How GM and other petroleum boosters subverted U.S. mass transit

While GM was mobilizing the Third Reich, the company — ironically — was leading a criminal conspiracy to monopolistically undermine mass transit in dozens of American cities.

The aim was to enhance its profits by addicting the United States to oil.

The war in Europe had been over for just 16 months when, on Oct. 2, 1946, a memo from the Department of Justice landed on the desk of J. Edgar Hoover, outlining elements of the GM conspiracy.

At the center was National City Lines, a company that suddenly arose in 1937, one ostensibly run by five barely educated Minnesota bus drivers, the Fitzgerald brothers.

Yet the Fitzgeralds miraculously marshaled millions of dollars to buy up one failing trolley system after another.

Soon, through a patchwork of subsidiaries, the brothers owned or controlled transit systems in more than 40 cities. Generally, when National City Lines acquired the system, the tracks were pulled from the street, the beloved electric trolleys were trashed or burned, and the whole system was replaced with more expensive, unpopular and environmentally hazardous motor buses that helped addict America to oil.

The Justice Department discovered that National City Lines was a front company for General Motors, in league with Mack Truck, Phillips Petroleum, Standard Oil of California and Firestone Tires — all petroleum interests. The companies became the major preferred stockholders of National City Lines, but operated behind the scenes.

The scheme worked this way: The manufacturers purchased NCL preferred stock to acquire transit lines on condition that when the systems were acquired, the trolleys would be dismantled and replaced with motor buses. All the conspirators gained immensely when non-polluting electric systems were replaced by oil-burners. Phillips and Standard sold oil products. Firestone sold the tires. GM and Mack divvied up the bus manufacturing and sales market according to an agreed-upon formula.

Transit systems in 16 states were converted, adversely affecting millions of Americans, who had to pay higher fares for lesser, more unpopular service. Dozens more cities were targeted in the $9.5 million scheme.

In April 1947, indictments alleging two counts of criminal conspiracy were handed down against General Motors, Mack Truck, Phillips Petroleum, Standard Oil of California and Firestone Tires, as well as against numerous key executives of the companies.

The defendants were found guilty on one of the two counts: conspiring to monopolize the bus business by creating a network of petroleum-based transit companies that were forbidden to use transportation or technology products other than those supplied by the defendants themselves.

The jury found the defendants not guilty on the count alleging a conspiracy to actually control those transit systems.

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 National City Lines, president E. Roy Fitzgerald and his co-conspirators at GM and the other companies, 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.”

The cases were appealed — even the one-dollar penalties — 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. But the government was unsuccessful.

Undaunted, National City Lines and its many subsidiaries continued into the 1950s to acquire, convert and operate urban transit systems using evolved methods.