VBOA Matters 5/2007

It’s always great to receive feedback and my attempt in VBOA Matters 4/2007 to identify some of the significant models that have anniversaries in 2008 brought forth some interesting comments. The first was from Neil Bonner of the VVOC:
“There is another anniversary on top of those mentioned in VBOA Matters 4/2007, another 50 years anniversary that will be supported by the VVOC next year and will be celebrated at Billing 2008 (Any excuse for Howard to bake another cake!): 50 years of Vauxhalls first factory produced estate car; the 1958 Victor Estate.

To celebrate we will be inviting all Victor Estate owners (F, FB & FC) and will hopefully have at least a brace of 1958 models. I am currently helping a member with the restoration of his 1958 Estate in Teignmouth, one which was exported to South Africa from new and re imported in 1971. It has been off the road since 1983 and was raced around a field until the fan belt broke and it was laid up. The current owner paid the princely sum of £1 for the car which is not in too bad a shape given the history. It is hoped that it will be on our stand in 2008 in its original Harvest Yellow with Charcoal Grey roof alongside Shane Portmans Horizon & Empress Blue 1958. All the welding has been done, and it should start coming back together early in the New Year.”

Mike Swanton from New Zealand wrote to offer Christmas greetings to the VBOA and went on to say:
“I have just got underway with the restoration of a 1937 25hp GY model, and together with the developing restoration of my 1946 J I hope to have them running by 6 December 2008 to join my lovely 1951 LIP as wedding cars for my younger son's wedding. I am trying to save and restore those Vauxhalls that aren't the glamorous early models but are the true family Vauxhall cars that once were so numerous and were driven by so many people (The GY wasn't so numerous but it too has disappeared). Now those models have almost completely disappeared leaving a large hole in our living history.
The L model, the only available new car in New Zealand after the war, deserves a bigger position in history than people give it credit for. It not only kept NZ and Australia running but it spawned the wider development of the Australian Vauxhall varieties and the development of the Australian Holden.”

Mike’s comments about saving the less glamorous cars certainly strike a chord with me. Too many “experts” consider that Vauxhall perished as a worthy car maker when General Motors purchased the company in 1925. The truth is that Vauxhall had lost its business focus by then and instead of developing sensible successors to the legendary but basically Edwardian designed 30-98 and 23-60 models were messing about with motor cycles, Grand Prix cars and Rolls Royce competitors (the S-Type). The only market driven design to come to market was the 14-40, an excellent car but relatively over-engineered and potentially loss making if priced to sell in a competitive market. Undoubtedly without GM there would not be a Vauxhall brand in the market place today. Under GM’s parentage, Vauxhall got access to GM research and know-how and produced a series of well engineered and built models which took the company successfully into the new era of mass production. But in my view, throughout the pre-war period and for a period after the war, Vauxhall retained a “DNA” that placed it above the like priced competition in terms of character and engineering excellence. They are indeed well worth saving.

Mention of General Motors leads me to confess to a rare mental condition called “send-recall”. The moment I press the send button I remember something important. That something, as far as VBOA Matters 4/2007 is concerned, was the centenary of GM itself, which will be celebrated in 2008!

William Crappo Durrant has been viewed by history in a number of different ways, ranging from a genius entrepreneur to an opportunistic carpet bagger. Whatever the truth, to create a company like General Motors takes a very special man.

Durrant was involved from the ground floor of the US car business, having been a successful carriage maker via the Durrant-Dort Carriage Company. Indeed, by 1900 he was the Nation’s largest producer and when the gasoline engine started to replace the horse, Durrant knew this was a business he just had to be in, so in 1904 he bought into the ailing Buick Company in Flint, Michigan. By 1908 he had turned it into the largest car maker in the US, bigger than better known pioneers such as Ford and Cadillac. Durrant was driven by a vision, shared by Henry Ford but few others at the time, that cars would be produced by the million as the Nation took to wheels for business and leisure. He determined to set up a group of companies that produced cars of different types and the components that went into those cars. While Henry Ford created mass production based on one model and no choice, Durrant took the longer view and based his business model on diversification. One day, he reasoned, the market would require more than just basic transport and he would provide that alternative.

Using Buick as his base and “cash cow”, in 1908 he created a new company called the General Motors Company. This was a holding company into which he brought in rapid succession Buick, Olds, Oakland (to be later renamed Oldsmobile and Pontiac respectively) and Cadillac. The companies continued to maintain their old management structures and operations, but gained significant benefit from cost savings through integration and, what would today be called, technology transfer within the twenty five companies that Durrant had packed into his General Motors shopping basket by 1910. Eleven of these were car makers, the rest supplying components such as electric lamps and chassis components. Significant acquisitions were the Champion Ignition Company, later to be reborn as AC Sparkplug and the McLaughlin Motor Car Company, Ltd., of Canada, destined to be the foundation of GM Canada.

If rationalisation by virtue of ownership of key suppliers was one motive for this purchasing frenzy, another appears to have been a desire not to get caught out by emerging technologies. The car was still in its relative infancy and design innovations were appearing like mushrooms. They varied from the rational to the lunatic, but the potential successes were not always easy to spot. So Durrant brought into his holding company businesses that had developed a friction drive system, two-stroke engines and truck designs. Some proved useful, the failures were tossed aside.

Although it can be argued that Durrant’s strategy was right in the long term, it initially created an over extended and lopsided organisation that depended almost entirely on Buick and Cadillac for revenue creation. By 1910, the General Motors Company was in financial trouble. A rescue package was arranged by an investment banking consortium and although Durrant remained a vice president and member of the board he was no longer responsible for day to day management.

The banking group ran the company from 1910 to 1915, disposing of the more dubious of Durrant’s acquisitions and making cautious progress in sales volumes. The US market was expanding rapidly with the success of the Model T Ford, and although General Motors Company sales went from 210,000 a year in 1911 to 1.6 million by 1916, the company halved its market share, largely because it did not compete in the low price segment of the market. On the positive side, it was built into a sound financial organisation, even if almost all of the profits still came from Buick and Cadillac. The General Motors Export Company was formed in 1911 to sell General Motors products overseas and operational efficiency amongst the companies in General Motors was greatly improved, the guiding hand in this case being that of company president Charles W Nash. Nash had worked for Durrant in his carriage business and moved up to be president of Buick. He had the administrative skills that Durrant lacked, if not the vision.

By 1915 General Motors was in such good financial shape that the board authorised a US record dividend of $50 per ordinary share, an amazing payback to shareholders that shook the financial world. But that was nothing to the shocks that were to follow shortly.

When Durrant lost control of his company in 1910, he had embarked on another automotive project in partnership with a Swiss émigré engineer and racing driver, Louis Chevrolet. Chevrolet was experimenting with light car designs and in 1911 they formed the Chevrolet Motor Company. With Chevrolet overseeing the technical side and Durrant in charge of the commercial, in just four years it was turned into a nationwide company with multiple plants and even a branch in Canada. Durrant traded Chevrolet stock for General Motors and quietly built up a significant shareholding in General Motors.

In 1915 the banker’s trust that had been in place since the 1910 rescue of General Motors by the consortium was due to expire. Much energy was expended by the bankers to ensure that their interests would continue to be well served and to this end they introduced millionaire industrialist Pierre du Pont to Nash with a view to him, or his du Pont company, taking a major financial interest in General Motors. However, all this manoeuvring fell apart when at the first meeting set up to plan the new board it became evident that Durrant intended to use Chevrolet as his entry ticket to regaining control of General Motors.

The situation was temporarily resolved by the appointment of Pierre du Pont as chairman and the re-election of Charles Nash as president. But Durrant was intent on wresting back control of “his” company and he moved forward with a plan to call a proxy vote. In the face of this aggression and the substantial shareholding held by Durrant’s Chevrolet organisation, the bankers capitulated and Durrant resumed management control of General Motors. Indeed Chevrolet had a controlling interest in General Motors, a fact that took some years to unravel. Nash left and was to receive the backing of the same banking group to set up the Nash Motors Company of Rambler fame. So, on June 1st 1916, William Durrant was once again president of General Motors. In 1917 he changed it from a company to a Delaware registered Corporation with the main car manufacturing businesses becoming divisions. Thus General Motors went from a holding company to an operating company.

Despite the internal wrangling which had occurred in the recent past, when Durrant wanted substantial extra funding for the corporation he turned to du Pont. In 1918, the du Pont company became major investors in General Motors, in return for which du Pont personnel took over control of the vital finance committee, the only non-du Pont member being Durrant.

Between 1918 and 1920 Durrant was back to his old ways of bringing in new companies and projects. The incorporation of Chevrolet in 1918 gave the new corporation the potential to fight Ford in the low cost segment of the market. A major shareholding was taken in Fisher Body which was to have major significance for the future as was a small purchase of a refrigeration company that was to blossom into the Frigidaire Division. General Motors Acceptance Corporation (GMAC) was founded to fund the purchase of General Motors products and General Motors of Canada was incorporated. A group of component manufacturers called United Motors and run by a keen student of corporate organisation called Alfred P Sloan were brought into the fold in 1918.

But Durrant still ran the corporation as a completely decentralised organisation with investment decisions being made in an undisciplined and disorganised manner. A major investment was made in tractors which was not destined to be successful and then in mid-1920 the car market collapsed as a major recession swept the World economy. Ford made huge price reductions, motor company shares plummeted in value and vehicle stocks rose to alarming levels. Investment money dried up as the twin factors of economic recession and the lack of a sound organisational structure brought General Motors to its knees. The plants were shut and the crisis deepened. An emergency financial restructuring was hammered out by the bankers Morgan Brothers and the du Pont Corporation to keep General Motors from total collapse. The price of the rescue package was the resignation of Durrant as president and he left General Motors for the last time at the end of November 1920, to be succeeded by Pierre du Pont.

Clearly the loosely controlled, fully decentralised, General Motors of Durrant was no longer a viable business model. The board, much influenced by Alfred Sloan, adopted a system of “controlled decentralisation”, with strict central accounting and appropriation procedures. The divisions would still be able to run their own shows but within strictly controlled budgets. Again, some of the disasters that had been acquired along the way, like the tractor operations, were closed.

A combination of these measures, an improving market as recession eased and tenacious management throughout 1921 re-established General Motors. It was now in much better shape to face the future but there was still much to be done to get the most out of the corporate structure. For instance, the product offer was rationalised so that each division had a clear segment of the market to aim at, with, for example, Chevrolet competing in the low cost sector, Buick for the middle classes and Cadillac in the prestige sector. Divisions would overlap, but direct competition was minimised. Careful consideration was also given to the price gaps between models in each division’s portfolio, so customers had an easy “walk up” to the next, more profitable, model in the range. Technical research was increasingly brought into the central organisation, the Divisions gaining the benefit without wasteful duplication.

With continual refinement, this was the basic model that would serve General Motors throughout its rise to become the World’s largest vehicle maker. In 1923, the architect of much of this, Alfred P Sloan, became president and he took the Corporation through its golden era.

A General Motors export operation had been set up in 1911 but there was little in the way of a strategy for sales outside of the USA and Canada. Complete cars were shipped to some markets, but in Europe, the only sizeable market opportunity outside of North America, the key countries applied large import tariffs which made the cars expensive. In some markets this could be partly overcome by supplying cars in component or knocked down form for assembling by a General Motors owned operation. Both approaches were applied in the UK at GM Hendon from 1923 with cars and trucks, but the tariff barrier problem was still there. Inevitably thoughts turned to local production. But again the arguments arose over how to best achieve this: set up a new company or buy and develop an existing one. The net result of this desire to expand export sales but the lack of a defined strategy led to a number of “experiments”.

In 1919, an approach was made to buy 50% of the Citroën Company in France. Andre Citroën was a tough negotiator and it became clear to the General Motors task force, which included future GM President Sloan, that the plant and machinery was tired and that the initial investment would just be the start. When the opposition of the French government was taken into account, they decided to walk away.

But the head of the General Motors Export Companies, James D Mooney, was a vigorous campaigner for overseas production.

By 1925 Vauxhall was ripe for either takeover or the kind of lingering death that befell many of its competitors. General Motors, by now on its way to becoming the World’s largest car maker, had set out for the second time to establish itself in Europe, following its abortive 1919 discussions with Citröen. The UK was particularly important because it gave access to the huge markets of the British Empire. The “McKenna import tariffs” made imported US cars expensive and they also suffered higher running costs by virtue of their larger engines and “square” cylinder dimensions which resulted in a high RAC horse power rating. As vehicle road fund tax and insurance costs were based on the RAC formula, the buyer of an imported US car faced a “double-whammy”. This could be partly circumvented by importing from Canada, which enjoyed “Commonwealth preference”, and General Motors had made good use of this bringing in so-called McLaughlin Buicks for sale to the English middle classes. Interestingly, Buicks had also been sold in the UK as “Bedford Buicks” through “the Bedford Motor Company”. This early use of the Bedford name may have been in Vauxhall mind’s when they required a name for their commercial vehicle range. As far as trucks were concerned, taxation was based on weight and assembly in the UK would get around the import duty issue. So, in 1923 assembly of Chevrolet trucks commenced at General Motors Hendon and the lightweight design became instantly popular. However, this formula wouldn’t work for Chevrolet cars because of their large bore and capacity engines, so in 1924, another General Motors task force was sent to Europe to study how best to commence car production. It recommended the purchase of the Austin Company, which had been through troubled times in common with the rest of the UK, but was recovering and had been able to maintain its position as the dominant UK manufacturer. An agreement to purchase was signed but the deal was withdrawn by General Motors in 1925 because of disputes over the valuation of Austin assets. Rebuffed by Herbert Austin and somewhat on the rebound, General Motors completed the quick purchase of Vauxhall, a substantially smaller concern than Austin, for two and a half million dollars.

With annual production at less than 2000 units, General Motors had bought little more than a respected brand name and the ability to build cars in the UK thus avoiding import tariffs and with the potential to penetrate the lucrative Empire market. General Motor’s President Alfred P Sloan saw the purchase of Vauxhall as “an experiment in overseas manufacturing”.

The experiment evidently didn’t deter General Motors from undertaking a second and far larger European investment. By 1928 the Opel brothers felt it was time to secure the future of the company by seeking a purchaser. Opel had a network of 736 dealer outlets and was unchallenged in Germany as the foremost producer of low-priced cars. The German car industry was important, but in global terms it was not able to compete with the US giants and neither did it have the significant empire that allowed the UK manufacturers to thrive. The brothers were very aware that General Motors had bought Vauxhall in 1925, a miniscule manufacture by Opel standards. The General Motors Export Companies had also opened an assembly plant for US cars in Berlin in 1927, so the von Opels decided to write to General Motors. Presidend Alfred P Sloan liked the idea of affiliation with established overseas producers and, following a visit to Europe in 1928, acquired an option to purchase Opel, to be exercised by April 1st 1929. Sloan pushed the Opel case with the Executive Committee and after a relatively swift courtship, which involved Opel forming Adam Opel AG, General Motors bought Opel in 1929 for just over 33 million dollars, valuing Opel at thirteen times that of Vauxhall.

Although Opel had pioneered mass production in Germany, incredibly, it had not set up a system of interchangeable parts for its cars. Most Opel dealers had large machine shops to make service parts! Clearly, a lot was needed to be done and General Motors installed a German speaking managing director, I. J. Reuter, who had earned his spurs at the Olds Company. The history of Opel now follows a parallel but distant path to Vauxhall, the common ground being provided by American management, engineers and research. Both companies benefited massively from the “General Motors gene pool” of breakthrough engineering developments throughout the thirties.

Ian Coomber