4 Things You Didn't Know About General Motors' Dominance

Today, General Motors (NYSE: GM  ) is the largest car company in the United States. Its market cap may place second to rival Ford Motor Company (NYSE: F  ) , 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.

Foolish takeaway
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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  • Report this Comment On December 22, 2013, at 11:56 AM, lar1429 wrote:

    "Dominance"...they should not even exist...had to take bankruptcy to get to the point they are!!! Screwed thousands of bondholders, stockholders, and employees of millions of dollars in the process. A great non-example for American business.

  • Report this Comment On December 22, 2013, at 2:01 PM, muskybubba wrote:

    I agree....THEY SHOULD BE GONE. Along with all the rest.

  • Report this Comment On December 22, 2013, at 2:24 PM, AmericanFirst wrote:

    Let's see,

    If GM is dominate, why can't they increasen their U.S. market share. The facts Nov. Ytd - GM market share increase 0.0%, where's the dominance?

  • Report this Comment On December 22, 2013, at 9:23 PM, fordracing1 wrote:

    I grew up in the southern United States and as a teenager I was around Fords and Chevys. All I know is from my own experience ,friends that had chevys was always adding oil ,because they either leaked or burned it. My personal vehicle was a Ford pick up. And if you wanted to tow with it or just plain make it work, it did such a better job than chevy,or even Dodge. I've always own a Ford product and have never had to walk. Ive been very Loyal to Ford and for that reason it makes me sick how us hard working Americans can just give money to a fledging car company. If Americans only knew that while we, Our Government was giving GM Billions they were increasing their support in NASCAR while Ford and Dodge was cutting back. Has anyone noticed this or does anyone really care. The bailout money should have been controlled better ,and GM still filed bankruptcy anyway. I'm a U.S Veteran and long time tax payer and anyone involved in the aforementioned Crime should punished .

  • Report this Comment On December 23, 2013, at 1:08 PM, A9930thTA wrote:

    First off you people that claim GM shouldn't be around are idiots. The banks screwed up and almost took down a lot of companies sadly the auto industry was the hardest hit because its products cost the most and require consumers to get credit to purchase in which the banks cut off credit to everyone.

    Next thing is GM didn't want to go into chapter 11 protection. Richard Wagoner said GM WOULD NOT enter chapter 11 protection. When he sought out a loan to keep GM afloat he found no banks were willing to loan anything to anyone so he had to go to the US treasury for the money. They told him flat out they would not loan GM the money as long as he was the CEO because of his comments. To save GM he stepped down.

    In bankruptcy protection the judge decides everything. Its no different for GM than it was for Hostess or Kodak or Kmart. Bondholders and stockholders always get shafted.

    As to the claim GM isnt dominating thats just flat out wrong. You can look at sales numbers on the surface and say they havent increased market share so they aren't dominating and thats not true. GMs RETAIL market share has increased while their FLEET sales have dropped. Roughly 37% of Fords sales are Fleet each and every month. Ford has taken the decrease in GMs fleet sales to increase their sales numbers.

    Why cut out Fleet? Because they are low profit sales that actually hurt residual values for vehicles. Ford doesnt care they lease all their vehicles in house so Ford Motor Credit is on the hook for Billions in vehicle value write downs.

    And all the while GM has not lost market share while cutting Fleet and with the monicker Government Motors. Now that the government is out of GM sales should start to pick up for GM. GM is also selling cars at higher margins than they were which is key. More profits.

  • Report this Comment On December 23, 2013, at 1:40 PM, chadster3 wrote:

    Thank you A9930thTA for saving me from a lot of typing..

    I would like to add, that it took the "Great Recession" to take GM down, while Chrysler has been struggling for decades, and Ford was in serious trouble during the economic boom. Ford hired Alan Mulally, sold off it's UK brands, and was able to get loans while there were still loans to get. Wagoner was turning GM around (revamped Cadillac, Buick, Pontiac, already developing the Volt, leading sales in China), but all of that work & money they spent doing it left them vulnerable, and when the bottom fell out, they couldn't survive.

    GM paid back it's loans in 2012 (or earlier), and the US just sold the last of it's stock at a $10b loss. There are a lot of smart people out there that are fairly certain the loss to the US would've been much more had GM, and then the entire industry collapsed.

    Lastly, fordracing1, GM drastically cut it's NASCAR budget, particularly track / race sponsorships, and still isn't back to where it was pre bailout. Though, that is basically advertising money, something all car companies need to be spending to survive.

  • Report this Comment On December 23, 2013, at 4:20 PM, shadrio wrote:

    Thanks, Fool. Instead of dumping my Ford stock , I listened to you and continue to watch it deteriorate.

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