~ S P E C I A L ~ F E A T U R E ~

How General Motors and Ford Almost Merged

an excerpt from the new book

The Story of Two Unique Men, a Legendary Company,
and a Remarkable Time in American History

by William Pelfrey


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 "General Motors."

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Pelfrey recreates the events of that day using obscure newspaper accounts, personal letters, and other previously unpublished documents.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, Kettering University.]

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 running.

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 described it:

"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 merger:

"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 reconciled.

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.


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 Buick.

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.


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 recalled:

"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 University.]

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

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 Henry Leland.

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 managers everywhere."
-- 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 researched."
-- 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.