Billy Durant: Creator of General Motors

Ten. Durant's Rule — and Another Collapse

Chapter Ten Durant's Rule and Another Collapse Durant's coup in reestablishing personal control of General Motors had astounded the world of business and industry. The bankers had been routed. Chevrolet held the controlling interest in General Motors and Durant and his friends controlled Chevrolet . Writers of the time likened the situation to Jonah swallowing the whale. Typically, Durant was juggling more than one big business scheme in the first half of 1916. In May, after he was firmly in control of GM but not yet its president, he formed United Motors Company with the help of Louis Kaufman. United Motors was at first a holding company to control some of the leading automotive parts suppliers, including the Hyatt and New Departure roller bearing companies, Dayton Engineering Laboratories (Delco), Remy Electric, Jaxon Steel Products and Perlman Rim. The president of Hyatt was Alfred P. Sloan, who had reorganized the company in 1898 with an investment of $5,000. In 1916 he sold it to Durant for $13.5 million. Durant then named Sloan president of United Motors, which in 1918 became a division of General Motors. Sloan was eventually to rise to president and later to chairman of General Motors. He was to become the great leader of GM's post-Durant era. The first order of business for Durant after succeeding Nash as GM president on June 1, 1916, was to woo Buick's tough, brilliant general manager, Walter P. Chrysler. "When the results 181 Billy Durant of the election were known and the bankers were no longer, much to their chagrin, active in General Motors, the situation internally was very intense," Durant wrote in his memoirs. "The first thing of importance that occurred was a letter of resignation from Chrysler. He was tied up very closely with the bankers and felt their defeat very keenly." Durant said he received Chrysler's letter in New York and took the first train to Flint. He went to Chrysler's office at Buick, turned on his charm, and opened the purse strings. "I was frank to say that he occupied a position of great responsibility ... that I trusted him implicitly and had planned to make the Buick the pivotal part of a very large institution, and that I needed his organization without interruption. "I talked with him about the responsibility toward the men who believed in him and who had come with him because of their belief in him; that I had made the acquaintance of some of his men, mentioning the name of K. T. Keller [later president of Chrysler Corporation], who was devoted to him, and whom I would like to see in my organization. I used every argument that I was possessed of, having to do with the future of the good men whom he had secured as part of his organization. When I had exhausted every argument, in his usual direct manner came the following: " 'What is your proposition? What have you to offer?" "In reply, quite as promptly, I made the following proposition : " 'I will execute a three-year contract with you dated today, giving you $10,000 a month in cash and at the end of each year $500,000 in cash or, if you prefer, $500,000 in General Motors stock, based on the price of the stock today. In other words, if you take the stock, you are to have whatever value General Motors has obtained as the result of the organization which you are to create to handle the business, which organization is to be of your selection without interference.' "When I had finished, Chrysler asked me if I would repeat the statement, which I did. He said: 'I accept. Billy, I didn't think you could win. You have beaten the bankers and have upset their plans.' 182 Durant's Rule-and Another Collapse Chrysler remembered that he made one strong point at the meeting: "I can accept only if I'm to have full authority. I don't want any other boss but you. Just have one channel between Flint and Detroit: From me to you." Durant was beaming at me then. I saw him touch his fingers lightly to the table top for emphasis. "It's a deal," he said.1 Durant continued: "From that time on, the situation was different. We proceeded to line up work for the near future and found plenty to talk...