A:

William Durant, the founder of General Motors, lost control of his company due to his aggressive expansion plans. Going wholeheartedly from a carriage manufacturer to an automotive force, Durant used debt to finance his takeovers and mergers with other auto startups. The bankers, who helped with refinancing efforts, and the stockholders, to whom Durant had sold and resold shares, finally decided to oust him and consolidate current holdings, rather than to continue the breakneck expansion.

Durant immediately began to look for a way to regain control of his company. He hooked up with a Swiss racer named Louis Chevrolet and the two formed Chevrolet. Although Durant soon disagreed with Chevrolet about the direction of the company and bought him out, the company was highly successful. Durant still held a large amount of GM stock and he used the profits from his new company to buy even more.

Durant eventually owned enough GM stock to bring the company to the table for merger/buyout talks. Durant offered a five-for-one stock swap. GM shareholders jumped at the chance to get another popular brand under their umbrella at a cheap price. GM particularly relished merging with a brand that could help it fight off Ford. As part of the deal, Durant regained control of the company he had founded.

However, Durant's success was not long-lived. The company once again suffered from Durant's management and in 1920 Pierre Du Pont, Durant's main financer, ousted him for good. Durant tried repeatedly to replicate his former successes, but he was never able to create another GM or Chevy.

(For related reading, see Henry Ford: Industry Mogul And Industrial Innovator.)

This question was answered by Andrew Beattie.

RELATED FAQS
  1. Who are General Motors' (GM) main suppliers?

    Take a look at the current operations of General Motors, the largest U.S. auto manufacturer, and find out what companies ... Read Answer >>
  2. What are the most popular companies in the automotive sector right now?

    Learn about the largest global automobile manufacturers, including the most popular automakers by sales volume and companies ... Read Answer >>
  3. What are the primary risks to understand when investing in the automotive sector?

    Learn more about the automotive industry and the risks presented to investors. Find out how the auto industry has changed ... Read Answer >>
  4. Who are Ford's (F) main suppliers?

    Explore the history and current operations of Ford Motor Co. and discover some of its primary global parts suppliers. Read Answer >>
  5. What can cause a merger or acquisition deal to fail?

    Mergers and acquisitions are resorted to when one or both companies involved have goals as diverse as seeking greater market ... Read Answer >>
  6. How did mass production affect the price of consumer goods?

    Discover how mass production has affected the price of consumer goods throughout recent history. The automotive industry ... Read Answer >>
Related Articles
  1. Investing

    Nike Signs Lebron James to "Lifetime" Deal (NKE, UA)

    NikeĀ (NYSE: NKE) has built its shoe business by partnering with top-tier athletes. The most obvious example of that is its long-term relationship with Michael Jordan. That partnership changed ...
  2. Investing

    How GM Keeps on Truckin'

    Following a giant bailout and a giant IPO, the new GM is carried by sales of its giant trucks. But is it profitable?
  3. Investing

    Ford Vs. Chevy: Comparing Business Models and Strategies (F, GM)

    Learn about how the business models of Ford and General Motors compare, including market share, recent performance and brand strategies of each company.
  4. Insights

    GM Fined $1M by SEC, Investing $1B in U.S. (GM)

    General Motors, which was fined $1 million by the SEC for accounting snafus, is planning a U.S. manufacturing investment of $1 billion to create 7k jobs.
  5. Investing

    Ford Says Cancelled Mexico Plant Has Nothing to Do With Trump's GM Tweet

    The bully pulpit has moved to Twitter.
  6. Investing

    3 Reasons Why GM Is Better Than Ford

    GM CEO Daniel Akerson bought $1 million in stock on the open market May 11. That's just one of three reasons why GM is a better bet than Ford.
  7. Investing

    Analyzing General Motors Company's Return on Equity

    Understand General Motors' return on equity (ROE) in recent years and what it tells investors about its overall performance relative to its competition.
  8. Investing

    GM Surges on Morgan Stanley's Positive View

    GM is surging after Morgan Stanley raised its price target on shares. Future growth, however, is still in question.
  9. Investing

    Analysts Postive on GM Following Quarterly Results

    Piper Jaffray raised its price target on GM to $43 from $42.
  10. Investing

    Will GM 2017 Performance Hold Up after Results?

    GM is expected to report earnings tomorrow before the open of trading. Investors should watch our for tax rates, costs and expenses.
RELATED TERMS
  1. General Motors (GM) Indicator

    An indicator based on the theory that the performance of U.S. ...
  2. Controlling Interest

    When one shareholder or a group acting in kind holds a high enough ...
  3. Auto Sales

    The major producers of domestic automobiles report sales monthly. ...
  4. Mogul

    An individual who has been very successful in business and has ...
  5. Bailout Takeover

    A scenario in which a government or profitable company acquires ...
  6. Busted Takeover

    A highly leveraged corporate buyout that is contingent upon the ...
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center