October 1, 1908 was a big day in the growing automotive industry. Up in Flint, Michigan, William Durant had recently formed General Motors, intending it be a holding company for various automotive interests. On this day in 1908 his new company acquired its first property, Buick, though it was more or less a transfer from current owner Durant to GM. On the same day, about 70 miles southeast of Flint, in the booming town of Detroit, the Ford Motor Company manufactured its first production Model T. The world changed forever.
A month after Buick moved under the GM umbrella, Durant acquired Oldsmobile. In 1909 he’d snap up several more, including Cadillac, Oakland (to become Pontiac), Rapid Motor Vehicle Company (to become GMC), Reliance Motor Truck Company and others. He had his sights on an automaker that was seeing rapid growth, but was in trouble with the law, Ford Motor Company.
When Henry Ford released the Model T he was in the midst of a court battle regarding patent infringement. To make a long story short, George Selden received the patent for the automobile in the United States in 1895. He leveraged the patent to form the Association of Licensed Automobile Manufacturers (ALAM), which issued licenses to build cars. Ford, upon applying for such a license was denied. This is likely due to his close ties to ALAM members who had lost money on earlier Ford ventures. Despite not having the legal right to produce vehicles, Ford moved forward, releasing several models, including the T.
This court battle loomed heavy over Ford, knowing he could be put out of business if ruled against. The verdict came on September 15, 1909. The courts found in favor of ALAM. Henry Ford now owed Selden a fortune. Instead, Ford filed an appeal.
About three weeks later, on October 5th, Ford met with Durant to discuss the sale of his company at a New York hotel. Knowing Ford was gambling once again on the outcome of a court battle that could rage on for years, Durant structured a deal that Ford couldn’t refuse. It all came down to how much cash Ford wanted. The answer was $8 million.
A problem arose when it became apparent Durant saw money different than Ford. Durant had purchased many of the companies now under the GM umbrella on credit or with stock, allowing sellers to earn their profits over several years. Ford, however, wanted cash, or as he put it, “Gold on the table.”
They struck a deal. The men agreed to included $2 million in General Motors stock and $6 million in cash. Of that, $2 million would be paid up front and $4 million would be paid over the course of three years at 5 percent interest. But Durant’s previous acquisitions had all but run him dry. To obtain the $2 million, he headed for the National City Bank in New York. He left empty handed.
Unable to secure the $2,000,000, Durant informed Ford that the purchase could not move forward. The GM board of directors released Durant the next year for his inability to maintain company finances.
After an antagonizing 14 months Ford’s appeal came to verdict. The courts found in his favor. He, nor any automaker would no longer be required to pay royalties to ALAM and George Selden. The failed sale of Ford to General Motors ultimately proved to be a bright spot in Ford Motor Company history. The company continued producing the Model T until 1927. It’s hard to imagine an automotive industry where that sale took place.
