How Packard could have doomed Chrysler Corporation
Things were tense in the executive suite of General Motors. The year was 1915 and GM founder Billy Durant was back in charge, but many were not happy.
Five years earlier, Durant had severely overextended the company’s finances, and when financial institutions called in their loans, Durant, with little working capital, surrendered stewardship of the company to bankers.
Among those seizing control of the company was Boston Brahmin James Storrow, the senior partner at Lee, Higginson & Company, head of the bankers’ voting trust and instigator of the coup to oust Durant. A graduate of Harvard Law School, Storrow was Durant’s opposite, preferring research and data to Durant’s preference for intuition and speculation. Even as Storrow continued his work at Lee, Higginson & Company, he was designated the chairman of GM’s finance committee. It was Storrow, not Durant, who was now running General Motors.
“Mr. Storrow was of the “banker” type—rather cold-blooded—which was entirely contrary to his real makeup,” says Charles Nash, who had in 1891 joined what would later become the Durant Dort Carriage Company. There, he rose to become a director and vice president. Storrow, who also held a position on the American Locomotive Company’s board, appointed Nash as Buick’s president and general manager, replacing Durant. When an experienced manufacturing executive was needed to run Buick’s factories, Storrow knew just the man: Walter Chrysler.
“Mr. Storrow, a director of American Locomotive, discovered Walter P. Chrysler in one of that company’s shops and recommended him to Mr. Nash,” recalls Alfred Sloan in his memoir, My Years With General Motors.
“Mr. Nash hired Mr. Chrysler in 1911, I believe, as works manager of Buick. In 1912, when Mr. Nash moved up to be president of General Motors, Mr. Chrysler remained at Buick, where he was later to be president and general manager,” Sloan writes.
“We became friends, in fact, for life,” Chrysler writes of Nash in his autobiography, Life Of An American Workman. “Charley is a grand man.”
By 1915, the new management team put in place under Storrow returned GM to financial health, and declared a $50-per-share cash dividend—$1271 when adjusted for inflation—on its stock in 1915, a record at the time. While it rankled the notoriously parsimonious Nash, it marked the beginning of a battle between the bankers and Nash on the one hand, and Durant on the other. Despite having been stripped of authority, Durant had remained on GM’s board as a powerless vice chairman, although during the past five years he had established the Chevrolet Motor Company, quietly exchanging its stock for that of General Motors with help from the du Pont family.
Then, in June 1915, Storrow left the board. Durant knew the time was right.
“On September 16, 1915, Billy Durant walked into the General Motors stockholders’ meeting. Quickly and quietly he asserted and established that he, the founder, was once more in control; that is, Chevrolet controlled General Motors,” recalls Chrysler. “Durant had spent $27 million of du Pont money to accomplish this end.”
“After Mr. Durant’s victory, inducements were offered to Mr. Nash to stay with General Motors,” Sloan says. “But on April 18, 1916, he resigned from the presidency of the company.” By June, Durant had taken Nash’s place as president of GM.
As Nash contemplated his future, Storrow had been planning to build a car company to compete against GM and Durant. His prey? Packard.
“Nash and Storrow were persuaded we three ought to work together in something else. I was willing, provided we could make our plan work,” Chrysler recalls. “We wanted to buy out the Packard Motor Car Company; plants, agencies, everything. Mr. Storrow was coming out to Detroit to make the trade. The negotiations had proceeded so smoothly until then that we counted on it as practically settled.”
While Packard’s chairman, Henry B. Joy, was interested, company president Alvan Macauley was less enthusiastic. The takeover would lead to his demotion, as it would for most of the board. The discussions weren’t made public. In fact, the only hint of negotiations was noted in the Packard Motor Car Company board minutes from November 1916, where there was “a discussion of the affairs of the company.” A month later, Macauley “was authorized to have the company’s property appraised,” according to company board minutes.
Meanwhile, back at GM, Durant had made Chrysler an offer he couldn’t refuse: assume the presidency of Buick for $500,000 a year ($12.7 million in today’s dollars), an exchange he recalls in his autobiography:
“I want to be perfectly frank with you, Mr. Durant,” Chrysler said. “If a plan on which I am negotiating now goes through, I’m quitting here.”
“This is a great company. You’ve been doing a splendid job,” Durant replied.
“If this plan goes through, Mr. Durant, I’m committed.”
Billy nodded, smiling his understanding. “How long will it take you to learn for sure?”
“Thirty days, I think.”
“I’ll be in Flint for thirty days. When you make up your mind, you call me. I’d like to talk to you.”
Back in Detroit, the Packard board determined that the company’s business was fine; it saw no need to change things. Joy resigned as chairman due to “the pressure of other affairs,” according to company minutes.
Storrow and Nash went on to take over the Thomas B. Jeffery Company of Kenosha, Wisconsin, renaming it Nash Motors. Chrysler, not tempted to move to Kenosha, would remain at GM until 1919 before moving to Willys-Overland and Maxwell. He established the Chrysler Corporation in 1925.
Packard survived until 1957, succumbing to the marketing muscle of Detroit’s Big Three, which included General Motors and the Chrysler Corporation.
Sources: “My Life With General Motors,” By Alfred Sloan; “Life Of An American Workman,” BY Walter Chrysler; “Billy, Alfred, and General Motors” by William Pelfre; Riding the Roller Coaster: A History of the Chrysler Corporation By Charles K. Hyde; Storied Independent Automakers: Nash, Hudson, and American Motors By Charles K. Hyde; “The Packard Cormorant”; and the Federal Reserve inflation calculator.