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The General Of General Motors
"Billy" Durant typified the courage of American business. He was charismatic, arbitrary and impenetrable.
August 1973 | Volume 24, Issue 5
On March 18, 1947, at 2:15 A.M. , William Crapo Durant, founder of General Motors and Chevrolet and the “leading bull” in the great stock-market boom and crash of the late 1920’s, died at his New York City apartment with his wife and nurse in attendance. His last fortune had evaporated in the Depression of the 1930’s, and he had been an invalid for several years. People were already beginning to confuse him with Will Durant, the popular historian of philosophy. Within a few weeks Henry Ford, whose automotive career strikingly paralleled Durant’s, was to die too—rich and famous but also ridiculed and despised. “Billy “Durant, on the other hand, left a public image that was clouded but untarnished. A eulogy in the Detroit Free Press said : “There was nothing of the ruthless pirate in Durant for all of his financial manipulations. Despite his fortunes and his power he was always a simple, human person, with a consciousness of the problems of the little fellow. … W. C. Durant typified the courage of American business, of free enterprise and initiative. If all of his principles are no longer acceptable, there are elements in his character that America badly needs today.”
Those better acquainted with Durant knew he was not “a simple, human person. ” The man they remembered was a riddle. He projected a confusing, contradictory image to the world, and underlying the image were unfathomed depths. Durant had few intimate friends and did not encourage familiarity. The diminutive “Billy” was rarely used in his presence. Even to close associates he was “Mr. Durant,” while subordinates referred to him as “the boss” or “the Man.”
The short but indomitable creator of business empires was understandably dubbed Napoleonic by the press. This tag described aptly as well Durant’s charismatic charm and his tendencies to be visionary, arbitrary, and impenetrable. One of the few bankers sympathetic to Durant probably sketched best his strengths and weaknesses: “Durant is a genius, and therefore not to be dealt with on the same basis as ordinary business men. In many respects he is a child in emotions, intemperament, and in mental balance, yet possessed of wonderful energy and ability along certain other well-defined lines.” Even associates who liked and respected Durant as a person found this combination of traits difficult. Walter P. Chrysler, who began his automotive career at Buick, related: “I cannot hope to find words to express the charm of the man. … He could coax a bird right down out of a tree, I think. I remember the first time my wife and I entered his home. The walls were hung with magnificent tapestries. I had never experienced luxury to compare with Billy Durant’s house. In five minutes he had me feeling as if I owned the place. ” But Chrysler resigned after only three years because he was frustrated by Durant’s unpredictability and interference in Buick’s operations. Chrysler knew they could never work together when Durant told him, “Walt, I believe in changing the Dolicies iust as often as mv office door ooens and closes. ”
Durant’s dual personality was also noted by Alfred P. Sloan, Jr., who ultimately built Durant’s brain child, General Motors, into the world’s leading manufacturer of motor vehicles. Durant, said Sloan, had “a salesman’s enthusiasm” and “tried to carry everything in his head. When some thought flashed through his mind he was disposed to act on it forthwith, and rarely troubled to consult with the man who had the real responsibility. … Yet even when this sort of interference struck as a lightning bolt into your own department, you did not protest, because he was so sweet natured, so well intentioned. It was just Billy Durant’s way. You accepted it, and perhaps liked it because you liked him.”
In temperament Durant often seemed less like a businessman than a musician or an actor. He had a passion for classical music, especially opera, and he exhibited impeccable taste in furnishing Raymere, his show-place home at Deal, New Jersey. In contrast with his tendency to make business decisions involving millions of dollars on the spur of the moment, he spent hours personally designing the Buick and Chevrolet emblems. He was so moved by good theatre that he once had to leave abruptly after breaking into uncontrollable tears while watching Raymond Massey portray Lincoln.
At heart an actor himself, Durant scorned statistics, hard evidence, and logic in playing his entrepreneurial role. He relied instead on intuition and imagination, and his personal relationships were less cerebral than emotional. His strong drive to achieve was matched by an equally unquenchable need for approval and an intense loyalty to significant others. He protected himself by avoiding deep friendships while maintaining a surface affability to all and by being generous with money to the point of eccentricity. This kept most relationships formal and put them on a cash-in-advance, you-owe-me basis. Durant never dickered over price, and the salaries he paid were often exorbitant. Before Walter P. Chrysler could ask for fifty thousand dollars a year, Durant offered him five hundred thousand.
Incorruptible by money himself, Durant should have known that he could not buy true approval, loyalty, and affection. He was ultimately undone by trusting the yes men whose good will came cheap and then trying to protect the cronies who had gone along in his ventures.
In a lifetime that spanned the period from the outbreak of the Civil War to the beginnings of the post-World War n boom, Durant ultimately found what he sought from people only in his relationships with three adoring women: his mother, his daughter Margery, and his second wife, Catherine. The child is indeed the father of the man. And Durant’s early experiences with a boy’s normal male-role models were traumatic. The combination of a stern, prominent grandfather, a weak, irresponsible father, andanoverdemanding, unsympathetic uncle left indelible scars on Durant’s personality.
Billy Durant was born in Boston on December 8, 1861. His father, William Clark Durant, was a handsome, socially prominent banker at the time. But addictions to alcohol and stqck speculation soon turned him into a drifter. He left one day on a fishing trip when Billy was seven and never returned. Billy was later to spend a small fortune in unsuccessful attempts to locate the father who deserted him so early in life.
The father’s desertion drew Durant into a relationship with his mother that a psychoanalyst might well describe as oedipal. They were constant companions, bound to each other by mutual idolization. At the height of his success Durant would disrupt a busy schedule and travel days to spend a few hours with her. W. A. P. John, a reporter, found that Durant’s most striking characteristic was “his love for his mother. Of the dozens with whom I have spoken concerning him, most have singled out that particular trait as most indicative of the man. ” With tears glistening in his eyes Durant confirmed for John, “Yes, that’s all quite true. … She has always thought I was a wonderful boy. And I have tried not to disappoint her.”
Rebecca Folger Crapo, the mother, could trace her ancestry back to the Mayflower . The Crapo family had made a fortune in shipbuilding and whaling by the time her father, Henry H. Crapo, moved from New Bedford, Massachusetts, to supervise personally the family lumbering operations in the frontier town of Flint, Michigan. Henry H. Crapo came to be reckoned one of Michigan’s leading citizens, and in 1864 he was elected to a four-year term as governor of the state. The grandfather’s achievements imposed a formidable burden on a boy in a culture that assumed one ought to do better than one’s ancestors.
When Billy was nine years old, the Durants followed the Crapo family to Flint. Billy attended the Flint public schools, where he was a well-liked but mediocre student. A critical turning point in his life occurred when he was forced by the decision of his uncle to leave school at sixteen to take a job at his grandfather’s mill at seventy-five cents a day. Bitter about the decision and determined to succeed in spite of it, Billy worked nights as a clerk in a local drugstore. This was followed by brief careers as a patent-medicine peddler and a cigar salesman. Durant then turned to selling insurance and real estate and undertook the management of the Flint water works. As a sideline he read gas meters. By the time he was twenty five years old, William C. Durant had a reputation as one of Flint’s most successful and enterprising young businessmen.
In 1885 Durant married Clara Pitt of Flint. But their temperaments proved to be irreconcilable, and despite Durant’s continued success in business they were divorced in 1900. It was rumored that Durant sent Clara a present of two million dollars a few years later when she remarried—one of his characteristic attempts to smooth things over with money.
By the time of his divorce Durant was already a millionaire. His first fortune had humble origins. Shortly after his marriage to Clara he had acquired for fifty dollars the patent rights to a two-wheeled road cart, claimed by its inventor to have the riding qualities of a much more expensive four-wheeled carriage. Durant found a partner in J. Dallas Dort, a hardware merchant. With two thousand dollars of borrowed money they formed the Flint Road Cart Company.
Their timing was perfect. A flourishing carriage-andwagon industry was then developing in southern Michigan and northern Indiana because of the proximity of excellent hardwood forests and the rapidly growing midwestern market for vehicles. Since Durant and Dort were both salesmen who knew nothing about making buggies, they devoted their energies to sales and farmed out the production of their cart to a Flint carriage manufacturer. They bought the completed carts from him for eight dollars and sold them for $12.50. The profits from their first ten thousand vehicles were plowed back into the business, and the name of the firm was changed to the Durant-Dort Carriage Company.
Sales soon outstripped production. The partners decided that they would have to undertake the manufacture of their vehicle themselves. Fearful that the growth of horizontal trusts in ancillary industries would make components and raw materials hard to get at reasonable prices, Durant and Dort purchased hardwood forests and set up specialized subsidiary companies to manufacture bodies, wheels, axles, upholstery, springs, varnish, and whip sockets.
By the turn of the century Durant-Dort had fourteen branch plants, hundreds of sales agencies, and annual sales of more than 150,000 vehicles. In a day when its competitors were mere order-taking assemblers of components, the company’s emphasis upon aggressive sales techniques and its integrated manufacturing operations were major innovations in the carriage industry. DurantDort’s bold conception of a mass market for low-priced vehicles and its attempt to blanket the market with a complete line of vehicles were other novel ideas that William C. Durant would apply to the manufacture of motor vehicles in a few years.
With his first million made and his first marriage on the rocks, by 1900 Durant had outgrown the challenges of Flint and the carriage industry. The days of the carriageand-wagon industry were in fact numbered. Introduced into the United States in 1895, the automobile took America by storm. By 1900 the nation’s leading bicycle manufacturer, the Pope Manufacturing Company of Hartford, Connecticut, had already switched over to the production of motor vehicles. And several leading firms in the carriage-and-wagon industry, including the Studebaker Manufacturing Company, the world’s largest producer of horse-drawn vehicles, had begun experimental work with automobiles. In addition, hundreds of back-yard mechanics and small businessmen throughout the country were working on experimental cars and seeking financial support from local capitalists in order to enter the infant automobile industry. Southern Michigan was bound to be one of the hotbeds of such activity. It was not only a center for the production of carriages and wagons but also for stationary gasoline engines, which were widely used on midwestern farms.
One of the many Michiganders who attempted to enter the automobile business was David D. Buick, a Detroit manufacturer of plumbers’ supplies and an eccentric inventor. He was soon deeply in debt, and his operation was bought by James H. Whiting, a Flint carriage-and-wagon manufacturer who had become alarmed about the potential inroads of the motor vehicle upon the market for horse-drawn vehicles. The Buick plant was moved to Flint. But Whiting was unable to get the floundering company off the ground. Only six Buicks were sold in 1903, sixteen in 1904. Whiting was under pressure from the Flint banking community, which had supported his venture, to find someone who could put Buick in the black. To the bankers and Whiting, William C. Durant seemed the perfect choice.
Durant had been unresponsive to earlier overtures to enter automobile manufacturing, and as late as 1902 he had forbidden his daughter Margery to ride in a car owned by a school friend’s family on the ground that it was too dangerous. Probably he only considered Whiting’s proposition because his mother had become a small Buick stockholder. Before committing himself, he personally put the two-cylinder Buick car through its paces on the worst terrain he could find. Satisfied that the product was a winner, he agreed to undertake the management of the Buick Motor Company on November 1, 1904.
Once in control at Buick, Durant moved with boldness and speed into the volume production of a reliable car in the intermediate price range. Buick’s capital stock was increased from seventy-five thousand dollars to three hundred thousand the day he took over. On September 11, 1905, it was increased again to $1.5 million, and Durant is said to have sold nearly half a million dollars’ worth of the new stock to his Flint neighbors in a single day. The Durant-Dort Carriage Company became a major source of capital for Buick, and Buick cars were exhibited in its salesrooms. Companies that had supplied Durant’s carriage enterprise were shifted to automobile work. A national network of wholesale and retail distributors was established. Ina few years the Buick car was substantially improved in quality for the price asked. Large assembly plants were built at Flint and at Jackson, Michigan, which turned those cities into boom towns reminiscent of western mining camps. Boarding houses rented beds to workers in shifts, and Buick was forced to become involved in planning housing developments for its employees.
For a time Durant had a bedroom at the home of his daughter and her husband, Dr. Edwin Campbell, a Flint physician she married in April, 1906. Margery’s privately printed 1929 biography, My Father , has been appropriately described as “a work of filial piety.” In it Margery remembered her father as “a very clean man : an immaculate man.” Still, he “smoked cigars almost incessantly— I almost never saw him without one.” Durant ate very little, hurriedly and mechanically. He “slept only two or three hours a night.” He disliked outdoor exercise, open windows, and cold weather. He was always too busy to buy new clothes, so he generally ordered his suits on approval by phone. “He always had a bag packed ready to go. ” And it seemed to Margery that “he spent most of his life travelling. … He never planned ahead; hejust went.” She found him an affectionate and considerate father, even though “he doesn’t ever give all of his inner self to those about him.”
The most significant omission in Margery’s book is that she makes no mention of Durant’s taking, in 1908, a second wife, Catherine Lederer of Jackson, Michigan, the bright and pretty teen-age daughter of a railroad employee. Durant was forty-seven at the time, Catherine younger than Margery. It is a good guess that Margery jealously felt displaced by her father’s charming young wife.
Despite the age difference, or maybe in part because of it, Durant found an ideal mate in Catherine. Her devotion to him was constant through a hectic career that involved as many failures as successes. The marriage was childless but otherwise idyllic. Catherine never had to fear that Durant’s affections would stray: his life was amazingly free from any breath of scandal. That he practiced a strait-laced morality was learned the hard way by a Los Angeles Durant Motors dealer who gave a party to honor the founder’s visit to southern California. When Durant entered the railroad car that had been rented for the occasion and saw that liquor and women were prominently aboard, he muttered a few caustic remarks and left. The dealer’s franchise was cancelled. Durant’s main diversion when travelling was playing checkers on the small checkerboard he carried around in his pocket.
By the time he married Catherine, Durant had built Buick into the leading automobile producer in the United States. In 1908 the company built 8,487 cars, had a net worth of $3.5 million, and occupied the largest automobile plant in the world. Nevertheless Durant was worried about the immediate future. So was Benjamin Briscoe, president of the Maxwell-Briscoe Motor Company, one of Buick’s chief competitors.
Whereas Henry Ford was confident by 1908 that his Model T was the “car for the great multitude,” Billy Durant was more uncertain than ever about the best bet in automotive technology. So he decided to play the field. His rationale was revealed in a later lament, “They say I shouldn’t have bought Cartercar. Well, how was anyone to know that Cartercar wasn’t to be the thing? It had the friction drive and no other car had it. … And then there’s Elmore with its two-cycle engine … maybe a two-cycle motor was going to be the thing. … I was for getting every kind ofthing in sight, playing it safe all along the line.”
Benjamin Briscoe also found conditions in the spring of 1908 “somewhat ominous, especially for such concerns as had large fixed investments in plants, machinery, tools, etc.” Briscoe was worried about “concerns which did not have a worthy car or any manufacturing ability, but with large stock issues to sell, and by ingenious exploitation would succeed in stirring up the trade and the public. … “He was afraid such companies would force “even the sanest among the manufacturers … into business risks which they would not have entered had they not been fearful that some other concern would gain a few points on them.”
Briscoe and Durant conceived that the answer to these problems was a horizontal and vertical trust. They decided to try “to form a combination of the principal concerns in the industry … for the purpose of having one big concern of such dominating influence in the automobile industry, as for instance, the United States Steel Corporation exercises in the steel industry. ” The easiest way to accomplish this was to merge their own firms, Buick and Maxwell-Briscoe, with several other leading producers of gasoline automobiles. But the merger plan failed when Henry Ford and Ransom E. Olds each demanded three million dollars in cash to sell out, instead of the securities Briscoe and Durant offered.
Undaunted, Briscoe and Durant hatched another consolidation scheme. They secured a New Jersey charter for an International Motors Company, with J. P. Morgan & Company to underwrite the stock issue. This plan fell through, too, when the House of Morgan withdrew its support. During the negotiations Durant correctly prophesied that soon a half million automobiles would be sold annually in the United States. George W. Perkins, who represented the Morgan interests, curtly suggested that when Durant wanted to borrow money, he had better keep such crazy notions to himself. By this time Briscoe had had enough. He and Durant parted company.
Working alone now, Durant moved quickly to form the General Motors Company as a New Jersey holding company with a nominal capitalization of only two thousand dollars on September 16, 1908. The holding-company structure allowed Durant, who was short of both cash and bank credit, to finance his combination mainly through exchange of stock. Cadillac, purchased for a premium $4.5 million, was the most notable of the few companies for which cash had to be paid. General Motors soon acquired control of thirteen motor-vehicle and ten partsand-accessories manufacturers that varied considerably in strength, prominence, and potential. Its capitalization reached an astonishing sixty million dollars within a year.
But General Motors was in trouble from the start. Durant’s attempt at “getting every thing in sight, playing it safe all along the line” turned out to be catastrophic. He bought too many weak units that drained off the profits from a few strong companies. The most spectacular error was purchasing the Heany Lamp Company for seven million dollars in General Motors stock to obtain a patent on an incandescent lamp that turned out to be fraudulent. Only two of the thirteen automobile manufacturers in the combination he threw together, Buick and Cadillac, were making money. And as Durant dispersed his energies Buick began to decline, threatening to leave Cadillac alone among the automobile-manufacturing units to support the heavily overcapitalized holding company. Durant was so optimistic about demand that he failed to build up cash reserves, to get adequate information about the combination’s financial condition, and to achieve economies through coordinating and integrating the constituent units of General Motors.
The crunch came when sales unexpectedly dropped as a result of a slight business recession in IQlO. Durant was unable to meet his payroll and bills from suppliers. The First National Bank of Boston, to whom Buick was indebted for seven million dollars, called in a banking syndicate that agreed to save the General Motors combination—but only after receiving assurances of feasibility and support from Henry M. Leland and Wilfred C. Leland of Cadillac and extracting stiff concessions. They received over six million dollars in General Motors stock plus fifteen million in five-year, 6 per cent notes for a $l2.75-million cash loan. Durant was to remain as vice president and a member of the board of directors of General Motors. But he was forced to retire from active management, and the banking syndicate gained control of the combination through a five-year voting trust. Durant’s power as one of the trustees was negated by the other four, who represented the bankers.
To the leadership of General Motors the bankers appointed James J. Storrow, a senior partner in the Boston house of Lee, Higginson, who served first as the temporary president and then directed operations as chairman of the finance committee. Charles W. Nash, who had succeeded Durant as head of Buick in 1910, was moved to the presidency in 1912. Walter P. Chrysler, manager of the American Locomotive Works, was then brought in to take over Nash’s position at Buick.
The Storrow-Nash regime followed a conservative policy of retrenchment during their five-year period of control. Only five companies were allowed to continue to manufacture motor vehicles—Buick, Cadillac, General Motors Truck, Oakland, and Oldsmobile. A centralized research and testing program was initiated, and internal administration was improved. But they made the crucial error of withholding common-stock dividends. This increased the propensity of General Motors stockholders to sell their shares to Durant, who, down but by no means out, was anxious to regain control of the combination.
Within a year after the bankers took control of General Motors, Durant started his comeback. While still a substantial stockholder in General Motors, in 1911 he formed two new companies to manufacture automobiles: the Little Motor Company in Flint, to build a small, fourcylinder runabout that sold for only $650, and the Chevrolet Motor Car Company in Detroit, to build a light, moderately priced car designed by Louis Chevrolet, a Swiss mechanic who had been one of Buick’s racing drivers. After forming and folding two other companies, Durant then abandoned Little and concentrated his energies on Chevrolet. The Chevrolet manufacturing operations were transferred to Flint—and Louis Chevrolet was arbitrarily fired the third time he walked into Durant’s office with a cigarette dangling from his lips. Durant had abruptly quit smoking and could no longer tolerate the habit in anyone else.
Nearly sixteen thousand cars that bore Chevrolet’s name were sold in the two years ending August 14, 1915. Durant announced that he would bring out a new $490 model to compete with the Ford Model T; and in September, 1915, he organized the Chevrolet Motor Company of Delaware as a holding company for all Chevrolet activities. Raising its capitalization to eighty million dollars, all common stock, Durant offered to trade five shares of Chevrolet for one share of General Motors. There were so many takers that the offer was closed on January 26, 1916.
Durant’s return to control was imminent by the time the General Motors voting trust expired on October 1, 1915. Early that year Durant and Pierre S. du Pont began buying up General Motors stock in the open market with the aid of Louis G. Kaufman, president of the Chatham and Phoenix Bank of New York City. Du Pont and John J. Raskob, treasurer of E. I. du Pont de Nemours and Company, saw General Motors as an ideal place to reinvest their huge profits from World War I munitions sales. Some twenty-seven million dollars of du Pont’s money helped push General Motors common stock from a quotation of 82 on January 2, 1915, to a high for the year of 558. It was summer before the banker-dominated management at General Motors realized what was happening.
At a meeting of the General Motors directors and large stockholders on September 16, 1915, Kaufman and du Pont were elected to the board of directors, du Pont as its chairman. A belated attempt by Durant’s opponents to mobilize stockholder support for another three-year voting trust failed. With the votes of about 40 per cent of the General Motors common stock in his pocket, Durant proceeded to announce calmly: “Gentlemen, I now control this company.”
With the resignation of Charles W. Nash on June 1, 1916, Durant regained the presidency of General Motors. He took over a much stronger combination than he had left five years before. The du Pont alliance eased the problem of obtaining working capital. Chevrolet was a moneymaking addition to the General Motors manufacturing units. Strength was also added by the acquisition of the United Motors Corporation, a Durant-created holding company owning the securities of five leading automobile-accessory manufacturers. With United Motors came Charles F. Kettering, the engineering genius, and Alfred P. Sloan, Jr. Recognizing the need to integrate and consolidate his impressive new empire, Durant reincorporated the General Motors Company, a New Jersey holding company, as the General Motors Corporation of Delaware, an operating company, on October 13, 1916.
Some of Durant’s new moves turned out to be brilliant. The Fisher Body Company was purchased in 1918. And recognizing well ahead of his contemporaries that the automobile industry could not continue on a cash-on-delivery basis, Durant pioneered in time sales for expensive consumer goods with the creation of the General Motors Acceptance Corporation in 1919. Against everyone’s advice he paid fifty-six thousand dollars for a faltering, one-man electric-refrigerator company that served only forty-two customers, on the ground that refrigerators were related to automobiles—both were essentially cases containing motors. A contest to find a name for the company was won by “Frigidaire.”
The trouble was that Durant lacked the judgment to discriminate among the many ideas about which he became enthusiastic. For every Buick there was a Cartercar; for every Frigidaire there was a Heany Lamp. Durant’s idea of “playing it safe all along the line,” backing every impulse in the hope that some would pan out, made him an inveterate expansionist who could survive only in flush times. His performance was brilliant when he concentrated his considerable energies upon building up a single company in an expanding market, as at Durant-Dort, Buick, and Chevrolet. But his bent toward indiscriminate dispersal of his energies and one-man rule spelled disaster when times got tight and the profits from a few phenomenally successful bets began to dwindle. Sorry examples were two new passenger cars that Durant added to the General Motors line for no apparent reason : the Sheridan and the Scripps-Booth. Both were losers. But even had they proved popular, they would merely have competed in the same general price range with Buick, Chevrolet, Oakland, and Oldsmobile. As in 1910, by 1921 only Buick and Cadillac were making money for General Motors.
The enthusiasm that Durant developed to get into the farm-machinery business was more understandable. Impressed by the initial success of the Fordson tractor, Durant developed an obsession to “lick Henry Ford in the manufacture of tractors” and, while he was at it, to “lick the I nternational Harvester Company in the manufacture of agricultural implements.”
In 1917 Durant bought into the Samson Sieve-Grip Tractor Company, of Stockton, California, manufacturers of a tractor called the Iron Horse, which was guided by reins. He later added two other small agricultural-machine companies and formed the Samson Tractor Division of General Motors. In addition to the Iron Horse, a lighter “Samson” tractor was developed to compete with the Fordson. Plans for a nine-passenger farmer’s car that would sell for only seven hundred dollars never materialized because it became obvious there was no way to build it at a profit. The Samson tractor and the Iron Horse were returned in droves by irate farmers who demanded their money back. The tractor-division fiasco cost General Motors a sum variously estimated as between thirteen and forty-two million dollars before it was liquidated in 1920.
Relationships with key associates were severed as Durant became more and more difficult to work with. Charles W. Nash was the first to go. Next, Henry M. Leland and Wilfred C. Leland left Cadillac to form Lincoln in 1917 over the refusal of Durant, a pacifist by inclination, to endorse their enthusiasm for the war effort. Other executives grew frustrated by Durant’s chaotic schedule, inability to recognize priorities, and increasingly heavy involvement in the stock market. Walter P. Chrysler was called to New York by Durant. “For several days in succession,” he said later, “I waited at his office, but he was so busy he could not take the time to talk with me. It seemed to me he was trying to keep in communication with half the continent; eight or ten telephones were lined up on his desk. … ‘Durant is buying’ was a potent phrase in Wall Street then. ” Alfred P. Sloan, Jr., also recalled that executives lounged around the room watching Durant’s barber, Jake, shave him “while our scheduled work was neglected.” At executive meetings “the ten or fifteen of us who gathered there would wait all day for the Chief… old friends could not easily be denied, and so we had to wait.”
As the stock market came to absorb his attention Durant relied on cronies and made important decisions off the top of his head. Sloan was aghast that a car model was tested on a supposed cross-country trip by the same man who designed it; he dispatched reports, enthusiastically received by Durant, “by conniving with hotel porters along his scheduled route” while never actually making the trip. Sloan was even more aghast at Durant’s casual attitude about the location and price of the new General Motors Building in Detroit, a twenty-million-dollar project that Durant later opposed as too costly. “He started at the corner of Cass Avenue, paced a certain distance west on West Grand Boulevard past the old Hyatt Building. … Then he stopped, for no apparent reason, at some apartment houses on the other side of the building. He said that this was about all the ground we wanted, and turned to me and said, as well as I can remember, ‘Alfred, will you go and buy these properties for us and Mr. Prentis will pay whatever you decide to pay for them.’”
By 1919 Walter P. Chrysler was worried that “Buick was making about half the money [earned by General Motors], but the corporation was spending much faster than we could earn.” Insult was added to injury when Durant sold the lucrative Detroit Buick branch house to a crony without consulting Chrysler. The end came when Durant promised the city of Flint a six-million-dollar frame plant. Chrysler was convinced that Flint lacked adequate facilities, and knew that the plant would “cost more in five years than we would pay for frames in ten.” Though Durant later backed down, Chrysler soon left, saying to Sloan, who tried to talk him into staying: “No, I’m washed up. I just can’t stand the way the thing is being run. All I’m anxious about now is to sell my stock. ”
Sloan was soon on the verge of resigning himself. He could no longer tolerate the one-man rule of an inveterate gambler who ignored facts to make decisions on the basis of “some intuitive flash of brilliance.” His ideal executive was the security-oriented technician who, sensitive to the opinions of others, worked well as a member of an entrepreneurial team. Sloan took a vacation abroad to think things over early in the summer of 1920. When he returned in August, he “sensed something unusual” and decided “I’ll ride along awhile and see what happens.” What Sloan “sensed” was that Durant’s days at General Motors were numbered.
Almost sixty, Durant did not recognize adequately that the business environment was changing rapidly in the automobile industry. An incurable optimist, he was also banking on an uninterrupted post-World War i boom in automobile sales. He was unprepared, as were Henry Ford and many others, for the sharp recession that accompanied conversion to a peacetime economy. General Motors was caught in the midst of an expansion program that could not have been more ill-timed. The working capital of the corporation had been dissipated. So an issue of sixty-four million dollars in common stock was offered for underwriting. Thirty-six million of the issue was picked up by an English-Canadian banking syndicate at twenty dollars a share, but that still left twenty-eight million dollars to be disposed of in a declining market. And the crisis deepened as the stock issue quickly became essential to the survival of General Motors.
The expansion program, initiated in 1918, was not Durant’s error alone. By 1919 the du Pont interests owned 28.7 per cent of the General Motors common stock, and Pierre S. du Pont, chairman of the corporation’s board of directors, had supported the expansion without objection. John J. Raskob, the du Pont treasurer, who was chairman of the General Motors finance committee, was at least as responsible as Durant for enthusiastically promoting the program. But wherever the fault lay, other large General Motors stockholders, concerned about what was happening, began to unload their holdings. Durant saw that this could collapse the price of General Motors stock, with the disastrous result that it might be impossible to dispose of the remaining twenty-eight million dollars of the new issue. He also wanted to protect the value of his personal holdings, which on paper were worth $105 million. But despite Durant’s attempt to snap up large blocks as they were offered for sale, the stock slid from $38.50 to under thirty dollars a share before a syndicate headed by J. P. Morgan & Company agreed to underwrite the remaining twenty-eight million of the new issue.
On July 15, 1920, the Morgan interests announced that the twenty-eight million dollars in stock had been disposed of. But Durant’s troubles were just beginning. There was either a misunderstanding or a conflict with the House of Morgan and its financial allies. In either case the Morgan men dumped a hundred thousand shares of General Motors stock on the market, driving the price down to $20.50. As the stock continued to tumble, Durant bought frantically in a desperate attempt to salvage something. Operating heavily on margin, he supported the stock down to twelve dollars a share before he admitted he was licked. Durant’s cash resources were wiped out, and he owed over twenty million dollars to twenty-one brokers and three banks.
The du Ponts, Raskob, and the House of Morgan became afraid that if Durant declared bankruptcy, he might drag down with him the brokers, banks, and General Motors. At a series of meetings in November, 1920, they worked out an alternative. They would bail Durant out of the mess on the condition that he hand over to them control of General Motors. Durant came out of the deal with about three million dollars of General Motors stock plus a personal loan of five hundred thousand from Pierre S. du Pont.
Durant resigned as president on November 30, 1920. “You knew he was grief-stricken, but no grief showed in his face. He was smiling pleasantly, as if it were a routine matter, when he told us he was resigning,” remembered Sloan. The following day Durant cleaned out his desk. When he was leaving the building, he turned to remark: “Well, May first is usually the national moving day, but we seem to have changed it into December first. ”
To allay fears in Flint about Durant’s resignation and the “take-over” of General Motors by eastern bankers, the new management built a three-hundred-thousanddollar hotel in Flint and named it the Hotel Durant—the impersonal corporation’s final tribute to a founder who had outlived his usefulness to the firm.
The Durant name still had magic. The Goodrich Tire & Rubber Company invited Durant to set himself up in a modest office in its building in New York City. After a brief holiday at White Sulphur Springs Durant contacted sixty-seven friends, asking them to back a new automobile company that would bear his name. Within forty-eight hours he raised seven million dollars, two million more than he needed. Durant Motors, Inc., came into being on January 21, 1921.
The enterprise started under propitious conditions. Durant’s public image was excellent. He was looked upon as an underdog, a self-made man who had been crucified by the du Ponts and the Wall Street bankers. The first model produced, the “Durant four,” was an exceptional value at $850; as Durant advertised it, it was “a real good car.”
Durant Motors, Inc., grew by leaps and bounds. Facilities were built in Flint and Lansing and in Oakland, California. The Sheridan plant in Muncie, Indiana, was bought to produce the “Durant six. ” The bankrupt Locomobile Company of Bridgeport, Connecticut, was purchased to add to the Durant line a luxury car with a longstanding, prestigious reputation. With the Willys Corporation in receivership, Chrysler and Studebaker were outbid at $5.25 million to acquire the new Willys plant at Elizabeth, New Jersey, the most modern automobile factory in the world, plus the Willys design for a mediumpriced car that became the “Flint.” Then, on February 15, 1922, Durant announced that he would bring out the “Star,” which at a price of !348 would compete with the Ford Model T. Cognizant of Ford’s patent anti-Semitism, Durant thought the Star would have a special appeal to Jewish buyers. Some sixty thousand people flocked to see the Star at its first showing in New York City, and by January 1, 1923, Durant had accepted cash deposits on orders for 231,000 Stars, a full year’s production. The Durant Motors Acceptance Corporation was formed to finance time sales and to help dealers store cars over the winter for spring delivery. Ever a financial innovator, Durant worked out an ingenious scheme for financing his new company by selling stock at low prices, on the installment plan. He got 146,000 shareholders- more than any other American company except American Telephone and Telegraph. And he created the Liberty National Bank, to raise still more money. He called it “the most democratic bank in the United States.” Its officers and board of directors worked without salary. Anyone could purchase stock in it. No one was allowed to own more than one of its three hundred thousand shares, which could be purchased on the installment plan.
Yet despite its promising start, Durant Motors never amounted to much. In its best years it was unable to capture more than a fifth of the market for new cars. Henry Ford effectively crushed the threat of competition from the Star by unexpectedly lowering his prices for the Model T. Other Durant models never caught the fancy of the buying public. And anyway, by the mid-1920’s the market for new cars was rapidly approaching the saturation point.
A well-managed firm might have pulled through—but Durant failed to recruit top-flight managerial talent. Few of his more capable associates at General Motors had left with him. They knew that with Durant business was a roller-coaster ride that was apt to end in a crash. And in the automobile industry the word had gotten around that Durant was difficult to work for. That put the burden of managing Durant Motors squarely on Durant’s shoulders. He might have succeeded if he had applied his energies fully to the task. But he could not resist the lure of the stock market, and soon he started to treat Durant Motors as a sideline.
After the First World War the dominant power that the eastern investment bankers historically had wielded in Wall Street increasingly came to be shared with a new group of self-made millionaires who came mainly from the Midwest. Less cautious and conservative than their predecessors, these new speculators became the prime movers in the runaway bull market of the late 1920’s. The most important figure among them by far was William C. Durant, who after 1924 was widely referred to by the press as “the leading bull.”
The “bull consortium” that Durant led was estimated at various times to include between twenty and thirty millionaire investors, who were known as Durant’s prosperity boys. It was said that Durant himself had Sl.2 billion in the market by 1928 and that he directly controlled about four billion in investments. Durant had accounts with at least fifteen brokers, and his commission fees to brokers were rumored to run as high as six million dollars a year. Phone bills of twenty thousand dollars a week were supposedly not uncommon. The financial press regularly reported multimillion-dollar killings that Durant was said to have made in individual pools.
Durant, like many other insiders, unloaded in the spring of 1929. Shortly after the collapse of the market on Tuesday, October 29, Earl Sparling, a financial writer, visited Durant to get his comment on the fact that some forty billion dollars in security values had been wiped out overnight. Durant did some quick calculations on a pad of paper, smiled, and announced that if the loss were translated into a stack of silver dollars, it would reach a hundred thousand miles into the sky.
But like many others who had sold before the initial disaster struck, !Durant assumed that the worst was now over. He plunged back into the market to pick up stocks at what he thought were bargain prices, only to find that the market kept deteriorating. His brokers sold him out in 1930.
Durant scraped together his remaining resources and plowed them into Durant Motors. Conceiving that the American market was ripe for a small car with low initial and maintenance costs, he started to manufacture the French “Mathis” in New Jersey. Ultimately the Volkswagen was to prove him right, but at the outset of the Great Depression not even Billy Durant could revitalize the corpse that Durant Motors had become.
Durant Motors was liquidated in 1933. Bankruptcy for Durant followed in 1936, when he declared liabilities of almost one million dollars versus assets of only $250 (his clothes). Raymerc, the elegant home at Deal, was sold complete with furnishings at auction in 1938 and brought $111,778. Through it all Durant managed to hang onto his apartments in New York City and at the Hotel Durant in Flint, and enough money to provide him and Catherine with a comfortable living for their remaining years.
A short time after the bankruptcy proceedings reporters acting on an anonymous tip found William Crapo Durant washing dishes in a five-cent hamburger joint attached to a supermarket that had recently opened in an old Durant Motors salesroom at Asbury Park, New Jersey. Looking at least two decades younger than his seventv-five years. Billy obligingly posed with a broom, sweeping out the supermarket, too. It was a publicity stunt. Durant owned both the supermarket and the lunch counter. His nephew confided to the reporters: “Mr. Durant is just as enthusiastic over building up the Food Market as he ever was over automobiles. In fact he no longer can bear the thought of an automobile.” Supermarkets would be a big thing one day. But not then. Durant lost the place in a few months’ time.
Nineteen forty found Durant trying to start a chain of bowling alleys in the Midwest. He had conceived that recreation was the industry of the future and that a bowling alley serving only nonalcoholic beverages would appeal to young people and families. Opening his first bowling alley in his hometown of Flint, he tried to be helpful and to make friends of all the bowlers. The idea was excellent, but Durant again was ahead of his time.
Durant’s health failed, and for most of his remaining years he was an invalid. But his interest in taking another flier never failed. Looking forward to the post-World War ii boom, in late 194.3 Durant wrote to W. H. Washer, a Flint inventor: “When you have developed anything novel that appeals to you, don’t be afraid to give “Uncle Bill’ an opportunity of joining the workers’ ranks.” At the war’s end Durant told the Flint Journal , in a formal statement through his secretary: “The consumer market needs everything at home and abroad. The demand is so great there virtually is no competition and no sales resistance. ” He predicted a three-to seven-year boom. Reminiscent of his early days hawking patent medicine, yet foreshadowing the sixties, when the cosmetics industry would come into its own. Durant’s last business venture was backing a nostrum to prevent baldness and cure dandruff.
Billy Durant once said: “Money? What is money? It is only loaned to a man: he comes into the world with nothing and he leaves with nothing.” It was a characteristic statement, and a suitable epitaph.