Did that headline make you frown? International Motors? Who was that? And what does it matter? More than you think.
It started with great ambition. International Motors was the name J. P. Morgan chose for the automobile industry’s first merger. Morgan loved ‘International’ in its names. International Harvester was their creation, as was the International Mercantile Marine, the parent company for all their shipping interests (which included the Titanic).
Ben Briscoe started the process because Morgan had loaned him money for his sheet metal business, He quickly involved Billy Durant, Henry Ford and Ransom Olds, who by then had been forced out of Oldsmobile and headed up REO (named after his initials).
The International Motors Deal
The House of Morgan proposed what is common, even today: a stock swap. Each would get International Motors stock in exchange for the stock in their companies. Each participant stood to make a huge profit. The Ford Motor Company, for example, was capitalized with the grand total of $28,000. Along the way, the dividends on that investment totaled several times that. In exchange, Henry Ford would have received stock worth something like $5 million. Not too shabby, you might think. Ford turned it down. Flatly. He was prepared to take less money, $3 million, but it had to be cash on the barrelhead. Olds said he wanted the same deal.
Nobody tells the House of Morgan what to do, least of all small-timers from out west, so that was the end of International Motors.
Well, almost. Billy kept at it and persuaded George Perkins, the partner at Morgan who created International Harvester and was in charge of their automobile venture, to try again with just Maxwell-Briscoe and Buick, two of the top four automakers.
But while that was underway something mysterious happened. This report appeared in the New York Times of July 31, 1908.
Frank Stetson, the Morgan lawyer in charge of everything while the old man was away, assumed Billy had leaked the story, despite the fact that there were no Buick details, only Maxwell-Briscoe. To this day nobody knows who planted that story, but because it contained the exact details we have to assume it was someone from Morgan, Maxwell-Briscoe or the lawyers.
Whatever the case, Stetson blamed Billy, immediately pulled the plug on the whole endeavor, and that was truly the end of International Motors.
Now What?
What was Billy to do? He was in New York to put together a combination. If the idiots at Morgan were going to mess that up, well, he would just have to do it on his own, wouldn’t he?
Just over two weeks later, Billy Durant started General Motors in quiet obscurity with all of $2,000. A far cry from the grand Morgan/Wall Street $25 million merger.
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The people at Morgan at first poo-poohed General Motors as just another amateur DIY flim-flam creation. However, its growth and profitability threatened to show up the mighty Morgan house and it wasn’t long before they began a whisper campaign against GM. Didn’t matter–GM grew like crazy.
When a minor recession struck in 1910, Morgan (the de facto Federal Reserve at the time) saw their chance. They told banks they would not help any bank which lent money to General Motors. Billy didn’t help himself by heaping on too much debt too quickly, so GM… Well, you’ll just have to read Comeback! to find out what happened next. 🙂