Chapter 1: 1920; The Fateful Year

• The year of decision making for Alfred whether to stay or

leave.
• Though Alfred was regarded as one of the best and the
business legends in the coming years, the future was yet
unknown.
• GM was as its peak and was the most talked co. in wall
street. Within 20 years it had grown more than 500 times
in terms of car production.
• Employment-13000 to 651000 in 15 years
• Automobile was the No. 1 industry. Yet Alfred was
uncertain about the future.
Why the Uncertainty??
• Much of GM’s growth was financed by issuance of stock and Billy’s
personal charm rather than cash or assets.
• The disintegrating of the business units within the company and lack
of accountability in all the departments. This was due to the poor
policies of the central office.
American and The General on a Roll
• Warren G Harding was elected the President in 1921.
• Due to the world war, Americas investment on manufacturing
increased from 600 million to 2.5 billion in the span of 3 years.
The Jazz Age

• After the world war the automobile industry wanted to get back to
the production of vehicles used for daily commutation.
• At the same time there started a new era of the ‘the jazz age’, where
in people started forgetting the war memories and started moving to
cities and looking for jobs and enjoying their lives.
• Michigan had become the fastest growing city in the world in terms of
population. Doubling its population in a span of 10 years.
• As a company GM also grew leaps and bounds with its assets growing
from 19 million to 179 million.(1912-1919)
Contd..
• GM was the only competitor to FORD with a market share of 11%
compared to that of 42% of FORD.
• Billy was also sympathetic towards society and his employees.
EX: He built houses for affected local communities and his
employees spending $2.5 million which was his 5th largest capital
expenditure.
• In the year 1919 Billy also introduced something called as Employee
Investment plan.
• Billy also made many acquisitions during the 1919 period namely the
Frigidaire and controlled major interest in Fisher body.
• Billy also established GM acceptance corporation. This was to finance
the buyers of GM products.
Loosing a man called Chrysler
• Chrysler was bought to GM in 1911 and was in charge of the
manufacturing. He was the highest paid man in the entire auto
industry.
• Chrysler had great regard for Billy as a person but at the same time he
did not like his ways of management. Chrysler always believed in
decentralised management where as Billy wasn’t so.
• When finally Chrysler decided to quit, both Alfred and Chrysler were
sent on an official visit to Europe to examine the facilities and
management of the French automaker Citroen, which Billy wanted to
acquire.
• The other intention of Billy was to bring back Chrysler.
Contd…
• But the efforts of Billy both to acquire Citroen and to retain Chrysler
failed. In fact Alfred himself was doubtful with his future at GM after
his return.
• After Chrysler departed, Alfred wrote a letter to Billy and expressed
the need for an Employee Savings Scheme, a decentralised operations
and a centralised office administration.
• Employee savings scheme- 62000 employees; availed by 32000
• Alfred also drafted a clear organisational structure which got little
notice then but later on became industry standard and also adopted
by government.
• Alfred’s mantra was ‘Decentralised operations and coordinated
control.
• Alfred also had a partnership offer from the Investment bank,
Higginson and co. at that time. And hence he was in a dilemma
whether to continue in GM or quit for a safer future.

• Not being able to bear the pressure, Alfred and wife Irene decided to
go on a Europe road trip on a Rolls Royce to give himself sometime
and make decisions.

• Alfred had decided to come back to New York and resign. But after he
heard the news of Chrysler also putting his papers, Alfred decided to
stay on and go through the journey.
After the War
• The demand for all types of consumer goods abruptly stalled in the
late summer of 1920.
• The ambitious expansion plan of GM had doubled the production
capacity.
• Most of the company’s investment came from issuance of stocks as
Billy always did.
• Billy was optimistic but Alfred saw dark grey clouds of
overproduction, overexpansion, unsustainable debt and lack of
accountability.
• Then came the crisis of 1920.
• The crisis was almost like an eye opener to all the American corporations.

• The way in which GM dealt with the issues of organisational structure,

production control, forecasting, brand management, finance, leadership
development and communication became an industry standard for the all
the large corporations for the next 50 years to come.

• Until few Japanese companies came up and changed the way all these
were looked at again.

• How did they get along? How did the two most distinctive personalities
come together to create one of the biggest automobile company even
today maybe?
Chapter 2: A Precocious Dropout Forges his First
Empire
Durant:
• Son of an alcoholic father and he was then raised by a socialite
divorcee.
• Billy was a high school dropout. He was a continuous dreamer.
• He was a strong supporter of the 18th amendment of the U.S
constitution.
• He was also the creator of one of one of worlds largest enterprise
only to loose control of it twice.
• He was also known as the Warren Buffet of his day.
• At Flint where he was best known, people didn’t have any negatives
to tell about him.

• He was said to win people over instantly with his energy and modest
voice.

• He had two children; a son and a daughter.

• Once a friend of Billy had asked him, “Do you ever worry?”. Billy
answered with a smile, “Never, in the day time I am too busy and at
night I am too sleepy.”
A Hands-on Education
• Billy was not interested much in the typical class room education. He
Believed the real education is in the real world.
• At the age of sixteen he had dropped out from school and had joined
his grand father’s lumberyard and started his work as a manual
labour.
• But soon he discovered that all he wanted to do is sales. First he
joined a drug store as a night clerk, there he urged the drugstore
owner to allow his to sell patented drugs door to door. He was very
successful in doing so.
• Next he ended up cigars, working on commission. He had sold more
cigars than three agents put together.
• By this time Billy had become pretty famous in Flint. A group of
people had asked him to revive the city’s privately held waterworks
and he could not refuse.

• Within 8 months of Billy accepting the job, the waterworks not only
started making profits but also started receiving compliments.

• The way he revived the waterworks became a landmark and a

standard for most of the future chief executives. The formula was to
take time and listen to what customers had to tell and most important
was to get the organisation focussed on what needed fixing rather
than going through their regular routine.
• He also set up a local insurance co. when he was just 22 years old.

• He had also purchased his own house at a very young age.

• Billy’s success made him the most eligible bachelor of his times.

• He got married to Clara Pitt, daughter of Flint’s railroad’s local ticket

master.

• When Billy was young he was mostly supported by his grandfather as his
father betrayed his family at a very young age.
Just a Short Ride Across Town
• In 1854 before Henery Howland Carpo had entered the local picture,
Flint had been home to only five hand assembled carriage.
• By the end of the century Flint was also known as ‘the vehicle city’
• One day when Billy was rushing for the board of
directors meet at the waterworks, he met his
friend Dallas Dort.
• At the same time there came another friend John
Alger with a bizarre horse drawn cart.
• After the ride Billy had a great business idea in mind.

• Billy had noticed a niche market for horse driven carriages.

• He approached the cart building factory located in Coldwater,

Michigan.

• He struck a deal with them to buy the whole unit and the inventory for
a mere $1500.

• But the problem for Billy was he did not have enough money
immediately to buy it.
Selling Billy Durant, then selling the product
• Billy approached Robert Whaley, President of Citizens National bank
for the $1500.
• Within minutes of the sitting, Billy was approved a loan of $2000 to
start his business.
• He also got additional working capital from his friend Dallas Dart who
abandoned his hardware shop to partner with Billy.
• The Flint Road cart co. was established with the president being Dallas
Dort and Billy heading the operations.
• Billy knew that best products always spoke for themselves. He also
knew word of mouth was one of the main way customers would get
influenced.
• The challenge for Billy now was to stage a public demonstration of his product.

• The best way to do it was in a fair. But all the fairs were already over for the
year.

• There was one fair in the state of Wisconsin called the tri-state fair.
• He entered the fair with the best in class of carriages and carts.

• On the very first day of the fair he received orders for 100 carts. He called the
first cart as ‘ the famous blue ribbon line’.

• Billy on the way back to Flint made various stops and received more than 600
orders.
A bitter lesson in production control
• Billy now had 600 orders but he did not have a manufacturing unit. So
Billy decided to outsource the orders to a wagon manufacturer called
William Paterson.
• Paterson charged $12.5 for each unit and Billy sold it for $ 22.5
• Billy had established one of the first assembly lines for the
production.
• Billy sold 4000 units and made a profit of $18000.
• Paterson soon realised his carts were sold for a higher rate by Billy. He
soon started selling his own carts directly to customers for a lower
price than Billy.
• This was a bitter lesson for Billy and Dallas. They quickly managed
to buy an abandoned woollen mill and started the production. The
name now was Durant Dort Carriage co.

• This led to a new paradigm in the manufacturing sector namely the vertical
integration of the production of all the components of finished products
under the manufacturer and seller’s own ownership and management.

• With the lesson learnt from Paterson, Billy’s strategy of broad variety of
models; high volume, standardised production; direct ownership and
control of key suppliers and a franchise of dealers.

• Billy also carried on the same strategy for General Motors as well.
From Start-up to industry leader
• In less than 10 years from the first cart ride, Billy had established the biggest carriage
industry in the whole United States.

• As their production increased to 75000 units their per unit cost decreased and they were
grossing $5 million annually.

• They had 14 plants all over the U.S with many models on sale.

• By the 1900 when automobile industry was just coming to light Billy was already known as
the ‘King of Carriage makers’.

• He was known as ‘the man’ in Flint.

• The new age was dawning, Durant was growing restless. Meanwhile a 19 year old boy Alfred
Sloan passed out from the university of MIT looking for work.