The People's Tycoon: Henry Ford and the American Century (Vintage) (17 page)

Then Ford hooked a new financial partner from an unlikely source. Official histories of the Ford Motor Company, and, indeed, Henry Ford himself, have tended to slight the crucial role played by Alexander Y. Malcolmson in the founding of the company. In hindsight, it seems clear that the enterprise could not have been launched without his help. This aggressive, energetic Detroit businessman had accumulated considerable assets over the previous decade, and, although completely unversed in the automobile game, he now entered Ford's orbit.

Born June 15, 1865, in Scotland, Malcolmson had come to Detroit in 1880 and steadily worked his way up from grocery clerk to grocery-store owner. By early in the next decade, he had entered the coal business, establishing his first yard in 1893. He focused on delivery, using many small, three-horse wagons to make faster deliveries in greater volume and satisfying customers in thousands of homes around Detroit. Advertisements declared that Malcolmson's coal was “Hotter Than Sunshine,” a slogan that was also posted on the sides of his delivery wagons. By 1903, he had bought out two competitors, set up ten coal yards around Detroit, purchased the city's only coal trestle, constructed a steam coal-plant, gained an interest in a West Virginia mine, and branched out southward to establish the Crescent Fuel Company in Toledo. “We now have 120 horses and 110 wagons constantly at work, which gives an average delivering capacity of 1,800 tons daily,” he told a newspaper in that year. Malcolmson also secured several large industrial accounts to supplement his fleet of wagons, supplying coal to steamships, railroads, factories, and state institutions in and around Detroit.
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Small, lean, and muscular, full of nervous energy and ambition, the Scotsman with the dark hair and full walrus-style mustache threw himself into his business endeavors. According to his son, Malcolmson was “the plunger type, a man who did not hesitate to take chances.” He “had a fiery temper and would blow up fiercely when anyone did something he considered wrong or stupid.” After the death of his first wife, in 1901, Malcolmson had married a woman from his church to help care for his six children.
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He had first met Henry Ford in the 1890s, when the latter was the chief engineer of the Edison Illuminating Company and in charge of coal purchases for its furnaces. Ford would go to Malcolmson's yard every couple of weeks or so to check the quality of the fuel. In subsequent years, Malcolmson supplied coal to Ford's residence. The two became reacquainted in 1902. Ford may have simply approached Malcolmson as a likely investor, or vice versa, since the coal dealer had witnessed Ford's racing victory over Winton. The contact may have come through William Livingstone, Jr., a
prominent businessman who knew Ford and had extended much credit to Malcolmson for his business activities. Whatever the case, by late summer the two men were talking seriously about a joint venture.
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Malcolmson agreed to put up money to finance Ford's development of a commercial automobile. John W. Anderson, Malcolmson's attorney, met with the two prospective partners on August 16, 1902, to discuss the organization of an automobile company. In Anderson's words, Malcolmson “was interested in automobiles, had become interested in Mr. Ford's idea and thought it was a good one, and was willing to back his faith by advancing money to supply materials and pay the labor necessary to create a car.” On August 20, the two signed a preliminary accord drawn up by the attorney. According to this contract, Ford would contribute to the enterprise all of his drawings, machines, models, and patents, while Malcolmson would provide cash to finance the building of a prototype. The partners also agreed that within a short time, once the car's design was completed and a working vehicle actually constructed, they would create a corporation, fold the partner-ship's assets into it, and seek additional investment capital. Finally, the pair decided to maintain majority control of the corporation, with Malcolmson handling its financial affairs and Ford its mechanical and manufacturing endeavors.
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So, throughout the fall of 1902, at the very same time they were scrambling to complete the 999 and Arrow racers, Ford, Spider Huff, and Harold Wills used any spare moments to develop plans for a commercial automobile. Riding the wave of enthusiasm following Oldfield's victory in the Manufacturer's Challenge Cup, in the last few months of 1902 Ford began hiring workers to finalize the commercial prototype and put the manufacturing process in place. These included old friends such as the design engineer Oliver Barthel, and Frederick Strauss, who became manager of the machine shop. New employees were a draftsman, Gus Derenger; a pattern-maker, Dick Kettlewell; and mechanics John Wandersee and Fred Seeman. By Thanksgiving, the two-cylinder motor for a pilot automobile was in running order; by Christmas, the chassis had been made.
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Malcolmson offered encouragement as his partner's development work progressed. “Hope you will get everything running in good shape at the shop, so that the work can be pushed ahead with all possible speed,” he wrote Ford on October 30, 1902. “Our salvation for next season will be in getting the machine out quickly and placing it in the market early. It is pleasing that you have been so successful thus far in getting the right kind of help.” Malcolmson and Ford maintained an amiable personal relationship during this period. When the coal dealer's car, a Winton, broke down near Pontiac,
Ford, along with a pair of his mechanics, rushed to the rescue. They discovered that a piston had come loose, harming the gasoline pump and causing it to leak fuel everywhere. Ford and his colleagues repaired the problem.
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By the late spring of 1903, the Ford team had made two significant advancements in their project.

First, an “assembling plant” was established on Mack Avenue near the Belt Line Rail line. One of Malcolmson's acquisitions in the coal business had brought him the lease on an old wagon shop at this site, and it was enlarged according to Ford's specifications. After some twelve weeks of remodeling, a small workforce moved in on April 1.
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Second, the prototype of Ford's new car—he and his team had decided to call it the Model A—was completed in late spring and contracts were arranged with parts-makers throughout the city. Ford and Malcolmson signed an important agreement with the Dodge Brothers Machine Shop to provide 650engines, transmissions, and axles for the new automobile. John and Horace Dodge, owners of the largest and best-equipped machine shop in Detroit, rejected offers from the Oldsmobile Company and the Great Northern Automobile Company to throw in their lot with Ford. The new enterprise also contracted with the C. R. Wilson Carriage Company to construct wooden bodies and cushions, the Prudden Company to build wheels, and the Hartford Rubber Company to provide tires.
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In the meantime, of course, a hunt for investors sought capital to incorporate the enterprise officially. Malcolmson and Ford approached everyone they knew. Progress was slow. Ford, for example, spoke with his old boss at the Edison Illuminating Company, Alexander Dow. Dow refused politely; he ruefully recalled, many years later, “I didn't know then, of course, that he was going to make millions of the blamed things.” Malcolmson contacted his myriad associates in the Detroit business community. As investors slowly came on board, they also pitched in to help raise additional funds. John W. Anderson, who had drawn up the original partnership agreement, recruited his law partner, Horace H. Rackham. Lacking funds himself, he also wrote a long letter to his father seeking a loan of $5,000for investment purposes. “I earnestly believe it is a wonderful opportunity, and a chance not likely to occur again,” Anderson wrote earnestly. “Mr. M. is successful in everything he does, and such a good businessman and hustler, and his ability in this direction, coupled with Mr. Ford's inventive and mechanical genius… makes it one of the very most promising and surest industrial investments that could be made.”
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After much struggle and persuasion, enough investors were corralled to allow the crucial step. On June 16,1903, Ford and Malcolmson filed incorporation
papers for the Ford Motor Company and transferred all of their assets and holdings to this new corporation. The two partners listed twelve individuals (including themselves), who invested a total of $28,000 in cash and promised $21,000 more in notes, receiving $49,000 worth of stock in return. Malcolmson, it is clear, had been the driving force on the financial front, for nearly all the investors were his friends, relatives, or business associates. The Malcolmson group was impressive: John S. Gray, a banker and his uncle; John W. Anderson and Horace H. Rackham, his lawyers; Vernon E. Fry, a businessman and his cousin; Charles J. Woodall, his bookkeeper; James Couzens, his business manager; and Albert Strelow, the contractor who had built his coal yards. One outsider investor, Charles H. Bennett, president of the Daisy Air Rifle Company, also joined the group. The final two contributors were highly interested parties. Brothers John and Horace Dodge invested in the company, but did so as part of a larger business arrangement. Each contributed a $5,000 promissory note, but they covered their investments by demanding up front $10,000 in cash to cover the cost of manufacturing the 650 engines, transmissions, and running gears for the company. By June 20, Detroit newspapers had announced the formation of the new company, complete with praise for “a commercial venture that promises strong competition for the auto manufacturers already in the field.”
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In the summer, Henry Ford's work teams began assembling the first Model A's at the Mack Avenue facility. The plant, sitting on a corner right next to a railroad spur line, measured some 50 by 250 feet, about a third of an acre, and had a wooden clapboard exterior with numerous tall windows that gave the interior a light, airy feel. A second story was added within a few months at a cost of about $5,000. A large Olds gasoline engine provided power for a milling machine, a planer, and several lathes. As engines and body parts manufactured at the Dodge Brothers plant and the Wilson Carriage Company arrived in quantity, about a dozen workmen hired by Ford at $1.50 a day assembled them into complete vehicles. Methods were crude. As one employee recalled:

Production also was minimal. “I remember that we used to try and get out fifteen [cars] a day,” another early employee remembered. “We would work our hearts out to get fifteen a day.”
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The Model A was a solid, reliable vehicle, and it embodied Henry Ford's principles of lightness, simplicity, and durability. “Excess weight kills any self-propelled vehicle…. The car that I designed was lighter than any car that had yet been made,” he described many years later. “The cars gained a reputation for standing up. They were tough, they were simple, and they were well made.” But sales failed to materialize, and for several weeks the company led a hand-to-mouth existence. Funds dwindled rapidly as a steady stream of payments for parts and labor flowed out with no cash returning. The company's balance fell to a total of $223.65. Finally, on July 15, the company made its first sale: a check in the amount of $850from Dr. E. Pfennig, a Chicago dentist, was recorded for the purchase of a Model A. This punched a hole in the dam, and over the next few weeks additional orders and payments came trickling, and then pouring, into the Ford factory. By the end of August, the balance stood at some $23,000. The new enterprise had taken its first breaths of life.
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As the company scrambled to its feet, Henry Ford assumed a dominant role. In the beehive of activity that surrounded both the assembly of Model A's and the design work for new models at Mack Avenue, he seemed to be everywhere at once. Workers at the plant encountered their quiet, amiable, yet energetic boss daily and in varied situations. Ford, usually dressed in casual work clothes, mingled with the men and provided injections of energy and inspiration. Walking among the assembly groups, he offered friendly encouragement, asked questions, and helped supervise the labor process. Occasionally he pitched in to help. “If there was a dirty job and he had a good pair of trousers on,” one employee noted, “he wouldn't hesitate a minute in those days to tackle any job.” The original employees of the Ford Motor Company idolized their boss as a man who treated them evenhandedly and expressed genuine appreciation for the work of a mechanic. According to Fred Rockelman, one of the earliest workers, “At that time we looked upon Mr. Ford as our great godfather or benefactor. We were always able to go into his office because he would have an open door and we felt that he had a great sense of understanding of mechanics.”
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Ford also provided a calming, soothing influence on the frantic, occasionally contentious work atmosphere of an early industrial plant like this one. With an even, cheerful disposition and quiet reputation as a “square shooter,” he mediated explosive situations that arose. Charles Bennett, one of the original stockholders, became involved in an argument with James Couzens over a financial matter. Others were drawn in, and soon a bitter
shouting match erupted. At this point, Ford “stepped right forward and took hold of my arm and said, ‘Aw, come on, let's calm down. Let's all calm down,’ ” Bennett recalled. “He meant
all
of them too…. We started talking about something else, and it all melted away.” This calming influence was enhanced by a reputation for full-blown, authoritative involvement in shaping the company's product. The design engineers, as well as the assemblers on the plant floor, knew who was in charge. “Mr. Ford kept in touch with everything in the experimental room, with every piece of paper on the board and everything in the shop, looking at the parts as they progressed,” noted John Wandersee, one of the key early development engineers. “Mr. Ford always gave the designers a lineup of what he wanted designed. The ideas, I believe, were original with him.”
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