CHAPTER TEN

THE GM CONSPIRACY

On the bitterest winter night in memory, in an alley behind his apartment building in snowy Minneapolis, crusading editor and publisher Walter W. Liggett had parked his Ford near the side door. Liggett’s wife, Edith, and ten-year-old daughter, Marda, were in the car with him. They had just returned from grocery shopping. A fearless journalist and muck-raker, Liggett was known for a four-page publication called the Midwest American and its unrelenting investigation of Minneapolis’s growing crowd of racketeers and their ties to Governor Floyd Olson. Chief among Liggett’s editorial targets was the state’s most notorious mobster, Kid Cann, whose real name was Isadore Blumenfeld.¹

The most brazen of Minnesota’s many dapper, machine-gun-toting gangsters, Blumenfeld had been arrested and indicted more than a dozen times for a gamut of offenses from pickpocketing to procuring prostitution, from bootlegging to running white-slave traffic, from kidnapping to murder. Except for two conceded minor convictions, Blumenfeld aka Cann always seemed to beat the rap. In some cases, key witnesses were found machine-gunned before they could testify. Sometimes, the jury itself was threatened.²

Just days earlier, Liggett had published a scathing article about Olson’s ties to the mob. Now the editor was preparing to deliver a speech to the legislature calling for the governor’s impeachment over his ties to Cann and a gallery of other underworld thugs. Such crusades were dangerous. Just fifteen months earlier, journalist Howard Guilford had announced a new radio series that would expose “the whole story of Governor Floyd Olson’s connection to the underworld.” Before he could begin broadcasting the most revealing information, Guilford was murdered by a shotgun blast fired from the window of a passing car.³

Now, as Liggett unloaded groceries, a dark car appeared at the end of the alley. He looked at his wife and daughter in the backseat. The car slowly rolled closer, crunching snow beneath its tires. Liggett quickly motioned to his wife and daughter to remain in the Ford. As the ominous car advanced, its passenger window rolled down. Suddenly, headlights from a second car in the alley starkly illuminated Liggett, making him a target. In that moment, Liggett smiled at his family waiting in the Ford.⁴

From the passing car, out came a machine gun barrel, dully glinting in the alley light. Decades later, Marda still remembers, “I ducked down so fast.” But Liggett’s wife stared straight at the gunman, looking him directly in the eye. Five shots from the machine gun crackled into the night. All five bullets found Liggett. A moment later when Marda looked up, the car was speeding away, and her father lay sprawled across the pavement, fast bleeding to death. Marda ran to his prone body screaming, “Don’t die, Daddy; don’t die!" Over and over again. “Don’t die, Daddy; don’t die!" But it was too late. Liggett was dead.⁵

Decades later Marda remembers that her father “was in poverty when he died. He was trying to help the afflicted. He was committed to justice. Money was never a motivating factor for him. My mother had a hard life because of it, but some people have to live for their ideals.” The next issue of the Midwest American was published on time by Liggett’s widow, Edith. The great banner headline blared MY HUSBAND WAS SLAIN BUT HIS FIGHT WILL GO ON.⁶

Edith and another witness went on to identify the killer, a snarling yet smiling man. That man was Blumenfeld, aka Kid Cann. He was arrested, indicted, and prosecuted for the crime. But once again, Kid Cann beat the rap. First burglars broke into the prosecutor’s office in an abortive attempt to steal the evidence; prosecutors were expecting it and had secreted the evidence where it would not be found. Then a dozen witnesses, including three bankers and a policeman, gave Kid Cann alibis. Ultimately, this jury too would find him not guilty. The jury foreman explained that if Cann were the machine gunner, the mobster would have been smarter than to allow himself to be recognized.⁷

During the first three decades of the twentieth century, thousands of cities and towns throughout the United States inaugurated or enjoyed access to trolley lines. These rail streetcars were powered by electricity transmitted through overhead catenary wires or hot third rails. Wherever electricity and lighting existed, a trolley system was generally found. Virtually every city and major town enjoyed a system.⁸ For most cities and towns, the trolley was a virtual badge of admission to the twentieth century.

Smooth riding and quiet, spacious and clean running, trolleys immediately became popular at the turn of the century as a cherished and vastly more economical alternative to the filthy, cinder-spewing, coal-burning railroads. For example, Connecticut, once the home of major railroads, saw trolleys proliferate throughout its many small towns and larger urban centers. By 1900, passenger traffic on Connecticut’s trolleys exceeded the state’s steam railroad traffic by 20 percent.⁹

Massachusetts track mileage had increased by as much as 18 percent since 1894. In 1901, that state’s trolley lines grew by 242.7 miles while its steam railroad miles began to shrink. By 1902, trolley passenger loads throughout Massachusetts rose to four times the volume carried by steam locomotives.¹⁰

Trolleys were fun and flexible. Commonly, they picked passengers up and dropped them anywhere along their route. Streetcars ran frequently, and at speeds that safely coexisted with pedestrians and horses; people could just hop on and hop off. Only one of every three hundred million passengers suffered a fatality. Requiring little more than the width of two narrow-gauge rails, trolley lines often wended through pastoral areas, minimally disturbing the beauty of the environment and allowing people to enjoy the countryside. One early-century publication observed that travel on a trolley is “pleasanter than on a steam road, for the breezes can be allowed to blow through without fear of smoke or cinders, and the surrounding scenery is infinitely more attractive. A trolley road can penetrate the most exquisite retreats without spoiling their charm—a steam road has the faculty of making everything it touches hopelessly vulgar and hideous.”¹¹

A 1903 McClures magazine feature subtitled “The Marvelous Development of the Trolley System” sweetly extolled the virtues of electric trolleys. “More passengers by hundreds of millions are traveling than ever before, but the steam railroads are not carrying the increase. . . . Inch by inch, the field is contested . . . the locomotive is giving way before the insistent trolley.” McClures, a nationally admired chronicler of contemporary news and culture, added that it was more than city and suburbs. “Swiftly,” the magazine declared, “electric lines [have] flung their spider filaments from town to town until now great sections of the country are cobwebbed.”¹²

Serving more than just towns and cities, the trolleys extended between cities, thus creating true intercity transit lines. A trolley line humming between Cleveland and Detroit was inaugurated in December 1901. Pittsburgh’s system spread fifty miles in all directions, linking that city with most of western Pennsylvania and parts of Ohio. McClure’s described Detroit’s system as “no longer a timid intermediary between house and office,” adding “it leaps boldly 300 miles at a spring . . . [with] flying shuttles [that] weave their web . . . to Bay City and to Kalamazoo. . . . Their extensions now underway [will] span the entire State of Michigan and lead straight through to Chicago.” In Iowa, virtually the entire state was innervated by electric trolley lines.¹³

McClure’s bragged that with twenty thousand miles of track countrywide, “It will soon be possible to travel by electricity without a break half way across the continent, from the coast of Maine to the middle of Nebraska.” The 1903 magazine predicted the journey could be made uninterrupted coast-to-coast once hydroelectric was captured and the way west by rail was electrified.¹⁴

Streetcars moved through crowded city streets at cautious speeds. But when the route was open, as it was on three hundred miles of track between Indiana cities, or the lines coursing up New York’s Hudson River, trolleys easily hit 60 mph. It was understood that electric trolleys could always outpace a coal-burning train.¹⁵

Moreover, compared to steam railroads, trolleys were cheap to ride and cheap to operate. For example, 1903 town-to-town fares from Joplin in southwestern Missouri to nearby Galena, Kansas, cost passengers a penny per track mile, a third the cost of railroads. From Harlem in New York to Yonkers, passengers paid a nickel for the twenty-six-minute direct ride, which beat train fares costing ten times as much and consuming an hour under the best of indirect connections. “The trolley roads can make money at such prices,” reported McClure’s “for all their expenses are small. It is estimated that a light country electric road can be built for $7,540 per mile, or $10,540 including power station and car-house. A double-track electric line substantially built for fast traffic can be constructed for $31,500 per mile. These are about half the corresponding figures for steam roads.”¹⁶

Trolleys became more than transportation to the public. They inspired songs and movies. Passengers loved them. They defined lifestyles. McClure’s painted the picture of 1903 streetcar enjoyment this way: “If you take a trolley ride in the suburbs on a summer evening you will see the open seats filled with cool, comfortable people, sociably chattering, with their hats in their laps, while the breeze blows through their hair or whiskers, as the case may be. The car whirls on, and nobody gets off. It reaches the end of the line, and still nobody leaves it. The passengers merely turn over the seats and ride back. They were not going anywhere—they were simply enjoying a spin in the people’s automobile. That is a new luxury of modern life. Neither horse-car nor locomotive ever provided it. The need in human nature to which it responds went unsupplied until the trolley car came into existence to fill it.”¹⁷

McClure’s sneered that the joy of trolley riding could not be replicated “by a steam railroad if it were left without competition for a thousand years.”

Throughout the first two decades of the twentieth century, trolleys continued to flourish. Some wondered if streetcar usage would decline as a result of the explosion of automobile ownership that occurred during Ford’s battle with the Selden monopoly and after the cartel’s defeat from 1904 to 1911. That did not occur. In 1906, about six billion passenger boardings were logged on streetcars nationally, or about seventy-five rides per year for every man, woman, and child. This amounted to seventeen million persons daily and climbing. By 1910, the nationwide number had zoomed to ten billion passengers annually. The more than twelve hundred electric lines represented by the American Electric Railway Association predicted that number would double within the coming decade. In January 1911 the Wall Street Journal ran a front-page article headlined ASTONISHING GROWTH OF ELECTRIC STREET RAILWAY SYSTEM IN THE PAST TWENTY-FIVE YEARS.¹⁸

In fact, as the automobile proliferated, thus enabling urban centers to push out farther and farther, trolleys and other electrified transit sustained their popularity. Far from destroying public transit, sprawl only boosted suburban commuting and long-distance pleasure riding. In the twenties, electrified public transit substantially expanded into a three-pronged system—subways and elevated trains, traditional trolleys, and by the end of the decade “trackless trolleys.” Trackless trolleys were electrified buses that looked like modern buses and rolled on rubber tires, but they were powered by overhead electric trolley lines.¹⁹

During the twenties, until the Depression in 1929, there were numerous ups and downs in ridership as the peaks and valleys of economic times dictated the ebb and flow of usage. Moreover, in America’s largest cities, such as New York and Chicago, subways and elevated trains became more practical for commuters. But for many, trolleys were still the transit vehicle of choice, attracting between twelve and thirteen billion passenger boardings annually, or between 82 and 89 percent of all electrified urban transportation, and indeed of all transit by any means—petroleum-powered or electric.²⁰

A typical feature in the September 19, 1937, Los Angeles Times described just one way that urban sprawl symbiotically coexisted with the trolley. The article bore the subhead “Cheap Street Car Trips Through City Popular Recreation.” It opened, “Going nowhere at thirteen miles an hour, and at a cost of less than a cent a mile—that’s what happens when street cars are used for pleasure riding. It’s sort of like riding a merry-go-round—you keep on the go but end up right where you started. Thousands of people living in and near Los Angeles, who don’t possess automobiles or who dislike driving in traffic, go for a street car pleasure ride every week. . . . They select a long route, load their families aboard the yellow cars, get a transfer slip for each passenger, and ride for an hour and a half for 7 cents each; less than that if they use tokens.”²¹

The Los Angeles Times article chronicled an almost idyllic weekend lifestyle that any urbanite would covet: “Through a street car window an interesting and, at times, unbelievable picture of the metropolitan area slowly unfolds. Few of the throng of city dwellers that never get out of the shadow of downtown buildings know that near Inglewood there is an Iowa cornfield with ripening yellow ears almost ready for the harvest. . . . Attractive shop windows make it difficult for one to refrain from getting off the car and changing the street car excursion into a shopping excursion.”

The article closed with a section subheaded “Peaceful Scene.” It captured the almost dreamy experience of trolley riding for pleasure. “Children eating watermelon on the lawn beneath the shade of a willow; dogs panting in a dusty gutter; schoolboys on bicycles pedaling homeward, their faces scarlet; women shopping in corner markets for something for supper, their hair wet and straggly, their stockings twisted and wrinkled around their stout ankles, their cotton dresses hiked up in the rear by the heat; these are the sights which soon become familiar all along the line, and at a cost of less than a cent a mile. A cheap panorama, to say the least!”²²

By 1919, Henry Ford was wondering if he should quit auto manufacturing to start a trolley business.²³

In 1925, electrified systems enjoyed more than sixteen billion annual boardings, whether by traditional rail trolleys, subways and elevated trains, or so-called trackless trolleys. Passenger volume continued to climb until the Depression, when all business suffered a steep decline. By the end of the Roaring Twenties, some of the oldest trolley lines began deteriorating and then disappearing. During the thirties and forties, the pace quickened as small towns and bigger cities everywhere lost their trolleys en masse. By the postwar fifties, virtually all electrified streetcars had vanished in the United States. Even the rails were pulled from the streets, which were then paved over to erase any vestige of their flourishing function.²⁴

One by one, the public transit companies of America were either bankrupted out of existence or had converted to expensive diesel-burning, rubber-wheeled bus fleets. Then in many cases those bus fleets also disappeared, leaving urban populations without public transit and reliant on the gas-guzzling automobile. Why?

Scores of these cities interacted with one conglomerate: National City Lines.

What was National City Lines? The Enronesque conglomerate was little more than a front for General Motors at a time when the giant Detroit automaker headed up what all three branches of the federal government—teams of Department of Justice prosecutors, the courts from the lowest district venue to the Supreme Court, and the Senate—called a vast criminal “conspiracy” that insidiously operated across the whole of America. This conspiracy—which also included such petroleum and automotive interests as Mack Truck, Phillips Petroleum, Standard Oil of California, and Firestone Tires—stretched from the nation’s largest metropolises such as Los Angeles and St. Louis to the country’s smallest cities such as Decatur, Illinois, and Beaumont, Texas. That criminal conspiracy changed urban transportation forever.

What happened and why have the facts been obscured and forgotten?

Most people have never heard of the nationwide mass transit conspiracy set in motion by GM and its coterie of petroleum and automotive confederates. But to a small corps of argumentative urban historians and Internet activists, the entire story has become a virtual urban legend that has continuously and vituperatively been debated for years. No one can properly delve into what GM and its partners actually did without first comprehending how this arcane debate among experts—real and self-appointed—has obscured and prevented the extraordinary details about GM and mass transit from coming to the fore.

In brief, GM’s conspiracy had its roots in the twenties when the automobile market became so saturated that auto sales slowed significantly and GM lost $65 million. GM targeted trolley systems across the country for monopolistic takeovers and systematic irreversible conversion from electric streetcars to gasoline- and diesel-burning buses. A series of stealthy mergers and acquisitions began in the midthirties and continued unabated until GM and its corporate cohorts achieved a monopolistic market presence in dozens of cities from St. Petersburg, Florida, to Los Angeles. The conspirators—GM, Mack Truck, Phillips Petroleum, Standard Oil of California, and Firestone Tires—acted through a front company called National City Lines, which they secretly financed. Once National City Lines purchased a transit company, electric trolley service was immediately discontinued, the tracks quickly pulled up, the wires dismantled, and the company switched to GM-made petroleum-burning motor buses.²⁵

In 1947, in a landmark case, the federal government prosecuted GM and its corporate partners for a criminal conspiracy to monopolize bus sales and foreclose competition across the United States in the many cities where National City Lines operated. The entire group of oil and automotive companies, as well as their executives, were convicted on one of two similar counts of conspiracy. Despite vigorous appeals by the best defense attorneys in the nation, the Supreme Court allowed the convictions to stand. Eventually, even though GM and National City Lines continued their monopolistic entrenchment in urban mass transit, the scandal faded off the nation’s headlines.²⁶

A generation later, in 1974, in the immediate aftermath of the Arab-imposed 1973 oil shock, the GM Conspiracy was resurrected by the U.S. Senate Judiciary Committee’s subcommittee on Antitrust and Monopoly. In an exhaustively documented study entitled “American Ground Transport,” Judiciary Committee staff attorney Bradford Snell accused GM of contributing to the nation’s petroleum woes by a deliberate conspiracy against scores of local mass transit systems.²⁷

Snell’s work was largely, but not exclusively, based upon thousands of pages of documents arising from the Department of Justice’s 1947 prosecution of GM and the consortium that had created National City Lines. But going beyond the prosecution, Snell asserted that GM’s true motives were not just to convert electric trolley systems into bus lines so it could sell more diesel buses and eliminate competitive electric systems, but also to then cause the abandonment of those very bus companies, thus killing mass transit altogether.²⁸

Snell’s logic was that with those newly transformed bus companies defunct, America would be converted within a span of several years from a nation served by thousands of electrified mass transit systems to a nation reliant on the automobile for most transportation. Snell’s report called GM’s scheme not just a plan to eliminate trolleys but nothing less than “a drive by GM to sell cars and trucks by displacing rail and bus systems.” That, Snell argued, was by implication at the root of the nation’s petroleum dependence.²⁹

In other words, first acquire the trolley lines, then convert them to unlikable and unprofitable bus lines, and finally make those bus lines disappear altogether, leaving only highly profitable gas-guzzling automobiles. This final assertion—the actual killing of mass transit in any form, electric or motorized—added an additional conspiracy not found in the prosecution’s documentation. It was the “extra” conspiracy that gave GM, its defenders, and surrogates the basis to discredit Snell’s otherwise exhaustive and largely correct study and to attack any who sought to learn more about this corrupt chapter.

After Snell’s report was presented, GM immediately went on the counterattack, denying Snell’s charges and demanding that the Senate Judiciary Committee cease circulating its own report, The automaker then created its own misleading and fact-shaded rebuttal report, entitled “The Truth About ‘American Ground Transport,’ “ and further demanded that the Senate never permit its own report to be distributed without GM’s rebuttal. The Senate agreed.³⁰

In the years that followed, a small clique of urban planning scholars along with a cortege of transportation buffs and armchair hobbyists, aided by the Internet and by self-appointed conspiracy-theory debunkers, launched their own attack campaign against Snell and the very word “conspiracy.” The debate was all intensified by a live-action animated film entitled Who Framed Roger Rabbit, which contained a fleeting atmospheric subplot about the destruction of the Los Angeles trolley system by an evil corporate schemer. The villain—the black-garbed “Judge Doom,” no less—was of course inspired by the known facts about the nation’s mass transit dilemma. But the silliness of the quasi-cartoon Roger Rabbit enabled both academics and self-appointed Internet experts to invoke the film’s title as a means of denigrating Snell and acquitting GM of any conspiracy whatsoever.³¹

None of the GM urban experts would deny that King John was an inhumane monarch because of Robin Hood spoofs, or deny the crimes of the Third Reich because of the film and Broadway hit The Producers. But this tack has been taken against those journalists and scholars exploring the GM Conspiracy. Several academic papers on the topic even included “Roger Rabbit” in their title. One respected academic author of such a work conceded this was done as a “hook to make it more interesting.” The consequence of all this has been to shout down legitimate journalistic attempts to learn the facts of GM’s conduct. Just inquiring about the provable facts or court record invokes public ridicule by a corps of so-called experts. The result has been the hazing over of vital urban history.

Not a few of the circle of experts have adopted a “So what?" approach, asserting that electrified mass transit was dying anyway, so GM’s action was simply clever business.³²

The topic has become so supercharged that many of the key debaters themselves have receded from their once irrepressible defense of GM. One urban planning historian complained emotionally, “I really don’t care anymore; I am not really interested in this topic. You want to know why? Because it haunts me. I constantly get calls from kooks and crackpots. I tried to get away from it and still I get the calls.”³³

More than half a century after GM’s criminal conduct and conviction, the facts remain forgotten and indeed buried. In no small part the story has been forgotten because the scandal has remained shrouded in the urban legend stridently perpetuated by the small group of experts who should have investigated the deeper facts as a cautionary tale for the future. Many of the most esteemed academic experts are indeed versed in the operational history of one or more local transit systems. Speaking to a dozen of the leading and most often quoted debunkers of the GM Conspiracy is more than revealing. When contacted, the various urban history students, teachers, and other experts in the debate have confirmed they have no experience or training in corporate criminality or antitrust conspiracy. None of the debaters contacted even understands the meaning of the criminal concept of “conspiracy” that led to GM’s prosecution and conviction. One of the most respected authors on the subject wrote an academic chapter on the topic and throughout mistakenly referred to the government’s criminal prosecution as a “lawsuit.”³⁴

Most important, despite their many position papers, Internet postings, academic journal articles and university dissertations, all the experts contacted confirm that they have never examined any of the fifteen boxes of court documents in a Chicago archive; the seven hundred pages of FBI documents in a basement in High Point, North Carolina; fifty-four linear feet of National City Lines’ own corporate documents in an obscure repository in Atlanta; a collection of National City Lines reports in a New York library manuscript collection; the personal papers of Judge William J. Campbell at a Chicago facility; the private archived papers of key transit principals and gangsters stored in little-known locations from Minneapolis to Los Angeles; or the original smoking-gun contracts, memorandums, and correspondence of the conspiring executives that are located in various repositories and back rooms around the country.³⁵

But anyone who examines the actual documents, instead of merely guessing at the contents, would have little trouble seeing why prosecutors, judges, and congressmen all concluded that GM did engage in a transit conspiracy, and why the submerged details explain much about this nation’s oil dependence.

The story begins in 1921. Post-Great War speculation suddenly came crashing down in 1921 in a short depression marked by massive unemployment, collapse of the transportation sector, deflation of all manufactured goods, and the worst year ever for the automobile industry.³⁶

A Wall Street Journal retrospective summarizing the year told the story in its headline: 1921—DEFLATION: SPECULATIVE MARKETS COLLAPSE-INDUSTRIAL ENTERPRISES LAG—UNEMPLOYED TOTAL 6,000,000. The article explained, “The year 1921 was one of intense depression in trade with few parallels in the mercantile and financial history of the country, marking the complete collapse of the speculative postwar boom which culminated so suddenly at the close of 1920. The height of the depression was reached in the summer. . . . All manufacturing and industrial enterprises lagged, but in the iron and steel trade particularly, the depression was more pronounced. Month after month orders continued to fall off despite a series of price reductions and wage cuts. Everywhere the process of deflation ruled. . . . Unemployment reached unprecedented levels of 6,000,000 in July; wage cuts, dividend reductions and suspension were the order of the day.³⁷

“The year was one of the worst for our railroads,” the Wall Street Journal stated. “More mileage was abandoned than built, acquisition of new equipment fell to a low point. . . . Most of the year, the railroads struggled to keep out of bankruptcy.”³⁸

Detroit automakers were particularly hard hit. Their industry was thrown into a depression. A Christian Science Monitor article on March 24, 1922, was clear: motor companies pass through a severe period. The article opened, “American automobile companies experienced their most trying year in 1921, but as a whole they have weathered the storm, and as a result of their drastically reducing inventories and costs of production their prospects for 1922 are much brighter. During the last three years the motor concerns have experienced a complete change in fortunes. During 1919 and 1920 they did capacity business, rolled up huge profits and distributed dividends liberally, but in 1921 they saw the other side of business—depression.”³⁹

No automaker was harder hit than General Motors. GM had over-supplied and saturated the automobile market. The decrease from 1920 to 1921 threw the entire conglomerate into chaos. Buick, down from 112,208 units to 80,122. Chevrolet, the major brand, halved from 134,117 units to 68,080. Pontiac, down from 34,839 units to 11,852. Total vehicle sales of 393,075 in 1920 dropped to 214,799. Adding all the lost sales revenue and unsold inventory, GM recorded a $65 million deficit for the year.⁴⁰

In a lead front-page article on March 13, 1922, entitled GENERAL MOTORS SHOWS RESULTS OF DEFLATION, the Wall Street Journal declared, “The loss is staggering.”⁴¹

GM president Alfred Sloan recalled years later the “1920–1921 crisis” laid bare the company’s inability to forecast the national demand for automobiles.⁴² In 1921, the market was temporarily saturated. To diversify its income streams, GM expanded into trucks and added buses.

Meanwhile, the nation’s transit systems suffered a drop in ridership from 15.5 billion in 1920 to 14.5 billion in 1921. With six million unemployed, and even remaining wage earners taking home substantially reduced paychecks, commuting and pleasure riding flattened. The downturn in transit revenues came at a crucial time for transit systems. Cities and their suburbs were sprawling. Transit systems were obligated both by municipal franchise and popular mandate to provide coverage to the farthest residential and commerce zones. Metro transit needed to add lines. But not all lines were created equal. Some of the newer routes, especially those in outlying areas, generated fewer passengers and less revenue. Therefore, it was harder to justify the capital-intensive construction of electrical wires, rails, and other infrastructure to expand service. At the same time, even the profitable, well-traveled lines were beginning to show wear. Seat cushions and other interiors needed to be replaced. Car mechanisms needed repair. New equipment was needed. Modernization was overdue.⁴³

A cheap alternative was needed. Gasoline-burning motor buses were inferior. They smelled and sprayed thick clouds of smoke wherever they drove. They literally changed the landscape and the lifestyle of the towns that purchased them. People called them stink wagons or stinkmobiles. Many people found them cramped and uncomfortable. Unpopular as they were, however, gasoline buses seemed to many transit operators an expedient, if not necessary, short-term cost-cutting compromise for their most ancillary service.⁴⁴

In the short run, gasoline buses of course seemed more economical. In the early twenties, buses could be purchased quite cheaply, often for between $3,500 and $8,000, whereas streetcars could easily cost two or three times that amount. Buses could be garaged cheaply and could be deployed at once on city streets without track being laid. That said, buses were a bad capital investment because they needed to be replaced within six to eight years. Traditional streetcars could easily run for two to three decades. Trackless trolleys, which began proliferating late in the decade, generally lasted twelve years. Maintenance on buses was greater than for trolleys. Moreover, buses carried far fewer passengers per vehicle than streetcars—generally seventeen to forty-five passengers in a cramped bus, and generally sixty-five passengers in a spacious trolley. Hence, buses were initially thought of as mere ancillary vehicles.⁴⁵

Nonetheless, during the early twenties when cash was short, metro transit companies found themselves acquiring more and more motor buses on newer and less traveled routes and as feeder lines to their existing trolley routes, elevated lines, and subways. In 1920, fewer than seventy-five buses were in use nationally for these limited purposes. Within a few years, several thousand buses were operating. However, despite the fast growth of bus use, the transit industry was determined to keep them tertiary and not use them to replace mainstay streetcars. New York transit companies were typical in their entrenched loyalty to streetcars. In 1923, nationally known transit consultant John Allen Beeler, who would later begin to favor buses, typically informed the state’s Transit Commission that even though motor buses in certain respects were less expensive to operate and acquire, these vehicles could simply not replace streetcars in the five boroughs of New York. Beeler even authored an article for Electric Railway Journal headlined BUSES COULD NOT FILL PLACE OF STREET CARS IN NEW YORK CITY.⁴⁶

True, operating costs for most streetcar models were generally about 45.7 cents per mile, while buses generally cost 41.5 cents per mile, explained Beeler. But because buses offered fewer seats and were known for incessant “lurching and abrupt movement,” they were unacceptable to standees. Hence, when streetcar companies calculated the added benefits of standees, and the indirect costs of dismantling the infrastructure and repaying, Beeler concluded, “The cost of bus service . . . is approximately 65 per cent greater than the average cost of the street railway service.”⁴⁷

Beeler added that while 1,002 streetcars could serve Manhattan during rush periods, the same task would require 2,538 buses, and such a fleet would impose intolerable congestion on city streets.⁴⁸

One transit official summed up the prevailing mood among transit experts in a 1924 issue of Electric Railway Journal: “The bus cannot replace streetcars in ordinary service. . . . Most railways find it unsuitable for regular service.”⁴⁹ That would change—and soon.

Electric transport worked and its popularity was measured in billions of passenger boardings annually, but it could not keep working without funding for infrastructure upgrades and extensions. One idea proposed by Congress would create a so-called superpower zone extending from Maine to Maryland. The zone would electrically unify the 315 public utilities, 18 electric railways, and 96,000 industrial sites within the zone. The result, if implemented, would electrify nineteen thousand new miles of railway throughout the urban and rural centers of the Northeast. The federal government’s proposed “superpower” zone would save local economies a half billion dollars annually within a decade and provide the modernization and extensions urban transit systems needed to cement the idea of electric transport as an economic linchpin.⁵⁰

But General Motors had other ideas. GM believed in internal combustion as the solution to every motive question. In the face of uncertainty about future automobile sales, GM decided to branch into transit motor buses. The company was convinced it could systematically convert thousands of electric transit systems throughout the nation to oil burners.

General Motors, even in the twenties, functioned as vastly more than just a Detroit carmaking company. The megacorporation that had years earlier surpassed Ford was nothing less than a billion-dollar conglomerate of transportation-related entities that included manufacturing, sales, finance, and operational firms in the fields of automobiles, trucks, and trains. Generally, when GM wanted to add to its diversification, it acquired existing companies or combined bits and pieces to form new ones, sometimes publicly, sometimes secretly, sometimes creating a wholly owned division and sometimes controlling via a quiet interest. The corporation moved its executives around from division to division and company to company like knights on a chessboard. By this means it could defend and expand its empire at will.

So it was with GM’s decision to convert American transit from clean electric to petroleum, a campaign that would involve hundreds of communities and their transit systems. That campaign began in earnest in 1925 at the doorstep of the collection of the companies associated with Yellow Cab and Yellow Truck.

Yellow Cab was founded by Austrian native John Hertz, whose family emigrated from their home in the mountains north of Budapest to Chicago in 1883 when he was only four years of age. Hertz grew up in poverty, his father supporting the household on just $15 per week. Chronically nervous, Hertz flitted from job to job on doctor’s orders just to preserve his health. He worked as a police reporter for the Chicago Daily News, a delivery-wagon driver, and any other job he could snare. But he seemed most successful as one of the nation’s earliest automobile salesmen.⁵¹

Hertz and a partner in 1907 began their own taxi company using trade-in vehicles. In 1915, Hertz broke off from his original partner and founded Chicago’s Yellow Cab Company. Hertz painted his forty or so vehicles attention-getting bright yellow as a means of street advertising. He had read a University of Chicago study identifying that hue as the most conspicuous color any person could notice. Eventually, Yellow Cab sprouted hundreds of manufacturing and operating subsidiaries, including a car-rental business later named Hertz Rent-A-Car, and yellow cab companies across the country. But the conglomerate’s most important unit was Yellow Coach Manufacturing, which built those iconic yellow taxicabs. Yellow, in fact, assembled 90 percent of all cabs in the nation.⁵²

In 1923, Hertz expanded into the emerging field of buses, acquiring four square blocks in Chicago to erect a manufacturing factory. That year, Yellow Coach sold 207 buses. That was only the beginning. The next year, 1924, Yellow produced as many as six units per day. In 1924, Hertz combined a recently purchased local bus line, Chicago Motor Coach, with New York’s decades-old Fifth Avenue Coach Company. Putting the two companies together in a $25 million deal, Hertz created the Omnibus Corporation. The New York Times headline read JOHN HERTZ INVADES NEW YORK. Fifty Avenue Coach Company officials became Omnibus officials as Hertz hired and shuffled executives from subsidiary to subsidiary. Despite his high corporate maneuvers, Hertz spurned such descriptions as “financier” or “banker,” preferring to call himself an “operator.” When Omnibus took over Fifth Avenue Coach Company, which had successfully been running petroleum buses for about two decades, Hertz also acquired Fifth Avenue Coach Company’s bus manufacturing plants, which had been expanded since World War I. The Omnibus acquisition made Yellow not only America’s largest taxi concern, but also the nation’s preeminent bus manufacturer.⁵³

GM took notice. GM president Sloan approached Hertz about a merger. On July 7, 1925, the deal was consummated. Hertz agreed to sell GM eight hundred thousand Yellow shares—slightly more than half of Yellow Cab Manufacturing’s stock, for $16 million. That $16 million sales price included $10.5 million in capital. GM’s deal was subject to a special Yellow stockholder meeting to rubber-stamp the decision. When approved, the taxi and bus company would be renamed Yellow Truck and Coach Manufacturing. With this merger, GM would acquire Yellow’s massive bus-building capabilities. In turn, Hertz, who had long eyed the truck market, would have access to GM’s truck assembly plants.⁵⁴

Hertz was ecstatic, hailing the merger as “the greatest achievement in their history.”⁵⁵

For Sloan, acquiring control of Yellow was the pivotal gateway to the transit bus business. Not only did Yellow give GM bus manufacturing capability, but because Yellow owned New York’s Omnibus and other transit operating companies, the merger made GM itself a transit company—not openly, but circuitously through its control of Yellow. As such, GM was able to use its influence not only to entrench itself as a supplier but to effect the conversion of electric streetcars and later trackless trolleys to petroleum-burning buses. Yellow was the key.

Sloan explained to his colleagues, “The Yellow Cab Manufacturing Company, apart from its position in the taxicab business, occupies a strong position in the bus field. . . . General Motors Corporation has recognized the importance of the bus and believes that the . . . merger with the Yellow Cab Manufacturing Company will immediately place it in a strong position in the bus business, with the opportunity of enjoying a really unique position in the future development in that field.”⁵⁶

Within a few months of the September 1925 merger ratification, the first fruits of the GM-Yellow union became apparent. On December 28, 1925, the Public Service Railway Company in Newark, New Jersey, granted Yellow the largest transit bus order in history, 333 coaches plus parts and services, all valued at $3 million. Buses were to be shipped at the rate of one hundred per month. Public Service Railway would use them as feeders and on newly purchased routes.⁵⁷ This was big—but not big enough for Sloan.

Sloan lived for bigness. Slender and natty, attired in the latest collars and ties, Sloan commonly wore spats, even to the White House. He often outdressed his former GM boss, millionaire Pierre du Pont. A strategic thinker, electrical engineer, and Massachusetts Institute of Technology graduate, Sloan was as driven by a compulsion to grow his company as he was compelled to breathe oxygen. “Deliberately to stop growing is to suffocate,” Sloan wrote about his years at GM. “We do things in a big way in the United States. I have always believed in planning big, and I have always discovered after the fact that, if anything, we didn’t plan big enough. I put no ceiling on progress.”⁵⁸

Now, with the massive New Jersey bus order in hand, Sloan was more than sure of himself. Just days after the New Jersey order, Sloan issued a prediction to a Washington Post business writer: “Our research and study of this whole transportation problem leads us to believe that the railroads and electric railways of this country will eventually be the largest users of commercial motor vehicles in the world.” The sureness of this prediction stood in stark contrast to the industry belief of the day that buses possessed a limited future. Just days earlier, Lucius Storrs, managing director of the American Association of Street Railways, repeated to the New York Times the mantra of the transit world: “I believe that buses will become during the next few years a necessary adjunct to the street railways, but they must remain an adjunct and not compete with the electrically operated lines. .. . For this reason, street railways must control all buses operating in urban communities.” Storrs’s assertion came just as the nation’s electrical systems boasted record passenger loads.⁵⁹

Nonetheless, even as electric transit—subways, elevated lines, and streetcars—continued to attract between 14.5 and 15.5 billion passenger trips annually, bus usage in the twenties continued to climb. In 1922, more than 400 million passenger trips on petroleum buses were logged by the members of the American Electric Railway Association. Of course, the true national bus usage number was undoubtedly greater because many independent bus companies were not reporting members of the electric railway organization, a group seen as their natural competitor. By 1924, annual bus boardings had risen to a billion. By 1925, electric railways were operating about 4,400 buses—a 60 percent growth during the prior twelve months. By 1928, of the nation’s more than 17 billion passenger trips, more than 2.5 billion were on some 90,000 buses. But the vast majority of ridership still remained on trolleys and other electric transit systems. Hence, on September 25, 1928, transit expert Beeler assured the Wall Street Journal that even though small cities with populations of about one hundred thousand might select the financially expedient motor bus, “The future of streetcars is better than ever.” Yet, at that very time, Sloan still felt the opposite was true.⁶⁰

“I predict a rapid increase in the use of buses by electric railways in cities large and small,” promised Sloan in January 1928, “and an even greater development in the so-called interurban field, whether by rail or independent operators. I believe this new arm of transportation is destined to a future that surpasses the most optimistic dreams of the ardent enthusiasts of a few years ago.”⁶¹

A tension was in play. Passengers by the millions in cities across America continued to use and enjoy the trolleys, elevated lines, and subways with billions of rides annually. Transit engineers and professionals foresaw a brilliant, virtually indispensable future that needed to be preserved with updating, modernization, and expansion. Meanwhile, local management and ownership fiddled with the finances and engineering reports and often allowed its service to deteriorate. Buses and their cheapness allowed most electric railway managements to stave off plowing further funds into infrastructure. Ironically, the economic realities at play were often more rooted in corrupt business practices than intelligent public policy or transportation sense.

Transit companies in some of the larger cities were municipal agencies. But in most cities and towns, the transit systems were privately owned enterprises, often controlled by the local utility, and commonly misused as personal piggy banks, slush-fund sources, or venues for stock manipulation. Known for deep-seated corruption, hidden ownership practices, and unlimited avarice, transit owners commonly eschewed spending money on new equipment and lines when they could stretch old vehicles and infrastructure yet another day and yet another year. It was not unusual to dispense false or uneven engineering and financial comparisons to sway public opinion and government action. Too often, twenty- and thirty-year-old electric vehicles and rail infrastructure were compared to brand spanking new gasoline buses. “No one expects a trolley built in 1905 to be as up-to-date as a brand-new bus,” complained one streetcar passenger in a letter to the editor of the New York Times.⁶²

Moreover, it was hard to determine the true finances and operating costs of many trolleys and other electrical lines because so many inflated charges and personal enrichment schemes were loaded into the numbers. Theft, looting, bribery, embezzlement and public deception among transportation owners and executives was legendary throughout the industry.

For example, Minneapolis’s Twin City Rapid Transit was owned by a New Jersey firm that maintained secret minute books. In 1908, four years after the system’s latest corporate incarnation, company officials met in Manhattan where they passed a resolution: “That two hundred and fifty thousand dollars ($250,000) of the accumulated surplus of the company be transferred to a special reserve fund to care for such extraordinary outlays as may have to be incurred for purposes other than operating expenses, such as defending attacks on the company’s franchise.” The company’s franchise did not expire until 1923—another fifteen years. Various state and local investigations of Twin City Rapid Transit revealed a long, damning list of inexplicable money movements. In one case, $30,000 of transit company money was transferred to “miscellaneous” and in another $574,523 was written off as “incidental” or “nature of expenditures not shown.”⁶³

When the Pacific Electric Railway incorporated in Los Angeles, the first order of business on September 14, 1911, for majority shareholders was not investing millions of their own funds as owners, but creating a $100 million bond issue and mortgage. This indebtedness was regularly refinanced and recollateralized with massive fees to the mortgage bankers, all associates of the shareholders themselves. Those fees provided bountiful compensation to insiders. One financial underling in accounting eventually complained that such continuous high-cost financing was breaking the company at a time when it could afford it least. His objections were ignored.⁶⁴

Yellow Taxi in Chicago, after decades of management and ownership reorganizations, created additional dozens of captive suppliers, often mere fronts, to sell itself fuel, parts, insurance, and other day-to-day necessities. In some cases, the fronts were nothing more than an office and phone. For example, at one point, the combined Yellow and Checker taxi companies were purchasing more than 12 million gallons of fuel per year through Parmalee Motor Fuel Company, which charged a halfpenny per gallon surcharge—causing a $60,000 fuel hike. Parmalee was a Yellow and Checker captive operating out of the back of a garage. At the same time, two insurance companies, Calumet Mutual and City Mutual, both at the same address, raised the taxi company’s liability and collision premiums by 25 percent to $4 million annually. Both insurance companies were also captives. Through this maze of self-dealing, Yellow was able to regularly and surreptitiously inflate its operating costs to exceed the fare-hike expense thresholds in Chicago’s taxi ordinance.⁶⁵

In the years before the Fifth Avenue Coach Company was swallowed by Yellow through Omnibus, it and other independent New York transit lines were widely considered to be dens of corruption with hidden ownership. In one case, the police inspector’s wife was discovered as the real owner of one small Manhattan bus line. Typical was the broadside launched by New York mayor John F. Hylan on October 28, 1922, against Fifth Avenue Coach Company when he protested, “The people of this city needed buses badly because the owners of the traction lines and their ‘receivers’ would not or could not provide proper service.” Hylan added, “The Fifth Avenue Coach Company, which operates buses on the principal streets of the city on a ten-cent fare . . . want the bus privileges and they do not want the city or anyone else to have them.”⁶⁶

Referring to the network of corrupt businessmen who controlled or coveted Fifth Avenue Coach Company and other transit lines by their traditional derisive name, “the traction ring,” Hylan’s speech held back nothing. He accused the owners of Fifth Avenue Coach Company of trying to falsely justify higher fares with fake expenses while making a 50 percent profit. “The traction ring,” he declared, “. . . knows that as long as I am mayor and my associates are with me . . . [the] higher-fare plan cannot go over. They think . . . they can hoodwink the people. . . . The City of New York can make a good profit on bus operation on a five-cent fare. The traction ring knows this and is anxious to grab all the bus routes that the city has established. [However], these bus routes will remain in control of the city and will not be given to the traction ring, the Fifth Avenue Coach Company, or any other subsidiary corporation.”⁶⁷

Nor were the corrupt practices limited to the transportation companies. Those in local and state government who could influence the transit owners, or be influenced by them, were often paid bribes, and not infrequently the officials required bribes. One investigation of the Twin City Transit Company found that from 1916 to 1921, $41,000 had annually been paid to E.E. “Big Ed” Smith of Minneapolis and $20,000 annually to R.T O’Connor of St. Paul. Smith was the “unofficial” boss of the Republican machine in Minnesota. O’Connor held sway as boss of the state’s Democratic machine. Both men were known as ruthless to their enemies but loyal to their friends. The list of political payments was long. In one well-publicized case, two staunch political opponents of the transit line’s high $24 million valuation who changed their mind overnight mysteriously received payments of $15,000 and $2,600 from Twin City Transit Company.⁶⁸

In New York, Fifth Avenue Coach Company and its regulators were continually excoriated by New York mayor Hyland; the “state legislature [was] controlled by the traction ring.” In Chicago, graft and corruption among and between aldermen, regulators, financiers, and transit companies was a legendary lifestyle. In the late twenties, the U.S. Senate Judiciary Committee launched an investigation of the highly publicized charges of “collusion” between Chicago railways, receivers, and Westinghouse Electric.⁶⁹

Government corruption by and against transit companies was in fact a cliche of the Roaring Twenties. One transportation study concluded that from the turn of the century right through the twenties, the overwhelming majority of American cities were racked by either fierce legal confrontations, heated public-fare conflicts, or investigations for scandalous transit corruption. When pressed at one federal hearing, a company owner openly admitted, “We insiders are selling out just as fast as we can, and when ten years are up, you will not find your uncle Dudley or any one of us that will own a share of stock or a bond [in electrical transit].”⁷⁰

Currents and currency drove the trolleys, elevated lines, and subways of America, each in their way. Graft and gasoline fueled the buses of America, each in their way. Round and round spun both the wheels and the coins of mass transit, each in its own way. Lubrication took on several definitions, depending upon the speaker and the friction in question. Transit crises like oil shortages could be created at will if the purpose suited either the regulated or the regulators. Equipment languished or could be rejuvenated at will if the purpose suited either the regulated or the regulators. For those who regulated, governed, invested in, or operated urban transportation, it was a mad, elbowing, backstabbing dash for the bank. But for the average citizens who depended upon electrical transportation, it was about getting from point A to point B safely and economically. Caught in the midst of this traction was the public. Mobility and mendacity in the Roaring Twenties were on a collision course. The moment of impact finally came on October 29, 1929, when the stock market crashed and the resulting Great Depression gripped the nation.

Now, money and jobs were short while breadlines were long. From October 1929, ridership tallies began to fall sharply when as many as 15 million Americans—some say a third of the nonfarm workforce—were thrown out of work. Some 85,000 businesses, once worth $4.5 billion, toppled into bankruptcy. Consumer prices crashed. Deflation racked all values and savings. Suicide and murder multiplied into an epidemic. For too many, their last moment of travel was a hopeless jump from a high window. People murdered for the price of a nickel streetcar fare or a crust of bread, take your pick.⁷¹

Yet some companies, such as GM, prospered and expanded. True, total transit ridership from 1929 to 1933 fell by more than a third, from 17 billion to 11 billion. True, GM’s American auto and truck sales dropped dramatically during this period, from nearly 1.8 million in 1929 to just a half million in 1932—the lowest level since the 1921 depression. True, during those same Depression years, streetcars rides were slashed almost in half, even as subway and elevated boardings remained constant at about two billion boardings. But by 1932, motor-bus usage—the cheap, short-term alternative—rivaled that of elevated and subways. Even as electric transit usage stagnated in thousands of cities and towns across the nation, motor-bus passenger volume increased, both numerically and proportionately. GM spearheaded the trend in New York, where GM buses were voraciously adopted by GM and Yellow’s Omnibus Corporation, as well as by other neighboring transit systems.⁷²

When Depression-era municipality funds dwindled too low and outside financing shriveled, for some cities the only solution to their aging, broken electric fleets was GM and Yellow. As GM general counsel Henry Hogan recalled, the company “decided that the only way this new market for [city transit] buses could be created was for it [GM] to finance the conversion from streetcars to buses in some small cities.” That in mind, on June 29, 1932, GM quietly created United Cities Motor Transit, a special holding company to finance small-city conversion from streetcars to petroleum-burning vehicles. A GM attorney explained, “To develop motorized transportation, our company should initiate a program of this nature and authorize the incorporation of a holding company with a capital of$3OO,OOO.”⁷³

The method: First, United Cities Motor Transit would locate a financially unstable transit system where the trolleys needed to be rescued. Second, United Cities Motor Transit would help create a new, properly financed rival company. Often GM invested directly. Third, the management of the new transportation company would quickly orchestrate the termination of electric lines in favor of total GM motor-bus operations. Fourth, GM and Yellow would liquidate their own presence, turning the local company over to others.⁷⁴

GM’s general counsel, Hogan, confirmed as much in one federal investigation. “In such case,” Hogan stated, GM “successfully motorized the city, turned the management over to other interests, and liquidated its investment.”⁷⁵

Systems in Kalamazoo and Saginaw, Michigan, as well as Spring field, Ohio—all in the throes of bankruptcy—were among United Cities Motor Transit’s initial targets. In Kalamazoo, GM invested as little as $20,000 in the new transit company. In Saginaw, the newly formed company began with rented buses first and then moved to outright purchases. In Springfield, Ohio, GM invested just $30,000 in the new company; within a year, after ensuring conversion to buses, GM sold its ownership to local interests.⁷⁶ In each case, the streetcar system was not resuscitated, modernized, updated, or rescued by local city authorities. The money was put into oil-burning buses. The rails were pulled up, streets paved over, and trolley cars disposed of. The electric streetcar lines would simply vanish. Only the buses remained. GM’s fingerprints did not.

By 1935, the American Transit Association (ATA) was clearly upset over GM’s actions. Its members were being undercut and virtually eliminated by GM United Cities Motor Transit. Certainly, Depression-era transit systems were in trouble everywhere, but the ATA wanted clean electric systems updated and saved—not obliterated. A test case came in Portland, Oregon, as GM pushed hard to add that city to its list of financed conversions. A special ATA advisory committee was created to investigate. On April 30, 1935, the advisory committee’s report was presented to the Executive Committee, which was moved for the first time in its history to propound a set of business ethics to condemn such manipulations. Later that year, at its September annual meeting, the ATA adopted Rule 11: “It is considered unethical for a manufacturer to furnish directly or indirectly, financial aid or technical advice, or otherwise assist in any franchise negotiation, public hearing or referendum election, which would have the effect of displacing an existing operator who is conducting or endeavoring to conduct his business.” The ATA then voted a formal censure of United Cities Motor Transit.⁷⁷

Stung by the ATA’s censure, GM dissolved United Cities Motor Transit.⁷⁸ Nonetheless, Sloan would not retreat from his conversion campaign. Indeed, that campaign, which was test-driven so successfully in the small cities targeted by United Cities Motor Transit, would now go into high gear. But henceforth GM would act stealthily through a front company in a broad conspiracy. Ironically, the federal government itself created the perfect conditions for Sloan and GM to shift into high gear.

As the Depression ravaged families and businesses alike, President Franklin Roosevelt sought to restructure American society and in many ways protect the country from ruthless manipulations of big business. He called it the New Deal, a system of new laws and regulatory agencies designed to save the average man and woman from ruination and to stop the powerful from using the type of corporate manipulations that had caused so many upheavals in the past. A prime target of Congress’s reforms were the corrupt community of local utilities companies, commonly owned by secretive out-of-state syndicates and holding companies that were only one face of a complex of self-dealing pyramids. This in mind, the Roosevelt administration engineered the passage of the Public Utility Holding Company Act of 1935, which sought to dismantle those pyramids and force divestiture.

Roosevelt was merciless in his condemnation of utility holding companies. The holding company, said FDR in a message to Congress, “is a corporate invention which can give a few corporate insiders unwarranted and intolerable powers over other people’s money. In its destruction of local control and its substitution of absentee management, it has built up in the public utility field what has justly been called a system of private socialism which is inimical to the welfare of a free people. . . . It is time . . . to reverse that process of the concentration of power which has made most American citizens, once traditionally independent owners of their own businesses, helplessly dependent for their daily bread upon the favor of a very few, who, by devices such as holding companies, have taken for themselves unwarranted economic power.”⁷⁹

A pivotal provision of the Public Utility Holding Company Act intended to protect the public called for the immediate divestiture by all utilities of their local transit companies.⁸⁰ The intent was to insulate electrical transit from the manipulations of the unscrupulous.

Instead, a great transit power vacuum was created. This was the time for public policy on the local, state, and federal level to implement measures to preserve, modernize, and rejuvenate the clean electric systems within their midst. That did not happen. Into the vacuum stepped GM.

The linchpin of GM’s operation was E. Roy Fitzgerald, president of National City Lines. Through National City Lines, Fitzgerald controlled a pyramid of allied, associated, and subsidiary transportation entities including the transit systems in scores of American cities, large and small. His rise was virtually meteoric, from relative obscurity to the absolute pinnacle of the nation’s mass transit—or at least, it seemed he was at the pinnacle. Who was GM’s partner in American transit? Who was this powerful chief executive of transportation?

Fitzgerald was an uneducated bus driver.

One of five brothers of rugged rural Minnesota stock, Fitzgerald dropped out of school in the seventh grade in Mankato. That was during the early years of the twentieth century when internal combustion machines were first making their entree. As a youngster who needed to work, Fitzgerald became a common laborer in a railroad camp, helped out summers on the family farm, took odd jobs, and in 1916 became the night man in a garage in the tiny, north-Minnesota community of Eveleth. Without mechanic skills, Fitzgerald worked mainly at washing cars, pumping gas, and some office work. But it paid him twenty dollars every week. That was food on the table. In 1919, after three years of helping out, the garage allowed Fitzgerald to drive its bus on a short two-mile shuttle run for miners.⁸¹

In 1920, Fitzgerald and two of his brothers bought the garage’s shuttle bus, plus another used bus from Wisconsin. The boys put up some savings, and the rest was financed through the local bank. The Fitzgerald brothers drove those two buses from morning till night, shuttling miners, schoolchildren, and anyone else they could coax into a ride. By 1922, the hardworking Fitzgerald boys had stretched their routes some sixty miles, using fifteen-passenger, custom-stretched Packards. By 1925, the Fitzgeralds’ tiny company, Range Rapid Transit, was operating twenty-five secondhand buses. All told, the shoestring operation provided little more than living expenses, or “barely enough to get along on,” as E. Roy Fitzgerald remembered. But that year, 1925, things changed. The brothers sold out to a successful nearby Minnesota bus operator, Carl Wickman, the man who later organized Greyhound bus lines. The three Fitzgeralds cleared $33,000 each from their sale to Wickman. But that was only the beginning of their association. That same year, Wickman joined Fitzgerald in establishing a new company named Royal Rapid Transit, which bought small area bus lines. By now, two other Fitzgerald brothers joined the enterprise, making a total of five Fitzgeralds available to drive buses and make their fledgling company work.⁸²

In 1927, the Fitzgeralds actually consolidated their new company, Royal Rapid Transit, with Wickman’s Greyhound. At about that time, Royal Rapid Transit stopped buying secondhand vehicles from various makers and began purchasing spanking new buses from GM’s Yellow Coach. GM manufactured almost all of Greyhound’s buses. Fitzgerald was quite fortunate. As part of the transfer of his small bus line, Fitzgerald received a significant block of Greyhound stock, which was subject to a buyback at a tidy profit a year later.⁸³

Thus, from his meager beginnings as a struggling, uneducated rural bus driver and operator, Fitzgerald was suddenly able to enjoy the benefit of stock buy-ins, buyouts, and buybacks, all courtesy of Wickman and Greyhound. By this time, 1928, E. Roy Fitzgerald was no longer driving buses. He had moved from the big bus to the big boss. He also moved to the nice house and the comfortable farm estates of McHenry County, northwest of Chicago. Fitzgerald had become a man of means. Indeed, Greyhound had more in store for Fitzgerald.⁸⁴

In 1928, Greyhound wanted more. Now Fitzgerald was to create a special financing entity called Rex Finance. “Greyhound Corporation furnished $100,000 worth of cash to help us start that company,” Fitzgerald later testified. Now Rex would finance purchases of GM and Yellow buses by small intercity lines, such as the one from Chicago to Evansville, Indiana. Rex’s highly affordable financing made it easy for these small companies to modernize their equipment.⁸⁵ As those intercity routes received new, easily financed buses, the updated service ably competed with older intercity trolley lines. Moreover, trolleys required expensive track and overhead wire. Buses rolled free of charge on government-built highways. Hence, route by route, motor transit enjoyed a significant competitive edge. As bus lines became more viable, Greyhound could acquire them or advantageously enter a market already solidified by competition that Greyhound itself had quietly helped create.⁸⁶ In this process, buses regularly won. Trolleys regularly lost.

Throughout, GM maintained a close working business relationship with Greyhound. In fact, so close was the relationship that a few years later, in 1931, during the Depression, General Motors simply “absorbed” $1 million of Greyhound debt. One million dollars during the Depression was equal to $12 million in twenty-first-century money.⁸⁷

For some five years, the Fitzgeralds, Greyhound, GM, Yellow, and Rex proliferated petroleum buses to take the place of small Midwest intercity trolleys. Then in 1933 a new opportunity presented itself. George McLean, the Chicago-based GM and Yellow Coach salesman who handled Rex, met with Fitzgerald. During that meeting, McLean suggested that Rex move into urban lines. This was a big difference. It was one thing to take over long-distance routes between cities. But this was in-city transit. Rush-hour commuting, pleasure travel, minute-to-minute schedules, neighborhood service, community regulation—the issues were numerous and complex. Fitzgerald was a long-distance bus driver and hardly a savvy executive. He understood the highway. He had no understanding of the intersections and curbsides of metro transit. City transportation had just never occurred to him. Prior to that meeting with McLean, the plainspo-ken Fitzgerald remembered, “I never gave it any consideration.”⁸⁸

But the corporations behind Fitzgerald wanted him in urban transit.

Fitzgerald’s attorney later explained the context of the times in a sworn statement: “During the period from 1920 to 1930, local transportation operations in the United States were largely streetcar operations. Motor buses were being used in some cities, and in some instances to extend the service rendered by streetcar lines. The local transportation operations of the country were owned largely by electric power companies. Beginning in about 1931, the revenues of these operations began to decline, due not only to the Depression, but also because the streetcar tracks, power transmission lines, and streetcars themselves were in general in a dilapidated condition, and in many cases the centers of population had moved away from the areas in which the streetcar tracks had been laid.”

Fitzgerald’s attorney made it clear that the solution could have gone either way: electric or gasoline. “The owners,” the attorney confirmed, “did not have the funds necessary to extend or modernize the streetcar systems or to install motor-bus equipment due to failure to set up adequate reserves. Also, the operations being largely owned by electric power companies, the owners often had no desire to make further investments in the transportation business, which was incidental to their main business of generating and selling electric power. This was particularly true as to purchase of motor buses since that would not involve use of electric power.”⁸⁹

Here was the crossroads. After a period of years, all transit equipment needs updating, renewal, and redirection. Would new Depression-era moneys and development rejuvenate the aging trolleys that had for years been allowed to deteriorate, or would vast corporate resources be deployed to impel the abandonment of electric service in favor of gas-burning vehicles?

With Greyhound-financed Rex behind them, and wielding extraordinary GM and Yellow equipment credit terms that allowed a virtual cashless takeover, the Fitzgeralds would systematically move from community to community. The plan was not to rescue those electric systems, but convert them to oil-burning buses. In 1933, GM’s McLean suggested that the local trolley line in Galesburg, Illinois, was prone and should be the first takeover. McLean made it clear that the owner, Illinois Power and Light Corporation, wanted to unload Galesburg City Lines without regard for whether it continued as an electrical system. Thus, tiny Galesburg became city one in the national urban conversion campaign that would soon spread across the American map.⁹⁰

Fitzgerald’s attorney conceded that the initial move into Galesburg and like communities made Fitzgerald’s company “the first organization to embark upon a program of acquiring local transportation operations and converting them into modern, efficiently run motor-bus operations.”⁹¹

During his later prosecution, Fitzgerald was asked in open court about the 1933 takeover of Galesburg’s system: “Did you take it over?" Fitzgerald answered, “We took it over.” He was asked, “Did you install new buses?" Fitzgerald answered, “Yes.” What type? Small seventeen-passenger Yellow buses were purchased to replace the aging trolleys.⁹²

Next, in 1934, Fitzgerald and his allies targeted Joliet City Lines just outside Chicago for a similar takeover from Illinois Power and Light. This time, the change literally occurred overnight. Again, Fitzgerald was asked in open court, “Did you take it over?" Again, Fitzgerald answered, “We took it over.” He was asked, “What did you do about the streetcars?" Fitzgerald came back in simple words: “We never done anything about the streetcars. They discontinued operating the streetcars in the city one night, and we started operating modern buses, a modern bus system—the next day.” What type? Larger twenty-one-passenger Yellow buses were purchased to replace the aging trolleys.⁹³

East St. Louis, Illinois, was the third city. Quickly, it too was converted from a mainly streetcar system to one rolling on rubber and burning oil. Of course, Fitzgerald acting by himself lacked the resources to purchase these old trolley lines, one after another, let alone purchase the new GM buses needed and then operate these transit companies. But with financial help from his outside partners and suppliers, it all became possible. Asked in open court how he was able to afford the conversions without money, Fitzgerald plainly admitted, “We ran out of capital and was low on capital and I talked to the Firestone [tires] man.” Fitzgerald explained that Firestone then extended extraordinary credit terms that permitted no payment for a year. He was then asked, “Were you buying General Motors buses on time too?" Fitzgerald responded in his unpolished grammar, “During them days all our buses were bought on time from General Motors. The Yellow Coach Acceptance Corporation—we didn’t have money to pay cash for buses. We had to pay them out of revenues.”⁹⁴

Pressed for an answer during his criminal trial, Fitzgerald was asked in open court about Greyhound specifically: “Why did you want to get help from them?" Fitzgerald answered, “Because we had to have the capital.” The next question hammered home the point, “You didn’t have the money?" Fitzgerald confirmed, “We didn’t have enough money.” The next question, specifying Greyhound, asked, “They became your partners in this East St. Louis [transit] property?" The reply: “Yes.”⁹⁵ Ironically, during this time, Greyhound’s generosity to Fitzgerald remained constant even as the bus company struggled from its own Depression woes, barely surviving except for that beneficial assist when GM absorbed $1 million of Greyhound’s debt.

After the Public Utility Holding Company Act mandating transit divestiture went into effect in 1935, a cavalcade of other small Illinois cities rapidly fell from electric operation to petroleum thanks to Fitzgerald’s accelerating conversion campaign. He was guided by detailed city surveys provided by the General Motors Survey Department outlining the profitability of any given acquisition. Fitzgerald and Rex rolled through the state of Illinois like a machine. Decatur City Lines, acquisition approved November 25, 1936, and then quickly converted. Quincy City Lines, acquisition approved October 1, 1936, and then quickly converted. Champaign-Urbana City Lines, acquisition also approved October 1, 1936, and then quickly converted. Danville City Lines, acquisition approved November 25, 1936, and then quickly converted. Bloomington-Normal City Lines, acquisition approved December 2, 1936, and then quickly converted.⁹⁶

While urban electric lines were dependent upon large outlays of capital to renovate, update, and extend their systems, Sloan and GM along with Firestone and Greyhound made it possible for Fitzgerald, a struggling, undercapitalized Minnesota bus driver and operator, to become a transportation tycoon. For Fitzgerald, being a tycoon was the good life. For the communities affected, life changed. The beloved, hop-on/hop-off trolleys simply vanished from small-town Main Streets. In their place, people were greeted by the rumble and black clouds of GM buses.

Throughout 1936, Fitzgerald’s expansion continued through the Midwest. Jackson and Kalamazoo, Michigan, were next. But Sloan and GM wanted expansion beyond the Midwest. The South was eyed. The transit system in Montgomery, Alabama, was the first in a Southern city to become a Fitzgerald property. GM prepared a transportation survey, after which Fitzgerald went forward with the acquisition.⁹⁷

At about the time of the Jackson and Kalamazoo acquisitions, it became clear that larger urban centers were next. The scope was becoming too large for Rex Finance and Fitzgerald’s other closely held entities. It was decided that Fitzgerald should organize a public company so Wall Street backing could be obtained. A new entity was conceived: National City Lines. This new firm took over most of the properties acquired by Rex. National City Lines would be financed by $2.25 million in shares to continue its conversion crusade. But public financing was an expensive, time-consuming proposition, costing $350,000 in fees to the financial houses and brokers. Additionally, when National City Lines acquired the Rex Finance transit systems, it also acquired the substantial debt that those lines owed to General Motors Acceptance Corp. (GMAC), which weighed negatively against the books of the newly invented National City Lines. Moreover, some Illinois and Michigan transit line acquisitions were not yet final because Fitzgerald simply lacked the money to complete the purchases. Indeed, the whole concept of a public company with a national acquisition campaign was completely beyond Fitzgerald’s simple experience.⁹⁸

Not to worry. Once again, one of the corporate giants behind Fitzgerald stepped in. At the end of 1936, GM gave National City Lines a temporary loan of several hundred thousand dollars. “Some of it was used for [transit lines in] these cities [in Illinois and Michigan],” testified Fitzgerald during his criminal trial, adding, “$ 150,000 [was used] to pay back General Motors Acceptance Corporation, and some more of it to pay off the $350,000 [in financing costs].”⁹⁹

Hence, GM was able to facilitate the creation of National City Lines as a public company by providing the cash so several key Midwest transit systems would be added to its assets, then negating its own $150,000 GMAC debt to reduce the National City Lines liabilities, thus improving the new company’s apparent value. What’s more, GM helped defray the cost of the Wall Street financing itself. Certainly, Fitzgerald was the president of this new company, and his name and signature graced the tops and bottoms of all the paperwork. But all this big business was beyond Fitzgerald. Behind Fitzgerald, however, and indeed hovering above him, were Sloan and GM, and others in their motor transport combine. Surely they thought no one would ever know. Surely, they thought it would all remain sub-rosa.

But years later, the truth was discovered. Thus, history records that at the turn of 1936 and in 1937, at the stealthy creation of National City Lines, the shadowy conglomerate that would soon ravage mass transit from coast to coast, the secretive efforts of GM, and other commercial giants, skidded down the well-lubricated slope of corporate misconduct. Here, at the incarnation of National City Lines, the misconduct leapt from a clandestine operation to a prosecutable conspiracy.¹⁰⁰

The government said it best years later. Referring to GM and a circle of other corporate icons in plain words, on page 7 of the indictment, in section IV, labeled “THE CONSPIRACY,” senior federal prosecutors and the grand jury jointly declared, “Beginning on or about January 1,1937, the exact date being to the Grand Jury unknown, and continuing to and including the date of the return of this Indictment, the defendants, together with other persons to the Grand Jury unknown, have knowingly and continuously engaged in a wrongful and unlawful combination and conspiracy to acquire or otherwise secure control of or acquire a substantial financial interest in a substantial part of the companies which provide local transportation service in the various cities, towns and counties of the several states of the United States, and to eliminate and exclude all competition in the sale of motorbuses, petroleum products, tires and tubes to the local transportation companies owned or controlled by or in which National City Lines. . . had a substantial financial interest. . . in violation of Section 1 of the Act of Congress of July 2, 1890 . . . commonly known as the Sherman Act.” The indictment was signed by the grand jury foreman and countersigned by six prosecutors plus U.S. Attorney James M. Carter.¹⁰¹

Fitzgerald fully understood that the new Public Utility Holding Company Act exerted pressure on electric companies to sell their aging systems, lines that Fitzgerald, backed by his corporate partners, would convert. He was asked during his conspiracy trial, “You knew at that time there was a so-called Public Utility Act that had been passed by Congress, didn’t you?" Fitzgerald replied, “That is right.” The next question: “And that affected the availability of local transit properties to be purchased by your company?" He answered, “Well, yes, because it was the law that they had to divest themselves of transportation properties in these several cities they operated in.” The next question: “That resulted in a number of local transportation companies being put on the market because they were owned by the power company; is that right?" Again Fitzgerald replied, “That is right.”¹⁰²

Fitzgerald was next asked in court, “Did you go ahead and acquire the Beaumont [Texas] property that had been owned by the power company?" He replied, “We did.” The next question: “Did you then operate the streetcars?" Fitzgerald replied, “No, sir; we motorized the system.” He was asked, “Did you also acquire Port Arthur, Texas, about that time?" Fitzgerald replied, “We did at the same time, from the same people. We put in a bus operation . . . General Motors. . . twenty-one-passenger buses.”¹⁰³

Continuing, Fitzgerald was asked in court during his trial for conspiracy, “In 1937, did you also acquire Cedar Rapids, Iowa?" He replied, “Yes, sir. It was a streetcar system, wholly in a run-down condition. There was not any service, and they were losing money there.” When asked, “Did you continue to operate the streetcars?" Fitzgerald testified, “No, sir; we motorized, got a new franchise. . . . The streetcar tracks were taken up and the streets were paved.”¹⁰⁴

In 1937, the West Coast was eyed. Another corporate creature was invented. This one was called Pacific City Lines. It began when an executive of an obscure entity called City Coach Corporation approached Fitzgerald asking if he would expand operations to California. The first three cities suggested for takeover were Stockton, San Jose, and Fresno. Fitzgerald testified, “I told him [the City Coach executive] . . . we didn’t have any capital to expand our operations out on the West Coast. He told me that it was his opinion that he could borrow money from bankers, investment bankers, and so forth, on the West Coast, and, he said, finance a company for that purpose, and asked us if we would become interested if he could raise the capital. . . . I told him that we would be glad to do so, but his job was to get the capital.” Asked who was really behind City Coach, Fitzgerald testified, “It was made up of executives of the Greyhound Corporation.”¹⁰⁵

But neither City Coach nor Greyhound could attract bank financing for the new California venture because the targeted transit systems in Stockton, San Jose, and Fresno maintained “no record of earnings,” as Fitzgerald recalled in court, “nothing to justify the investment bankers or any companies in putting up the money, because the companies showed no earnings, no earnings in the company for a period of years, to justify any financial backing.”¹⁰⁶

A million dollars was needed to finance the new California subsidiary. Fitzgerald had no money, and the investment community would not join the enterprise. Where would it come from?

Once again, the corporate giants behind Fitzgerald stepped in. At the end of 1937 and the beginning of 1938, Fitzgerald contacted GM. Expanding his list of backers to another petroleum interest, Fitzgerald also called Standard Oil of California. Standard Oil and GM jointly agreed to provide most of the money for the new venture. National City Lines put up $150,000, City Coach invested $150,000. The remaining $700,000 was provided by GM and Standard Oil, with the oil giant functioning through a surrogate company. When asked in court, Fitzgerald didn’t even recall the name of the Standard Oil subsidiary that invested several hundred thousand dollars. He told the court the investment was made by “Standard Oil Company of California or a subsidiary company, I don’t remember which, and General Motors Corporation—Yellow Truck and Coach.” As for the corporate paperwork for the new entity, that was handled by Greyhound corporate attorneys.¹⁰⁷

During his conspiracy trial, after detailing the investments and assistance of GM, Standard, and Greyhound in creating an entity to take over California transit systems, Fitzgerald was asked, “Is that the origin of the Pacific City Lines?" Fitzgerald replied, “That is the origin of the Pacific City Lines.” He added that although National City Lines and City Coach were minority investors, they each received 37.5 percent of the stock, that is, a total of 75 percent; whereas Standard and GM, which provided 70 percent of the capital, split the remaining 25 percent of the stock. Thus, the true economic powers behind the new company appeared to be just minority players. Percentages, however, were less important than control. In short order, Pacific City Lines acquired the Stockton, San Jose, and Fresno lines, which included both streetcars and aging motor-bus fleets. All three city systems were updated with Yellow coaches that utilized Standard Oil gasoline, lubrication, and other petroleum products.¹⁰⁸

Almost from the outset, Standard was worried about its link to the enterprise, which would later cause the company to be prosecuted as a coconspirator. Shortly after agreeing to fund Pacific City Lines, representatives of Standard and National City Lines met in Chicago to discuss details. At the time, Standard was still stinging from infamous disclosures that had made headlines in the 1890s, a half century earlier, about its bid-rigging with and improper relationship to Southern Pacific railroad. Standard did not want a repetition of that debacle with Pacific City Lines.¹⁰⁹

In Chicago, Standard’s representative Victor Palmer made it clear that the corporation was willing to advance Fitzgerald $300,000, but only through a discreet partnership that would hide the oil company’s true connection. Moreover, the investment would avoid acquiring common stock that would enable voting rights, since controlling voting rights would eventually be disclosed under federal law. In reviewing the stock holdings of GM and Standard, senior National City Lines vice president Foster Beam-sley later explained, “Originally, Yellow and Standard’s holdings of both classes of stock [common and preferred] were the same; however Standard later requested that due to their identity becoming known through hearings held before the California Railroad Commission at the time of the acquisition of the Southern Pacific properties, they thought it best to own no voting stock.”¹¹⁰ The solution: invest via a partnership called Bush and Company.

A National City Lines executive, Merrill Buffington, worried about the reliability of so large a cash •investment from an uncertain partnership like Bush and Company. What was Bush and Company? Would the money ever come? On February 28, 1938, Buffington wrote to GM attorney H.C. Grossman explaining, “Mr. Palmer had proposed a partnership subscribed [for stock] in the place of Standard Oil of California. . . . [But] we have no assurance that the subscription . . . is within the partnership powers [of Bush and Company] or enforceable against the partnership assets, and we have no knowledge of what these assets are.” What’s more, the Bush and Company assets that could be discerned worried Buffington. Those assets appeared to be surrogate holdings committed to others and therefore, he cautioned, “would be of little protection to us.” Both Buffington and Greyhound executives wanted “Standard Oil or some other corporation . . . to furnish us with satisfactory evidence that we have a binding commitment by someone with proper responsibility.”¹¹¹

On March 2, 1938, GM’s Grossman reassured Buffington that Standard would not renege and was not trying to avoid financial liability for its investment promise. “I believe that I understand why Standard Oil Company is desirable of subscribing to stock through an agency other than their own company. . . . Their present arrangement is not motivated by a desire to circumvent their liability.” Grossman suggested Buffington ask Standard for a written confirmation in black and white. “I see no harm in, and would consider it good business, to request reasonable assurances from Standard Oil of California.”¹¹²

Buffington took Grossman’s advice, writing a Standard Oil executive on March 5 that Bush and Company, the proposed partnership fronting for Standard, may have “ample assets. However, its articles of partnership indicate that it does not own outright property, but merely holds title to property as a’nominee or agent for others. Under these circumstances, I would suggest you send us an agreement in the form of a letter to Pacific City Lines . . . backed up by proper financial responsibility.”¹¹³

Several days later, Standard Oil’s Palmer complied, furnishing the requested letter confirming that “Bush and Company is the undersigned’s nominee to subscribe to stock of Pacific City Lines, Inc., and that the undersigned guarantees the payment.” Palmer signed in his corporate capacity for Standard Oil. In so doing, the invention of Pacific City Lines to convert California metro transit systems was finalized.¹¹⁴

The conspiracy against mass transit was first and foremost a conspiracy to convert cities from electric to petroleum systems. Secondarily, the campaign was designed to reward the conspiring companies with a monopolistic edge over their competitors in the gasoline, tire, and bus business. True, most of the cities being affected were relatively small, such as Beaumont, Decatur, and Fresno. The smaller the city, the more vulnerable its transit line was to takeover and the easier the conversion. But as National City Lines and Pacific City Lines absorbed and converted one city transit line after another, the bounty became greater in scope. As the campaign succeeded, the monopolistic conspiracy widened. How? A small combine of automotive suppliers would fund National City Lines transit takeovers by buying preferred stock. The supplier then received exclusive anticompetitive purchase contracts from the newly acquired systems.

On May 13, 1939, Fitzgerald sent a letter to a small group of prospective supplier investors outlining the bargain. “We contemplate using the proceeds from the stock sold pursuant to these stock contracts for the expansion of our operations,” wrote Fitzgerald, “through the establishment or acquisition of additional bus lines in various municipalities. We have several such projects under investigation or active negotiation at the present time. In order to be sure that we will not be delayed in establishing any such project by a lack of free capital, we have entered into a contract with Continental Illinois National Bank and Trust Company of Chicago, whereby we are given a credit of $75O,OOO.”¹¹⁵ But the bank credit line was hardly enough. National City Lines needed more.

Firestone was the first to join GM and Standard in financially backing National City Lines. On May 15, 1939, Firestone executed the first of several contracts funding National City Lines acquisition and conversion activities conditional on a series of anticompetitive contracts to exclusively provide tires for the newly converted transit lines. Firestone’s initial contracts called for the tire maker to provide $250,000 toward the acquisition by Pacific City Lines of the three targeted California transit lines—Fresno, Stockton, and San Jose—plus a fourth system in Canton, Ohio. The tire company purchased five thousand shares of National City Lines $50 convertible cumulative preference stocks—that is, preferred stock with the right to convert to common shares. In return, Firestone’s contract stipulated, the acquired transit lines would purchase tires only from Firestone—and from no other tire maker.¹¹⁶

“National will cause said four units [transit lines about to be taken over in Fresno, Stockton, San Jose, and Canton] to execute contracts with Firestone,” Firestone’s contract mandated, continuing that “all corporations and other entities which it [National City Lines] now controls or may control in the future, either directly or indirectly, shall equip and shall continue to equip all their transportation units with Firestone products to the exclusion of any products competitive thereto, except as this covenant may conflict with operating contracts now in effect.” Any existing contracts for tires “in effect” were allowed to lapse without renewal or terminated outright and replaced with Firestone contracts. The words “to the exclusion of any products competitive thereto” caught the eye of prosecutors, who deemed the agreement anticompetitive and monopolistic.¹¹⁷

Quickly, competition in the purchase of tires vanished from systems controlled by National City Lines because other tire companies were simply blocked, creating local transit monopolies for Firestone. For example, for years U.S. Rubber Company had supplied bus tires on a price-competitive basis to many transit systems. But once National City Lines took over a system, U.S. Rubber was effectively precluded from the business. A Federal Bureau of Investigation agent interviewed a U.S. Rubber executive about the subject. The agent recorded the executive’s complaint that Fred Nolan, president of the Baltimore Transit Co., stated, “There was nothing to prevent him [a U.S. Rubber executive] from bidding, but that it would be a waste of time.” The U.S. Rubber executive protested that whenever National City Lines acquired a transit system, the U.S. Rubber “contract is terminated,” adding that U.S. Rubber “has never received a request to submit a bid on a tire mileage contract with a National City Lines operation.”¹¹⁸

Phillips Petroleum was next to join the conspiracy. Standard Oil of California monopolized National City Lines petroleum purchases in the West. But transit systems east of Standard’s territory were available for Phillips. As in the case of Standard, there was concern about obscuring the supplier’s involvement with National City Lines.

On April 18, 1939, National City Lines’ outside attorney Guido Pan-taleoni wrote to Phillips trying to dissuade Phillips from registering its stock to comply with federal law. Registration would reveal Phillips’s ownership. “The trouble is,” wrote Pantaleoni, “that I feel very strongly not only that registration would be of no assistance on this point, but also that registration might be positively damaging through being used hereafter as evidence against you on the question as to whether you had an intention to resell at the time of your purchase and, hence, should have been named as an underwriter.”¹¹⁹

Pantaleoni’s next sentences virtually outlined the quid pro quo at the heart of the later prosecution. “First: You are buying the stock only as part of a larger deal which gives you the oil contract. Second: Neither you or any of the other purchasers [e.g., Firestone, GM, and Standard] are in the business of distributing securities. Third: You are buying the stock at $50 a share, when the market, which is very thin, is about $38 a share. Fourth: Certain privileges of yours under the oil contract are affected by your holding or failure to hold your stock.”¹²⁰

Making clear that revealing ownership through registration could endanger the entire circle of supplier investors, Pantaleoni cautioned, “Until we get this question settled, it is impossible to push the rest of the deal through. Because everyone involved is interested in this aspect of the problem, I am taking the liberty of sending a copy of this letter to Roy Fitzgerald, to the bankers who are represented on the Board, and to Firestone.”¹²¹

Ultimately, Phillips went along with the group, executing its contract on July 14, 1939. Once Phillips joined the combine, it became common knowledge within the oil and lubricating industry that National City Lines would shift all its eastern purchases to Phillips. This eliminated price-lowering competitive opportunities for such oil companies as Sinclair and Mid-Continent Oil.¹²²

When Phillips wrote its investment and product exclusivity contracts with National City Lines, the oil company added a dynamic new dimension in Clause 6. Clause 6 required that the acquired transit systems never again use a nonpetroleum-based form of propulsion without Phillips’s permission. In other words, the transit systems would not be permitted to reinstitute electric service even if called for. Fitzgerald barely understood the legalisms inherent in this contractual clause. When asked during the conspiracy trial, Fitzgerald specified his confusion over “certain other things in the contract that I am not too familiar with, that were objectionable.” The next question: “Now, you are referring particularly in your last testimony, are you, Mr. Fitzgerald, to Clause 6 of Government’s Exhibit 84, which reads, ‘National agrees that neither it nor any of its subsidiaries or lessees or persons operating the equipment. . . shall in Phillips’s territory change any present type of equipment or purchase any new type of equipment to use any fuel or method of propulsion other than gasoline without the consent of Phillips,’ “ Fitzgerald replied, “That is the clause I am referring to.”¹²³

Referring to all the supplier investment contracts, Fitzgerald was asked point-blank in open court, “These contracts, the language of these contracts wasn’t your personal language was it?" Fitzgerald answered, “No.” The next question pinned down Fitzgerald’s level of understanding: “They were drawn up by the attorneys?" In his simplistic way, belying his status as the chief executive of a national conglomerate, Fitzgerald responded, “Attorney language, I call it.”¹²⁴

On August 1 and 2, 1939, the last two supplier contracts were finalized. As the supplier attorneys conceded to prosecutors, “In a large measure they [the contracts] formalized the relationships existing before the contracts.” GM had been Fitzgerald’s bus supplier for years based on verbal understandings, handshakes, and quiet quid pro quos. But now as the program broadened to include dozens of cities and operating companies under the National City Lines umbrella, GM set forth in writing exactly what it expected for its money. In exchange for a fresh investment of $500,000, GM demanded “not less than 85 percent of the dollar volume” of all bus purchases for all transit systems already wholly or partially controlled by National City Lines or Pacific City Lines. Clause 5 of GM’s contract listed the transit systems National City Lines had taken over thus far: “Aurora City Lines, Aurora Elgin Bus Line, Beaumont City Lines, Beaumont-Port Arthur Bus Line, Bloomington-Normal City Lines, Canton City Lines, Cedar Rapids City Lines, Champaign-Urbana City Lines, Danville City Lines, Decatur City Lines, East St. Louis City Lines, Elgin City Lines, Joliet City Lines, Kalamazoo City Lines, Montgomery City Lines, Pontiac City Lines, Port Arthur City Lines, Portsmouth City Lines, Quincy City Lines, Rex Equipment Sales, Saginaw City Lines, Southern Limited, Terre Haute City Lines, Tulsa City Lines.”¹²⁵

Being careful not to phrase its contract with the same exclusionary language of Firestone, Standard Oil, and Phillips, GM only asked for 85 percent of the volume, not 100 percent as the others had. Moreover, moving forward, GM was willing to split sales to future transit system acquisitions with Mack Truck fifty-fifty. GM’s Clause 6 specified that future subsidiaries purchase “not less than 42.5 percent of the dollar volume,” or exactly half of 85 percent.¹²⁶

One day earlier, August 2, 1939, Mack Truck concluded its own agreement with National City Lines. Like GM, Mack invested $500,000 in exchange for purchases by the future acquisitions, that is, “subsidiary corporations hereafter formed or acquired by it.” Those new systems purchases would equal, per contract, “approximately 42.5 percent in dollar volume of all the new buses and equipment requirements for said subsidiary corporations of National.” Hence, Mack’s contract mirrored GM’s as the two manufacturers split future bus business fifty-fifty.¹²⁷

In practice, the bus exclusives often meant that along with dozens of GM and Mack vehicles in any system, there were commonly one or two lone Ford buses in operation to forfend the appearance of monopoly. Rather than mask the monopoly, the calculated tokenism only attracted the attention of prosecutors, who saw it as evidence of the combine’s true intent. More often, when National took over a transit line it simply canceled all other bus sales.¹²⁸

Typical was the case in Spokane. On July 9, 1945, bus manufacturer Twin Coach Company was sent a letter by the assistant purchasing agent of Spokane United Railways: “Under date of September 5, 1944, Spokane United Railways placed with you a conditional order for 10–32 passenger Train Coach Buses. . . . On July 7, 1945 the fiscal property and equipment of the Spokane United Railway will be transferred to Spokane Pacific City Lines, subsidiary of Pacific City Lines. . . . Now that the deal has been consummated . . . it is necessary that this order for equipment be cancelled. Will you therefore consider this letter as cancellation of the conditional order, and please acknowledge receipt so that our files will be complete.”¹²⁹

Mack always understood that it was acting in concert with partners as a member of a combine. For weeks prior to signing its contract with National, Mack officials had been circulating memos specifying exactly how much the other supplier partners—GM, Firestone, Standard, and Phillips—would invest. Later, an FBI agent would interview a senior Mack official about the company’s August 2, 1939, agreement with National. The FBI agent reported, “He [the Mack official] stated there was no agreement whereby National City Lines Inc. committed itself to buy buses in return for stock purchases by Mack Trucks.” Ironically, by this time, the FBI had obtained a copy of the agreement in question.¹³⁰

From the beginning, Mack knew that even though it would be a junior partner to GM in the National City Lines enterprise, the rewards would still be substantial. While trolleys lasted two to three decades, buses needed to be replaced every six to eight years. This would be expensive for the transit lines, but profitable for Mack. A June 29, 1939, internal Mack memo to its president, E. C. Fink, made this clear: “It is estimated that National City Lines present fleet of approximately 860 buses will require replacements of at least 130 buses annually. Based on past experience in the employment of this amount of capital, it is estimated $2 million of additional gross revenue can be secured.” As for trolley conversion, the Mack memo added, “If such properties require complete conversion from rails to rubber, approximately 200 additional new buses will be needed.”¹³¹

The five major suppliers came together to act through National City Lines. In large measure, the companies did not interact separately but in close coordination, since their interests were necessarily interwoven. For example, on July 26, 1939, just before GM and Mack sealed their early-August 1939 investment and purchase contracts with National City Lines, Phillips attorney R. M. Riggins dashed off a short note to Firestone assistant treasurer R. S. Leonard, stating, “Roy Fitzgerald advised me that General Motors and Mack Truck are going in for $500,000 each on the same basis as the rest of us, in connection with purchase of equipment.”¹³²

Just days earlier, Fitzgerald assured Phillips officials in a letter, “In connection with the contracts hereto and executed by us today, we want to advise you that it will be our policy to discuss in advance with the proper officers of your company any proposed borrowing or investments by National City Lines.”¹³³

In practice, National City Lines and Pacific City Lines officials asked for their suppliers’ permission before making any transit system acquisitions, knowing full well that those manufacturers controlled the purse strings. For example, in June of 1943, as he was finalizing the purchase of three properties, Pacific City Lines president J. L. Haugh wrote a letter to senior officials of Standard, GM, and Firestone: “I am continuing negotiations for the acquisition of the bus operating properties at Sacramento and Salt Lake City, and the capital stock of the California Street Cable Railroad Company. This is in accordance with our talks at your respective offices at Akron, Pontiac and San Francisco. The estimated cost of these three properties, including costs of acquisition, legal expense, and initial working funds, is as follows: Sacramento, $420,000, Salt Lake City $705,000 and California Street Cable R.R. Company $325,000. Total $1,450,000.” Of this amount, Haugh stated that Pacific City Lines would contribute only $350,000 and would require “net amount of additional capital to be supplied by preferred stockholders: $1.1 million.”¹³⁴

Haugh continued to keep senior corporate officials of the combine apprised on the pending acquisitions until on June 29, 1943, he felt he could wait no longer on the Sacramento effort. “Important to close this quickly,” cabled Haugh, “as their labor agreement expires tomorrow and negotiations have been held in abeyance pending our purchase.” On July 1, 1943, the permission slips began arriving. For Firestone, Russell A. Firestone sent a telegram: “Agreeable conclude Sacramento transaction as stated in your telegram today.” At the same time, GM’s attorney Grossman wired Haugh: “Received your wire after conversation. You may conclude transaction on basis represented, H.C. Grossman, General Motors Truck.”¹³⁵

Once a city system was secured, National hardly purchased its supplies at the lowest price. For example, GM’s contract included a completely contradictory and convoluted provision stating that prices would be “the lowest available"—except they would not. Clause 8 stipulated in exquisite doublespeak: “The prices at which buyer agrees to purchase . . . shall in no instance be greater than the lowest price at which such motor-bus equipment is at the time being offered by manufacturer to the largest users of motorbus equipment, except, however, sales by manufacturer to the Greyhound Corporation, the Omnibus Corporation, Public Service Corporation of New Jersey, and companies subsidiary to and affiliated with them, United States Government, and all municipal bodies. It being understood and agreed that Buyer is not entitled to the same prices which these last mentioned customers receive.”¹³⁶ Hence, National City Lines transit systems, despite the collective purchasing clout, did not qualify for the best discounts. The extra cost was passed on to the citizens.

National City Lines began its existence by acquiring some of the smallest city systems in the Midwest and South. When operations were expanded to small urban centers along the West Coast, the company and its partners formed and funded Pacific City Lines. When bigger cities were targeted in 1943, a third holding company was formed, named American City Lines. The same corporate combine of five automotive suppliers created this third major entity, except that Standard Oil’s participation was now funneled through a subsidiary innocuously called Federal Engineering. American City Lines, directly or indirectly, acquired a controlling interest of such major urban transit systems as the ones in Los Angeles, St. Louis, and Baltimore.¹³⁷

Prosecutors calculated that between National City Lines, Pacific City Lines, and American City Lines and their dozens of subsidiaries spread across at least forty-two cities in sixteen states, GM ultimately invested more than $3.1 million, Standard invested more than $2 million, and Phillips invested more than $1.5 million, while Firestone and Mack each invested more than $1.3 million.¹³⁸

Prosecutors also calculated that over a decade, from 1936 to 1946, GM enjoyed $25 million in bus sales to National City Lines, Pacific City Lines, and American City Lines systems, while Mack sold the companies approximately $3.5 million. During that same decade, Phillips annually sold the companies as much as $900,000 in petroleum products in its territory, while Standard sold as much as $700,000 annually in its western territory. Firestone annually sold all the operating companies in excess of $450,000 in tires.¹³⁹

When National City Lines or its subsidiaries gained control over urban systems, they always moved expeditiously to convert from electrified buses and trolleys to motorized transport. GM’s Survey Department would first scout the city, then turn the survey over to National City Lines. Survey in hand, the transit conglomerate would proceed with the local powers that be. Dozens of city systems were converted in this fashion. Tampa, which converted in 1946, followed the pattern. In that vein, on March 13, 1946, a National City Lines internal memorandum from C.J. Helbing to Cone T. Bass opened, “Complying with your telephone request of yesterday, March 12th, 1946,1 am enclosing a GM Survey of Tampa, Florida, which was made during June of 1941, together with a map of Tampa’s street car system, showing the street car routes, together with a summary of their schedules on the various routes they operate.”¹⁴⁰

The internal memo outlined plans for converting the various electric lines and replacing them with buses. “By a rough estimate,” wrote Helbing, “I anticipate we would require approximately 75 additional buses of the 36 to 40 seating capacity type, in order to provide adequate service. Allowing approximately 10% for spares, would permit us to schedule approximately 115 coaches.”¹⁴¹

In many cases, state commissions or local city councils had already voted to mandate the dismantling of the streetcars because city planners had often consciously failed to incorporate electric buses, trolleys, and light rail into their metropolitan growth. This policy amounted to a mixture of planned obsolescence and strategic neglect. In some cases, city officials were indifferent. In some cases, they were induced to vote for trolley abandonment. In St. Petersburg, Florida, for example, rumors were rife that councilmen, municipal engineers, and others had been bought off with Cadillacs to facilitate the conversion by National City Lines and GM.

On September 4, 1947, the U.S. attorney general received a letter from a Florida resident, a so-called insider, complaining, “At the present moment, this group [National City Lines and American City Lines] is making every effort to prevail upon the City Councilmen of St. Petersburg, Florida to scrap the electric railway system and the electric power plant, both owned and operated by the municipality. . . . A representative from General Motors has been ‘practically sleeping with the City Councilmen’ for the past six months or more, and has succeeded in biasing them against the electric railway.”¹⁴²

The insider charged that the technical assessments against the trolley were equally tainted: “The City Utilities Engineer, who might normally be expected to do what he could to defend the efficient electric railway and the power plant, has evidently been similarly influenced, as he publicly criticizes the electric railway and the power plant, and invents all manner of foundationless reasons why they should be eliminated.” The insider appealed to the FBI, “St. Petersburg needs your help quickly.”¹⁴³

How did the insider believe officials were being tainted? With free Cadillacs. “The retiring City Councilmen,” wrote the insider, “who vacated their offices July 1 [1947] mysteriously and simultaneously acquired a fleet of new Cadillac cars, having previously placed an order for a fleet of buses for the city. The retiring mayor also acquired one, at the same time. Can you believe that this is just a coincidence?”¹⁴⁴

FBI director }. Edgar Hoover received a copy of the letter, and a full investigation was ordered.

An FBI agent interviewed the insider and recorded, “He [the insider] stated that the councilmen were being retired July 1, 1947 and being replaced by a new council, and that they rushed to pass the bill to scrap the electric transportation system and buy buses before they retired. . . . He said that the unfair practice consisted of pressure and gifts, and that the councilmen all acquired a new Cadillac just about the time they retired which to him looked suspicious.” The complaining insider added that the city utilities engineer who was charged with stilting his reports “also received a new Cadillac.”¹⁴⁵

Checking with a City Hall source, the FBI agent on the case reported that the second individual also “stated that he is personally cognizant of the rumors which are rampant in the city concerning the alleged gifts of Cadillac cars to the members of the outgoing City Council, in return for assistance in doing away with the electrical streetcars presently operating in most sections of the city . . . in spite of the fact that the streetcars afford adequate and full transportation facilities for the city and are making money for it.”¹⁴⁶

The City Hall source added that “equipment including the overhead wires are to be dismantled as quickly as possible under this resolution. He indicated that buses have been used in other sections of the city [merely] to augment the streetcars and that during the first year the buses were in operation it cost the city approximately $28,OOO, while during that same time the streetcars yielded a net profit of over $300,000 and that during the past year, the buses have shown a net profit of $134,000, while the streetcar system furnished a net profit of $146,000. He indicated that [the] City Manager . . . is part of the plot to get rid of the streetcars in favor of buses.” Repeating the familiar refrain that lines had consciously been allowed to deteriorate, the City Hall source told the FBI, “The City Manager. . . had deliberately permitted the equipment to become obsolete, so that the public would complain about the service, the poor condition of the equipment and thus bring about a demand for improved transportation. He stated that no attempts have been made to replace the obsolete equipment or to keep the present in a usable condition.”¹⁴⁷

The FBI agent concluded his report, ‘The transition of the city transportation system to motorbuses is one of the weightiest political issues presently evident in this city.”¹⁴⁸

Indeed, the political sensitivities of converting the electric system of Tampa had been brewing for some time and were made known to the National City Lines backers. For example, on December 1, 1944, National City Lines vice president Beamsley wrote to an official at Standard Oil to report that following conversion of Baltimore’s system, American City Lines had dramatically been increasing its gasoline consumption in that city to ten million gallons. At the same time, Beamsley continued, he thought it best to not disturb existing oil and lubrication contracts in Tampa for the present. Tampa “within a reasonable length of time could be delivered,” Beamsley wrote, “but for a while at least the political situation is such that present contracts should not be disturbed.” That said, he reminded the official that the combine was using a front called Andover Finance Company: “Andover, as you will recollect, is owned one half by National City Lines and one half by American City Lines, we having used it to make investments in situations beyond the legal limit.”¹⁴⁹

In every city, large and small, people wept for their lost way of life. Certainly, automobile drivers often cheered the demise of the streetcars and electric buses that competed with them for road space. But for the millions who cherished local transit, losing their streetcars and electric buses made them feel vanquished.

The first total conversion to buses after the end of World War II was in Lincoln, Nebraska, where the final run was so nostalgic, even the fall 1945 National City Lines employee newsletter took notice: “All the way out to the end of the line, and all the way back, guest patrons pulled the stop cord. . . . The old whistles blew and blew. People gathered at curbs and on lawns and porches to wave a last farewell. Guests of the front car called out places of interest along the route even though their companions all had lived in Lincoln for many years and knew all the spots. There was an intimate sort of relationship between the folks in the cars and people along the way. . . . Kids on bedecked bicycles rode behind the sound truck. Lincoln’s dogs, sensing the unusual, barked at the cars for the last time and many chased the procession for blocks.”¹⁵⁰ Progress had come to Lincoln.

Letters to the editor of the local newspapers in city after city commonly excoriated the conversions. In Tampa, weeks after the conversion, a December 8, 1946, letter protested, “The most cruel thing ever done in Tampa was to take away the streetcars and give us these jolting buses that never take you where you want to go. I have walked the soles off two pairs of shoes since riding on them. It is too bad that the citizens have no say in what they get. The only ones who are praising this new system are those who drive cars. They are glad to have the streetcars out of their way. Signed, Ruby Seely.” Another letter to the Tampa newspaper, September 19, 1947, possibly alluding to the rumors of Cadillac bribes, declared, “I respectfully suggest that our City Fathers put their fine cars in their garages and ride these buses for one week, especially during the rush hours, and maybe we poor devils would get some relief from this diabolical mess of transportation. Signed, One of the Fed Ups.”¹⁵¹

In Baltimore, the city had invested several million dollars since 1940 ordering more than one hundred state-of-the-art, streamlined trolleys. The publicly owned transit line boasted that the new cars would give Baltimore “one of the largest fleets of modern rail urban transit cars in the United States.” Moreover, a fifty-year ironclad contract for electricity, signed in 1922, locked in the power cost for three more decades. Paid ridership rose from 121.4 million in 1935 to 142.8 million in 1941 and reached a wartime high of 271.8 million, when gasoline was rationed. Operating income rose regularly during these years with an increase of 33 percent, from $1.5 million to $2 million during the twelve-month period from 1941 to 1942.¹⁵²

But trolley infrastructure expansion was neglected during the protracted throes of Baltimore’s city sprawl. What’s more, new postwar oneway traffic patterns were inaugurated to relieve congestion. These two factors combined to frustrate the future value of electric mobility in spite of its successes. Consequently, as soon as American City Lines finished its takeover of Baltimore’s transit system in 1946, conversion, not modernization, was implemented. The annual obligatory expense of the electricity contract for thirty more years was simply absorbed. Those new streetcars were sold off or contracts canceled. The tracks and wires were systematically ripped away. Citizen lawsuits seeking to stop the first seventy-seven miles of rail abandonment were unsuccessful. As routes were terminated, “mourners” would board in a “death watch,” seeing their beloved vehicles ride into oblivion. Route 1 was first, on June 21, 1947, followed by Routes 17 and 29. More than fifteen years later, when the last Baltimore trolley, Number 8, made its last run, “mourners” hooted and booed when the replacement bus pulled down the street.¹⁵³

National City Lines always kept tabs on citizen anguish over losing trolleys. A file folder in many offices marked ABANDONMENT OF THE TROLLEY was kept brimming with the latest newspaper clippings bemoaning the conversion. The threnodies and complaints in these folders chronicle the painful changes each city endured.¹⁵⁴

Ironically, in 1942, a key time of expansion for National City Lines, the United States was at war with Nazi Germany. Pursuant to a presidential executive order issued just days after Pearl Harbor, the Office of Defense Transportation’s Division of Local Transportation in April 1942 promulgated instructions to all private and public transit systems mandating their return to trolley. Motorized city transit was to be curtailed wherever possible.¹⁵⁵

“Our present policy in the following matters is determined almost entirely by the stoppage of rubber imports and the desperate need for conserving all the rubber now in our possession,” the Division of Local Transportation declared. “Waste of rubber tires under present conditions is little short of disloyalty to the national interest. . . . Transit companies and regulatory authorities should take immediate steps to obtain the fullest possible use of all operable rail lines and equipment. This will require discontinuance of bus and trolley coach services which are being provided over routes where street railway lines are or can be made operable, as well as on street railway routes now being served part of the time by buses or trolley coaches.”¹⁵⁶

But the five-page order received by National City Lines went counter to the plans of Sloan and GM. In many ways, Sloan did not believe the war rules applied to his company. Sloan had been tangling with the Roosevelt administration for years. In 1934, when Sloan telephoned Secretary of Labor Frances Perkins to renege on a promise made to meet with labor strikers, Perkins lashed out bitterly at the GM chief. Shocked at the reversal, Perkins shouted into the phone, “You are a scoundrel and a skunk, Mr. Sloan. You don’t deserve to be counted among decent men. . . . You’ll go to hell when you die. . . . Are you a grown man, Mr. Sloan? Or are you a neurotic adolescent? Which are you? If you’re a grown man, stand up, and be a man for once.”¹⁵⁷

A flabbergasted Sloan protested, “You can’t talk like that to me! You can’t talk like that to me! I’m worth seventy million dollars and I made it all myself! You can’t talk like that to me! I’m Alfred Sloan.”¹⁵⁸

Yet at that very time, Sloan and GM were being profoundly deferential to Adolf Hitler. GM became a key Nazi collaborator in the growing Hitler war machine that was publicly rearming despite international sanction. The corporation’s wholly owned Opel division prospered as the number two auto manufacturer in the Third Reich. Overseeing GM’s German operation was James D. Mooney, president of the General Motors Overseas Corporation. Mooney had learned early on to pump his arm diagonally, palm outstretched, in the Hitler salute. On one occasion, in 1934, Mooney practiced his “Heil, Hitler” salute in a mirror to get it just right before an important meeting with der Führer in Hitler’s chancellery office. Ironically, that day Hitler did not return Mooney’s salute, but merely shook the GM official’s hand. Mooney, like others, found Hitler to be fascinated by all things automotive.¹⁵⁹ GM and the Hitler regime found great common ground.

Quickly, Sloan, Mooney, and GM realized that the Reich military machine was its best customer in Germany. In large measure, the Nazi army moved in GM trucks and automobiles, especially the three-ton Opel Blitz trucks. Sales to the army yielded a greater per truck profit than civilian sales—a hefty 40 percent more. So GM preferred supplying the military, which from the outset loudly declared it was preparing for war against Europe. Almost 17 percent of Blitz truck production was sold directly to the Nazi military in 1937, despite Hitler’s open threats to overrun Europe. That sales figure was increased to 29 percent in 1938—totaling some six thousand Blitz trucks that year alone. The Wehrmacht, the German military, soon became Opel’s number one customer by far. Other important customers included major industries associated with the Hitler war machine. The expansion of its German workforce from seventeen thousand in 1934 to twenty-seven thousand in 1938 also made GM one of Germany’s leading employers. Unquestionably, GM’s Opel became an integral facet of Hitler’s Reich.¹⁶⁰

In 1938, Mooney on behalf of GM received one of Hitler’s highest medals, the Merit Cross of the German Eagle with Star. A year earlier, the Merit Cross of the German Eagle with Star was created for Thomas Watson, president of IBM. The award had been bestowed upon Watson in 1937 in an opulent Berlin ceremony in recognition of the information technology IBM had invented to organize the Reich’s programs of racial supremacy, economic recovery, and war preparedness. The citation accompanying the medal was to “honor foreign nationals who made themselves deserving of the German Reich.” The Merit Cross of the German Eagle with Star ranked second in prestige only to Hitler’s German Grand Cross, reserved for German nationals.¹⁶¹

In the months leading up to the feared invasion of Poland, Sloan defended his close collaboration with the Nazi Reich. In a long April 1939 letter to an objecting stockholder, Sloan wrote, “General Motors Corporation is an international organization. It operates in practically every country in the world where motor cars are used. . . . Its export activities have been quite an outstanding achievement of its development and represent an evolution of something like twenty years of aggressive, and I believe in the main, intelligent effort. . . . The profits which the stockholders have received as a result of its overseas activities have been outstanding.”¹⁶²

Brushing off attacks for his partnership with a Nazi regime notorious for filling concentration camps and dismantling Jewish communities, its takeover of Austria and now its threats to install the Master Race across Europe, Sloan was stony and proud. He stated that GM needed to be sensitive to the Reich’s social and societal desires as well. “Now I believe,” he continued in his April 1939 letter to the stockholder, “that if an international business, such as General Motors, engages in the commercial activity of any country with the idea of making a profit. . . that it has an obligation to that country, both in an economic sense as well perhaps as in a social sense. It should attempt to attune itself to the general business of the community; make itself a part of the same; conduct its operations in relation to the customs. . . . I believe further, that that should be its position, even if, as is likely to happen and particularly as was the case during the past few years, the management of the Corporation might not wholly agree with many things that are done in certain of these countries. In other words, to put the proposition rather bluntly, such matters should not be considered the business of the management of General Motors.”¹⁶³

Once war broke out on September 1, 1939, the Blitz truck became an indispensable factor in the blitzkrieg launched against Poland, which ignited World War II. German troops mercilessly overran Poland in GM trucks. At the same time, GM and Standard Oil of New Jersey jointly worked with I. G. Farben to produce tetraethyl lead, eliminating ping and knock from German internal combustion machines, especially those operating on synthetic coal-derived fuels. The fuel additive became indispensable both for Blitz trucks and the JU-88 bombers that were manufactured in GM German plants once the war began. Those JU-88 bombers rained terror and devastation from above upon civilian populations.¹⁶⁴

In 1940, as France and Western Europe were under invasion and brutal occupation, Mooney resisted all pressure to return the commendation, declaring he would “do nothing to make Hitler mad.”¹⁶⁵

In May 1941, a year and a half after World War II broke out, with millions displaced, murdered, ghettoized, or enslaved by Nazi aggression and genocide and at the height of the rape of Poland, with most of Europe occupied, as London was being blitzed, as Jews throughout Europe were being rounded up and shipped into hellish ghettos and concentration camps—all of which blared across the front pages of America’s newspapers and the newsreels of movie theater screens—Sloan told his closest executives during a Detroit briefing, “I am sure we all realize that this struggle that is going on through the world is really nothing more or less than a conflict between two opposing technocracies manifesting itself to the capitalization of economic resources and products and all that sort of thing.”¹⁶⁶

Sloan continued in a rambling, incoherent fashion, “The materials that we use are the materials that are needed the most and the things that count the most, and the technical skills that we have, likewise, is needed the most in the things that count the most, and likewise the fact that most of the things that are needed in such prodigious quantities that it needs a type of organization that is used to doing things in a very big way in order to meet the demands that are upon us.”¹⁶⁷ Few, if anyone, understood what he might have meant.

GM collaboration with Hitler would come back to haunt the Detroit automaker. Later, that collaboration became a pivotal factor in the examination of its record in American mass transit. A generation later, in 1974, when Bradford Snell and the special House subcommittee released its stinging report on GM and National City Lines, the first several pages of the key accusatory section dwelled exhaustively on GM’s far-reaching collaboration with the Reich. Indeed, the only photographs in the Snell Report were those illustrating GM’s activities on behalf of Germany. The implication was that in the thirties and forties, at a time when GM was undermining American transport and urban mass transit, the bus and auto giant was doing all in its power to enhance Reich transport. Moreover, the years-long collaboration was cited by Senator Philip A. Hart (D-Michigan) as he introduced legislation, the Industrial Reorganization Act, designed to break up GM and other great Detroit automakers.¹⁶⁸

GM was so riled by the charges of collaboration that the first six pages of rebuttal in its eighty-six-page reply to the House and Snell were devoted to denying that GM “actively assisted in the Nazi war effort.” The automaker attached numerous newspaper clips showing how documentation assembled by the House and Snell had resonated with the media and the public. GM’s rebuttal termed the House documentation of its Nazi collaboration to be nothing less than “slander,” “totally misleading,” and “totally irresponsible.”¹⁶⁹ GM claimed it never happened.

During the war years and during the immediate postwar months, local complaints of bribery, collusion, anticompetitive actions, and restraint of trade streamed into the Department of Justice from across the country. Finally, the federal government took notice.

October 2, 1946, Department of Justice to J. Edgar Hoover, director of the Federal Bureau of Investigation:

“The Antitrust Division has received numerous complaints concerning the activities of National City Lines, Inc., and various associated companies in connection with the acquisition and operation of local transit systems acquired by those companies in various cities throughout the country. Through a series of contracts, manufacturers of buses, tires and petroleum products have become important stockholders in the National City Lines. Investigation of the complaints disclosed the probable existence of a systematic campaign by National City Lines, acting with its manufacturing stockholders, to secure control over local transportation systems in various cities. As soon as control is secured, the local transportation company is directed to buy buses, petroleum products and tires from the manufacturing stockholders of National City Lines in accordance with the contracts between the manufacturers and National City Lines. The purpose of the plan is to set up an integrated scheme of control whereby manufacturing stockholders furnish supplies of buses, tires and petroleum products to local transportation companies on terms agreed upon by the National City Lines and manufacturers. . . . It appears that National City Lines and its manufacturing associates have entered into a plan to secure control over local transportation systems in important cities of the United States. . . . One result of the plan for integrated control over local transportation has been the elimination of electric railway cars in city transportation controlled by these companies.”¹⁷⁰

Prosecution is a dance with only one willing partner. During late 1946 and early 1947 the dance began. Agents in blue suits fanned out across America interviewing executives, transit experts, community leaders, and local officials. Subpoenas for masses of documents were served. Documents, once seized, were delivered to the FBI labs for handwriting analysis. Memos with investigative notes were exchanged among many FBI field offices. Excuses and explanations were proffered by many executives. Phone calls were placed to many defense counsels. Reviews were undertaken by many Justice Department supervisors. Joint action was undertaken by a team of hard-nosed assistant attorneys general, with outside lawyers brought in for the unprecedented corporate strike. Tall stacks of evidence were hauled from one Justice Department conference room to another. Presentations were made to the federal grand jury.¹⁷¹

April 9, 1947, the waiting was over. True bills of indictment were handed down. Two counts of criminal conspiracy were unsealed.¹⁷²

The United States of America v. National City Lines, Inc., American City Lines, Inc., Pacific City Lines, Inc., Firestone Tire Ġ` Rubber Company, General Motors Corporation, Phillips Petroleum Company, Mack Manufacturing Corporation, Standard Oil Company of California and its subsidiary Federal Engineering Corporation, plus National City Lines executives E. Roy Fitzgerald, and Foster G. Beamsleγ, as well as General Motors executive H. C. Grossman, Standard Oil executive Henry C. ]udd, Firestone executives L. R. Jackson, and Phillips executives B. F. Stradleγ, and A. M. Hughes, all defendants.¹⁷³

Count 1 alleged a conspiracy to control mass transit through systematic acquisition. The defendants, the indictment charged, “knowingly and continuously engaged in a wrongful and unlawful combination and conspiracy to acquire or otherwise secure control of or acquire a substantial financial interest in a substantial part of the companies which provide local transportation service in the various cities, towns and counties of the several states of the United States, and to eliminate and exclude all competition in the sale of motorbuses, petroleum products, tires and tubes to the local transportation companies owned or controlled by . . . National City Lines.” The count also alleged that none of the transit systems, once taken over, “could convert or change the equipment used by them from a type using the product sold by the supplier defendant to any other type.”¹⁷⁴

Count 2 alleged a “conspiracy to monopolize” the bus business by creating a network of transit companies that were forbidden to “use products other than the products sold by supplier defendants.” Moreover, count 2 continued, “the motor bus, petroleum, tire and tube business of defendants, National American and Pacific and their operating companies, would be allocated and divided among the supplier defendants in an artificial, arbitrary and noncompetitive manner.”¹⁷⁵

The prosecution made clear in its subsequent bill of particulars that the action of the defendants was in fact a long-lived and snowballing conspiracy: “The defendants National City Lines, Inc., Pacific City Lines, Inc., General Motors Corporation, Standard Oil Company of California and The Firestone Tire and Rubber Company joined the conspiracy on or about June 1, 1938. The participation in the conspiracy by the defendant General Motors Corporation prior to September, 1943 was through the Yellow Truck and Coach Manufacturing Company. The defendant Phillips Petroleum Company joined the conspiracy on or about July 11, 1939. The defendant Mack Manufacturing Corporation joined the conspiracy on or about August 1, 1939. The defendant Federal Engineering Corporation joined the conspiracy in or about October, 1943. The defendants E. Roy Fitzgerald, Foster G. Beamsley and H.C. Grossman joined the conspiracy in or about the year 1938. The defendant Henry C. Judd joined the conspiracy in or about August 1943. The defendant L. R. Jackson joined the conspiracy on or about May 15, 1939. The defendants B. F. Stradley and A.M. Hughes joined the conspiracy on or about July 11, 1939.”¹⁷⁶

Moreover, the government wanted all to understand that the conspiracy was not the product of a handful of colluding businessmen. The alleged collusion permeated senior management. In long columns on page after page, prosecutors listed numerous senior executives, directors and officers, and entire committees of the board of directors as coconspirators. The point: The conspiracy was broad and the corporate undertakings were not renegade transactions but deep-rooted official policy.¹⁷⁷

The streetcar conspiracy trial caused a sensation throughout the country, especially in the dozens of cities listed in the indictment. Typical was the headline in the New York Times: TRANSIT LINE PLOT LAID TO NINE FIRMS. All the companies promptly issued denials along the lines of the one released by Standard Oil of California: “Standard unequivocally denies that they participated in any conspiracy or any other arrangement to acquire control of transportation . . . monopolize or restrain trade, or exclude competition.”¹⁷⁸

The defendants hired some of the best defense attorneys in the nation. The case dragged on for two years in both California and then, when the venue was changed, in Chicago. Prosecutors were up against not just one or two defense lawyers, but multiple teams of defense lawyers who filed motion after motion over the smallest question and demanded strict proof at every turn. The paperwork extended for yards. Of particular interest were long motions and debates over what instructions the judge could issue to the jury, with strict attention to the issues they could and could not consider. That argument was important. The case was universally considered one of the most complex and precedent-setting conspiracy trials in recent memory, and the first to have such issues go to a jury.¹⁷⁹

The so-called “housewife jury,” composed of a dozen Chicago women identified in the press as “housewives,” returned their verdict. None of the women understood high finance. Not a few had relatives gainfully employed in the automotive and transportation industry. Indeed, the judge reminded the women paternalistically to sign the verdict using their own names, and not to use their husbands’ names, as in “Mrs. John Smith.” On March 12, 1949, they delivered their decision.¹⁸⁰

Count 1: Conspiracy to secure control of transit systems. Not guilty.¹⁸¹

Count 2: Conspiracy to monopolize the transit business for their own oil, tires, and buses. Guilty as charged.¹⁸²

Forty-two cities in sixteen states were converted, and dozens more targeted. Millions of Americans were affected. Some $9.5 million was invested. On April 1, 1949, the judge handed down his sentence: a $5,000 fine to each corporate defendant except Standard, which was fined $1,000. As for Fitzgerald and his coconspirators, they too were fined. Each was ordered to “forfeit and pay to the United States of America a fine in the amount of one dollar.”¹⁸³

The cases were appealed—even the one-dollar penalties. It went all the way to the U.S. Supreme Court, which allowed the convictions to stand. The government filed a civil action against the same circle of companies trying to stop their continued conduct. The government was unsuccessful.¹⁸⁴ Moreover, the penalties were never adjusted to more than one dollar per executive. At those rates, GM and its combine felt they could continue the same conduct. National City Lines continued to acquire and convert systems.

In most cities, streetcar service had been allowed to deteriorate slowly only to be replaced by motor-bus service that was allowed to deteriorate on the fast track. Once National City Lines took over, fares were hiked, routes were truncated, transfers were eliminated, and schedules reduced. These unpopular changes became a standard operating procedure, so much so, the company undertook them almost instinctively.

A March 13, 1946, internal National City Lines memo written shortly after the company took over the Tampa system was typical. “In the event we maintain a 5 cent fare in Tampa,” the memo advised the Chicago headquarters, “without transfer privileges, my thought was to terminate all routes downtown. In other words, eliminate all crosstown through service.”¹⁸⁵

The day motorization occurred in Tampa, a local newspaper editorial complained, “Will Tampa Transit Lines, Inc. which will have a monopoly because of the discontinuance of the street car system, furnish the service the people need and want?" Drastic reductions in service decreed from Chicago quickly answered the question. Shortly after Tampa’s service was curtailed, several hundred residents filed formal petitions with City Hall to restore service. National City Lines persevered, claiming it could not run buses over unpaved streets.¹⁸⁶

Mobile, Alabama, was equally unsettled by service reductions. A letter to City Hall from the area director of the War Manpower Commission, written July 9, 1945, just weeks after the war in Europe concluded, questioned whether National City Lines even intended to run a proper service. “It is my considered judgment,” the federal manpower director wrote, “that a comparison of the Company’s schedule runs as of, for example, July 1944 with July 1945 will reveal a reduction in service well beyond any decline in employment or reduction in local demand for service. The reduction is clearly not due to any shortage in equipment. I am reliably informed that the Company has disposed of a number of busses and now has additional busses idly parked here in Mobile. I note also that the employment of the Company has declined from 368 in March of this year to 304 on our most recent report.”¹⁸⁷

In Port Arthur, Texas, residents complained, “Big areas here are not served by buses—some not at all and others not satisfactorily. . . . Before we begin paying higher fares, I think we are entitled to substantially improved service.”¹⁸⁸

In Beaumont, Texas, the mayor himself dispatched an urgent telegram to the National City Lines regional office in East St. Louis, Illinois. “Believe that it is imperative,” the mayor wired, “that something be done about bus service immediately. We average fifty complaints daily and have received five or six petitions. I frankly think the answer is more busses in service during the peak hours. Please consider this wire a personal one. Otho Plumer, Mayor City of Beaumont.” Proving that National City Lines possessed the resources to do it right when pressured by officials, the Chicago headquarters immediately dispatched six modern buses, then four more, for a total often suddenly provided to Beaumont.¹⁸⁹

Residents of the largest cities such as Los Angeles, Baltimore, and St. Louis were just as dissatisfied as their counterparts in smaller urban centers. A letter to the Los Angeles Times during that city’s 1946 transit strike complained that National City Lines was of course making “substantial earnings” because it imposed overcrowding on its underserviced lines. “Almost every bus,” wrote the upset reader, “regardless of the time of day, carries double the number of passengers it should carry.” The theme was echoed in publication after publication, such as a lead October 1947 article in the Los Angeles Herald and Express illustrated with irked crowds trying to cram through the narrow doors of a narrow bus. The Los Angeles Herald and Express article bemoaned the indicted Fitzgerald clan’s takeover of the Los Angeles transit system and the shrinkage of service. “In Los Angeles,” the magazine declared, “the curtailment of the trolley lines into bus lines already jammed, and in a city swiftly growing, has created an uproar.”¹⁹⁰

In the 1950s, other factors not related to monopolistic collusion conjoined to undermine the viability of the bus companies. Running segregated buses in the apartheid South was neither cheap nor efficient. National City Lines subsidiaries in the South were expected to obey and enforce racist transit laws. Therefore, along many Southern routes National City Lines operated separate colored and white buses. This played havoc with schedules, cost, and customer satisfaction. No white or black person in a rush or in the rain wanted to see one or more buses pass him by because they were for the wrong skin color. Sometimes drivers were arrested for breaking the rules and picking up a black woman in the rain in a white bus. When buses were finally consolidated in a city, “coloreds” were required to ride in the back of the bus. Drivers were given police powers in this regard. Sometimes drivers did the arresting or called the police and signed the complaint. Occasionally, the policy resulted in blacks being beaten and removed from a bus. Segregated transit had economic consequences not only because such systems were expensive, but because black bus boycotts broke out with regularity. Boycotts were local, but their impact was felt far beyond the city limits by National City Lines.¹⁹¹

A typical November 1946 weekly report to Chicago headquarters from the Jackson, Mississippi, subsidiary explained, “Last week it was necessary for one of our operators to call the police officer for a colored passenger that refused to move back from the front of the bus so white passengers could be loaded. This colored passenger’s name Elport Chess had to be taken off the bus by force by the police and it was necessary for the police officer to strike him with his club in order to subdue him. . . . This colored party was a G. I. Veteran with five years in the Pacific and was attending the colored school. . . . As a result of this negro being arrested, the colored school children at the school he attended boycotted the busses.”¹⁹²

In December 1955, a woman named Rosa Parks riding the Montgomery bus refused to move to the back. She was arrested, and this sparked a broad boycott, expensive litigation, and the modern civil rights movement. The bus had become a flash point in urban society.

After World War II, metro transit service declined in popularity for a web of reasons. New automobile sales exploded. Cities mushroomed, creating a historic nation-changing urban and suburban sprawl. Cars became the desired mode of traffic. The advent of the interstate highway system transformed automotive transportation. But the network was justified less as a transportation necessity than as a Cold War national defense measure. In fact, interstate development came under the portfolio of the secretary of defense, who helped name the road network the National System of Interstate and Defense Highways, also known as the interstates. The growth took many by surprise.¹⁹³

In 1952, federal highway legislation authorized a meager $25 million annually for the fiscal years 1955 and 1956. Such spending was always authorized two to three years in advance. But in 1953, Dwight D. Eisenhower’s incoming secretary of defense made highway construction a national priority like never before. An astonishing $350 million was spent during the next fiscal periods, from 1956 to 1957, yielding the beginnings of a state-of-the-art highway system. Additional millions in construction money were permanently locked away in a new economic creation, the highway trust fund. Moreover, these new highways would not only link cities, they would also link neighborhoods and suburbs within a metropolis.¹⁹⁴

But while millions of hard-lobbied dollars were devoted to automotive transport and road building, little was done for mass transit. No money was allocated for urban systems, which stagnated as a public became more and more unwilling to ride. Just when mass transit needed it most, during the country’s postwar industrial boom, the emphasis was turned to internal combustion and done so against a backdrop of fiery mass approval. The secretary of defense marshaling the great new highway expansion was Charles Wilson, who from 1941 to 1952 had served as president of GM.¹⁹⁵

At his confirmation hearings, Senator Robert Hendrickson (R-New Jersey) pointedly challenged Wilson, asking whether he had a conflict of interest considering his forty thousand dollar shares of GM stock and years of loyalty to the controversial Detroit company. Bluntly asked if he could make a decision in the country’s interest that was contrary to GM’s interest, Wilson shot back with his famous comment, “I cannot conceive of one because for years I thought what was good for our country was good for General Motors, and vice versa. The difference did not exist. Our company is too big.”¹⁹⁶

New highway construction resculpted America’s cities and the country’s sense of mobility. The concomitant abandonment of transit financing for American cities ensured that the national love affair with the automobile came at the expense of mass transit—electric or gas-burning. Congestion, pollution, and the petropolitical consequences of moving atop a fulcrum of oil were always understood by policymakers.

Highways became the new rivers and the new railroads, and they brought democracy to every driver—white or black. One man, one vote. Soon one man, one car. The expressway and interstates divided and conquered America’s cities. Where they coursed, they gave breath to towns and neighborhoods. But that breath was blackened and thickened, and the economic lungs of the country became polluted and addicted.

Nineteenth-century transit systems were rarely updated to the twentieth-century realities of metropolitan life. As the decades progressed, the beloved trolleys and electric buses were not reconfigured into dedicated tramways, trolleyways, and busways. Yet cars were given express highways to radically update their viability. Midstreet tracks made less and less sense for overcongested cities. Trolleys simply never changed with the times. Automobiles did. Urban planners and managers allowed the neglect without regard for the environmental, economic, or political consequences.

One by one, the transit systems failed—not just those controlled by National City Lines, but also the largest and the smallest independents. None of them could compete against the sexed-up, finned-up, high-octane, go-anywhere, drink-gas-like-water automobile. Chiffon and chrome, glitz and guzzle, were transduced to an automobile culture without compare.

The combine that ran National City Lines was not civic-minded. They were profit-minded. In the fifties, National City Lines joined the national mania to move to the internal combustion machine. As the firm systematically raised fares and reduced service, its systems became less and less acceptable to the public. In 1956, fares were raised. Champaign-Urbana fares rose from 12 cents to 15 cents. Stockton’s three tokens that cost 35 cents now cost 40 cents. East St. Louis’s fares went from 13 cents to 15 cents. Baltimore’s first zone was increased from 18 cents to 20 cents. St. Louis’s weekly permit went from 75 cents to 90 cents.¹⁹⁷

As ridership crumbled, National City Lines began selling off its dying systems to the cities and counties that could not exist without them. It did so at a profit. From Kalamazoo to Los Angeles, the holding company began liquidating its transit lines, pleading economic necessity but reaping millions from the sales. The company’s 1957 annual report to stockholders notes, “During the year of 1957, the City of Kalamazoo leased the bus system of Kalamazoo City Lines, Inc., on terms comparable to the Jackson lease reported last year. Both leases have been operating very satisfactorily___¹⁹⁸

“As stated in the last annual report, the franchise of Tulsa City Lines, Inc. expired June 30, 1957, and the company is being liquidated. It is anticipated the final liquidation will give a profit to National City Lines, Inc. The garage building formerly occupied by Terre Haute City Lines, Inc., has been leased to the Highway Commissioners of Vigo County, who have an option to purchase it. Both the lease and the option are on terms very favorable to National City Lines, Inc.¹⁹⁹

“Los Angeles Transit Lines sold its operating properties to Los Angeles Metropolitan Transit Authority, a municipal corporation, on March 3, 1958, and is now in process of liquidation. It is anticipated that this will bring an eventual profit to National City Lines, Inc., of at least $6,500,000 after all taxes.”²⁰⁰

National City Lines profits were not channeled into mass transit for other viable cities but into truck rental firms, such as a new subsidiary called National City Truck Rental. Proceeds from system sell-offs were also used to acquire existing freight carriers such as United Motor Express and Sioux City Motor Express. After investing in trucks, National City Lines turned next to aircraft. The company provided the paperwork needed to secure tax breaks for leased aircraft. An annual report described the aircraft business as “strictly financial transactions, that is, the company performs no service in connection with the airplanes.”²⁰¹

Hence the profits of National City Lines’ urban transit companies were systematically exhaled into other petroleum-based transportation businesses, giving them new life, but leaving those original neglected municipal systems to fend for themselves. Generally taxpayers did the fending—and the moneys were always insufficient. With lines reduced and mortally underfunded, Americans often had little recourse but to turn to automobiles to get from here to there, for work or play. In the fifties, gas was cheap. New cars became an acquired birthright. The national reliance on automobiles only deepened as transit systems fell from grace—whether they were owned by National City Lines or independents.

The men of National City Lines cultivated a mentality that influenced mass transit throughout the nation. Executives of their dozens of subsidiaries were sought after by other transit companies seeking to abandon trolleys and join the modern era of urban transit. When these executives transplanted themselves, they brought their years of corporate conduct with them. After the trial and conviction, GM placed mileage between the company and the Fitzgeralds. GM no longer needed conspiratorial rings. A community of bus-thinking, trolley-abhorring transit experts and officials took root throughout the American transportation establishment.

At the top of the National City Lines operational hierarchy was B. M. (Barney) Larrick, the conglomerate’s operations manager who for twenty years had been deployed by the company in city after city, where he would convert trolley lines, break unions, raise fares, and outmaneuver politicians who did not promote the National City Lines agenda. The conglomerate had brought Larrick to Los Angeles, Oakland, Pasadena, Salt Lake City, Tampa, and many other cities precisely because he was so effective at transforming transit systems.²⁰²

But in 1948, in the throes of the federal prosecution, Larrick left National City Lines to sell his considerable skills to any independent system that would pay his price. His modus operandi was to spend two years raising fares, converting streetcars to motor buses or expanding the existing bus fleet, and then move on to the next city. His first such stint was as president and general manager of Miami’s transit lines, which had already switched to buses and under Larrick were about to undergo a bus expansion. Two years later, Larrick moved up to Buffalo to assume the post of general manager of that city’s system, which had also just converted and was in the midst of a bus expansion program. National City Lines did not own either the Miami or Buffalo system, but where Larrick went, he brought the National City Lines style of doing business and a determination to place more GM buses on local streets.²⁰³

The Twin City Rapid Transit Company in Minneapolis-St. Paul was considered by many to be a model urban transit system. The much loved Minneapolis-St. Paul trolley system traced its heritage back to nineteenth-century horse-drawn operations. The firm was owned by some three thousand shareholder citizens nationwide, led by a circle of major stockholders who saw the enterprise as a civic duty. During the twenty-year span that preceded World War II, the directors had virtually sworn off dividends, even though the stock traded on the New York Stock Exchange for as much as $108. During the war years when trolley systems made strong profits because of gasoline rationing, the company used its excess cash to pay down more than half its $14 million debt, and to purchase a fleet of sleek, new streetcars. For some reason, probably lack of financial self-boosting, the company’s stock had dwindled to just $10 a share and was therefore massively undervalued. This caught the sharp eye of New York gangland financier Charles Green, who in 1949 jumped at the chance to make a market killing. He purchased six thousand shares.²⁰⁴

But when no dividends materialized, an unhappy Green started a fierce crusade against the existing management. He wrote an incendiary letter to the three thousand other stockholders demanding the board’s resignation. At the same time, Twin City Rapid Transit Company began showing the results of the national turndown in ridership—a 41 percent decline for Minneapolis-St. Paul. Therefore, shortly after Green’s buy-in, the company reported a significant deficit and this only enraged Green further. He demanded service be slashed to save money and generate dividends. When the president of the transit line refused, Green snickered, “All offers are off. We’ll play winner takes all.”²⁰⁵

Green wanted a vicious proxy war. He was that kind of guy. Green described himself as “always ready to make a fast buck.” But he needed help. He turned to the state’s most notorious gangster, a thug who had been arrested and/or tried for a range of crimes from simple bootlegging and pickpocketing to murder and kidnapping. This gangster’s most recent murder trial was for the 1935 machine-gunning of journalist Walter Liggett in front of the newspaperman’s wife and daughter. Green turned to Isadore Blumenfeld, aka Kid Cann.²⁰⁶

Cann, himself a minority stockholder of Twin City Rapid Transit, was also concerned about dividends. The racketeer Cann suggested they team up with a friend of his, Fred Ossanna, a two-fisted attorney for Yellow Cab Company and a local labor union. Ossanna had a knack for slush funds, kickbacks, and bribery. Ossanna and Cann would head up Green’s proxy war.²⁰⁷

Green, Ossanna, and Cann met frequently at a known mob hangout, Club Carnival, to discuss tactics. They decided to commence an elaborate mail campaign to stockholders across the United States to attract enough proxies “to oust them [senior management] at the next stockholders meeting.” The proxy campaign was successful. Green won out, becoming president of Twin City Rapid Transit. He advocated an immediate fare hike. The Minnesota Railroad and Warehouse Commission had just voted a penny hike to twelve cents. Not enough. Green insisted on a rise to fifteen cents and then seventeen cents.²⁰⁸ Or else.

Or else what? The Minnesota Railroad and Warehouse Commission wanted to know. Green answered by immediately firing eight hundred employees, about 25 percent of the workforce, which reduced the payroll by $1.8 million. Schedules were slashed, leaving Twin Cities’ citizens shivering in subzero weather on street corners waiting for a trolley. The public, newspapers, and regulators revolted. Just before Green carried out a threat to completely shut down the St. Paul half of the company, officials rushed into court and secured a temporary restraining order. The state, the community, and the riders demanded to know how a private company operating a public utility could act so contrary to the public interest.²⁰⁹ The public?

“The public be damned!" Green yelled. “I intend to force a profit out of this company! If necessary, I’ll auction off all the streetcars and buses and sell the rails for scrap iron!”²¹⁰ That is exactly what happened.

Despite the open conflict with the community, a stockholder effort to remove Green was unsuccessful. Green personally controlled more than 19,200 shares, and more through a block held by gangsters and friends of Kid Cann’s. Through nominees and fronts, such as personal friends or family, shares were controlled by such hoodlums as Tommy Banks, the gambling and liquor king who jointly ruled the Minneapolis rackets with his chief accomplice, Kid Cann. Banks had purchased blocks of shares through his brother, his attorney, and McCarthy’s Cafe, a restaurant Banks’s wife was associated with, and also through numerous other partners and associates involved in pinball machines and casinos. Other shareholders included Kid Cann’s personal doctor and childhood friends of Kid Cann’s. Eventually, the stockholder’s registry was brimming with mob-connected personalities, such as Phillip “Flippy” Share, previously imprisoned for the cigarette torture of a boy, the bombing of a restaurant, and kidnapping, and who was twice arrested for murder. The stockholder list even included Charles Holleran, an associate of both Banks and the infamous Jake “Greasy Thumb” Guzik, the financial brain and a collector for AlCapone.²¹¹

The Minnesota Railroad and Warehouse Commission concluded that Ossanna controlled 12,600 shares, Banks and associates controlled 15,800 shares, and Cann controlled 10,800 shares.²¹²

“Over 25 per cent of the Twin City Rapid Transit stock is held by persons of questionable character,” complained commission chairman Leonard E. Lindquist. “It is obvious that this is a strong enough faction to control management votes.” The comments were in Lindquist’s report to both the governor of Minnesota and the Special Senate Committee on Organized Crime in Interstate Commerce, headed up by Senator Carey Estes Kefauver (D-Tennessee). The crime commission that riveted America’s attention in the early 1950s was commonly known as the Kefauver Committee.²¹³

Lindquist also told the governor, “While the holdings of Mr. Ossanna, Kid Cann, Tommy Banks and associates may not constitute a numerical majority of the outstanding stock, so much of the other stock is. . . in small lots or in the hands of people living at distant points that the combined holdings of Ossanna, Kid Cann, Tommy Banks and associates are sufficient in actual practice for them to exercise effective control of this company. ²¹⁴

Green handily rebuffed the March 1950 effort to oust him as president. He was reelected and was more determined than ever to destroy the trolley system and convert to GM buses. But soon Green was deposed by Ossanna and Cann in a power play for the reins of the company. Ossanna and Cann had rallied their own proxy votes, 192,000 over Green’s 73,000. Police expected violence at the March 1951 stockholder meeting that would decide the issue. Green was frisked at the door, and his revolver taken. But once inside, the parties agreed to disagree peacefully. Green just resigned.²¹⁵

Now Ossanna was in charge. He took over from Green as president. But the campaign to destroy the trolleys was still a mantra of management. Ossanna liked everything about the bus conversion. First and foremost, the conversion would help him loot the company. Ossanna wanted a slush fund established to bribe city officials. When he was at Yellow Cab, he had created slush funds and mastered political bribery by securing kickbacks from suppliers. Now Ossanna suggested that kickbacks be used based on fuel purchases for some 350 buses. “That is the way we built up a slush fund at Yellow Taxi,” said Ossanna, Green later testified.²¹⁶

But acquiring GM modern diesel buses would take money. Ossanna approached the local banks, but with the uproar over gangster ownership and the shattered public image, the company’s credit was no good. So Ossanna contacted GM executive vice president Roger Kyes about helping them finance 25 new diesels. Kyes, who would later become deputy secretary of defense under GM’s Wilson, was more than receptive to Ossanna’s request. Kyes sent in a team of experts and a survey team.²¹⁷

After GM’s team of experts visited Minneapolis in 1951 to survey the facts on the ground, Kyes was encouraged about Twin City Rapid Transit and its management. Despite the community revolt and the public charges of racketeer control and credit unworthiness, GM found in Ossanna and his circle of managers people that the Detroit corporation could do business with. Just a few weeks later, Ossanna was invited to Kyes’s office in Detroit. Kyes was said by some to have the “personality of a pit bull.” One senior executive colleague described him as a “spooky guy.” But Ossanna and Kyes apparently found common ground, and Ossanna left their meeting shocked and jubilant. GM had offered the scandalized company not just 25 buses, but twenty-one times that number—525—and all on favorable credit terms.²¹⁸

Quickly, Larrick, previously of National City Lines, was brought in by Ossanna to be general manager and oversee the conversion. More than 700 streetcars, including 141 state-of-the-art trolleys, would have to be taken out of service and replaced with the 525 buses to achieve the conversion.²¹⁹

Many believed the conversion would take a half decade. It took only two years. Ossanna went on a rampage of conversion. First 700 trolleys were systematically idled. Then the rails, copper, and equipment were sold as scrap metal. Then real estate was disposed of. Who bought the trolley infrastructure and land? American Iron and Supply and Mid-Continent Development and Construction, both of which were controlled by Kid Cann and another hoodlum stockholder, Harry Isaacs. For example, Kid Cann and Isaacs bought two substations for approximately $225,000, and then split a fast $57,000 profit. Another $500,000 in iron and copper was purchased by American Iron as scrap under advantageous terms for speedy resale.²²⁰

As for the trolleys, old and brand-new, some of them were sold to systems in Mexico City, Newark, and Cleveland, but none of that was fast enough for Ossanna and Larrick. India offered to barter jute bags, Brazil offered coffee beans, and Argentina offered beef, but the trolleys could not be sold off as quickly as Ossanna wanted.²²¹ But Ossanna had a schedule to keep if those 525 shiny new GM diesel buses were to roll across the streets of Minneapolis and St. Paul. Ossanna wanted every trolley gone—and he wanted them gone faster than anyone could manage.

So he decided to burn them. One by one, Ossanna’s men isolated the streetcars and torched them.

Ossanna wanted it faster. Day after day, the skies over Minneapolis and St. Paul carried the billowing smoke.

More. Faster.

The pyres continued until June 1954, when the last streetcar was torched in spectacle fashion. Shunted to a side track, and from there pulled from the rails, the last streetcar in Minneapolis and St. Paul was shoved until it reposed in the dirt on a sad tilt. Flammables were poured over it and stuffed into its interior. Then that last trolley that had brought so many people so many places for so many years was gleefully ignited by Os-sanna himself. The prone, burning streetcar, embodying the long crusade against electric traction, quickly exploded into sky-reaching flames. Out of every window and from the front door, the flames wrapped tightly around the vehicle and consumed it. Dressed in spats, Ossanna smiled for cameras as the immolation rose behind him.²²⁶

All of Minneapolis was watching when that last trolley was burned. The IRS intelligence unit had been watching since the beginning. Audits of American Iron’s accounts revealed that conversion transactions constituted the majority of the company’s business in 1954. Seventeen checks totaling $101,000 were deducted under the description “business expense.”²²⁷

September 18, 1959, the grand jury returned true bills. Fred Ossanna, B. M. Larrick, Harry Isaacs, Isadore Blumenfeld aka Kid Cann, and others were indicted on conspiracy, mail fraud, and other charges arising out of the two-year bus conversion. Isadore Blumenfeld was also indicted separately on white-slavery charges for transporting a woman, Anita Carlson, from Miami Beach to Minneapolis for the “purpose of prostitution, debauchery and immoral practices.”²²⁸

August 6, 1960, after five days of deliberation, the jury rendered their verdict. As the nine men and three women filed into the courtroom, all stared straight ahead, making no eye contact. The judge took four or five minutes to read through the many typewritten verdicts stuffed into the envelope handed him by the clerk, who passed it on from the jury foreman.²²⁹

Ossanna and Larrick, both guilty as charged: six counts of mail fraud, two counts of wire fraud, and three counts of interstate shipment of stolen property. Isaacs, guilty of five counts on the same charges. They were all sentenced to prison time.²³⁰

Except Kid Cann. Once again, he beat the rap. The jury somehow found him not guilty.²³¹

For decades, questions have haunted every aspect of the GM Conspiracy. Did GM by its actions and those of its cohorts allied with National City Lines “kill mass transit” in America? The answer: absolutely not.

National City Lines acquired control of less than one hundred cities. Many of those cities, such as Tulsa, East St. Louis, and Salt Lake City, were important but limited components of the nation’s overall transit picture. True, National City Lines also gained control of some of the biggest systems in America, such as those in Los Angeles, Oakland, St. Louis, Baltimore, and Philadelphia. However, the dozens of cities affected taken together still constituted less than a majority of the ridership in America.

But did GM try? The answer: yes.

During GM’s conspiracy trial, National City Lines was compelled to provide a list of dozens of additional cities targeted by the conspirators. • These purchase efforts had been under way, but unsuccessful as of the trial date. But the acquisition of new territories became more likely as each new city system was converted, and as an entire generation of transit officials was led to believe that internal combustion was better. Therefore the list is revealing about the ultimate aims of the combine. The list given to the court revealed that some of the most important systems in the nation were eyed for future conversion, additional consolidation, or additional investment. In several areas that were already converted, the list demonstrates the intent to wipe out the last vestiges of independent lines in those cities. The list:

In New York: Albany, Binghamton, Elmira, Schenectady, and Staten Island. In Illinois: Chicago—both its regional commuter trains and its local rapid transit lines, plus Peoria, Rock Island, Moline, and Springfield. In Massachusetts: Boston and Worcester. In Michigan: Flint and Grand Rapids. In California: Sacramento and Santa Barbara. In Florida: Miami, Miami Beach, Pensacola, and St. Petersburg. In Ohio: Akron, Cincinnati, Cleveland, Columbus, Sandusky, and Youngstown.²³²

In Pennsylvania: Allentown, Oil City, Reading, Pittsburgh, Scranton, and York. In Alabama: Anniston and Gadsden. In Arizona: Phoenix and Tucson. In Arkansas: Hot Springs and Little Rock. In Georgia: Columbus, Rome, and Savannah. In Indiana: Indianapolis, Evansville, Muncie, Fort Wayne, and Gary. In Iowa: Clinton, Davenport, Waterloo, and Cedar Falls. In Kansas: Topeka and Wichita. In Kentucky: Covington, Lexington, and Louisville. In Louisiana: Alexandria and Baton Rouge.²³³

Plus many more in Maine, Maryland, Minnesota, Missouri, New Hampshire, North and South Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.²³⁴

Why did GM fail in its national designs? The answer: The company was stopped by prosecutors in 1947, but thereafter found that the motorized transit revolution GM and its cohorts had set in motion had caught fire across the nation and now burned of its own volition. By the fifties, conspiracies were no longer necessary. It was just progress.

Did GM deliberately convert electric traction systems to bus systems with the intent to then cause the demise of those companies, leaving nothing but automobiles to clog cities? The answer: No, there is not a single line of evidence in thousands of pages of documentation to suggest this. GM wanted to sell buses. But in many ways, that is what happened anyway.

The rapacious crippling and looting of mass transit by GM, its coconspirators, and the independent owners of systems, juxtaposed with the meteoric rise of the automobile, naturally led to the systematic decline of urban transit. But it is also important to remember that GM struck mainly where city systems were weak and vulnerable, where city planners had left streetcars and electric buses out of urban progress, and where policymakers did not think twice about the harmful changes they were systematically bestowing upon the nation.

None of the comparative economic numbers can be believed because in so many instances the transit systems had been fleeced and manipulated long before GM ever arrived. Moreover, no one ever factored in the cost to the environment, the cost to human health, and above all, the reality that trolleys never needed an army or a navy to support their fuel source. Motor buses did. Buses used petroleum, which from 1928 was increasingly coming from an unstable Middle East. No one ever added in the military costs. As such, the portrayal of internal-combustion versus electric costs may be the biggest financial scandal of the twentieth century.

Ironically, during the same decades when trolleys, light rail, and electric buses were deemed to be obsolete, unworkable, and unusable in American cities, they flourished throughout the world, in all the great cities of Europe, in the congested nations of Asia, and the spread-out urban centers of Latin America. Across the globe, trolleys have been and continue to be mainstays of city living, successfully woven into the transit fabric of the twenty-first century. But not in America, which is only now returning to the decades-old concept of trolleys and electric buses.

Therefore, when GM stood in the dock to face charges of conspiracy, and when it bristled at the report of Snell and others who documented its activities, the company should not have been alone. Its crime—limited or not, economic or more—could never have occurred without the neglect and participation of policymakers and the public itself. When GM and its collaborators were indicted, when they were prosecuted, when they were convicted, and when they were reviled, public policy and the American public, singly and severally, were unindicted coconspirators, and they should coequally have shared the blame.

GM may have killed some important fraction of mass transit. But the policymakers who let it happen—they got away with murder.