How Chrysler Bought Dodge Brothers (by Mike Sealey)
History does not tell us about Walter P. Chrysler's abilities as a poker player, but his approach to and eventual acquisition of Dodge Brothers suggests he may well have been as good as any. The creation of DeSoto (and Plymouth, and the Fargo truck line) was a factor in this, but not widely known until recently. (Most of the beginning of the story has more to do with Dodge than DeSoto; trust me, the tie-in will come.)
When the 1920s opened, there was no connection. Dodge Brothers was one of the stronger manufacturers, having started as a machine shop making engines for curved-dash Oldsmobiles and most of the assembly of the earliest Fords on a subcontracting basis before building the cars bearing their own names in 1914. (Dodge's first dealer was Cumberland Motors of Nashville, Tennessee, which remained in business until the late 1960s, proudly advertising their status as "World's First Dodge Dealer.")
Dodge Brothers did not immediately offer a truck line, and when it did, only a single model was offered. Even that started out life as a purpose-built ambulance for US forces in World War I before morphing into an actual factory-built pickup in 1918.
Both brothers died in 1920 - Horace in January, John in December - and despite such productive moves as the hiring of Frederick J. Haynes to run the company, and a 1921 joint venture with the Graham brothers to produce Graham Brothers trucks, which used Dodge mechanicals and were sold through the Dodge dealer network, the Dodge widows appear to have ultimately considered themselves unable to run the business themselves. (Interestingly enough, Matilda Rausch Dodge, John's widow, had been his secretary in the company's earliest days.) The widows sold the company to New York investment bankers Dillon, Reed & Co. in 1925 for $146,000,000, an astronomical sum in an era when a new Ford sold for less than $300.
John Bittence, Editor, Dodge Brothers Club News, added: “Frederick Haynes of Dodge Brothers was not the Haynes of Haynes-Apperson [as we had written]. Frederick Haynes attended Cornell University where he learned state-of-the-art casting and mold making, and came to Dodge from Franklin Motors early in the machine-shop era of the Dodge Brothers, bringing Russell Huff, Franklin engineer, to Dodge when they started on the car.
While Dillon, Reed apparently bought Dodge with the intention of selling it, Dodge continued to operate at a profit after the takeover. Dodge management under Dillon, Reed went on to buy out the Graham Brothers in 1926 (who went on to buy Paige-Detroit, renaming it Graham-Paige, which was then sold to Kaiser-Frazer) and consolidate all truck manufacture under the Dodge Brothers name.
Having started out building engines and transmissions for other auto manufacturers, Dodge was a relative colossus among independent automakers, most of whom bought a much higher percentage of components from outside suppliers. Dodge had an enormous plant complex in Hamtramck, Michigan (known as "Dodge Main" until the day it was torn down in 1980), with its own foundry, hospital, and even its own telephone exchange. Dodge also had one of the strongest dealer networks in the business.
Dillon, Reed had a pretty good idea of what it had, and had no intention of letting it go cheaply.
The fledgling Chrysler Corporation, at this time still not much larger than it had been as Maxwell-Chalmers, was a relative fly on the wall in somparison. Walter Chrysler desperately needed Dodge's foundry and production capacity if he was ever going to make it The Big Three. It's unclear now whether there was other interest in Dodge besides that of Chrysler, but it seems likely that there would have been... Billy Durant, for one, mad acquisitionist that he was, had to have been at least a little bit tempted.
Unlike GM, which acquired more than thirty different car, truck and tractor manufacturers before settling down with the five core car divisions plus GMC Truck, or Ford, which seems to have acquired Lincoln as much for Henry I to administer a dose of payback to Henry and Wilfred Leland as anything else, Chrysler absolutely needed Dodge, and Walter Chrysler never seemed inclined to acquire any other existing makes during his lifetime. (Indeed, he killed Chalmers immediately upon taking over M-C, and built the last Maxwell less than two years after that.)
His scheme for getting Dodge was quite possibly his most audacious act since buying the Locomobile touring car that became his introduction to the auto business.
Companion makes were very much in the news at the time, with Hudson's Essex a huge success and Willys-Overland's Whippet not far short of that. Studebaker had a smaller car, the Erskine (named after the company CEO), but its greatest success was overseas. At GM, Cadillac had the relatively lower-priced LaSalle filling the gap between Cadillac and Buick, and Oakland had the very popular Pontiac, which would ultimately be the only GM companion make to survive to the present day, and which in fact outlived its parent make Oakland after 1932. Buick had the lower-priced Marquette in the wings, which differed from established Buick practice in that it had a flathead engine, and Oldsmobile was preparing to introduce the Viking, unusual among GM makes in that it was actually higher priced than its parent car.
Most of the GM companion make activity was aimed right at Dodge's segment of the market, which had to have made Dillon, Reed somewhat less than comfortable.
Into this fray stepped Walter Chrysler with the announcement of three new makes of vehicles. The first Plymouth (or "Chrysler Plymouth" as it was originally billed) was a continuation of the old Chrysler Four, which was itself a continuation of the final Maxwell. But Dillon, Reed was likely far more unnerved by the other two introductions; a new lightweight six-cylinder car, the DeSoto, which initially sold right below Dodge in price, and the Fargo line of trucks, aimed straight at the Dodge truck line. In his excellent biography of Walter P. Chrysler, Vincent Curcio states that DeSoto and Fargo were created for the primary purpose of intimidating Dillon, Reed into selling Dodge... which they did later in 1928 for $170 million, perhaps short of their asking price but still at a profit.
It seems that Chrysler successfully bet the entire company on his ability to buy Dodge Brothers... in later years, he was quoted as saying "without Dodge, there would be no Plymouth car". In the sense that Plymouth and the other makes would not have been able to expand production as they later did without Dodge's capacity, plus of course the later sale of Plymouths by Dodge dealers, this was undoubtedly true... and yet, Plymouth, DeSoto and Fargo production were all well under way when the Dodge sale took place. It's interesting, and a little unsettling, to imagine how the two firms would have weathered the upcoming Depression had they remained separate, what with Chrysler's new multiple makes and relatively low levels of production capacity, and Dodge's independent ownership by an investment firm with no other ties to the auto industry.
Curcio also stated that Chrysler's original intention was to drop DeSoto and Fargo upon acquiring Dodge. With Fargo, this wasn't difficult, since the Fargo line was sold by Chrysler-Plymouth dealers, and the line was dropped in 1931. DeSoto, on the other hand, was sold through a separate dealer network numbering over three thousand outlets, which would have had grounds for legal action had Chrysler dropped the make as planned. The fact that DeSoto Division was headed by Chrysler son-in-law Byron Foy may have provided additional complication.
In any event, DeSoto took the first year sales record for a new make, and appears to have been profitable for most of its years (1934, the Airflow year, being an exception). DeSoto gained a reprieve that lasted an amazing 32 years in the United States, and which continues to this day in Turkey.
The first DeSoto was the 1929 Series K, bearing Spanish-influenced names such as Cupe de Lujo (DeLuxe Coupe), Faeton (Phaeton), and Roadster Espanol. The Walter P. Chrysler Museum website states: "More than 5010 dealers signed up to sell the new DeSoto, sight-unseen, when it was announced in the Detroit Free Press on May 6, 1928. The DeSoto provided comfort and style for a moderate price." (Links: DeSoto Taxis)
[added by editor] Dodge would turn out to be more successful than the moderately short-lived DeSoto over the years, for various and often internal-politics reasons. Amusingly, though Dodge Brothers were almost exclusively car-makers, Dodge would become associated with trucks after many decades with Chrysler Corporation.