CHAPTER 17
Henry Ford had a hound’s nose for publicity, yet the man who had made his name racing had either chosen or been forced to sit on the sidelines in the Vanderbilt Cup. Both the 999 and the Arrow were fast and powerful, but neither could have survived a lap on the twisty, uneven Nassau County roads. Ford’s attempt to steal some headlines by setting a speed record over the ice had gained him notice for less than a month.
Even so, by early 1905, the economy was booming and the clamor for automobiles was booming right along with it. “Demand was outrunning production….The automobile, once little more than a fashionable novelty, was becoming a necessity for thousands of business and professional men….Numerous manufacturers, inundated with orders, hired additional batches of men and began working their assembly floors in two shifts.”1 What was more, in what seemed a vindication of Alexander Malcomson, with the burst in GNP came a soaring demand for larger and more expensive automobiles, in the $2,000 to $2,500 range. An automobile had come to be viewed as a symbol of success and prosperity, and consumers believed—inaccurately, as it turned out—that larger, heavier, and more expensive meant better-made. Manufacturers had therefore begun to add “luxury” features, many of which protected passengers from the elements—tops, for example.
Despite the market trend, Ford continued to be convinced that the future lay in lighter and less expensive, mass-marketed automobiles. In February 1905, Ford tried to split the difference and introduced a third model, the F, an improved, more luxurious Model C.*1 The engine had been retooled, with a larger cylinder head but slightly shorter piston rod, which resulted in a 20 percent increase in horsepower.*2 The tires were larger and the wheelbase longer; the radiator had a greater capacity to mitigate overheating; a running board had been added for easier entry and exit; and the paint job had been made more attractive, with, as the sales brochure described it, the Model B’s “rich dark green” for the body and yellow running gear. (Many of these improvements did not emanate from the Ford team but came as a result of suggestions from the Dodges.) The company described the F as “the general all around car for the man who wants a powerful runabout or a comfortable and fast touring car for five people at a moderate investment and low cost of operating and maintaining, capable of taking all kinds of roads.” The weight of the car had increased—as had the price, to $1,000 without tonneau.
With a lack of clear corporate strategy, Ford Motor was thrashing about. When, for example, the Model F went into production, it became awkward trying to sell the remaining Model Cs. Fortunately, demand for cars was so great in 1905 that buyers would often accept the earlier model rather than wait an indefinite period for a later one. But none of the three vehicles produced for the 1904–5 model year would survive to 1906. All served their purpose, however—the company’s cash flow was sufficient to fund its operations and capital expansion, as well as to pay the mounting legal expenses in the Selden suit, all without resorting to outside borrowing.
Avoiding Wall Street was extremely important to Ford because he saw financiers as parasites, enemies to business who fostered incompetence through a focus on short-term performance over long-term growth:
Businessmen believed that you could do anything by “financing” it. If it did not go through on the first financing then the idea was to “refinance.” The process of “refinancing” was simply the game of sending good money after bad. In the majority of cases, the need of refinancing arises from bad management, and the effect of refinancing is simply to pay the poor managers to keep up their bad management a little longer. It is merely a postponement of the day of judgment. This makeshift of refinancing is a device of speculative financiers. Their money is no good to them unless they can connect it up with a place where real work is being done, and that they cannot do unless, somehow, that place is poorly managed.2
Poor management was never an issue with Ford, especially on the factory floor. While he could be harsh, even cruel—many of the practical jokes for which he was famous bordered on the sadistic and were most often foisted on the most innocent and vulnerable—he also was hands-on and encouraging, led by example, and was every bit the team player. Ford never stood still. Inside the factory, he could turn up anywhere at any time, “the shop, the experimental department, the drafting room or the power plant; he came and went as he liked.”3 By all accounts, he was one of those rare individuals with true charisma, idolized by his workers, especially those with whom he was in direct contact. They eagerly embraced his insistence that there was no component that could not be improved, no process that could not be streamlined, and they worked themselves silly trying to prove it. Ford welcomed, even demanded, suggestions from his workers, and then took responsibility for implementing any resulting changes. He also took the credit, especially when an idea worked. He tended to blame others when one didn’t, but few complained. Ford later said that these early years of building his company were the happiest of his life.
Eventually, of course, charisma fatigues, and Ford’s management style would wear thin. Almost all of those who had the most to do with his early success, including Wills, Couzens, Cooper, and Malcomson—a group Keith Sward called “the Ford Alumni Association”—eventually left him under less than amicable circumstances. Ford never expressed regret nor accepted responsibility for a rift; he foisted blame in some cases, but in most he simply pretended the person had never existed.
In My Life and Work, for example, Harold Wills’s contribution is omitted. In fact, there is no mention of him in the entire work, although he remained a key member of Ford’s design team for more than a decade and Ford was best man at his wedding in 1914. Even Allan Nevins, certainly a sympathetic Ford biographer, admitted that “in the design of all the company models of the next dozen years, it is impossible to disentangle Ford’s work from that of Wills.”4 But Wills, who also eventually became one of the world’s foremost metallurgists, would not be shoved down the corporate ladder, so he was eventually shunted aside, one of the many associates crucial to Ford’s success whom Ford would ultimately consider disloyal ingrates. Alexander Malcomson is also not mentioned in Ford’s account—less surprising given the acrimony that would characterize the collapse of their partnership but still a significant oversight. Ford never alluded to the fact that at the outset both he and Wills drew salaries paid by Malcomson.*3 But the most stunning omission is of James Couzens, whose name appears not once and whose indispensable contributions to Ford’s success are either ignored or attributed to Ford himself.
By 1904, it had become clear to both Ford and Couzens that Strelow’s Mack Avenue plant was no longer adequate. Couzens had built a strong network of dealers, many of whom complained that they had sold an entire allocation of automobiles before a single actual car arrived at their showroom.
As a result, Ford Motor became one of a number of auto firms between 1904 and 1906 to move in to expanded facilities. Cadillac’s new plant was capable of producing 4,500 cars per year, all to Henry Leland’s exacting standards, and Packard added 50,000 square feet of floor space. Olds pushed against the tide of auto manufacturers and parts makers locating their businesses in Detroit and moved back to Lansing, albeit to a factory twice the size of the one he left.
Ford contracted for a huge new three-story brick factory on Piquette Avenue in Detroit, each floor 22,500 square feet, in total ten times the floor space of its predecessor. Despite its size and modernity, the plant had a number of oddities, the most curious being that Henry Ford did not have a private office in the headquarters of the company that bore his name. He worked from a desk out on the floor in the pattern department, “where he usually spent the first hours of the morning before circulating through the plant.”*4, 5 Assembly of the automobiles—Ford still manufactured virtually nothing onsite—was done on the third floor rather than the first. Deliveries came in and finished cars went out by means of an elevator at the rear. Material was sometimes moved to the appropriate place on the floor by hay wagons, and “the assembly of automobiles was as yet a primitive operation. While the engines, frames, and bodies were assembled separately, with every effort to promote efficiency, they were brought together for final assembly simply by being carried to a designated spot and set on wooden horses.”6 Whereas both the Olds and Cadillac factories worked on an assembly line principle, Ford clearly had yet to grasp the efficiencies of that method of production and assembly.*5
But perhaps the strangest feature of the new Ford plant was the placement of the other executive offices. Couzens and all the business staff were with the machine shop and the electrical and shipping departments on the first floor, where Ford rarely visited. And Couzens almost never went to the second floor to the engineering and experimental sections, where Wills and an expanding staff of engineers, designers, and pattern makers worked directly with Ford. This distance, born of mutual antipathy, would have sunk most companies, but Ford and Couzens were unique: their moving in separate orbits was instead the making of the Ford Motor Company.
Couzens, at this stage of the company’s growth, was considered “already one of the keenest, most experienced, and most ambitious businessmen in Detroit.”7 Although he and Ford could not stomach having offices on the same floor, Ford was savvy enough not to get in Couzens’s way:
The man was made of nails. [He] displayed an energy no less fierce and a passion for work no less intense than Ford’s. He performed on a dozen fronts. He was the company’s chief publicist, its foremost buyer, its super-salesman, its best-known missionary in the small town, and the canny keeper of the exchequer. His office was the nerve center through which all Ford dealers and shippers and suppliers had to clear. Over a period of thirteen years, the firm’s sales force and office personnel were selected and groomed under his personal supervision.8
Even Charles Sorenson, who thought as much of Henry Ford as any man alive, acknowledged, “From 1903 to 1913 was the Couzens period. True, the company had Henry Ford’s name, its product and production were his. There never would have been a Ford car without him. But the Ford Motor Company would not have made Ford cars long without James Couzens. He controlled expenditures, organized sales, and set the pattern for business operation. He drove Ford and the production side to produce cars to meet the public’s demand.”9
But perhaps the most important role Couzens played was among the least publicized—driving the ouster of Alexander Malcomson and the elevation of Henry Ford to majority shareholder.
The mutual antagonism generated by Malcomson’s forcing Ford to build the Model B had not diminished. Malcomson insisted the company produce at least one model, which would be called the K, for the upscale market.
The K was, despite Ford’s distaste, a fine automobile. It featured a vertical six-cylinder engine—the first Ford had built for a commercial vehicle—which could generate 40 horsepower and reach 50 miles per hour. The gas tank had been enlarged to 15 gallons, which gave the car a range of 250 miles. Tires were 34-inch on a 114-inch wheelbase. The carburetor and ignition had been improved and the axles were fitted with extra ball bearings.
To appeal to its market, the K was built with front and rear seats standard and offered an optional top and gas lamps. “Special attention” was given to the body “to make it of most pleasing design. It is of the Victoria type with swelled panels and graceful in every line, yet eminently distinct in design. The seats are large, roomy and handsomely upholstered with buffed leather, rolling well back over the top edges and tufted over coil springs and curled hair.”
With all the improvements, however, the K did not sell to anyone’s satisfaction except Malcomson’s, and that was likely because Malcomson’s standards were based in pride of authorship. But neither was the car a flop. In the end, it sold just enough to ensure that Ford and Malcomson would remain unyielding.
“Couzens saw that eventually either Ford or Malcomson would have to leave the company. If he himself wanted to stay, he had to choose sides.”10 Malcomson soon made the decision more pressing by insisting that Couzens resign his position at Ford and return to run the coal company so that Malcomson could manage the car business full-time. When Couzens told Malcomson that he would do no such thing, Malcomson demanded at a board meeting that Couzens be fired. He needed two of the other four directors—Ford, Gray, John Dodge, and his lawyer, John Anderson—to vote with him for the motion to pass. (Votes were individual, not proportionally based on stock holdings.) Only Anderson did, and Couzens was retained. A furious Malcomson was further marginalized when the board voted 4–1 to double Couzens’s $4,000-per-year salary. Malcomson had lost far more than a test of wills at two company meetings. He had forgotten that Couzens was no longer his clerk, and he made an enemy of a man who was a good deal smarter, tougher, and more ruthless than he.
A scheme for forcing Malcomson out was hatched in late fall 1905, and it bears Couzens’s stamp. If all went according to plan, Ford would finally succeed in gaining unquestioned control. And while they were at it, Ford and Couzens decided, they might as well use the opportunity to remove other dead wood—Malcomson’s allies—from the investors’ ranks.
In late December they set their project in motion. As reported in the trades, “The Ford Manufacturing Company has been organized in Detroit, its capital being $100,000 and its purpose being to build motors, parts and accessories to be used in Ford cars. Henry Ford is president of the concern: John F. Dodge, vice-president; C. H. Wills, secretary, and James Couzens, treasurer.”11
On its face, the plan seemed to be sound business—the new company was under the control of Ford Motor, and the creation of a dedicated manufacturing arm would end some of the costly subcontracting and put more of the fabricating process under the direct control of Ford executives. But in a clever little wrinkle omitted from the published reports, the prices that Ford Manufacturing could charge Ford Motor were left open, meaning that if they were set high enough, all the profit from the sale of a car would flow to the subsidiary rather than the parent. This would be of no consequence if the shareholder lists of the two companies were identical, but of course the entire point was that they would not be. Malcomson, Gray, Albert Strelow (whose $5,000 had saved them all), and some other minor stockholders—Malcomson’s personal friends—were not offered stock in Ford Manufacturing.12
Had he not been so overmatched, Malcomson could have launched an effective counterattack. He remained both treasurer and a principal stockholder of Ford Motor. But his speculator’s heart got the better of him. Instead of building support inside the company he had founded, he announced that he would form another car company, Aerocar, to produce “the Car of Today, Tomorrow, and of Years to Come.”
John Gray, who seemed a target of the cabal, was actually a supporter. He went along with being shut out of Ford Manufacturing because he was assured it was merely a short-term ploy to rid the company of his nephew, with whom even he had finally lost patience. “I have Mr. Ford’s promise,” he said, “that when they get things straightened out with Mr. Malcomson, the Ford Manufacturing Company is to be taken into the Ford Motor Company, just as if it had never existed.”13 The directors further turned up the heat on Malcomson by officially asking him to resign as treasurer and give up his seat on the board, citing as justification his intention to establish a competing car company. Malcomson refused amidst harsh words on both sides. Soon afterward, Ford Motor contracted to purchase ten thousand engines from Ford Manufacturing at a price to be determined. The subsidiary had even leased a factory on nearby Bellevue Avenue, ostensibly to produce the contracted material. (These engines would all be for the next rollout, the N, a low-priced model that Ford and the engineering team had been working on feverishly for months. Motors for the Model K would continue to be produced in the Dodge brothers’ plant—although, with John Dodge having a prominent position in Ford Manufacturing, full consolidation of manufacturing and assembly was inevitable.)
In May 1906, having convinced himself that the Aerocar would be a brilliant success, Malcomson agreed to sell his 25 percent stake in Ford Motor for $175,000. On July 12, the transaction was finalized. With the proceeds, he built an 80,000-square-foot building to produce a five-passenger touring car, featuring four air-cooled cylinders that generated 24 horsepower, priced at $2,800. By 1908, he was offering three models priced from $1,500 to $2,200. No one bought them. Aerocar folded, and Malcomson left the car business forever.*6 The following year, department store owner Joseph L. Hudson bought the building and formed the Hudson Motor Car Company—headed by Roy Chapin—to build low-priced cars. Never an immense success, Hudson was sufficiently profitable to remain in business until 1954.
Neither Couzens nor Ford ever expressed misgivings about ousting at a wildly deflated price “the real founder of the Ford Motor Company,” the man who “had given both men their start.” Ford, in fact, would gloat over his triumph in the coming years, never missing an opportunity to remind Malcomson of how much money he had lost. In time, as with many of Ford’s dealings, the series of transactions was sanitized to protect him.*7 Charles Sorenson presented such a version:
As Model N neared production stage, Malcomson became so troublesome that he alienated even the Dodge brothers. There were rumors that he was backing another motorcar company, whereupon Ford, Couzens, the Dodges, Wills, and two other Ford Motor Company stockholders organized the Ford Manufacturing Company, which would make parts for Model N, while the Dodges continued as suppliers for Model K. This move had three results: First, it brought the manufacture of motorcar parts under Ford control. Second, it enabled stockholders to take two profits, one from manufacture of parts and the other from sale of cars. Third, it forced Malcomson to sell Ford Motor Company stock.14
In fact, the first two were contrivances—no one had ever found fault with the Dodges’ work, and stockholders would profit only selectively—and only the third was germane to the move. In addition, although Ford Manufacturing was contracted to produce those ten thousand motors for the soon-to-be-released Model N, Ford, Couzens, and the Dodges assumed that by the time the motors had actually been built, Ford Manufacturing might well no longer exist.
With Malcomson’s departure and that of other minor stockholders, Henry Ford brought his holdings to 58.5 percent of Ford Motor Company. Couzens purchased Albert Strelow’s shares and became the second-largest stockholder at 11 percent. When John Gray died in July 1906, his 10.5 percent passed to his estate—in which Alexander Malcomson was not a beneficiary. With Gray gone, Henry Ford became president of the company.
Malcomson’s prejudice for larger cars had again worked to Ford’s benefit. The Model N, which would turn out to be Ford’s most innovative product and the effective prototype for the Model T, drew heavily on the engineering and design that Ford had been forced to undertake for the Model K. “Shortly after my arrival at Ford,” Charles Sorenson noted, “designs which plainly were parts for a lighter car began to show up on the blackboard and drafting tables. Mr. Ford was applying to this car ideas he had worked out with Models B and K. He was seeking a successor to Model F which would have four instead of two cylinders and torque instead of chain drive, and yet could be made to sell under the $800 minimum for his earlier runabouts.”
With that new model, Henry Ford, at age forty-three, would finally begin the ascent that would make him the richest man in America.