Motors administration committee from 1942 to 1945, of the policy committee from 1937 to 1946, and of the executive committee from 1924 to 1937. John L. Pratt, who had been a du Pont employee during most of the period from 1905 to 1919, went to work for General Motors shortly after du Pont acquired an interest in it. He was made vice president in 1922, a position he continued to hold until 1937. He served on the General Motors executive committee from 1924 to 1937. He has been a director of General Motors continuously since 1923 and a member of its financial policy committee since 1946. H. M. Barksdale was a vice president of du Pont from 1915 to 1918 and a director and member of the du Pont finance committee from 1916 to 1918. He was also a General Motors director and member of its finance committee from June to November 1918. Walter S. Carpenter, Jr., Lammot du Pont Copeland, Henry Belin du Pont, H.F. du Pont, Irenee du Pont, Lammot du Pont, Pierre S. du Pont, Angus B. Echols, John J. Raskob, all du Pont men, and Alfred P. Sloan, Jr., who avowedly considered himself a du Pont man, served simultaneously as directors of both companies at various periods between 1915 and the present. Carpenter, H.F. d Pont, Irenee du Pont, Lammot du Pont and Pierre S. du Pont were members of both du Pont’s and General Motors’ finance committees. Most of them held additional posts in both companies. Carpenter was president of du Pont from 1940 to 1948 and a member of its executive committee from 1919 to 1948, at the same time serving as a member of the first General Motors’ finance committee, then its policy committee, and then its financial policy committee. He is still a member of both companies’ finance committees. Pierre S. du Pont was president and chairman of the boards of both companies, occupying the latter positions simultaneously between 1919 and 1929. Lammot du Pont served first as president then as chairman of duPont between 1926 and 1948 and held the chairmanship of General Motors between 1929 and 1937.”
Cementing the new single-mindedness for the new GM, its 10-man executive committee was trimmed to four members in 1921, including three officers or directors from DuPont; in the following year, two GM directors would be added. In May 1923, the GM finance committee consisted of seven DuPont board members or company officials, offset by four others, one of whom, Alfred P. Sloan, Jr., had been hand-selected to replace Pierre as president by the duPont family patriarch himself.
“We have done a splendid job in electing Alfred president of General Motors Corporation,” said Raskob.
Sloan’s intensified obsession with profit and its measurement reflected the new corporate mindset at GM; it was out not just to grow bigger, but to make large returns while doing so and it wasn’t ashamed of it. The new GM was predisposed to selling a product like leaded gasoline, if only because the coldest fact of all was that, if it the new gasoline additive was successful, its profits promised to be both substantial and regular, passing DuPont’s only test of efficacy while also thereby helping do what no automaker had done, tempering the impact of the industry’s pronounced boom and bust cycles.
With Durant gone, a DuPont-owned, J.P. Morgan-approved General Motors would go on a spree of its own, quite unlike the adventures of the GM founder, profitable, but for all the sober talk and business school rubric, even more reckless and considerably more deadly.