Dodge Brothers Sold: Auto Giants Reshape American Economy

Investment bank Dillon, Read and Co. purchased Dodge Brothers, Inc. for $146 million plus $50 million earmarked for charity on April 30, 1925, completing what was then the largest cash transaction in American industrial history. The sale transformed a family-run automaker founded by John and Horace Dodge, who had died within 11 months of each other in 1920, into a Wall Street-controlled corporation. The Dodge widows, Matilda and Anna, received the proceeds and became two of the wealthiest women in America. Dillon Read organized the transaction by raising capital from a syndicate of banks and selling bonds backed by Dodge's assets and future earnings. The deal was a landmark in the growing power of investment banking over American manufacturing. It demonstrated that Wall Street could acquire major industrial companies, restructure them for maximum profitability, and resell them at a premium. Dillon Read held Dodge for approximately three years before selling the company to Walter Chrysler's Chrysler Corporation in 1928 for $170 million, earning a substantial profit on the transaction. The merger created the foundation for what became one of Detroit's Big Three automakers. The Dodge brand, which John and Horace had built from a machine shop that supplied parts to Ford into one of the most successful American automobile manufacturers, continued under Chrysler ownership. The transaction also highlighted the concentration of American industrial ownership that characterized the 1920s. By the late 1920s, a handful of investment banks controlled access to the capital markets that industrial companies needed to grow, giving Wall Street firms effective veto power over corporate strategy. The crash of 1929 and the subsequent Depression exposed the fragility of this arrangement.