Chevrolet starts competing with the Ford Model T.
William Crapo Durant’s greatest failure led to the creation of Chevrolet. A year after he incorporated General Motors, he went after Henry Ford’s third, and most successful, car company. Ford, according to Lawrence R. Gustin’s biography of Durant, was concerned about Selden’s patent suit claiming invention of the automobile, and was amenable to selling to GM if he could retain the rights for motorized farm implements.
GM was to pay Ford $2 million cash, plus $4 million at 5 percent interest over three years. On October 26, 1909, GM’s board “gave Durant authority to purchase Ford if financing could be arranged,” Gustin writes in “Billy Durant, Creator of General Motors.”
Banks were nervous about the nascent, fly-by-night auto industry, and refused Durant a $2 million loan for the downpayment. During a financial panic in 1910, GM’s board kicked Durant out and let bankers take over his company.
Durant began work on his comeback and set up retired Buick race driver Louis Chevrolet with his own Detroit shop in early 1911. Durant returned to Flint, Michigan, where he had seeded GM in the early 1900s, and bought the assets of the failing Flint Wagon Works. He then got former Buick engine builder Arthur C. Mason to set up a new operation, while Durant organized the Little Motor Car Company.
Durant incorporated the Chevrolet Motor Company on November 3, 1911. Louis Chevrolet was not an officer, but he experimented with large luxury cars while Chevrolet Motor Company’s Little brand sold lower-priced cars against Ford. The first “production” Chevrolet was the big, $2500 Classic Six of 1912, but the first Chevys, as we know them, were the 1914 Royal Mail roadster and Baby Grand touring car. Louis Chevrolet left his namesake company to return to racing.
The 1916 Chevrolet Four-Ninety was Durant’s direct shot at the Ford Model T. By now, Chevy was thriving with factories in places like Flint and New York City. Its success gave Durant the footing to buy up GM stock, with help from the DuPont family and a New York bank president, Louis J. Kaufman. Durant staged a coup d’etat, and on September 16, 1915, GM’s seventh anniversary, took control of GM again.
On December 23, 1915, Chevrolet stockholders increased capitalization from $20 million to $80 million, Gustin writes, and used the $60 million to buy up GM stock. Chevrolet bought GM. It wasn’t the other way around.