You probably know the story: in 1949, General Motors, along with a number of other companies including Firestone and Standard Oil, was convicted of criminal conspiracy regarding public transit. 

The company was fined $5,000, and its treasurer was fined a dollar.

But what you might not know is how the story really goes. Many people believe GM was convicted of conspiring to kill the electric streetcar, a popular method of transportation, so it could sell diesel and gasoline buses in its place.
That’s not quite the way it happened, but the conspiracy theory has ended up as popular lore. It was tackled in a 1974 article by government attorney Bradford Snell and in a PBS television documentary called Taken for a Ride. It even ended up as a subplot in the animated movie Who Framed Roger Rabbit.

In reality, the case is complicated, and even today there are still unanswered questions, along with theories and counter-theories galore.

Along with horse-drawn wagons, trains were the primary method of long-distance travel prior to the passenger car. The electric streetcar dated from 1888, and was popular in urban areas. By 1921, there were some 1,200 electric streetcar companies and inter-urban railways, serving either the city itself, or linking cities together. But as buses and cars became more common, riders began to switch.

According to writer and historian Cliff Slater, one of the first challenges streetcars faced were jitneys, which initially ran in Los Angeles in 1914 and which quickly spread to numerous cities.
More like a blend of bus and taxi, they were cars that ran along fixed routes, picking up passengers as they went. They often followed the existing streetcar line, but were faster and ran more frequently. It’s estimated that by 1915, there were more than 62,000 licensed jitneys in the U.S.

They cost some electric railways as much as 50 per cent of their ridership. The railways fought back, and in response, governments enacted such requirements on jitney companies as liability bonds, minimum route lengths and hours, area of operation restrictions, and speed limits. These laws, especially the expensive bonds, put most jitney operators out of business. 

However, it was obvious that passengers were very willing to look at other types of mass transit if they were more convenient than rail lines. Slater wrote that most electric streetcar lines would have fallen in favour of bus routes even if GM had no involvement at all, calling it a “natural economic event.”

Slater also points out that, during the 1920s, buses improved dramatically, becoming faster and more comfortable while streetcars changed very little. And as cities grew, buses could go pretty much anywhere. A streetcar couldn’t service an area until tracks and overhead wires had been put in.
Gradually, the hierarchy became streetcars at the bottom, buses in the middle, and private cars or taxis at the top. General Motors was building a very good bus, and it’s logical that many cities replaced their streetcars with GM buses because the quality was high, Slater wrote.

A story behind the story…

There was often another issue with electric streetcars: the companies had been artificially propped up. According to writer James J. Flink in The Automobile Age, socioeconomic conditions were to blame. He cites California’s Pacific Electric, which had routes that were part of real estate schemes, incapable of turning profits on their own. 

The streetcar companies had to install and maintain their track infrastructure, whereas bus companies ran on public roads. Rail lines were also regulated by governments and, in many cases, they couldn’t terminate unprofitable routes or raise fares to cover costs.
In many cities, transit companies had to also pave the streets upon which their trains ran, and when it was time to repave, many simply ripped out the tracks and went the less-expensive route of using buses instead.

In his 1974 article, Snell said that a $65 million loss that GM took in 1921 led company chief Alfred Sloan to conclude that the auto market was saturated, and that the only way to restore profitability was by “eliminating its principal rival: electric railways.” 

Since GM was the largest railroad freight shipper in the country, it used its clout to persuade railroads to abandon their electric rail subsidiaries. Using “a pack of notorious mobsters,” GM helped purchase and scrap the railways serving Minneapolis and St. Paul, among others. 

With the railroads gone and buses offering inferior performance to cars, riders would purchase automobiles, Snell wrote. Where rail systems couldn’t be bought, GM bought the officials instead, rewarding bus buyers with new Cadillacs.

In 1936, GM combined with the Omnibus Corporation to convert New York City’s electric streetcars to GM buses, a process that took a mere 18 months on the world’s largest streetcar network. 

However, in his article, Slater points out that it wasn’t entirely cut-and-dried. Seven routes stayed with streetcars until 1948; two routes had been run by a failed streetcar company and had been converted to buses in 1932; and four others met a similar fate in 1933. 

Ten routes had always used buses, six had been bus or jitney routes, and two electric routes had been abandoned before Omnibus began bus service. The ten remaining routes saw ridership increase by 62 per cent the first year they went from streetcars to buses.

Later, in court documents, General Motors admitted that by the mid-1950s, its agents had canvassed more than 1,000 electric railways, and had motorized 90 per cent of them.

GM had bought Yellow Coach, the largest bus manufacturer in the U.S., in 1925. Up until 1948, GM was also the largest shareholder in Greyhound, and the automaker’s National Highway Transport Corporation subsidiary, which provided intercity bus service in the southeastern U.S., became Atlantic Greyhound Lines. 

Greyhound bought only GM buses, and when the company ran into financial trouble, GM gave it a $1 million cash loan in 1932.

In 1936, a number of companies, including GM, Firestone and Standard Oil, formed National City Lines (NCL). It would buy up streetcar companies, motorize them, and then sell them to local transit districts. GM would get out of NCL in 1949.

In 1947, nine defendants were indicted by a grand jury in California for violating anti-trust laws: General Motors (on its own and as the successor of Yellow Coach), Mack Manufacturing, Phillips Petroleum, Standard Oil and its subsidiary Federal Engineering, Firestone Tire and Rubber, NCL, and two of its subsidiaries, Pacific City Lines and American City Lines. There was both a civil and a criminal case, and the hearings were held in Chicago.

The cases focused on monopoly. The first charge was of securing control of a number of companies that provided transit, and eliminating competition in the sale of buses and supplies to companies controlled by NCL. The defendants were acquitted. 

The second case focused on eliminating competition in bus and supply sales. In this one, the defendants were convicted, leading to the $5,000 fine and the $1 penalty for the treasurer, who had been a director of Pacific City Lines. GM appealed but was unsuccessful.

So what is the final tally? In terms of what we do know, a number of companies, including GM, were convicted of monopolizing sales to transit companies. In terms of what we can surmise, electric streetcars had their day in the sun, but even if nothing nefarious ever went on, they were an endangered species.
And was there a conspiracy to actually destroy them? As with so many conspiracy theories, that’s the part we’ll really never know for sure.