General Motors and Ford almost merged once, in 1908, when J.P. Morgan
tried to put together a deal between four major car makers: Ford, Buick,
Olds, and Briscoe-Maxwell. The secret meeting between the charismatic
heads of these companies is retold in the excerpt, below.
What's amazing about this excerpt is that all the parties involved
agreed to the merger -- including the enigmatic Henry Ford. It looked
like a done deal, to be called the "International Motors Corporation" --
a name picked out by J.P. Morgan. Suddenly, the deal unraveled. The
reasons are complex, involving the psychology of self-made men vs.
schooled managers, distributed vs. central control, and inventors vs.
the financiers they hated but couldn't grow without. W.C. "Billy"
Durant, who attended the meeting as the head of Buick, went on to make
the deal later that year -- without Ford -- and called the new company
The excerpt is written by National Book Award nominee William Pelfrey. A
veteran freelance journalist and GM insider, Pelfrey recreates the
events of that day using obscure newspaper accounts, personal letters,
and other previously unpublished documents. More information about the
author and the book follows the excerpt. Enjoy!
How General Motors and Ford Almost Merged
by William Pelfrey
[EDITOR'S NOTE: * indicates the source of the quotation is the
unfinished manuscript of William C. Durant, entitled "The True Story of
General Motors," housed in the Durant Collection, Scharchburg Archives,
The biggest adventure of all began with what Billy described as an
unexpected phone call from Chicago.
The caller was Ben Briscoe, who had established close relations with the
all-powerful House of Morgan in New York City after dumping his interest
in the failing Buick enterprise on James Whiting in 1904. J.P. Morgan
and Company agreed to back Briscoe with a bond issue of $250,000 to
acquire Jonathan Maxwell's automobile enterprise, which at the time was
only slightly healthier than David Dunbar Buick's business. The Morgan
bankers were finally taking notice of the automobile industry's
potential and saw the underwriting of Briscoe as a low-risk way to enter
the market. The also wanted to make sure that the concentration of
manufacturing operations in the Midwest was offset by at least one major
operation in the East. At the insistence of Morgan, the renamed Maxwell-
Briscoe Company proceeded to build a new plant in Tarrytown, New York,
on the banks of the Hudson River. Within a year, the plant was up and
The first Maxwell-Briscoe cars were immediately successful, but by the
spring of 1908, Briscoe (like so many others) was convinced that the
inevitable shakeout among manufactures would come sooner rather than
later. Accordingly, he had an idea to run by Billy Durant. As Billy
"I was dining with my daughter, Mrs. E.R. Campbell, when I was called to
the phone. Chicago on the line, Briscoe calling."
"Briscoe: 'Hello, Billy, I have a most important matter to discuss with
you and want you to take the first train to Chicago.'"
"Durant: 'What's the big idea, Ben?'"
"Briscoe: 'Don't ask me to explain, it's the biggest thing in the
country, there's millions in it, can you come?'"*
Durant told Briscoe he couldn't come to Chicago, he was too busy; but he
would have breakfast with him in the morning if Briscoe could catch the
evening train to Flint. Briscoe agreed, and Billy met him at the Flint
train depot at seven o'clock the next morning. They had a quick
breakfast at the nearby Dresden Hotel and then proceeded to Billy's
office at the Buick plant to discuss Briscoe's big idea.
The idea was a consolidation of carmakers on the lines of U.S. Steel,
whose creation in 1901 had been orchestrated by J.P. Morgan himself.
Morgan now wanted Briscoe to feel Durant out on the idea of a similar
automotive merger. As Billy recalled it:
"One of the partners of J.P. Morgan and Co. had made a small investment
in the Maxwell-Briscoe Co. when it was first organized. Pleased with
progress the company was making and recognizing the possibilities, he
asked me if a sufficient number of motor car concerns could be brought
together to control the industry. How would the leading companies regard
a consolidation? Would Briscoe canvass the situation and report [to
Morgan]? At that time trusts and combinations were the order of the day
-- promotions of all kinds encouraged by big banking interests. Biscoe
had no well-considered plan but wanted to get my ideas."*
Despite his years as a professional stock trader in New York before
taking on the Buick challenge, there is no record of Billy Durant having
ever dealt directly with the House of Morgan before Briscoe made his
pitch. If he had, he may well have told Briscoe good-bye on the spot.
Durant's business record (like that of all the other strong-willed auto
industry leaders of the day) indicates a temperament that would never
willingly cough up the kind of money and operational control that was
the J.P. Morgan and Company policy in underwriting mergers. That policy
was spelled out by Morgan partner George Perkins, who eventually became
the lead intermediary in trying to put together the first automotive
"Morgan and Company would investigate, consulting and questioning the
various producers in the field as to their interests and opinions. Then
the firm would prepare a plan and submit it to the chief corporations in
the industry. If approved, the House of Morgan would estimate the
working capital necessary to organize the new concern, and form a
syndicate to raise the money. If $10,000,000 were needed, the syndicate
would issue $15,000,000 in stock, the extra millions representing the
syndicate's 'bonus'...Morgan would also insist upon choosing all the
officers and directors of the new company. This point Morgan and Co.
have found indispensable in making their combination." (Bernard A.
Weinberger, "The Dream Maker," Boston: Little, Brown, 1979, p.128)
Perkins's description of more than a century ago remains a remarkably
accurate depiction of the way most investment banks still put deals
together today. It also explains why they were feared, respected, and
needed all at the same time, then as now.
At this meeting with Durant in Flint, Briscoe suggested bringing
together no less than twenty companies for discussions. He then asked
Billy what he thought. Billy told him he did not think it was workable,
with so many different parties and too many conflicting interests to be
Billy asked, "Why not modify your ideas, Ben, and see if you can get
together a few concerns committed to volume production in the
medium-priced class, all having a common objective, all heading for a
highly competitive field?"* He went on to suggest Ford, Maxwell-Briscoe,
Buick, and Reo, then the four dominant companies of the industry. (Reo
had been formed by Ransom E. Olds after his falling out with his
financial backer Fred Smith and his Oldsmobile management team and was
now actually outselling Oldsmobile.)
Durant further suggested that Briscoe meet personally with Henry Ford
before any of the others, explaining that Ford was "in the limelight,
liked publicity, and unless he could lead the procession, would not
play."* He told Briscoe, "Get Ford if possible, then take the matter up
with R.E. Olds. When and if everything is arranged to your satisfaction,
advise me the time and place and I will attend your meeting."*
Regardless of how much each player actually knew of the Morgan bankers'
modus operandi, a new game was afoot. The fact that all the players
quickly agreed to what Billy suggested that morning is testimony to how
nervous and uncertain each man was about who would survive in the young
but ruthlessly competitive and wide open automobile industry.
BILLY BRINGS THE BIG FOUR TOGETHER...
With J.P. Morgan and Company still in the background, Briscoe informed
Durant two weeks after their Flint breakfast that Henry Ford and Ransom
Olds would like to meet with the two of them in Detroit. The designated
place was the Penobscot Building (then Detroit's tallest building, still
standing and occupied today) rather than the more popular Pontchartrain
Hotel, where Durant and all other self-respecting nonresident auto
barons always stayed.
When Billy arrived, he saw the others waiting in a crowded public area
with a cadre of "associates and advisers." He immediately feared that
they would draw attention and headlines. As he observed:
"I sensed that unless we ran to cover, plenty of undesirable publicity
was in the offing. As I had commodious quarters in the Pontchartrain
Hotel and as luncheon hour was approaching, I suggested that we separate
(in order not to attract attention) and meet in my room as soon as
convenient, giving the number of the room and how to locate it without
going to the office. This was accomplished and I had the unexpected
pleasure of entertaining the entire party until mid-afternoon."*
Durant let Briscoe open the meeting. Not one to beat around the bush,
Briscoe explained that the objective was to come up with a plan for
merging the four companies that might appeal to J.P. Morgan and Company.
Then came what Billy called "a painful pause."
Durant himself broached the subject of the value of the companies,
throwing out a figure of $10 million for Ford Motor, $6 million for Reo,
and $5 million for Maxwell- Briscoe, but not offering a figure for
When Briscoe finally asked what Buick was worth, Billy replied only that
"the report of the appraisers and auditors and the conditions and terms
of the agreement" would answer that question.
With tension already in the air, the discussion then moved quickly to
the nitty-gritty of all merger negotiations: How would the new entity be
managed? Who would be the boss? How would the different companies be
represented in management?
Briscoe and Durant led the discussion, and their differing views remain
a remarkably accurate summary of the debate over centralized control
versus operational independence that is still conducted within large
companies and among potential partners every day.
As Billy Durant recalled the discussion:
"Briscoe took the position that the purchasing and engineering
departments should be consolidated, that the advertising and sales
departments should be combined, and that a central committee should pass
on all operating policies. I took the position that this would only lead
to confusion; that there should be no change or interference in the
manner of operating, that the different companies should continue
exactly as they were. In other words, I had in mind a holding company.
Briscoe came back jokingly with 'Ho! Ho! Durant is for states' rights; I
am for a union.'"*
Eerily, it was the same difference in opinion and philosophy that would
eventually lead to the General Motors crisis of 1920 and the final
parting of Billy Durant and Alfred Sloan.
Billy also noted that Henry Ford was the only person who remained silent
during the meeting. Despite the sharp difference between Durant and
Briscoe, the discussion kept going, with Billy recalling, "Business
conditions and the future of the industry were forecast, the hazards and
uncertainties were gone into thoroughly, the desirability of a
controlling organization agreed upon, the meeting breaking up with the
best of feeling with a statement from Mr. Briscoe that he would see his
people and report, and that, in all probability, we would be invited to
meet in New York in the near future."*
From that point, the House of Morgan took charge of the game, and none
of the players would end up happy with its rules.
HENRY FORD KILLS MORGAN'S BIG DEAL
The exact dates of the various meetings following that initial session
in Detroit are contradicted by the various players: James Couzens, Henry
Ford's point man, and Ransom Olds both left sketchy diaries that put the
most intense meetings in January 1908, while Billy Durant puts them in
May (around the time of his divorce and remarriage). Most historians
give credence to the January time frame but also concur with Durant's
recollection of the substance of the conversations. (See Arthur Pound,
"The Turning Wheel," New York: Doubleday, Doran and Company, 1934,
pp.111-118; May, "A Most Unique Machine," pp.300-303; and Weisberger,
"The Dream Maker," pp.123-128)
Regardless of the exact dates, the House of Morgan contacted all four
principles shortly after Briscoe's report. The next meeting was arranged
in New York and held at the law offices of Ward, Hayden and Satterlee at
120 Broadway rather than the fabled House of Morgan at the corner of
Broad and Wall Street (opposite the New York Stock Exchange). Herbert
Satterlee was a partner in the firm and happened to be J.P. Morgan's
son-in-law. Satterlee led the discussion and immediately asked the kinds
of questions that today make all executives wince in the presence of
competitors and in the absence of their own attorneys: How much capital
did each bring to the table? What would each gain by the merger? Would a
consolidation attract or discourage competition? What were their
objections, if any, to the merger?
Significantly, only Henry Ford raised any objection. As Durant recalled,
"He [Ford] thought the tendency of consolidation and control was to
increase prices, which he believed would be a serious mistake. He was in
favor of keeping prices down to the lowest possible point, giving the
multitude the benefit of cheap transportation."*
Ford's comment reflected his determination to build that "universal car"
for the masses, but it also reflected his lingering mistrust of
financiers and other businessmen. The mistrust went back to his early
failures. Those experiences actually led him to resent many of the basic
tenets of capitalism itself, especially the way financiers and investors
were driven by the profit motive rather than what he saw as the more
noble desire to create a product that would benefit the human race. Ford
expressed his bitterness and suspicion when recalling his ouster by the
financial backers of the Henry Ford Company in 1902:
"What I most realized about business that year is this: (1) The finance
is given a place ahead of work and therefore tends to kill the work...
(2) That thinking first of money instead of work brings on fear of
failure and this fear blocks every avenue of business... (3) That the
way is clear for anyone who thinks first of service, of doing the work
in the best possible way. The money influence...seemed to be at the
bottom of most troubles. I was not free. I could not give full play to
my ideas. Everything had to be planned to make money; the last
consideration was the work." (Sidney Olson, Young Henry Ford; Detroit:
Wayne State University Press, 1963, p.147)
Despite his comment in Satterlee's office, Henry Ford expressed no other
objection to the merger at that meeting. It was agreed by all parties,
however, that the session was to be considered "purely informal," that
there would be no publicity, and that none of the parties had made any
kind of commitment. Billy Durant left the meeting confident that a deal
would be made. Another meeting of the four principals and the Morgan
representatives and attorneys was called at Satterlee's office on
Broadway. The bankers reported that they had completed their audits and
appraisals. They also reported that they had already instructed their
attorneys to draw up contracts to be approved by the stockholders and
directors of the four companies.
The conversation then turned to the actual underwriting of the issuance
of stock in the new company, and Henry Ford quickly killed the deal by
announcing that he wanted cash rather than stock. This turn of events
might have been expected from the outset if the other parties had
followed a bit closer Ford's prior dealings with bankers and investors
as Durant recalled:
"We were told that generous subscriptions on the part of the
manufacturers would have a favorable effect upon the public acceptance
of the issue and Mr. Ford was asked how much of the preferred stock he
would subscribe for. He replied that when he was first approached by Mr.
Briscoe, he told Mr. Briscoe that he would sell his company for cash,
but would not be interested in or take stock in any merger or
consolidation. This was a great surprise and the bankers who were
expecting a large subscription from Mr. Ford were quite disappointed."*
The number Ford threw out that day was $3 million in cash plus a share
of the new company's stock. Ransom Olds immediately declared that if
Ford wanted to get cash, he did, too. Olds's number was also $3 million.
A stunned and embarrassed Satterlee asked Durant to step into an
adjoining private room. Durant told him that Ford's statement was news
to him, and he suggested they bring Briscoe into the room. Incredibly,
Briscoe told them that what Ford had said was true. Again, Billy
"Briscoe said that Mr. Ford had correctly stated the case, but that he
had shown such an interest as the matter progressed that Briscoe,
whether rightly or wrongly, inferred that Mr. Ford had changed his mind
and that he would go along with the others."*
With that, the deal that would have combined the Big Four automobile
makers into a single enterprise was dead. One can only speculate how
America's auto industry, its economy, and even its culture would have
been different today if the merger had proceeded. Would Henry Ford have
still had the freedom to proceed with the Model T? Would Ford and Durant
have been able to coexist in the same organization? Would the House of
Morgan have put its own management team and business strategy in place?
Would Alfred Sloan have remained a small independent supplier?
[EDITOR'S NOTE: * indicates the source is the unfinished manuscript of
William C. "Billy" Durant, entitled "The True Story of General Motors,"
housed in the Durant Collection, Scharchburg Archives, Kettering
About the Author
WILLIAM PELFREY (Beverly Hills, MI) spent 15 years at General Motors
Corp., most recently as Director of Executive Communications. A former
journalist, he reported from Vietnam, Appalachia, and Pakistan for The
New York Times, Atlantic Monthly, and The New Republic. His first book,
"The Big V," was nominated for the National Book Award and won him a
National Endowment for the Arts fellowship.
About the Book
BILLY, ALFRED, AND GENERAL MOTORS BILLY, ALFRED, AND GENERAL MOTORS:
The Story of Two Unique Men, a Legendary Company,
and a Remarkable Time in American History
by William Pelfrey
Published by AMACOM
ISBN 0-8144-0869-9, 336 pages, rare photos, hardcover, $27.95
Available through this site or directly from the publisher:
One industry has had more impact on life in America than any other
before or since. Here is the story of two men and one company at the
start of it all.
You couldn't find two more different men. Billy Durant was the
consummate salesman, a brilliant wheeler-dealer with grand plans,
unflappable energy, and a fondness for the high life. Alfred Sloan was
the intellectual, an expert in business strategy and management, master
of all things organizational. Together, this odd couple built perhaps
the most successful enterprise in U.S. history, General Motors, and with
it an industry that has come to define modern life throughout the world.
Their story is full of timeless lessons, cautionary tales, and
inspiration for business leaders and history buffs alike.
BILLY, ALFRED, AND GENERAL MOTORS is the tale not just of the two
extraordinary men of its title but also of the formative decades of
twentieth-century America, through two world wars and sea changes in
business, industry, politics, and culture. The book includes vivid,
warts-and-all portraits of the legends of the golden age of the
automobile, from "Crazy" Henry Ford, Ransom Olds, and Charles Nash to
the brilliant but uncredited David Dunbar Buick and Cadillac founder
The impact of Durant and Sloan on their contemporaries and their
industry is matched only by the powerful legacy of their improbable and
incredible partnership. Characters, events, and context -- all are
brought skillfully and passionately to life in this meticulously
researched and supremely readable book.
"This book is particularly timely, with the auto industry in a period of
extreme turbulence that features a restructuring of General Motors, as
well as other icons of times gone by. In a sense, we may be reliving in
the 21st century the auto drama of the 20th century portrayed so well by
Bill Pelfrey. The author's outstanding writing and research skills are
evident throughout and make this one of the most important and
fascinating books I've read in a very long time."
-- David E. Cole, Chairman,
Center for Automotive Research
"Every person who is interested in the building of the American
automobile industry must read this book. Bill Pelfrey has done a great
job researching the early years of Billy Durant and Alfred Sloan and the
very different roles they played in the history of General Motors."
-- Jack Smith, retired Chairman and CEO,
General Motors Corporation
"Anyone interested in the current story of General Motors should read
this engrossing description of the beginnings and early growth of this
largest of all America's businesses. BILLY, ALFRED, AND GENERAL MOTORS
is an important work on the history of the automobile industry."
-- John G. Smale,
retired Chairman and CEO, Procter and Gamble Company;
former Chairman, General Motors Corporation
"The challenges faced by Durant, Sloan, and others in the automotive
industry 100 years ago are as relevant as ever today: managing through
varying leadership styles; ensuring the ability to adapt to a changing
business environment; maintaining cash flow during downturns. This book
highlights both their successes and failures, and it should be read by
-- Ira M. Millstein, Senior Partner,
Weil, Gotshal and Manges; Special Adviser to the
World Bank on Corporate Governance
"To understand where General Motors is going, you must first understand
where it has been. The who and why of it all is beautifully described,
anecdote by anecdote, by Pelfrey in this fascinating read. Magnificently
-- Gerald C. Meyers, Professor of Management,
University of Michigan (Ross) Business School;
former Chairman and CEO, American Motors Corporation.
Copyright (c) 2006 by William Pelfrey. All
rights reserved. Reprinted here with permission of the publisher, Amacom
Books, http://www.amacombooks.org. Please feel free to duplicate or
distribute this file, as long as the contents are not changed and this
copyright notice is intact.