William Crapo Durant
This week marks the 60th anniversary of the death of William Crapo Durant. This week, as well, General Motors stock reached the lowest price on the stock exchange in its recent history.
William “Billy” Crapo – that’s his mother’s family name, properly pronounced as though there were a “y” after the “a,” as in Cray computers - Durant created General Motors. Twice.
And he lost it, twice.
Durant is perhaps the most colorful forgotten figure in modern American history, certainly one of the most dynamic in business history
(more after the jump)
He started with Buick, and built an automotive empire. At one time, he offered to buy the Ford Motor Company for $25 million. Henry Ford accepted, but the deal crumbled when Ford insisted on payment in gold and Durant’s bankers wouldn’t come up with it.
Bankers were always Durant’s nemesis. To him, money was not a store of intrinsic worth, but merely a tool, a means to an end. He borrowed money to create assets and then borrowed more money on the assets he created, all to build even more.
Durant invented the vertically integrated company. It was Durant who conceived of the idea of bringing multiple brands under the same corporate roof, and then realized that assembling cars and manufacturing them were different. With that vision, he set about bringing the component manufacturers under that same corporate roof. It was Durant who acquired the Delaware Electric Company – Delco – and Albert Champion’s second attempt at a spark plug company – AC.
But, he did it all with borrowed money, largely secured by the value of General Motors’ own stock.
Banks were happy to loan more and more money to finance Durant’s expansion of his company. But, at the first sign he was stumbling, they closed in. A downturn in the economy put a hole in the GM stock balloon and the bankers demanded more collateral. When Durant couldn’t come up with it, the bankers took over the company.
So, Durant started over.
He sensed that there was a market for a low-priced car that was stylish. Fords were utilitarian. A car that could be sold at a Ford price, but that could offer something of the look of higher-priced cars would be a winner.
Durant needed a name that would captivate the public and he found it with Louis Chevrolet, one of two brothers, both famous race drivers of the time, rock stars of their era.
Thus, Chevrolet was born and was very, very successful.
Meantime, GM was thriving. The bankers were sitting on a cash cow. But the profits were being plowed into repaying debt, not paying dividends on the stock. Even though the company was doing very well, the price of its stock kept dropping.
And, unknown to the bankers,
Durant was buying.
Over time, Durant accumulated more than 50% of the outstanding shares of General Motors common stock.
In a scene that later inspired the dramatic climax of the Broadway and movie hit, “Solid Gold Cadillac,” Durant appeared at the annual GM shareholder’s meeting, announced to the Board of Directors that he now owned General Motors, and promptly threw them out of office.
Then, he did it again: borrowed too much, and was forced out in another economic downturn. This time, the bankers brought in a gentleman with a great deal of organizational skill, Alfred Sloan. Sloan ran the company until the 1950’s.
Durant tried to start another car company, but the economy had seriously soured, the depression was beginning to take hold, and his spirit wasn’t in it.
But, he created the conceptual foundation of the modern automobile company and, simultaneously, the automotive market place that still, in its understanding of how cars are sold, operates today. He was never bitter about losing GM, never really looked back.
One senses that he knew what he’d done.