Sloan established a special unit within the corporation which was charged, among other things, with the task of replacing America's electric railways with cars, trucks and buses.
A year earlier, in 1921, GM lost $65 million, leading Sloan to conclude that the auto market was saturated, that those who desired cars already owned them, and that the only way to increase GM's sales and restore its profitability was by eliminating its principal rival: electric railways.
General Motors sought to reduce competition from electric railways through a variety of measures, including the use of freight leverage. GM, for decades, was the nation's largest shipper of freight over railroads, which controlled some of America's most extensive railways. By wielding freight traffic as a club, GM persuaded railroads to abandon their electric rail subsidiaries.
With a pack of notorious mobsters, GM helped purchase and scrap the street railways serving Minneapolis-St. Paul.
Members of GM's special unit went to, among others, the Southern Pacific, owner of Los Angeles' Pacific Electric, the world's largest interurban, with 1,500 miles of track, reaching 75 miles from San Bernardino, north to San Fernando, and south to Santa Ana; the New York Central, owner of the New York State Railways, 600 miles of street railways and interurban lines in upstate New York; and the New Haven, owner of 1,500 miles of trolley lines in New York, Connecticut, Rhode Island and Massachusetts.
In each case, by threatening to divert lucrative automobile freight to rival carriers, they persuaded the railroad (according to GM's own files) to convert its electric street cars to motor buses -- slow, cramped, foul-smelling vehicles whose inferior performance invariable led riders to purchase automobiles.
According to U.S. Department of Justice documents, officials of GM visited banks used by railways in Philadelphia, Dallas, Kansas City and other locations, and, by offering them millions in additional deposits, persuaded their rail clients to convert to motor vehicles.
Where these measures were unavailing, GM formed holding companies to buy up and motorize the railways directly. Thus, it helped organize and finance United Cities Motor Transit as a wholly owned GM subsidiary, as well as Greyhound, Rex Finance, Omnibus Corporation, National City Lines, Pacific City Lines, American City Lines, City Coach Lines, Manning Transportation and numerous other concerns, which acquired rail systems across the country, including those in New York, Los Angeles, Chicago, Philadelphia, Baltimore, Washington, St. Louis, Salt Lake City, Sacramento, San Diego and Oakland.
Where rail systems could not be bought, GM bought rail officials instead, giving Cadillacs to those who converted to buses.
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