'Twas Ever Thus

Ronnie Schreiber
by Ronnie Schreiber

Initial stock offerings, bankruptcies, brands being shuttered, established manufacturers being taken over by other concerns, financial crises – a time of turmoil in the auto industry. The time I’m describing is not just the present, it could well describe just about any period in automotive history. With the possible exception of the 1960s, when the Big 3 consolidated market share gained after the independent automakers were reduced to American Motors, there really never has been a long period of stability in the domestic auto industry. Even in the 1960s, Chrysler Corp. stumbled badly.

About a month ago Wayne State University Press, one of the leading publishers of automotive history books, sent me a box full of their recent titles, most of which concern the earliest days of the American auto industry: David Buick’s Marvelous Motor Car by Lawrence Gustin, Maxwell Motor and the Making of the Chrysler Corporation by Anthony J. Yanik, The Dodge Brothers: The Men, the Motor Cars, and the Legacy by Charles K. Hyde, and Hyde’s latest book, Storied Independent Automakers: Nash, Hudson, and American Motors.

While reading up on early American automotive history and I couldn’t help being struck by a sense of the more things change, the more they stay the same.

GM’s post bankruptcy initial public offering of stock was a major step in the company’s revival, but stock offerings, subscriptions and speculation have always been a part of the industry. At the turn of the 20th century there were very few securities regulations and you might say that stock manipulation was a standard practice back then. While some automotive pioneers, like Henry Ford, Ransom Olds and David Buick, were tinkers and engineers, others, like Billy Durant and Benjamin Briscoe, saw a business opportunity.

Briscoe, who by hedging his bets ended up being the financial backer of the two companies that eventually became the basis of General Motors and the Chrysler Corporation, repeatedly tried to sell or merge the companies he controlled so that he could profit in the exchange of stock. Billy Durant was not just a superb promoter, he was an acknowledged stock manipulator.

After Durant acquired Buick, he used it to anchor his assemblage of General Motors, buying up car, truck and component companies left and right. Overextended to his bankers, Durant lost control of GM. He started a new car company fronted by successful racer Louis Chevrolet and turned it into a success. He then traded Chevrolet stock to reacquire control of GM. Durant at the time was backed by Pierre DuPont, who saw a double opportunity to profit. In one hand the DuPonts gathered money selling GM quick drying “DuCo” paint and the then newly developed plastics. In the other hand they reaped wealth from dividends and increasing value of GM stock. The DuPont company effectively controlled General Motors for most of the 20th century but they were forced to divest in 1961.

When asked about the GM IPO, Roger Penske said that his broker had subscribed to the offer and that, yes, he would be buying shares of the new General Motors. I would assume that some members of the DuPont family got similar calls from their brokers.

While the recent financial meltdown of GM and Chrysler burned through billions in cash, figures that would have boggled the minds of even wildly successful industrialists like the Dodge brothers, the early days of the auto industry saw their share of bankruptcies and financial crises. David Buick never really controlled his company because he was indebted to Briscoe. Because of securities laws passed since then, things have been pretty stable but before the Great Depression financial panics were not uncommon. During those low points in the economic cycle, like during the depression of 1920-21, even established companies like Nash Motors had difficulty raising capital needed for product development. That same problem would doom most of the independents in the 1950s and is still a problem for Chrysler today. Fiat’s intended IPO of Chrysler stock will be used to fund future product development in Auburn Hills.

Chrysler is only the latest car company to be acquired by another car company. I already mentioned Durant’s creation of General Motors by buying up other companies. Maxwell Motor, looking for production capacity, took over the Chalmers car company. Later, after Walter P. Chrysler took control of Maxwell Motor, he bought Dodge Brothers from the bankers who bought that company from the brothers’ widows.

Pontiac and Oldsmobile were not the first well established brand names to disappear. Maxwell was a leading automotive brand from 1904 until 1925 and was still selling well when Walter Chrysler took control. However, even before the company was reorganized under Chrysler’s name it was already making a car branded Chrysler and the Maxwell name quickly disappeared after the reorganization. Well, at least as a living automotive brand. Unlike most dead and orphaned brands, the Maxwell brand name had a benefactor, sort of. Comedian Jack Benny‘s penny pinching radio, tv and movie persona drove a Maxwell. The incomparably great Mel Blanc did the sound effects for the Benny radio show, including the sputtering old Maxwell, which became a character on the show. The Maxwell moved to television with Benny. In “ Jack’s Maxwell Is Stolen“, the car is so decrepit that the car thieves return it a la Ransom Of Red Chief. More people today probably associate Maxwell with Benny than with Chrysler. Jack Benny drove a 40 year old car, in 2050 I wonder if some movie (or whatever they will watch 40 years hence) director will use a Pontiac as a sight gag.

Today, suppliers like Magna or Valmet can deliver a fully assembled car to the company whose brand it wears. This is also hardly a new phenomenon. Until 1914, when they started building and selling cars with their own brand name, Horace and John Dodge supplied Henry Ford with what were almost completed Model Ts. Though Ford Motor Company would later be famous for its vertical integration, making almost all components in house, in the early days most Fords were built by the Dodges. The delivered what we’d describe today as rolling chassis, and Ford’s Highland Park plant added only bodies, interiors and wheels.

In an industry that is well into its second century, I suppose it shouldn’t surprise us that history repeats itself. As the US Treasury starts to divest its equity in General Motors, the issue of government control of the auto industry is a contentious one. However, it’s not unprecedented – if not in the United States, certainly there is the cautionary example of British Leyland. Even in the United States there’s the precedent of the WWII era War Production Board. Not only did the WPB allocate war materiel production to companies during the war (I had no idea that there was a Nash plant on Plymouth Road in Livonia that built Sikorsky helicopters), in the immediate postwar era it also controlled how raw materials were allocated.

Today there are examples in the automotive and battery industries of government subsidies distorting the market and playing favorites. The Chevy Volt and the $7,000 tax credits for purchasing it or other EV type vehicles is cited as an example of such favoritism. Charles Hyde points out that in allocating a higher percentage of raw materials to the independent automakers right after WWII the WPB artificially distorted the market. The independents started taking more than 10% of the market. When the WPB was phased out in the early 1950s and controls on raw materials were relaxed or eliminated, the independents started losing market share. A price war between Chevy and Ford drove a few more nails in the independents’ coffins. Just as it was clear in 2008 that Chrysler could not survive without an automotive partner, in the 1950s the independents had no choice but to merge. Studebaker merged with Packard, Willys Overland with Kaiser-Frazier, and Nash merged with Hudson to form American Motors, later to acquire Jeep from the Kaiser Corp.

So it shouldn’t surprise us that much that GM filed for bankruptcy, reorganized and made a stock offering, Chrysler’s product lineup got stale, Pontiac is no longer, and that Fiat now owns Jeep. Like Kohelet said, there’s nothing new under the sun.

Ronnie Schreiber
Ronnie Schreiber

Ronnie Schreiber edits Cars In Depth, the original 3D car site.

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  • PrincipalDan PrincipalDan on Nov 19, 2010
    Unlike most dead and orphaned brands, the Maxwell brand name had a benefactor, sort of. Comedian Jack Benny‘s penny pinching radio, tv and movie persona drove a Maxwell. The incomparably great Mel Blanc did the sound effects for the Benny radio show, including the sputtering old Maxwell, which became a character on the show. The Maxwell moved to television with Benny. In “ Jack’s Maxwell Is Stolen“, the car is so decrepit that the car thieves return it a la Ransom Of Red Chief. More people today probably associate Maxwell with Benny than with Chrysler. Jack Benny drove a 40 year old car, in 2050 I wonder if some movie (or whatever they will watch 40 years hence) director will use a Pontiac as a sight gag. If they're smart they'll use Oldsmobile in the same way a DeSoto is used in "Happy Days." Oldsmobile and DeSoto sadly found themselves with almost the same image at the end of their respective lives.
    • Ronnie Schreiber Ronnie Schreiber on Nov 20, 2010

      Yanik's book is not immediately at hand to check, but I believe that Walter Chrysler announced the new Desoto brand on the same day in 1928 that he purchased Dodge Brothers. It seems to me that automakers were more cavalier with their brand names back them, discarding well established brand names in favor of new ones, and even renaming complete companies. Some of it was ego, like Charles Nash renaming the Jeffries company that made the Rambler after himself, or Chrysler renaming Maxwell Motors. Of course back then, the industrialists' names themselves were effectively brand names with perhaps even more credibility than their car brands. Still they had a clue about branding. When Hudson under Roy Chapin brought out popularly priced and performance lines, they didn't sell them as Hudsons but rather used the Essex and Terraplane brands.

      BTW, has there ever been a brand name that evoked an era better than Terraplane? Maybe it's a bit of an inferiority complex, but car companies have long looked to aviation for styling and marketing direction. In the 1920s and 30s, the time of Earhart and Lindberg, we got the Terraplane, and in the 1950s we got Rocket V8s, Quadra-Jet carbs, and tail fins. Currently, FoMoCo is bringing Mullaly's experience leading the design of Boeing's first full digital flight deck to bear on infotainment and interior design.

  • Buickman Buickman on Nov 21, 2010

    Larry Gustin is a very good customer of mine, excellent dude....class act too.

  • Ronin It's one thing to stay tried and true to loyal past customers; you'll ensure a stream of revenue from your installed base- maybe every several years or so.It's another to attract net-new customers, who are dazzled by so many other attractive offerings that have more cargo capacity than that high-floored 4-Runner bed, and are not so scrunched in scrunchy front seats.Like with the FJ Cruiser: don't bother to update it, thereby saving money while explaining customers like it that way, all the way into oblivion. Not recognizing some customers like to actually have right rear visibility in their SUVs.
  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
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