4 Things You Didn't Know About General Motors' Dominance
Today, General Motors is the largest car company in the United States. Its market cap may place second to rival Ford Motor Company , but in terms of sales, the company outpaced all of its peers with more than 9.2 million units sold globally in 2012. Here are four surprising, little-known facts that helped to make the company what it is today.
It all started with a Buick
In 1908, General Motors was started by William Durant, a man who would go down in history as a serial entrepreneur and who likely contributed to the automobile industry more than anyone else. However, the company's roots can be traced back to 1899, with the founding of Buick Auto-Vim and Power Company.
Shortly after its founding by David Buick, the company was bought up by James Whiting, who sold the fledgling enterprise to Durant shortly after. In 1908, Durant formed General Motors to act as a holding company for Buick and the string of other car manufacturers he would acquire over the next two years, including Oldsmobile and Cadillac.
General Motors' costliest mistake
In 1910, Durant pressed General Motors to acquire Ford for $8 million. At that time, Ford was a fast-growing enterprise that had built around 18,000 Model Ts in 1909 and would go on to build its one-millionth vehicle by 1915. Because of the fast growth the company was experiencing, as well as the market position it had, Durant believed it to be an invaluable addition to General Motors.
Unfortunately, neither the board of directors at General Motors or its bankers (to whom the company owed significant levels of debt) approved of the idea. As a result, Durant was stripped of his management role at the firm.
This allowed Durant to go on to co-found Chevrolet, in a deal that would set him up to return to General Motors in 1915 with a controlling stake. However, it forced the company to forever forgo an acquisition of Ford.
If the parties involved could see Ford today, they might have reconsidered. As of 2012, Ford's revenue came in at $134.3 billion, just $18 billion shy of what General Motors earned, while its net income was $5.7 billion, just $523 million short of General Motors'.
Everyone goes through a "phase"
Just like most individuals, companies have a tendency of going through some kind of phase at one point or another. General Motors was no exception. In 1930, General Motors delved a bit into the aviation industry through its acquisition of Fokker Aircraft Corp. of America and Berliner-Joyce Aircraft. The combined division was called the General Aviation Manufacturing Corporation.
In 1933, the company expanded and rebranded this division by buying North American Aviation and retaining its name. By 1940, the operation opened a number of plants in preparation for World War II and reached peak production of 91,000 units per year. After the war, though, production fell to around 5,000 units and, in 1948, GM divested the company in an IPO. Today, North American Aviation is owned by Boeing.
Talk about a bad reputation!
Back in the late 1930s and 1940s, there was no worse insult in the United States than being accused of aiding the Nazis. However, this was the accusation made numerous times against General Motors both during and after the war. Shortly after the start of the war, Germany nationalized its Adam Opel AG plant and used its manufacturing facilities to provide armaments to the Nazi party.
According to Bradford Snell, a historian whose expertise was the history of General Motors, "General Motors was far more important to the Nazi war machine than Switzerland ... Switzerland was just a repository of looted funds. GM's Opel division was an integral part of the German war effort. The Nazis could have invaded Poland and Russia without Switzerland. They could not have done so without GM."
Despite writing off its investment in its Opel plant during the war (and collecting a tax benefit of $22.7 million), the company received reparations from the Allies in the amount of $33 million after its German facilities were bombed. This, along with a string of other accounts, fueled the suspicion that General Motors profited from the war by playing both sides of the field. But those allegations didn't stop the company from becoming the giant that it is today.
As a company that has a long and rich history behind it, General Motors has the opportunity to be an interesting investment. The fact that General Motors has survived for over a hundred years stands as a testament to the company's strength.
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The article 4 Things You Didn't Know About General Motors' Dominance originally appeared on Fool.com.Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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