base than the total sales base used by Chrysler. In 1954, Ford had almost 20,000 suppliers on its rolls, in none of which the company had any financial interest. Studebaker-Packard conceded that it was not presently an integrated company, and it would not be able to achieve real integration until the completion of tooling for a brand new body, presently planned for the 1957 model.

A comparatively recent example of the trend toward integration was the purchase in December 1953, by Chrysler, of the Briggs Manufacturing Co., which made bodies for Plymouth cars. The Chrysler, Dodge, and DeSoto divisions make their own bodies in line with the tendency in the industry. Chrysler estimated that the cost of passenger-car bodies represents 40 percent of the cost of the finished automobile. Since Plymouth sales constituted 50 percent of its volume of business, and since there was no alternative body capacity to assure the number of bodies needed, Chrysler decided to buy Briggs. Chrysler emphasized that it considered the acquisition of Briggs absolutely essential to enable it to compete in the market. It was vital that the company control this major cost element in an increasingly competitive market. Mr. Colbert stated:

To be fully competitive, we no longer could afford to go without these advantages [owning body works] for our Plymouth Division. * * * Having Briggs has been a major factor in our effort to regain our share of the automobile market (I, 341). Chrysler's purchase of Briggs brought Studebaker-Packard face-toface with the necessity for manufacturing its own bodies, as Briggs had made bodies for Packard as well as for Chrysler. Briggs had previously sold bodies also to Willy's but, at the time of the purchase by Chrysler, was selling only to Chrysler and Packard. Mr. Nance testified that his company met the problem by working out an arrangement with Chrysler for the building in which Briggs had built Packard bodies, and retooling it to make its own bodies. Packard subsequently moved its final car assembly to this modern plant (II, 866).

The integration problem involves the question of whether to build or to buy. Producers purchase from outside suppliers as long as price and quality are satisfactory. In emphasizing their dependence upon a great number of suppliers, the automobile producers in effect admitted that certain operations could be performed more efficiently by small producers. Manufacturers recognize the value of having available alternative sources of supply. Some manufacturers have elected to produce certain parts themselves in order to obtain a check on the prices they are paying outside suppliers. It seems clear that the most successful manufacturers are the most highly integrated, and that the independents are being forced to follow suit. The tendency toward increasing integration has definite implications respecting future automobile concentration. As the degree of integration necessary for successful competition increases, so do the capital and the know-how required of a new company seeking to enter the field. Since the depression, only one producer of a standard-size car, Kaiser, has successfully invaded the market. Kaiser shifted its production and sales emphasis to commercial and utility vehicles in 1954. In December 1955, Kaiser announced it had no plans to build 1956 model passenger cars, but would confine itself to turning out utility vehicles. While industry spokesmen state there is no bar to entry, the changing structure of the industry is creating new obstacles for any potential entrant.

The antitrust authorities must maintain a constant scrutiny of industry to eliminate restraints and keep the arteries of competition free. However, this does not end governmental responsibility in this area. The increased tempo of national defense work placed great demands upon the automobile industry. It was discovered that automobilemanufacturers were peculiarly fitted by their mass production techniques to do many of the jobs required for defense work. It is becoming apparent that this type of work can no longer be viewed as a temporary affair. The automobile producers have come to depend upon it as a regular part of their production, and have geared their plants accordingly.

Testimony at the hearings focused attention upon the importance of defense business to automobile producers and its necessity to their very survival. The economic plight of both Packard and Studebaker in the postwar decline was exacerbated by the loss of substantial defense business. Packard's jet-engine production, scheduled to run to the middle of 1954 at a contract value of $196 million per annum, was reduced to approximately $15 million dollars in 1953. In 1953, Studebaker's jet-engine contracts of about $202 million were substantially reduced, and then terminated in January 1954.

Both Packard and Studebaker for many years were among the Nation's principal defense contractors, and during the war had furnished trucks, special vehicles, aircraft engines, marine engines, etc. Mr. Nance stated:

No small part of our plans, and a substantial purpose of the merger, is the recapture of what we consider to be a fair and reasonable share of defense business (II, 867).

The nub of the problem is implicit in Mr. Nance's further observation that, while his company seeks Government business on merit and value alone:

* on the basis of our past performance and present capacities we are right in believing that we are entitled to favorable consideration from the armed services buying agencies in this area (II, 867).

If the defense business is necessary to the survival of automobile producers, and if the public interest is best served by the continued existence of the independents, then the Government must seriously consider giving favorable consideration on defense contracts to these smaller producers even if this means higher prices. Such a form of subsidization may not be too high a price to pay for the continued existence of a healthy competitive automobile industry.

4. GENERAL MOTORS HISTORY AND POLICIES

Sales by General Motors exceed the combined sales of all other passenger-car producers. In an attempt to minimize the significance of this fact it has been suggested that General Motors' share of the automobile industry is no larger than the share held by the Ford Motor Co. in years past. But there is a marked difference in the importance of market shares between the periods 1921 and 1954. In 1921, when Henry Ford had over 60 percent of the automobile market, total passenger cars in use were approximately 1 per 13 persons. In 1954, when General Motors produced more than half the passenger cars in the United States, there were over 48 million passenger cars

registered, or approximately 1 for every 3 persons. In this intervening period, the automobile has changed the lives of all people in our country. Thousands of towns today are entirely dependent upon automotive transportation. The entire movement of population from the center of cities to the suburbs is dependent upon the automobile. No part of our economic and social life is independent of the passenger car and truck today.

In 1955, General Motors' sales were $12.4 billion, and profits, after taxes, were $1.2 billion, 48 percent more than in 1954. Income taxes in 1955 are in excess of $1 billion. Its assets exceed $6 billion, and its capital represents in excess of $4 billion. In 1954, General Motors sold almost 3 million passenger cars manufactured in the United States. In 1955, General Motors' sales of such passenger cars increased about 40 percent over 1954. But cars and trucks are not its only products. It makes tanks, locomotives, tractors, engines for airplanes and ships, and brakes for bicycles. It makes guns, rockets, ammunition, radios, clocks, oil well drills, ice-cream cabinets, ice-cube makers, mirrors, and keys. It finances the dealer selling these products, finances the consumer's purchase, and, in some cases, insures the product against fire and theft. General Motors has plants in 18 foreign countries where it produces passenger cars, trucks, automotive parts and consumer appliances. It produces Vauxhall cars and Bedford trucks in England, Opel cars and trucks in Germany, and Holden cars and utility vehicles in Australia.

There is probably no company in the United States that affects the lives of the citizens of the country as much as General Motors. Of the total value of goods and services produced in the United States in 1954, it is estimated that General Motors sales accounted for 3 percent. Its sales in 1954 were almost equal to the combined gross national products of Norway and Sweden.

General Motors was organized in 1908 by William C. Durant. Prior to that time leadership in the automobile industry was vested in those firms which subsequently formed the nucleus of General Motors, i. e., Buick, Olds, and Cadillac. From 1900-1904 the Olds Motor Works produced between 25 and 33 percent of industry output. Cadillac, an important producer, accounted for 12 percent of industry output in 1904 and 16 percent in 1905. Buick, organized in 1903, was taken over by Durant in 1904, and by 1908, the year General Motors was organized, was the leading firm in the industry. The formation of General Motors by William C. Durant concentrated one-fourth of industry output in the hands of the largest firm in the industry. Shortly thereafter, Ford output exceeded General Motors, but from 1910 to 1932, except for 2 years, these 2 firms were the industry leaders.

Early in 1908 Durant and Benjamin Briscoe had proposed a consolidation of Ford, Maxwell-Briscoe, Reo, and Buick. Ford demanded $3 million in cash, and Olds then demanded similar treatment. Negotiations fell through. Durant and Briscoe thereupon attempted a merger of their companies and sought the backing of J. P. Morgan for new capital. Disagreement between Durant and the Morgan attorneys cause the abandonment of this project. Durant thereupon proceeded to organize General Motors in September 1908. His original plan to consolidate other firms with his organization was not abandoned, however. In the latter part of 1909 Durant secured an

option to purchase the Ford Motor Co. for $8 million. His acquisitions during this period had reduced available funds and Durant was unable to raise the necessary money to buy out Ford.

Briscoe, after withdrawing from negotiations with Durant, proceeded to organize the United States Motor Co. in 1910. Within 2 years this firm was in receivership and reorganized as the Maxwell Motor Company. Ultimately, from this discouraging start, emerged the present Chrysler Corporation.

Durant organized the General Motors Co. as a holding company to acquire the stock of the Buick Motor Co. In the year it was organized, General Motors acquired the Olds Motor Works and the following year, the Cadillac Motor Car Co. By 1910, General Motors marketed 10 brands of automobiles, representing 21 percent of the entire industry output. Within the first 2 years of the organization of the firm, Durant consolidated over 20 different companies into his organization. The overextension of the firm due to these acquisitions made it necessary, however, to raise capital, which could only be accomplished under onerous conditions, including the relinquishment of control of the organization by Durant. A condition of the banking group which supplied the necessary capital was that a voting trust be established, with the understanding that it would have control of the board of directors (VI, 2470). Durant remained as a vice president and director, but ceased active participation in the firm for the period of the voting trust.

The recent Government antitrust case against Du Pont, General Motors and United States Rubber disclosed a great deal of information about the early history of General Motors. The inclusion of material from this trial is not for the purpose of reviewing the legal issues involved but to present primary source material bearing upon the growth of this large corporation. Mr. Ewart Harris, one of the attorneys for the Department of Justice in the case, appeared as a witness before the Subcommittee, and much of the following history of General Motors and its relationship to Du Pont is based upon his testimony and exhibits presented at these hearings (VI, 2468). The suit itself was dismissed by the United States District Court in Chicago, but the Supreme Court has agreed to review the findings.

During the period of the voting trust Durant was not inactive. In 1911 he organized the Chevrolet Motor Co., which grew considerably in the next few years. Durant used the profits of Chevrolet to purchase General Motors stock and so reacquire control of the company. At the expiration of the voting trust in 1915, Durant had sufficient stock to challenge the bankers who controlled the voting trust (VI, 2427). It was in this early period that the Du Ponts' influence in the corporation was first manifested. The Du Ponts began investing individually in General Motors in 1914. At the time of the struggle for control of General Motors, Pierre du Pont owned 2,200 shares of General Motors and John J. Raskob about 1,200 shares. The reorganization of the board of directors provided an equal number of appointees by the banking syndicate and by Durant (VI, 2470). Pierre du Pont became chairman of the board of General Motors and was empowered to name three members of the board as neutral directors. The members appointed by Pierre du Pont were all representatives of the Du Pont interests.

Following termination of the voting trust and the reaccession to control by William C. Durant, General Motors' earnings rose rapidly and the firm embarked upon another period of expansion (VI, 2477). The Du Ponts, realizing that Durant had control of the corporation, accepted his offer to exchange their stock for Chevrolet stock. Out of this association grew the plan for greater participation by the Du Ponts in General Motors.

The Du Ponts at that time had considerable funds for investment. Net profits during World War I were $232 million and Du Pont, while the war was still in progress, sought postwar uses for its facilities. Paint and varnishes which the automobile industry used in large quantities appeared attractive, and in 1917 Du Pont acquired Harrison Bros. & Co., one of the larger paint, varnish, and chemical manufacturers. Cawley Clark & Co., pigment manufacturers, and the Bridgeport Wood Finishing Co., varnish manufacturers, were purchased before the end of 1917. Prior to the war, Du Pont had entered the artificial leather and, in 1916, the rubber-coated fabric fields. Both products were major materials used in the automobile industry. In 1915 the Du Ponts also entered the celluloid field, also an important material used by the automobile industry. Nitrocellulose, the principal raw material used in the manufacture of smokeless powder by the Du Ponts, was also the material from which artificial leather and celluloid were produced.

Thus the development of the interests of the Du Ponts from manufacturers of gunpowder to major stockholders in General Motors was a logical progression. The close association between Du Pont and the automobile industry, its largest customer, convinced Du Pont of the industry's great potential. Obviously, an important consideration was the desire to maintain an interest in the company which promised to become in the future its greatest single customer.

In December 1917 Durant invited the Du Ponts to invest $25 million in General Motors. At that time, John J. Raskob, director and member of the finance committee of the Du Pont Co., prepared a report to the Du Pont finance committee recommending the investment (VI, 2475). The report stated that with Durant, Du Pont would control General Motors with considerably more than a majority of the outstanding stock. Of a total of 1,080,000 shares, Durant would hold 280,000 shares, and the Du Pont Co. would acquire 273,000 shares as a result of their investment. Holdings of Du Pont friends would approximate 100,000 shares. Raskob stated:

it is the writer's belief that ultimately the Du Pont Co. will absolutely control and dominate the whole General Motors situation with the entire approval of Mr. Durant who, I think, will eventually place his holdings with us, taking his payment therefor in some securities mutually satisfactory (VI, 2480).

Raskob's summary of the management structure was that Durant would continue as president, Pierre S. du Pont would continue as chairman of the board, and Du Pont representatives would dominate the finance committee. In urging the investment, Raskob stated that Du Pont had $50 million to invest and

Our interest in the General Motors Co. will undoubtedly secure for us the entire Fabrikoid, Pyralin, paint, and varnish business of those companies, which is a substantial factor (VI, 2480).

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