Chapter 6

Stabilization

The change in the presidency of General Motors in the spring of 1923, when Pierre S. du Pont resigned and I succeeded him, marked the end of the first period of the modern corporation. Despite the delay in the product program, the corporation in this period achieved general stability, which at that time represented its greatest need. This, in part, was made possible by the passing of the slump of 1920-21, but the foundation of the achievement itself belongs to Mr. du Pont. To him more than to any other individual must be assigned the credit for rescuing the corporation in its time of need and guiding it into a broad position of strength. It was when he recognized that the management of the corporation was again able to continue on its own feet that he made his own decision to turn the operating leadership over to the automobile men. He took this action in the following way.

An annual meeting of the shareholders took place on April 18, 1923, and elected a board of directors to hold office for the ensuing year. The next day, April 19, the directors held an organization meeting and re-elected the same officers, including Mr. du Pont as president, and the standing committees, to serve for another term. Almost all members of the board thought that we were set for a year. I certainly did. But it was not so.

On May 10, after a regular meeting, Mr. du Pont called a special meeting of the board and after asking Mr. Mott to act as chairman, presented his resignation as president of the corporation. Thereupon the board adopted unanimously the following resolution:

On motion duly made and unanimously carried, it was

RESOLVED, that the resignation of Mr. Pierre S. du Pont as President be accepted, and it was further

RESOLVED, that in accepting Mr. du Pont's resignation as President the Directors wish to place on record their appreciation of the invaluable services that he has rendered the Corporation during the past two and one-half years, and also to recognize the sacrifices that he made in taking over the duties of the presidency. During his incumbency of this office the affairs of the Corporation have been brought to a high state of prosperity and the Directors wish to express deep regret that he has decided to retire from this office. They are gratified to know that he is not in any way to disassociate himself from the Corporation, but is to continue active participation in the direction of its affairs as Chairman of its Board of Directors.

The meeting then proceeded to the election of a president to fill the vacancy. Mr. du Pont nominated me and I was elected. Subsequently, I was also elected chairman of the Executive Committee. Although Mr. du Pont's resignation at that time was not expected, it had been understood when he took office that it would be for a limited time, and that during his term he would transfer many of his operating duties to vice presidents. He had in fact done so.

No one can appraise Mr. du Pont's conspicuous service to General Motors in the critical period in which he served as intimately as I can. I was very close to him throughout his entire presidency; we traveled together, we attended meetings together, and we counseled together on all the problems that arose. Mr. du Pont had come out of retirement to become head of a complex enterprise which was in financial difficulties, and one in which he had little practical experience. The enterprise was decimated by resignations, its market position was declining, and its management's faith in itself and the future of its opportunities was shaken. Yet the mere fact that Mr. du Pont was there at the head of the enterprise changed the psychology of the whole situation, so to speak. The banks were reassured; the organization's faith in its future was renewed; the shareholders were encouraged; all of us in the corporation determined not only to carry on but to capitalize the vast opportunity inherent in the very nature of our business, and in this we were inspired by our faith in the new and distinguished leadership of Mr. du Pont.

His administration was an active one for him. He withdrew from his home in Pennsylvania, just outside Wilmington, Delaware, in which he took pride and satisfaction, and divided his time between New York and Detroit in alternate weeks. He made frequent trips into the field to inspect the properties and to discuss problems that could be better evaluated on the spot. Days were spent in inspection and observation, nights in discussion; and even then it was hard to keep up with the problems. Mr. du Pont's administration might be called one of evaluation and construction. As a result we were able to identify the elements of the business and, through the process of much trial and many errors, to construct the foundation upon which the modern corporation has been built.

Mr. du Pont's administration adopted in principle a sound scheme of organization and in principle a sound approach to the product line. At the same time, system was introduced into accounting and finance. A most comprehensive incentive plan was developed by John J. Raskob and his former du Pont associate Donaldson Brown, and it was supplemented by an opportunity for the more important executives to participate in the financial gains of the business. The plan for executive participation known as the Managers Securities Plan (described in a later chapter) was made possible by Mr. du Pont's belief in the validity of a partnership relationship between shareholders and executives. Mr. du Pont also liquidated unprofitable divisions, such as Samson Tractor, and guided a vast financial reorganization that put the corporation on a sound and solid basis.

An administration may also be measured by the caliber of the men brought in or retained by it. In or associated with the corporation in one place or another in 1923 was a large number of men who were to make a mark in American industrial history. Some of them had already begun to make it. There were the Fisher brothers, led by their dean, Fred Fisher. In Anderson, Indiana, as factory manager of the Remy Electric Division, was young Charles E. Wilson, who would one day be president of the corporation and afterward Secretary of Defense of the United States. James D. Mooney was vice president in charge of General Motors' overseas business. Down at Dayton, in charge of Delco Light, was Richard H. ("Dick") Grant, who would guide Chevrolet's sales through the twenties, and so become the top salesman in the United States. The comptroller of the AC Spark Plug Division was Harlow H. Curtice, who would be president during the great post-Korea expansion of General Motors. There was William S. Knudsen, who directed Chevrolet for some years before he, too, served as president of the corporation. John Thomas Smith was general counsel; he was later to serve on the Executive Committee, and I might say that his advice and influence in the corporation were of a very high order in moral and public-policy matters as well as in the law. The manager of manufacturing for Chevrolet was K. T. Keller, later to be president and chairman of the Chrysler Corporation. Albert Bradley, who would one day be chairman of General Motors, was then a young and important member of the Financial Staff. And so on; these and many others, together with those I have mentioned earlier—notably Charles S. Mott, Charles F. Kettering, John J. Raskob, Donaldson Brown, and John L. Pratt, the latter three of whom came from the du Pont organization—were a great team of experienced or promising automobile and financial men.

As to myself, I recognized that my election to the presidency of the corporation was a big responsibility and a business opportunity that comes to few. I resolved in my own mind that I would make any personal sacrifice for the cause, and that I would put forth all the energy, experience, and knowledge I had to make the corporation an outstanding success. General Motors has been for me a dedicated activity ever since, perhaps to a fault. My becoming president involved few changes in the activities for which I had been responsible as vice president in charge of operations. The work flowed on without a break. I became president under the auspicious fact that many of my basic views had become the accepted policy of the corporation. The period of development lay ahead.

But to Pierre S. du Pont must go the credit for the very survival of General Motors and for laying the foundation of its future progress.

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