On this day in economic and business history...
May 2 is an important day in the history of two of the Dow Jones Industrial Average's (DJINDICES:^DJI) longest-tenured former components. Without the breakthroughs that took place on this day, neither company would likely exist in present form at all, and the landscape of 20th-century American industry would have looked quite different.
Like a rock
General Motors (NYSE:GM) was already well on its way toward establishing itself as a credible top-tier automaker in the first few years following its formation in 1908. It began by acquiring Buick, added Cadillac and Pontiac the following year, and very nearly managed to buy Ford (NYSE:F) in 1910 before overextending itself. After that debacle, GM founder William Durant left the company to found Chevrolet in 1911. He built that automaker into a credible GM challenger over the next several years, all the while cleverly amassing enough of a stake in GM to eventually reclaim control. Then, on May 2, 1918, Durant engineered a deal that had GM buy Chevrolet, bringing GM its marquee nameplate and putting Durant back in the corner office.
The deal was valued at $28.3 million at the time, and the company reported sales of $270 million ($326 million when acquired subsidiaries were included) for the 1918 fiscal year, resulting in a $13 million net profit. GM had already grown into one of the country's largest industrial concerns, with a payroll of more than 49,000 people. Nearly a century later (in 2011), GM reported a record 4.76 million sales in Chevrolet-nameplate vehicles around the world -- more than half of the company's total vehicle sales. That year, the revived automaker's revenue reached $150 billion, with more than $9 billion in net income.
Durant deserves relatively little credit for this growth, unfortunately. Two years after he returned to GM, the crafty deal-maker was pushed out by another major stockholder: chemical giant DuPont (NYSE:DD), which had been amassing a stake in GM since 1914. By 1920, DuPont scion Pierre S. du Pont was chairman of the GM board, and he became president of the company after Durant's ouster. That year, DuPont's stake in GM contributed half of its total net earnings. DuPont held onto GM until 1961, when it sold the last part of its stake. Durant died a broken man, his assets gone in bankruptcy and his legendary business acumen wasted on managing a chain of Flint, Mich., bowling alleys -- ironically located in the shadow of the Buick plant he'd helped build decades earlier.
GM was a part of the Dow from 1925 to 2009, its 84-year tenure interrupted by one of the largest and ugliest bankruptcy proceedings in American history. Prior to that, the automaker was actually the first such company to join the Dow in 1915, but this early trial run lasted only one year.
Cutting through a chemical fog
Thomas L. Wilson accidentally discovered the process for creating commercially viable quantities of calcium carbide and acetylene on May 2, 1892. Anyone who has ever done some welding or torch-based metal-cutting knows the value of acetylene, which has been known since 1836, but this hot-burning gas has also become an important building block in the synthesis of hundreds of different organic chemicals. Calcium carbide, while used primarily to produce acetylene, is also important in the steelmaking process, in which it can serve as fuel, a deoxidizer, or a means to remove sulfur from iron. Wilson did not do much with this discovery on a commercial scale, but he did sell the rights to the process to Union Carbide shortly after its founding in 1898.
Union Carbide was actually known more for the production of calcium carbide -- which it manufactured for use in carbon arc lights and as electrodes in electric arc furnaces -- than for acetylene. The modern Union Carbide was formed in 1917 from the merger of two similar chemical companies, and it quickly expanded its range of products throughout the prewar years. In 1928, Union Carbide joined the Dow when the index first expanded to 30 components, and it stayed on the index for 71 years until its removal in 1999 -- shortly before joining another Dow, Dow Chemical (NYSE:DOW), which acquired Union Carbide in 2001.
In our time, Union Carbide is best-known as the company behind a series of major industrial disasters, including several asbestos incidents stretching back to the 1920s, a major contamination in Australia, and the infamous Bhopal disaster in India, one of the most devastating incidents of industrial chemical poisoning in history.