Planes, trains were also part of GM's grand plan

To view General Motors as just a car and truck maker is to overlook important chapters in its history — and some crucial turning points for the U.S. aviation and railroad industries.

GM's interest in railroads dates from 1930, when the company purchased Winton Engine Co. and Electro-Motive Engineering Co., both of Cleveland. Electro-Motive designed and sold gasoline-electric rail cars that were powered by Winton engines.

The dawn of the Depression may have seemed an odd time for a company, even one as successful as GM, to invest outside its core business. But as longtime CEO Alfred Sloan noted in his memoir, the company never doubted that Winton was a "good buy."

"For one thing, we were not at this point certain about the future of the U.S. automobile market, which had not been expanding during the late 1920s," Sloan wrote in My Years with General Motors. "Consequently, we had a natural interest in any enterprise within our scope that offered us a reasonable opportunity to diversify."

In addition to the gasoline-electric engines it supplied to Electro-Motive, Winton also built diesel engines, primarily for the marine industry. But it was struggling to apply the technology to railroads. Enter GM, which assigned its prize engineer, Charles "Boss" Kettering, to the task.

Kettering and his team answered with a lightweight, eight-cylinder, two-stroke diesel. The prototype made headlines in 1934 when it powered the Burlington Zephyr stainless steel streamlined train in its much-publicized "dawn-to-dusk dash" from Denver to Chicago.

That brought GM's new diesel engine to the attention of every railroad in America, nearly all of which still were running on steam.

By 1938, GM was building entire locomotives at a new factory in La Grange, Ill. By 1962, America's railroads had converted from steam to diesel, and GM's Electro-Motive Division was the world's leading manufacturer of diesel locomotives.

Along the way, GM's philosophy changed, says John Jarrell, the GM vice president responsible for the locomotive group from 1989 to 1995. Instead of viewing its nonautomotive businesses as a hedge, GM succumbed to analysts who thought the corporation was spreading itself too thin. In 2005, GM sold Electro-Motive Division to private equity partners.

"There are far different financial pressures now," says Jarrell, 73 and retired. "When GM was the largest industrial corporation in the world, they had money to put into those things. That's all changed."

Jarrell says GM had nine nonautomotive divisions when he joined the company in 1955. Electro-Motive was one of the last to go. "It just didn't fit then because it was the only orphan in the group," he says.

GM had dabbled in aviation as early as 1919, when it bought Dayton Wright Co., one of the earliest airplane manufacturers. But the automaker got serious about building airplanes in the late 1920s, when public interest in air travel was at a fever pitch. There was even talk that small personal planes, called "flivvers," could replace automobiles for much personal travel.

In 1929, GM bought a stake in two of the most prominent aircraft manufacturers of the day: Bendix Aviation Corp. and Fokker Aircraft Corp. The Fokker purchase was ill-timed; the stock market crash a few months later dealt Fokker a deadly blow. By 1931, the company was out of business.

In 1933, GM put more chips on the table by buying a controlling interest in North American Aviation, a holding company that bought and sold interests in airlines and aviation-related companies.

North American Aviation owned all of Eastern Air Transport (later called Eastern Air Lines) and minority stakes in Transcontinental Air Transport and Western Air Express Corp. Transcontinental, in turn, owned Transcontinental and Western Air Inc., which later became Trans World Airlines.

That same year GM tapped Ernest Breech, an assistant treasurer, to be president of North American Aviation. In 1942, he took the same post at Bendix and is credited with introducing GM management techniques there.

Breech was a favorite of Sloan's and seemed destined to succeed him in the GM hierarchy. But Breech's talents caught the eye of a desperate Henry Ford II, who in 1946 persuaded Breech to switch sides to help rebuild Ford Motor Co. Breech took with him Lewis Crusoe, whom Breech had snagged from Fisher Body in 1944 to be his assistant at Bendix.

GM's aircraft timing was not good. In 1934, Congress passed the Air Mail Act — which prohibited companies that engaged in aircraft manufacturing, either directly or through a subsidiary, from owning stock in an airline company.

"Almost immediately, GM was at a disadvantage because people were looking at it not as a corporate enterprise seeking to expand the economy but as another voracious monopoly feeding at the public trough," says Bob van der Linden, chair of the Smithsonian Institution's aeronautics division. "It wasn't true, but perception is reality." So GM, he says, "gradually backed off."

GM sold Bendix and North American Aviation in 1948, and North American's remaining assets and operations eventually became part of Boeing Co. But van der Linden says GM already had left its mark.

"It validated aviation as an industry, particularly from the perspective of Wall Street, and I can't overemphasize how important that was," van der Linden says. "It was as clear a symbol as you can get that aviation as an industry had come of age."