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The Great Automotive “What If”

What if Henry Ford sold out to General Motors?

by on Sep.20, 2011

The man and machine that changed the world. Henry Ford and the Model T.

As an “Ol’ Kentucky Story-teller” and, here, an automotive historian, I have always been fascinated by “What If” interpretations of history. To cite just a couple of examples:

In modern terms, “what if, after its invasion, the U.S. had discovered that Iraq indeed was armed with Weapons of Mass Destructions ‘good to go’?” Or conversely, “what if the Iraqis did have such weapons and unleashed them, and the US had NOT pre-empted their use?” Our political discourse, such as it is, would have been far different.

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Or, dialing back in time, “what if the U.S. had discovered Japanese plans to attack Pearl Harbor in December 1941 and had been able to ambush the enemy task force first?”

But for automotive enthusiasts, there is a particularly apt and little known “what if” with Chevrolet’s 100th Anniversary in early November approaching. What if Henry Ford wound up a part of General Motors. Yes, it was a very real possibility this time a century ago.

On September 15, 1909—not quite a year after introduction of the Ford Model T—Judge Charles M. Hough of the Federal Circuit of the Southern District of New York issued his decision on the infamous Selden Patent case: against Ford Motor Company (and also Panhard of France, the other defendant).

His decision meant that henceforth Ford and all other automobile manufacturers, importers and “unlicensed” users would have to pay license or royalty fees to the Association of Licensed Automobile Manufacturers (A. L. A. M.), owner of the Selden patent for an internal-combustion-powered automobile. Henry Ford opposed the patent for reasons both financial and of principle. But Billy Durant, the super salesman dealmaker who had put together General Motors during the preceding year, had reluctantly joined the “club” and already paid in $1 million “dues” for GM cars.

According to one account in Columbia University History Professor Allan Nevins’ 1954 Ford The Times the Man the Company, even before losing the Selden patent suit, Henry Ford and his right-hand-man, James Couzens–secretary and quarter-owner of Ford Motor Company–had been approached by Benjamin Briscoe about joining General Motors as it was being formed. But Henry and Couzens wanted $3 million each for a total of $6 million–more than Durant could raise–and nothing further came of it at that time.

Now a year or so later, Durant acted quickly on news of Ford’s loss of the Selden suit. Hearing that Henry Ford and Couzens were staying at the Belmont Hotel in New York, Durant decided to invite Ford again to join his new company. Like a lot of history that is not clearly recorded at the time because no one knows or thinks it has any significance, there are differing versions, recorded years later, of what transpired.

For a Detroit newspaper article in 1921, Briscoe—no longer associated with Durant after 1909–reported that Henry had an upset stomach from bad food consumed on the train from Detroit the night before. In an undated memo evidently dictated later to a secretary, Durant recalled likewise that Henry was suffering from intestinal problems. But, according to Nevins, Durant also reported in a 1926 court hearing that Henry had been disabled with lumbago (lower back pain) and was lying on his hotel room floor in discomfort.

In either case, Couzens met with Durant, either at Durant’s New York office or in the hotel lobby—recollections differ–to discuss the proposition. Disheartened by the loss of the patent suit and the impact it would have on Ford’s skinny finances at the time, Couzens told Durant that Ford was willing to sell his stock in Ford Motor Company for $8,000,000—but Henry wanted $2,000,000 in cash up front as part of the deal.

Thus, on October 26, 1909, Durant received authorization from GM’s board of directors to buy Ford for $8 million, including the $2 million cash. However, when Durant approached his New York bankers for a loan for the money, they turned the deal down.

It took more than a year, until November 22, 1910, for Ford to file its appeal against Judge Hough’s September 1909 ruling in the Selden case. By that time in 1910, Durant had been forced out of General Motors’ leadership, though he remained a large stockholder and director.

The year 1911 was a stupendous one for both Ford and, as it turned out, General Motors.

On January 9, a three-judge Federal Appeals Court overruled Judge Hough’s Selden decision. The panel’s decision was so firm that the A.L.A.M. decided against litigating the case further, freeing the auto industry from having to pay royalties for every car produced or imported. Ford, GM and the industry flourished.

And on November 8, 1911, Durant incorporated Chevrolet Motor Car Company, to compete in the low-priced field with Ford and its Model T-driven large volume sales.

So, “What If” Durant’s deal to fold Ford into General Motors had been successful?

And “What If” the bankers in 1909 had come up with $2 million for Henry? The automotive world would have evolved very differently.

It seems unlikely that strong-minded Henry Ford would have gone to work for GM or Durant, and that the moving assembly line and mass production would have been so readily accomplished as it was with Ford’s impetuous vision in 1913.

Henry would not have become the “first billionaire.” Ford’s legendary philanthropy—Company, Foundation and Family–thus would have been relatively meager.

Durant likely would not have developed Chevrolet, the early success of which enabled him to regain control of General Motors before the decade was over.

The intense rivalry driving sales of Ford and Chevrolet for nearly the last 90 years—ever since former Ford manufacturing executive Big Bill Knudsen joined GM to build up Chevrolet production capacity to match that of Ford—would not have developed.

The ubiquitous Model T Ford, which alone at one time in the 1920s—1923 was its peak vs rivals– accounted for half the world’s auto sales and 57% of U.S. production. Otherwise Ford might not have been credited with “putting the world on wheels.” However, Ford was overtaken by Chevy in 1927, the year Model T production ended and Ford plants were shut down for six months for changeover to the Model A. Since then, sales leadership between Ford and Chevy has seesawed back and forth with Chevy ahead most years.

Today, we wouldn’t have “Ford people” and “Chevy people” among car fans, not to mention monthly, quarterly and annual print, broadcast and internet stories on the greatest of industrial rivalries.

Sure, you can speculate about other alternatives, “would’ve beens.” Henry Ford might have joined forces with his major suppliers, the Dodge Brothers, to mass-produce motor cars. Then Dodge would have been the Model T.

Or the talented Ford Motor Company staff, no longer under Henry’s thumb, might have gone ahead developing the moving assembly line under General Motors’ auspices.

Or there could still be dozens or hundreds of American automobile companies, each producing only a few hundred or thousand bench-built cars a year, none very successful. And their prices would be even higher because “economies of scale” would be few.

Census Bureau Recognizes Auto Pioneer

GM founder, William Durant, was born today in 1861.

by on Dec.08, 2009

William C. Durant

Durant started making horse-drawn carriages in Flint, Michigan.

We all know what the U. S. Census Bureau does, right? It counts noses.

And those noses, properly scrambled or unscrambled, give marketers targets for selling goods and services, and legions of genealogists clues and info about their ancestors.

But what does it have to do with auto industry?

Perhaps most importantly, the every-ten-years national census ultimately determines how many members of the U. S. House of Representatives there are for each state, and since the number is capped, how they are divided up. States that gain population take Reps away from states that are losing.

So Michigan, Ohio, Indiana, and Illinois—some of the remaining key domestic-make auto-producing states—are losing population and Sun Belt states are gaining. If Detroit loses a Representative to, say, Arizona, the domestic auto industry will have less a voice in Congress.

All of the above is just to put the Census in perspective for the car guys and gals who read TheDetroitBureau.com, no doubt telling this elite group some things they already knew but probably hadn’t thought about lately. Once again, it’s a “ten” year and the census enumerators will be upon us shortly.

Birthdays, Too!

Birthdays, Too!

Still, we were surprised to see “our” U. S. Census Bureau issue a, gasp, press release today (December 8), extolling this as the birth date of William C. Durant (1861-1947), the super salesman financial wizard who created General Motors in 1908.

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