The People's Tycoon: Henry Ford and the American Century (Vintage) (48 page)

Henry Ford's entry into public affairs underlined his popularity among the common people. As a political figure he was viewed with suspicion by intellectuals, party managers, and social elites. But he generated considerable enthusiasm among voters, especially in the Midwest and West. His 1918 performance in Michigan revealed his extraordinary appeal.

Power brokers in the Eastern sections of the nation began to pay attention. An analysis in the New York
Tribune
examined Ford's appeal in the provinces. Although somewhat condescending, the editorial grasped something fundamental about this industrialist with the populist message. Ford, it concluded,

Ford's connection to ordinary citizens had been years in the making. Since the advent of the Model T nearly a decade earlier, he had appeared before the American people as a kind of miracle maker. His consumer vision of the American future, innovations in mass production, humane model for modern business, and status as a folk hero had made Henry Ford a household name and, for many, a truly beloved figure by the late 1910s. But in many ways it was only a beginning. Over the next decade, he would build upon this foundation to become one of the most prominent and powerful figures in the United States.

The 1920s seemed to mark a new period in American life. In the aftermath of World War I, the flowering of the Jazz Age obliterated any remnants of stuffy, genteel Victorian values left over from the earlier century. In a new atmosphere of flappers and speakeasies, older traditions of self-control and propriety gave way as the mass of American citizens, especially youth, adopted relaxed sexual mores and embraced a leisure ethic of self-fulfillment. At the same time, this exciting new decade saw the enjoyment of unprecedented material abundance among the middle class. A series of Republican presidents—Warren G. Harding, Calvin Coolidge, Herbert Hoover—presided over a booming economy that presented a cornucopia of goods to the American people. Spreading prosperity seemed to mark the inauguration of a consumer bonanza in the nation's history.

In many ways, however, the twenties were the Age of Ford. He dominated the decade, commanding attention and respect, generating controversy, creating headlines, and launching ventures in economic, social, and cultural life. As Americans purchased automobiles in ever-expanding numbers, especially the Model T, his role in the economy was ever larger. In addition, his views on and his involvement in a series of compelling projects kept his name constantly in the public eye. Simply put, Ford became a colossus in the American consciousness. He seemed to represent everything that was modern, innovative, and vital in this triumphant new society.

Ford's reputation and influence in the United States were so enormous that commentators struggled to explain it. Assessing this situation midway through the decade, Reinhold Niebuhr concluded, “Henry Ford is America.” In an essay published in
The Christian Century
some years before he emerged as perhaps the nation's leading theologian, Niebuhr argued that Ford had become “the hero of the average American” because he had made his fortune without ruthlessness, paid high wages to his workers, and made
a cheap but reliable product. Ford had done well by doing good. Moreover, he had spanned successfully a key historical divide in American history. For Niebuhr, Ford was “the symbol of an America which has risen almost in a generation from an agrarian to an industrial economic order and now applies the social intelligence of a country village to the most complex industrial life the world has ever known.” Like many common Americans, Neibuhr believed, Ford had kept one foot in the nation's rural past even as he was striding into its urban, industrial future.
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Other critics also tied Ford to deep social and economic impulses in American life. Arthur Pound, addressing “The Ford Myth” in
The Atlantic Monthly,
observed that in “a newspaper morgue the envelope filed under ‘Henry Ford’ bulks larger than that devoted to any other private citizen.” Pound attributed this popularity to Ford's reputation as a humane manufacturer and his image as a man of the people. But he also suggested that the automaker benefited from something over which he had little control—the decades-long evolution of “the market,” which made conditions ripe for the automobile by creating railroads, pipelines, and a prosperous country of consumers where wealth was widely distributed. In Pound's view, Ford had taken advantage of these conditions to become “a superman who has ploughed a straight, deep furrow through the crust of custom.”
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Many national publications joined the parlor game.
The New Republic,
a progressive journal of opinion, concluded that Ford's political popularity came from “roots deep into the soil of the American character.” The average citizen, it argued in 1923,“sees Ford as a sort of enlarged crayon portrait of himself; the man who is able to fulfill his own suppressed desires, who has achieved enormous riches, fame, and power without departing from the pioneer-and-homespun tradition.” For all his wealth and power, Ford seemed to embody almost literally the common man and his humble origins and tastes.
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These varied critics captured aspects of Ford's appeal. Yet, for all its connection to cherished American values, the Ford legend also received a lustrous shine from a less lofty source. A series of incidents and controversies in the late 1910s generated much publicity as the new decade began. Like spotlights shining on a skyscraper in the evening hours, these events illuminated Ford's towering stature.

On September 23,1916, a registered letter arrived at Henry Ford's office in Highland Park. Written by his longtime business associates John and Horace Dodge, it complained that they had been unable to get an appointment
to discuss the company's policy regarding dividends to stockholders. The Ford Motor Company's most recent financial statement indicated a net profit of $16 million over the past year and a cash surplus in the bank exceeding $50 million. Yet all this money was going to expansion, none to stockholders. The Dodges demanded a meeting of the company's board of directors to rectify the situation with a new policy “to distribute a large part of the accumulated cash surplus as dividends to the stockholders to whom it belongs.” Over the next several weeks, the company and the Dodge brothers exchanged several letters, with the latter demanding action and the former cagily promising to take up these issues at a future date.
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The Dodge brothers, of course, had been original investors in the company in 1903, putting $10,000 into the new venture. Over the next thirteen years, they remained vital to the Ford operation, building a variety of parts as the company moved into Highland Park. Throughout these years, the Dodges received around $5.5 million in dividends on their original investment, but with company profits running at almost $16 million a year by 1916 and capital assets far exceeding $100 million, this amount seemed meager. Frustrated by Henry Ford's lack of response to their queries on dividends, they sought redress by filing suit against the company in Wayne County, Michigan, on November 2, 1916. They asked the circuit court for an injunction to halt all expansion plans of the company and an order compelling Ford to distribute 75 percent of its cash surplus as dividends. The court immediately issued an order restraining Ford from using any of its cash resources for plant expansion.
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The lawsuit angered Ford on several counts. Initially, its timing seemed a calculated insult, the filing coming the morning after the wedding of Ford's son, Edsel, an event the Dodge brothers had attended. They had conversed congenially with the entire Ford family and said nothing about filing the suit, and “that's what made Mr. Ford so darned mad about it,” according to Ernest G. Liebold. But the lawsuit also violated Ford's visceral need for control over his company and its destiny, an impulse that had driven him since his earliest days in the automobile business. Furthermore, the Dodges' assertion about their right to dividends also ran against the grain of his business philosophy, which stressed public service and expansion of products. Finally, the Dodge lawsuit threatened Ford's plans for expanding his factory further.
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As the legal proceedings began, it became clear that the lawsuit involved a clash of economic interests. The need to maintain a steady stream of capital—the Dodges had started their own automobile company in 1913—partly motivated the plaintiffs. E. G. Pipp, who had close connections to both parties in the suit, wrote that the Dodges sued “because they
had grown too big ‘to be carried around in Henry Ford's vest pocket,’ as John Dodge expressed it,” and they needed financial support to sustain their own enterprise. In his testimony, Henry Ford claimed that the Dodge brothers had filed suit when he refused to purchase their stock in the company at an inflated price to provide them with capital. “They asked me to buy them out,” he testified. “They put a price of $35million on their stock, and they told me unless I bought they would harass me in anything I tried to do.” Clearly, Ford also had a great economic interest at stake in the suit: he did not want to distribute in dividends tens of millions of dollars that provided the wherewithal for future expansion of his company.
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As the case unfolded, however, such practical considerations gave way before a clash of philosophies. The Dodge brothers and Elliot G. Stevenson, their dynamic lawyer, insisted that the purpose of a business corporation was to earn profits for its stockholders. Just as vigorously, Ford and his chief attorney, Alfred Lucking, who was equally skilled if less flamboyant than his counterpart, defended a different conception of the modern business corporation and its duties. This model downplayed profits in favor of service, and valued consumers over stockholders. In particular, two principles became the centerpiece of Ford's defense.

First, in good populist fashion, Ford argued that stockholders were unproductive “parasites” and “idle drones.” Though they contributed money to get an enterprise up and running, he believed this contribution was of limited value. “Mr. Ford didn't feel that the stockholders ever contributed anything to the company except in the early days when they contributed small amounts of capital,” reported Ernest Liebold. This notion crept into his public statements. In his new manufacturing projects, he told a newspaper in 1916,“there will be no stockholders, no directors, no absentee owners, no parasites.” Ford insisted that, even if stockholders deserved a fair return on their investment, they did not deserve millions of dollars of profit, year after year, when they did not contribute actively to the success of a company.
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Second, Ford maintained throughout the Dodge suit that the purpose of a modern industrial corporation was to make products as well and as cheaply as possible rather than just to make money. “I do not believe that we should make such an awful profit on our cars. A reasonable profit is right, but not too much,” he said on the witness stand. “So it has been my policy to force the price of the car down as fast as production would permit, and give the benefits to users and laborers.” Selling a large number of cars at a small profit was much better than selling fewer cars at a large profit, he asserted, because “it enables a larger number of people to buy and enjoy the use of a
car and because it gives a larger number of men employment at good wages.”
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