Transcriber’s Notes:
Italic text is clothed with _underscores_.
The spelling, hyphenation, punctuation and accentuation are as the
original, except for apparent typographical errors which have been
corrected.
The wide table of Curb Market trading for years 1906, 1909, 1912 and
1916 has been split into two, vertically, the first displays the years
1916 and 1912, the second half displays years 1909 and 1906 for each of
the three folio pages.
[Illustration: BENJAMIN FRANKLIN
FIRST GREAT AMERICAN TEACHER OF THRIFT AND INVESTING FOR PROFIT
CHARLES E. DURYEA
MAKER OF THE FIRST AMERICAN GASOLINE AUTOMOBILE THAT RAN
HENRY FORD
FATHER OF QUANTITY PRODUCTION OF THE AUTOMOBILE]
Story of the Automobile
Its History and Development
From 1760 to 1917
With an Analysis of the
Standing and Prospects of
the Automobile Industry
By H. L. BARBER
Economist and Financial Writer
Author of “Making Money Make Money,” etc., etc.
CHICAGO
A. J. MUNSON & CO.
1917
COPYRIGHT, 1917, BY
H. L. BARBER
PREFACE.
So far as I know, there is no book in circulation that tells, in
concise form, the story of the mechanical and commercial evolution of
the automobile, mirrors its sudden leap into popular use, and shows how
it has demonstrated, in a most amazing way, the power of money to make
money, describes its benefits to the world, and forecasts the future
possibilities of the automobile industry as an investment.
This book, the “Story of the Automobile,” shows the struggle of man for
one hundred and fifty years to devise a means of propelling a vehicle
without animal power.
It describes the various stages of the evolution of the idea of motive
force other than animal power, in France, England, Germany and the
United States, and its triumphant culmination in a successful horseless
vehicle. And it makes clear how, when the automobile became of
practical use, its successful commercialization became most profitable
in the shortest period of time of that of any product of man’s
ingenuity supplying an article to meet human wants.
But if this were all that could be recorded of the story of the
automobile, this book would not have been written. The automobile’s
success demonstrates all this, and something more—something that would
not ordinarily occur to a person unless his attention was called to it.
The astonishing history of the automobile’s success affords one of the
most convincing and the best modern instance of the opportunities that
are being constantly presented for investing for profit.
It is a signal example kept in our hearing every day by the
Niagara-like roar of the cars along our boulevards, of the fact that
this is the age of golden opportunities for making money make money—of
opportunities that disclose themselves, sometimes unexpectedly, and,
when embraced, are apt to respond with a veritable avalanche of profits.
For was it not an avalanche of profits that overwhelmed the man who in
thirteen years made $200,000,000 and was offered another $200,000,000
for only a small part of his business? And this great fortune made by
Henry Ford did not exhaust the Ford automobile’s possibilities, for
millions are still being taken out of the business, one investor of
$2,000 having received over half a million dollars out of it lately.
When men who are not 40 years old today came out of high school they
either did not know what an automobile was or, if they had seen one
of the very earliest samples, they had no vision of what it would
develop into—no conception of what the future had in store for the
wabbly horseless vehicle, zig-zagging down the street, as a potential
money-maker.
And in the early days of the automobile’s struggles for recognition as
a promising investment, no banker or other moneyed man could be brought
to believe that it held out any reasonable hopes of great gain. No one
could foresee, not even the inventors of the automobile, that in less
than two decades the business done through its comparative perfection
would rank fourth in order of the industries of the United States. And
still less was there anybody so foresighted in the possibilities that
lie in money to make more money, as to vision the billions of dollars
of profits to be paid out by this one idea of a horseless vehicle.
We can find few instances which so forcefully show, as the automobile
industry shows, the chances for profitable investment in a short time
which may come from sources supplying the needs or pleasures of the
great mass of the people.
The chapters of the “Story of the Automobile” devoted to its
commercialization make clear that its greatest success has been due
to the production of automobiles at a price within reach of people of
ordinary means. For this the one man most responsible is Henry Ford. He
has demonstrated in a manner of many millions that the most money is to
be made out of things used by the greatest number of people—things that
become common needs.
The enduring truth of the profitableness of Philip D. Armour’s
apothegm, “Make and sell things that are ‘et’ up,” is not discredited
by the automobile industry, for the use of the automobile “eats” up
steel, brass, wood, rubber, leather, gasoline and many other natural
resources. The automobile wears out and has to be replaced, so it
properly comes in the category of things “et” up.
This truth, that the greatest profits lie in products that can be given
general distribution, with a consequent large sale, which is one I
have maintained in my book, “Making Money Make Money,” in my magazine,
“Investing for Profit,” and in all my teachings on the science
of investing, finds a splendid exemplification in the automobile
industry’s success as a phenomenally profitable form of investment, and
the circumstances of this success are but cumulative evidence of the
soundness of my doctrine.
And the success of the automobile industry in the measure and with the
speed it has achieved verifies not only this claim I have made and
maintained, but confirms my contention of the value of co-operation.
I have preached co-operation as urgently as I have advocated, as the
best objects of investment, the value of things used popularly and in
quantities.
The “Story of the Automobile” could not have had written into it the
glamour of the golden guerdons of Golconda but for Ford’s idea of
quantity production, reinforced by co-operative standardization of
parts. Co-operation between the manufacturers produced standardization,
and standardization enabled quantity production, and the low price
which quantity consumption warranted has caused automobiles to be
bought by millions, and the purchase of the automobile in millions,
instead of thousands, has made the hundreds of millions of dividends
which this wonderful mine of profits has yielded.
The “Story of the Automobile” is one of the best and most notable
proofs of two of my convictions bedded in the concrete of experience,
namely, that the most promising investments are those made in natural
resources and enterprises which the largest number of people can
patronize, and that co-operation is one of the most effective forces
in nature, and, therefore, applicable to the affairs of men as a
beneficent influence, and, if efficient, the handmaiden of success.
The story of the automobile has herein been treated in a way that not
only presents a graphic relation of the automobile’s development as an
invention, its commercialization, its benefits to man and the position
it occupies as a notable example of earning power, but in a manner that
develops the many morals taught by its success. The method of treatment
of the subject matter is uncommon, and, for this reason, interesting, I
trust, to those who read the book.
The chapter contributed by Mr. Edward G. Westlake, automobile editor
of the _Chicago Evening Post_, is a resume of automobile conditions
from the intimate viewpoint of a writer who has specialized in the
automobile, and enjoys a deserved reputation as the dean of the
automobile editors of the daily newspaper press. Every one interested
in automobiles will derive information and entertainment through
reading Mr. Westlake’s presentation of the amazing features of
automobile industrial figures. In it he states interesting facts not
stated elsewhere in the volume.
The book’s interest and value as a contribution to automobile
literature, of which there is not much in book form, would be less
than they are, but for the participation in its preparation by the
Business Bourse International, Inc., New York, whose vice-president,
Mr. J. George Frederick, is one of the highest authorities on business
economics.
The chapter by the Business Bourse deals with the automobile industry
from the standpoint of the financial and investment aspects of the
automobile, accessory and tire manufacturers’ securities, and Mr.
Frederick’s reputation in the financial world is a guarantee of the
authoritative accuracy of the facts presented in this chapter.
Credit for salient facts in the history of the automobile, obtained and
used in the “Story of the Automobile,” is given to a large volume of
nearly 500 pages, “The Romance of the Automobile Industry,” by James
Rood Doolittle, issued lately by The Klebold Press, New York city.
This volume is the most exhaustive work in book form yet published on
the automobile, and covers graphically every phase of its development
and popularization. It is virtually a textbook and reference guide of
facts of motor car history, and devotes particular attention to the
personnel of the founders of the industry and those engaged in it, and
the association features.
I can only hope that the work entailed in presenting this, the
“Story of the Automobile,” has been done sufficiently well to make it
interesting and instructive to those who read it.
H. L. BARBER.
Wheaton, Ill., April 2, 1917.
CONTENTS
PREFACE 1
INTRODUCTION 11
CHAPTER I.
Introductory—Automobile Figures Are
Amazing 27
Industry reaches two billion dollar mark—optimistic of
future increase—point of saturation far off—reliability
contest a factor in popularizing automobiles—Ford, the
wizard who converted the industry to price reduction—installment
plan of payment—part machining plays in low
selling prices—women a factor in automobile buying—good
roads now the industry’s greatest aid—farmers as
available prospects.
CHAPTER II.
Mechanical Evolution of the Automobile 49
First horseless vehicle constructed by Cugnot, a Frenchman,
over 150 years ago—invention traced in different
countries, down to the first successful gasoline automobile
made in the United States by Charles E. Duryea in 1892—prohibitive
laws in England discouraged invention there—Evans
in 1784 first American to experiment in horseless
vehicles—French and German inventors’ part in development—Selden
first patentor of gasoline motor—inventor’s
difficulties in interesting capital—electrics appear—steam
preceded both electrics and gasoline.
CHAPTER III.
Commercializing the Automobile 77
Steam and electric types outstripped by gasoline car—co-operation
partly popularized motor car—standardization
enabled price reduction—tungsten and other alloys, heat
treatment of steel, advertising and invalidation of Selden’s
patent, in the industry’s development—reasons for United
States’ supremacy in industry.
CHAPTER IV.
Automobile Industry As an Investment 139
Industry had little original capital invested in it—present
investment largely made up of profits—difficulties in getting
capital—dealers put up money to finance distribution—production
not reached its height—commercial cars and tractors promise great
opportunities—industry a surprise to economists—large as it is,
industry still in comparative infancy.
CHAPTER V.
Benefits Conferred by the Automobile 155
A medium of exchange of knowledge and ideas by bringing
people together—uproots bigotry and removes prejudice—revolutionizes
thought and habits, and liberalizes
mind—emancipates woman from drudgery of domesticity—increases
social amenities—a health giver; saves human
life; aid in eugenics—stimulates better roads—saving in
war.
CHAPTER VI.
Reports on Automobiles, Automobile Accessories
and Tire Manufacturers Securities
from a Financial and Investment Stand-point 171
Economic history, and its relation to stock trading in
the automobile industry—securities traded in on New York
stock exchange and curb—securities on exchanges in other
cities, and data for 1916—principal securities not generally
traded in—prices and terms—newer entrants—security
issues of tire companies—comparison of automobile with
other securities—present and possible future trend—graphic
charts and comparative tables.
CHAPTER VII.
Passenger Automobiles Manufactured in the
United States 219
Range of prices in effect April 1, 1917.
CHAPTER VIII.
Gasoline Trucks and Delivery Cars Manufactured
in the United States 231
Range of prices and other data prior to April 1, 1917.—Courtesy
of Everybody’s Magazine.
INTRODUCTION.
“What did Benjamin Franklin have to do with the automobile?” a great
many readers of this book will ask.
Benjamin Franklin was many-sided, and he had a great deal to do with
much that affects the birth of the American nation; and if it had not
been for what he and other patriots, statesmen and diplomats did, the
automobile business might have been in this country today exactly what
it is in England today—and that is a very insignificant industry.
Among other things Franklin was a signer of the Declaration of
Independence, and it was the American Revolution that made the
automobile industry of today possible; for, had there been no
revolution, we would probably still be a dominion of Britain beyond the
seas, and it is pretty certain that England would have had in force
in the colonies the laws she kept on her statute books until 1896,
practically prohibiting, by the imposition of excessive road tolls, the
use of the public highways to horseless carriages.
For, strange as it may seem to us in this country, which Emerson
epitomized as another name for opportunity, the English horse owners
and people generally resented, as early as 1840, the progress
represented by the automobile, and stifled all development of it from
that time to a date when France, Germany and the United States had made
it a real factor in transportation.
If, therefore, Franklin had not helped to free this land from the
British yoke, the automobile industry might have been in the United
States what it is in England today. France and Germany might now have
been doing the automobile business of the world, with England and this
country buying from them, as England and France are now buying from the
United States, whose automobile supremacy at this date is unquestioned.
While the gasoline type of automobile today is the most popular, this
is not to say that the electric type is not a success scientifically
and commercially. Indeed, the future extent of the automobile’s use
for commercial purposes is said by experts to depend largely on the
electric driven type.
And who will deny that but for Franklin the electric motor would not
have been, for it was he who wrested the thunderbolt from heaven, as
well as the sceptre of dominion over our land from the tyrant. Franklin
as the discoverer of electricity may well be accorded the credit
for the electric automobile, which has played no small part in the
development of the automobile industry, a fact which every student of
automobile history will concede.
It is, however, on an even firmer foundation than either of the
causes mentioned that Benjamin Franklin stands as contributing to the
success of the automobile industry. The inventors could invent and the
manufacturers could make the automobile, but who, pray, was to buy it,
if it was to be in general use, if not the common people? And how, may
we ask, were the people going to buy it without money?
As the great teacher of frugality and thrift, Franklin laid the
cornerstone, 150 years ago, on which the superstructure of the
American automobile industry has been erected. For, assuredly,
had the seed planted by him failed to germinate and ripen in the
American consciousness, we could as well have been today a nation
of spendthrifts as a people self-denying, thrifty and frugal. He
inculcated those principles of temperance and economy in the lives of
our forefathers which have been handed down to us from one generation
to another, to our advantage and as an aid to our saving habits, by
which we are enabled to buy automobiles.
Many a motor car today owes its ownership to the teachings of Franklin.
Many an automobile buyer would never have become one had he not heeded
Franklin’s injunction, to “Remember, a patch on your coat and money in
your pocket is better and more creditable than a writ on your back and
no money to take it off,” and the investor would not have put money
in stocks of automobile companies if he had not learned the truth of
Franklin’s teaching that “Money makes money, and the money that money
makes, makes more money.”
Franklin having done what he could to prepare American citizens to
economize and save against the day of the automobile, and to invest
their money in its manufacture, and the American citizen having
followed his teachings and accumulated enough to buy at least a Ford,
and perhaps a few shares of automobile company stocks, the man appeared
who produced the first gasoline automobile in the United States. That
man was Charles E. Duryea. His reputation rests on the fact that,
though there were steam and electric automobiles in existence, and the
gasoline motor had been developed, he was the first to put gasoline
motor and buggy body into co-ordination and make the first run the
second. To Duryea, the constructor of the “buggy-aut,” is accorded the
credit, by automobile history, of being the father of the American
gasoline car.
Following Duryea by only one year, came the genius who put into
general circulation the universal car.
A reading of Henry Ford’s biography discloses that his first idea, that
the big money was in production in quantity—that a million articles
sold at a profit of 50 cents each was a better paying transaction
than ten thousand sold at $3.00 each—was in connection with a watch.
Watches and clocks were the first things that Ford subjected to the
mechanical promptings of his boyish mind, and he had it all planned out
to make a 50-cent watch before Ingersoll had conceived the commercial
possibilities of a dollar one.
An accident which his father met with called him from Detroit to the
Michigan farm, and this accident deprived the country of a 50-cent
watch and gave it a $350 automobile instead. And most people will agree
that it was a fair exchange and no robbery. Thomas A. Edison, strange
as it may sound, was responsible for the practically universal use of
the Ford automobile, for he it was, who, by the chance remark, “What
you want to do to make money is to make quantity,” started Ford on
his downward price career. We have it from Mr. Ford himself that he
heard this statement by Edison, and that it so impressed him that he
made it the rule and guide of his life; that he never renounced the
idea. When, after building a motor that was a success and commanded
the attention and capital of moneyed men in Detroit, Ford formed
his first company to build his car, this great idea was obstinately
adhered to by him, and was the cause of his falling out with his
moneyed partners. They could not see the light which has given Ford his
halo—the great white light of quantity production. This light burns
with steady brilliancy because it is generated by the great principle
of the greatest good to the largest number. Ford’s associates in his
first company were not believers in this principle, evidently, because
when they fell out with Ford about it, and Ford got out of the company
to start the one he now controls, they went ahead making cars that
sell today for from $2,300 to $3,900. But though they have made fair
profits, they have not made the fabulous sums that Ford has, and one
can only wonder how they feel about it, and if they realize the error
of their views. They are probably wiser if not richer.
The success of Ford’s idea of quantity sales demonstrates a great fact
in the affairs of life. It is that fields of human endeavor are not
exhausted or worked out until the human race has ceased to exist. Take
any line of enterprise you will, and it has as many facets as a prism.
An idea only is needed, which, if the right one, illustrates the
enterprise as lights thrown on the prism cause it to sparkle in many
colored rays.
We think, for instance, that the acme has been reached in the making
and marketing of bread, but along comes a man with an idea for making
bread of bran, and he is immediately ushered into the inner sanctum
of the temple of great profits. Or we imagine that the last word has
been said in cereal foodstuffs, when lo, and behold, the man with the
right idea proves that the field has room and to spare for a financial
success in so simple a thing as rice dressed in a palatable and salable
form. And so it is in everything, automobiles especially. The man who
conceives the idea of a sport car supplies a want that others have
neglected. There may be many automobile tractors on the market, but the
human brain conceives one with some feature lacking in others, such,
for instance, as making a Ford automobile interchangeable into a farm
tractor, and it has an immediate and large success. And if anybody had
an idea that the profits from producing petroleum might be limited by
the use of gas and electric light, it was because the automobile’s
enormous consumption of gasoline and the use of oil by ships could not
be foreseen.
The field for investment is kept constantly fallow, and ready for the
seed that is to fructify into great profits, by the human brain which
is ever active—ever thinking. If its product is not an elemental,
it is a supplementary idea, as the rubber tire, the demountable rim
and the self-starter for automobiles. Until the world has arrived at
perfection in all things, the ultimate will not have been reached.
The opportunities of today and tomorrow are as great as they were
yesterday. It is a question whether they are not greater, for if the
quotation ascribed to Emerson is true, that the world will beat a
path to the door, though it be in a forest, of him who makes a mouse
trap better than his neighbor, the future possibilities of enterprise
are favored by increased population and the element of the cumulative
nature of the wants of man. As inventions and articles of use increase
in number, new needs which demand supplementary products are created.
Each new thing given to the world brings in its train other new things.
The crank of a Ford auto creates a demand for a self-starter. The
increase in population and wealth brings in its train a multiplication
of human units whose use of created things is on a crescendo scale.
The financial successes in the automobile business, great as they
are, have followed the inexorable law that the richest returns in
all investments are the ground floor ones. The history of no big
business demonstrates more clearly that the way to make money is to
invest in new companies when they are offering the first authorized
capitalization for investment subscription. Money-making opportunities
for new investors are always greatest in enterprises whose development
is ahead and in the future. If they have reached the stage where
development is already producing great profits, the door is closed to
the new investor, or else he must pay a premium to sit in such paying
company.
In the ground floor days of the Ford money-making machine, Miss Couzens
“risked” $100 on Ford. That $100 produced $100,000 in cold cash. But
it did so only because the inception of the Ford enterprise provided
the opportunity. Having made its half a billion, or more, the Ford
enterprise is no longer enterable on any basis that would give such
returns for each dollar invested. When money is needed enterprise is
willing to pay liberally for its use. When enterprise has all the money
it wants, money’s value to it is less. This is the most natural law. It
is a law that operates in other things besides money. “He that hath,
needs not; he that hath not, wants.”
The automobile industry illustrates graphically that when an enterprise
develops to the point where it is well grounded and has reached a
period of age and steady earning capacity, it is not new investors
who may come in and gather the richest plums, but the old ones, those
who helped to give it its start, who stood by it when the future was
obscure, and the ultimate outcome not certain. There is probably no
business that shows as many people in it now, who were in it at the
start, as the automobile business. This applies to manufacturers,
distributors and investors, and is, to a certain extent, due to the
industry’s newness. The original Ford investors are practically all
intact. It is the original investors who have reaped the reward of
their courage in embarking in new enterprise, and who have shared in
the division of the juicy melons the automobile companies have cut in
the form of huge stock and other dividends. We need no better proof of
the fact that ground floor investments promise the greatest returns on
money invested than the financial history of the automobile.
While quantity production and the co-operative spirit which led to
standardization were the keystones in the structure of the present day
automobile success, the history of the successful development of the
automobile demonstrates another fact, which is a vital one in the
realm of investment.
This fact is that most great financial successes are built on our
natural resources. This is peculiarly so of the automobile industry.
The steel, wood, rubber, leather and glass of which the automobile is
composed, are all products of the ground, the forest or the farm. It
could not be said that the products of the earth directly make the
profits of a stock life insurance company, but this can be said of the
automobile industry, and its history discloses that the automobile
business of the United States was four times rescued from failure,
first, by petroleum, for steam and electric cars would not sell in
quantities, and the gasoline from petroleum was needed to give the
automobile its great vogue, once by tungsten, vanadium and chromium,
again by the quantity production theory, and finally by co-operative
standardization.
At one period of automobile development, the manufacturers were ready
to give up in despair because cold-rolled and high carbon steels
only were available, and these made the weight of the car and the
price obstacles to its popular adoption. At the stage when failure
to produce a car at popular price was imminent, there entered on
the scene tungsten, chromium, vanadium and aluminum, all natural
resources, and they, combining with standardization, made quantity
production possible. Tungsten, alloyed with steel for valves, chrome
steel for springs, vanadium in steel to impart purity, and aluminum for
lightness, reduced the weight of the automobile 25 per cent, enabled
motors to be made smaller, tires lighter, original cost less, and cut
down upkeep cost to the users of cars. Quantity production thus was
made possible, and natural resources again vindicated their claim to
being premier possibilities of profit.
Of the future of the automobile and of products allied with it or
sharing in its construction and prosperity, as continuing money-makers,
all indications are that the profits already taken out of the motor
car industry in the United States are but placer croppings, and that
the years to come will record the workings of the real vein. This real
vein, in the opinion of the man who looks ahead, is in the use of
passenger cars, haulage trucks and motor tractors by the fifty million
of the population of this union of states who are on or of the farm.
As yet, the farmers have not risen to the full possibilities of motor
power in economic superiority over horse power for haulage, ground
cultivation, and other uses to which the horse is now put. Elements
which will hasten this awakening are the scarcity of man labor and
the workings of the immutable law of economics. There is not enough
food being produced by the world to supply the demand. If there were,
prices would be lower. Prices will remain high as long as the supply
falls below the demand. As long as they remain high, the stimulation
to greater production will continue, and this urge can have but one
result, which is to force the producer to adopt the most economical
method of production.
It has been determined that motor power is cheaper than horse power. It
is, therefore, only a question of time when the horse will go from the
farm as he is disappearing from the cities. In this evolution will be
found the money-making possibilities of investment in the motor tractor
and the motor truck. Their adaptation to the smallest as well as the
largest needs of the tiller of the land is now being assured.
With the horse, the farmers of the United States have been able to
break up only 70 per cent of the cultivable land not in timber. There
are over two hundred million acres of tillable land that have never
felt the cold steel of a chilled plow. There are two hundred million
more acres in timber that will, much of it, ultimately come under the
plow. Besides crippling the labor supply in this country, the European
war has taken a million horses out of our supply. The case in favor of
the tractor coming ultimately into common use seems from all this to be
completely made out—its adoption in large numbers being only a question
of getting the price down to a basis which will insure quantity
production. As this was done with passenger automobiles, it would be
folly to say it will not be done with tractors and trucks.
Figures showing the total amount of money that has been taken in
profits out of the automobile industry have never been compiled. It
is a business that has developed so rapidly and feverishly that the
water churned up by the commotion it has made has not yet settled. But
there is a record of enough individual instances of gigantic profits to
prove that the largest individual appetite for dividends should have
been satisfied by the ratio of earnings already made in automobile
manufacture.
But in every case the greatest profits were in the stock of those
companies that complied with Edison’s rule of large money-making—“What
you want to do to make money is to make quantity.” And they were also
companies which made an automobile that could be “‘et’ up,” as Armour
put it, by time and use, in less time than it takes time and use to eat
up a higher priced machine.
Ford, Overland, Reo—you will recognize this trinity as the leaders in
sales, and by the same token they have been the leaders in profits.
When it is stated that Henry Ford made $200,000,000 in thirteen years,
and was then offered a like amount for only a small part of his
enterprise, we may well believe that he credits his own statement that
“anything for only a few people is no good. It’s got to be good for
everybody or it won’t survive.” Other Ford investors profited on the
basis of $5,000,000 for each $10,000 invested. After the parent Ford
company had established a record of a million dollars a week in profits
in the United States alone, Ford stepped across the river into Canada
and organized a company there which is earning fifty per cent a year on
its capital of $10,000,000.
Profits of $52,000,000 in capital stock alone which has been built
up almost entirely of dividends earned, is the record of the
Willys-Overland Company. John North Willys founded the success of
this great money-making business on his personal check of $500,
cashed at great trouble during the panic of 1907, when the Overland
company was ready to go into bankruptcy. Besides the dividends
applied to increasing the capital, an immense amount in profits
has been disbursed by this enterprise. The dividends in 1916 were
$11,000,000, over 20 per cent of the capital. This year they will
likely be nearly double that amount. The Reo Motor Car Company has
paid over $50,000 on an investment of $1,000. These three are not
by any means all the automobile companies which have contributed
to make the automobile industry a signal example of the earning
power of money, but they represent the leaders of the popular or
quantity-production-through-low-price type. There are about 150
passenger automobile companies that are profitable in varying degrees,
proportioned to their price, not to say anything of trucks and
tractors, in the marketing of which fortunes are also being made.
CHAPTER I.
INTRODUCTORY—AUTOMOBILE INDUSTRIAL FIGURES ARE AMAZING.
BY EDWARD G. WESTLAKE,
_Automobile Editor, The Chicago Evening Post_.
During the year 1916 the automobile industry in the United States
entered the “billion dollar class,” and manufacturers who have
membership in the National Automobile Chamber of Commerce which holds
the industry, as it were, in the hollow of its great hand, made no more
ado over this significant, almost amazing development than to meet in
the annual banquet and reiterate their statements that the critic did
not live who could predict, with certainty, the gain that might be made
in 1917.
It was expected that the industry would climb into the billion dollar
fold—men said that the fourth industry in the country had the financial
stage set for starring the “Big Billion,” and they never permit
themselves to see a possibility of a recession unless steel becomes
too great to be kept within bounds—in short material price is the only
problem the venturesome automobile maker will put down for earnest
discussion.
Accurate figures spread on the records of the National Automobile
Chamber of Commerce indicate that retail sales of motor vehicles in
1916 totaled $1,068,028,273. This total includes a production of
1,525,578 cars and 92,130 trucks. The passenger cars were valued at
$921,378,000 and the trucks were listed at $166,650,275. When the
statisticians of the national organization compared figures and found
the gain was 80 per cent, and paused long enough to find that the gain
the year previous had been 36 per cent, they talked about the complete
automobilization of the country and the inevitable addition of more
than 2,000,000 to the total of cars in operation in the United States.
PRICE DROP IN ONE YEAR.
Weight decreased, as the engineers had planned, and the average price
of cars decreased in one year from $671 to $605. In the eight previous
years the average price of automobiles had dropped from $2,125 to $814.
Wall Street, which once had only the cold shoulder for the automobile
producer, took a permanent seat at the table where daily the industry
was dissected, analyzed, weighed, discussed and reviewed; and, as a
result, it is as difficult to keep from the financial eyes of Wall
Street the operations of the great automobile factories as it would
be to hide the clearing house reports. The keenest financial and
commercial experts of the United States have learned to keep the motor
car industry constantly under surveillance—not that they mistrust the
manufacturers, but that they have found the industrial situation is so
firmly linked to the dollars and cents program of the country’s economy
that nothing may successfully act to deprecate the importance of the
auto industry. Time was when General Motors sold as low as 40—what
Stock Exchange expert would expect to see this stock sell for less than
105?—and if conditions were to become so chaotic that General Motors,
with its prosperous units, were to break to a point or two under par,
what financial student would not search for something akin to a Black
Friday?
Immutable laws work in the automobile industry. The maker daily takes
a course in the University of Production, because an army of selling
factors constantly is attending to the absorption facilities of the
country’s markets and he rarely permits himself the task of figuring on
the “probable saturation point.” It is a wonderfully important thing
to the maker that the national Organization gets official reports,
guides the policies of standardization, holds an indefinable influence
over the engineers of the industry, and sits as the congress of the
Republic of Motor Car Production. The auto industry of today is,
perhaps, the most intricate thing in the country, and yet so responsive
to the law of supply and demand that there is not an element of
guesswork in it.
Although more than two hundred automobile concerns that had entered
the arena of business, developing from the “blue print stage” to
manufacturing concerns of considerable output, had failed in the last
twelve years, the automobile industry had been a big paying one.
Pioneers who remain and whose works annually pay dividends, accepted
the failures as the necessary concomitant of a great business that only
showed an output of 3,700 cars in 1899 and only 11,000 vehicles in
1903, the amount growing to 485,000 cars in the year 1913.
“Our house is a generally well ordered one,” the maker delighted in
saying. “The industry is like a science. The engineer has brought
standardization to almost finality, the matter of styles and body
designs is an exact science, the tire companies have been keen rivals
but beneath their terrific competition they have permitted the stream
of co-operation in tire standardization to run smoothly, and the
manufacturer has spent his money wisely in equipping his plant with
plenty of large-quantity type of machinery and increased his plant
to enable him to handle the large production. Increased production in
economically managed plants spells the maximum of profit.”
POINT OF SATURATION FAR OFF.
And with experts bold enough to say that the field of prospects facing
the industry numbers 5,000,000 probable buyers, little thought is given
to imminence of “saturation” and a consequent rehabilitation of the
motor manufacturing and distributing plans. In the plainest language
that it is possible for the automobile maker to use he says today: “The
maker who has an adequate organization and builds a pleasure car or
truck that is as good as specified and who permits no retrogression in
his organization, will succeed.”
“Luxury and necessity.” The automobile maker is willing to have his
product classed in this way. For the early years of the industry the
car was a clear cut “luxury.” It weighed so much that its cost was
prohibitive to the big family of “Necessity.” The car simply had to be
“had” by men of large incomes. Automobiles were not sold by intensive
salesmen in those days—the family bought them, even as a fine jewel was
purchased at the great jewelry houses. Tremendous prices were paid, in
comparison to the set prices of the automobile industry at this day.
The “make” of the car that stood in front of the owner’s home often was
accepted as a basis for rating the social position of the owner. Seat
cushions, slip covers, fine upholstery and the name plate on the car
told a big and varied story.
Immediately following the craze to buy the high priced cars, developed
the “man Friday” of the industry—the chauffeur. And the chauffeur
worked readily with the wealthy man, often advising the purchase of
the foreign machine upon which Uncle Sam collected a very large duty.
But the foreign made car had its stamp of distinction, perhaps much
easier to utilize in the form of extravagant, even snobbish, style
of life that the owner of the foreign car elected to affect, and the
United States manufacturer of cars was not at all prepared to put out
a car that would correct the desire of Americans to drive around in an
imported article.
But the domestic car had a friend in this contingency. Economical
living was that friend. Ruin often followed the extravagance of
those who bought the high priced and, as many experts said, inferior
imported cars. Homes were mortgaged and all the financial trails were
traversed in the effort to maintain an impossible extravagant life.
The banker began to detest the automobile. It seemed to him that it
was undermining the life of the nation. Something had to be done to
correct, also, the tone of the domestic automobile maker’s life. He
developed a desire for watered stock. Over capitalization of his plant
was suspected by the banking interests, and on every hand the motor car
industry was decried. Waste and inflation stalked arm in arm through
many plants. It even was said that the industry was only a “game”; that
incompetent executives kept their eyes on the broker’s tape, while
corps of associates in the factories were ready to play the “game” for
all it would stand.
Few were blind to the prospects in the motor industry at that time, if
the financial interests of the country were estranged; but no one was
able to withstand the developments. The fire of criticism cleaned out
the dross. Organization, the big thing needed to eliminate the “game”
and give the industry the foundation upon which the large “billion
dollar business” subsequently was built, began to come into being. Men
of energy and brains got to work. These characters have remained. There
are those veterans of the industry who say that the year 1907 marked
the start of the business on the basis of a real industry. In that year
44,000 cars was the total output, and the value of the product was
registered at $93,400,000. This was the highest total of value for the
output of the industry so far reached in the United States.
The next year the industry built 85,000 cars, valued at $137,800,000,
and quantity production, efficient buying of material, strict
attention to cost production in the plants, effective steps toward
standardization, engineering methods that abolished a great deal of
weight, etc., began to be set standards among car makers. The official
statements of the industry show how well the improvements fitted in.
In 1909 the production of automobiles amounted to 126,500, valued at
$164,200,000. The following year the output climbed above the 200,000
mark, and since then the production figures have mounted steadily.
Automobiles were _sold_ and competition became keener, but the output
increased.
VALUE OF RELIABILITY CONTESTS.
With the new era of development in the early nineties came into
prominence farseeing manufacturers who paid heed to the thought that
the best way to put a fit and efficient motor car into the hands
of the public was to test the car, its material and its mechanical
practices, in some officially conducted series of reliability contests.
Besides, it was urged there was a “romance of business” attached to the
motor car industry that would lead to a greatly increased amount of
publicity in the press.
The national annual reliability competitions grew into wonderful
favor. Makers strove hard to win the reliability titles. The “Glidden”
tours became the tests that attracted not only the attention of every
automobile man, but the general public. The whole country became the
testing ground. For several years these national events did well the
work they were expected to perform. Automobile building received,
perhaps, its most practical aid. Makers learned. They took advantage
both of the mechanical data and the publicity. A complex but valuable
adjunct of the national tours became popular—every region in which the
American Automobile Association was a factor, and this organization
continues to be a powerful aid to the industry, had its reliability or
its endurance classic.
It has been said that the manufacturers of automobiles lost interest in
national reliability tours after the test of 1911. Perhaps many did.
But the truth, as told by a wonderfully efficient engineer, is that
there remained nothing more that a national tour could teach the car
builder. He had measured the power of his steel to withstand shock, he
had calculated the efficiency of his motor to stand its daily tasks on
a strenuous schedule, he had learned of the troubles of his rivals and
he had spent his money liberally, at the direction of his engineering
department, to make a car that would do anything a less skillful driver
than a national tour pilot could ask of the machine. The national tour
became a luxury. It was revived in 1913 on the long and strenuous grind
from Minneapolis to the Rocky Mountains, and an immense amount of
valuable information was the result. But the national tour seems to be
now chiefly remembered by the occasional discourse of an engineer who
tells of the long struggles in the mud and the hardships of sand and
dust storms.
With the added development of the plants, came another reason why the
national tour was not necessary. Testing tracks were added to the
maker’s plant assets. Testing on the roads followed the block tests of
the motors, and it began to be accepted as an axiom in the industry
that the engineer knew to a hair’s breadth what his engine could do
before it went out of the secret room where the chief engineer worked.
Meanwhile prices constantly were beaten down. The field of opportunity
to own a car widened. It was, even then, so much bigger, in comparison
to that in the Old World, that even the clerk and small salaried man in
general looked with a smile toward the day when he would own a car.
It is recalled that when the manufacturer began boldly to put the
farmer in the class of available prospects—openly declared his idea
of building a car that he could sell in the agricultural districts
as readily as cars were sold in the city districts, one man who this
year is making 750,000 automobiles, gave to the world his edict which
resulted later in the United States court sustaining his contention
that the “Selden patent” under which the organization of makers was
maintaining its official life, “was not basic, in fact was not worth
the paper it was printed on,” and he would refuse ever to recognize
the right of the national organization to grant licenses to make the
internal combustion engine and the chassis that went with it.
The public read with a strange feeling, the record of the great
litigation against the “basic patent.” It seemed like a battle of
Titans, and ordinary folk thought it might result in danger to the
industry. But only the lawyers were strenuously engaged. They argued
and submitted briefs for more than two years, the national organization
of the makers who accepted the license of the “Selden patent,” honoring
their national organization by paying to the treasury their pro rata
on the amount of cars made.
An enormous fund grew. But the man who wanted to make from 200,000 to
750,000 cars a year was determined. He won in the Federal court and
almost immediately the “licensed association” began to break up. The
contributions of license fees ceased and soon the association was a
thing of history. It was succeeded by the National Chamber of Commerce
which has become the senate, house of congress—the parliament, if you
please—of the automobile industry in the United States. Some, there
were, who had a very poorly defined idea of the actual mission of the
“licensed association,” believing that it was a “trust,” called its
function destructive. They thought that the officers of the association
would lay an embargo upon certain manufacturers and allot a more
liberal figure on annual output to the larger and stronger firms in the
organization.
FORD, A “WIZARD” AND “GENIUS.”
Unfortunately at that time, the licensed association had not the grasp
on patent protective measures, engineering work, standardization,
etc., that obtains in the present national organization, and the real
mission of the licensed association never became wholly evident to the
public. But the organization did its part in laying the foundations of
the industry. It made the handwriting on the wall for popular price so
large, that every man who subsequently invested a dollar in automobile
making read, pondered and agreed. It placed popular price and
standardization of mechanism in the same category—linked them so that
the words of the Detroit automobile manufacturing wizard became axioms.
The Detroit genius had proved that the depth and capacity of the
automobile market was exactly in ratio to the possible price reduction.
Amazing but true, the big men said, was the field that the lower priced
car opened to the thoughtful maker of cars. Manufacturers began to
talk of some day building and selling as high as a million automobiles
in one year. Others calmly declared that when the motor car sales in
cities began to “slow up,” there would be still more than 5,000,000
prospects in the agricultural districts. Others drew diagrams intended
to show that there would be a market for any priced cars that were
built in this country, the few persons with large incomes assimilating
all the high priced cars, and the many with average incomes absorbing
the quantity production at popular prices. All allowances were made for
the increase in the cost of labor, materials such as steels and other
metals, leather, etc., and some even went far enough to include the
possibility of a foreign war on large proportions and its effect upon
the industry.
No one gave concrete thought at that time to the possibility of a
skillfully conducted partial payment organization of a national nature
that would aid the small salaried man in buying his automobile on time
payments. But that came about and still is working out its part in
the great economic scheme of distribution of the factory output. The
makers did not essay digging into the dealers’ and distributors’ plans
for moving cars delivered to them for cash from the factories, and
they were not bold enough to say they could finance any time payment
and chattel mortgage plans. But many of them admitted the great value
of the plan, if a distributer, through a proper alliance with his
banker, could make sales in that manner and realize his money. The
public learned well, early, that the maker of cars rarely consigned
any automobiles to a dealer. The maker sold for cash—the draft had to
be presented by the dealer or distributer before he could unload the
freight car. It would be legitimate business, the public said, for any
automobile dealer to finance himself so that he could sell cars on
time. On time today is a mighty big phrase in the industry. It means
many a car added to the annual output.
With the growth of incomes in the United States the statisticians found
there were more than 6,000,000 people in this country with annual
incomes of more than $1,200, and 3,500,000 with annual incomes of more
than $1,800. All these things aided in installing confidence in the big
men of the motor industry. Quantity production became the password for
the manufacturer. A new development in distribution was wonderfully
improved—dealers from all over the country were brought to the factory
of the car maker, and after a convention of a few days, the dealers
were invited to sign up for the coming year, nominating the number
and type of models they would buy. The maker pored over his order
blanks when the dealers left, made his plans for material accordingly,
and there was only prosperity in each automobile factory, as a rule,
for the remainder of the year. The orders were indicative of, safely
speaking, sixty per cent of the signed total. Some makers took chances
and built very close to the total agreed on by the dealers, and, except
in few cases, the scheme worked out. Today the maker studies all
conditions and accepts the orders of his dealers, setting the figure of
output after numerous factory conferences.
Makers who could point to an annual production of, say 400 cars,
took counsel among themselves, and some 50 increased their factory
efficiency and financial responsibility that they can now point to
an output of as many cars in one day as they made early in their
manufacturing experience in one season.
The writer recalls one manufacturer who, about nine years ago, had an
output of about 500 cars for one season. Only recently he paid close to
a quarter of a million dollars, if indeed his extra expenses did not
bring the total to $300,000, to conduct a twenty-one day convention at
his factory covering a site of seventy-nine acres, at which dealers
from the four quarters of the country were entertained. He had daily
meetings in the big halls of his administration building, and his
lieutenants carefully outlined to all the plans of the company for the
year, and exploited the line of models.
“We have $30,000,000 in materials purchased, and expect to get all
this material when we need it for manufacturing cars,” said the big
man to his dealers. “But the war in Europe has caused many problems of
price and quantify to arise, and heaven only knows what the material
situation will be after July 1. I advise you to order all the cars
you need—think well of your requirements—and stick by that number.
Then you will not be like many are bound to be, who are indifferent to
manufacturing conditions—you will have cars to meet the biggest demand
the industry ever has known.”
That automobile president had the pleasure of meeting thousands of
dealers, speaking to more than one thousand of them daily, and with
his factory production manager he figured the probable needs of his
country-wide organization of dealers and branch houses for the year.
It is significant that the few changes he made on his early winter
production table, which the writer was permitted to scan, were made
only in the “increase columns.”
THE PART MACHINING PLAYS.
It would lead to the exhaustion of the reader were many details to
be given showing how the makers made quantity production and economy
of factory operation an assured thing. The largest rooms of wholly
automatic machinery were equipped, so that a large amount of crude
steel wires, rods, etc., practically go into a factory at one end
and come out at the other, fully machined and ready to go into the
assembly of a machine. Cylinder boring, all with one operation, takes
the place of operations that required many hours. Progressive types
of assembly of the finished components of the cars make factories look
like the “last words in manufacturing.” Machining crankcases and work
of that nature that required hours, is done in minutes. Aluminum, that
magic metal of the early days of the automobile industry, when it was
comparatively cheap, now enters so largely into engine and other parts
that at its greatly increased price it is more than a magic metal. It
is no uncommon thing to find in an automobile factory that a machine
costing more than one hundred times the maker’s cost of an automobile,
has been installed to hasten production.
In all the field of manufacturing there has not been wrought such magic
as in gear cutting. Forges pound out tons of steel forms, but the most
important machinery of a plant soon has these forms turned into gears
and other machined parts for the assembly.
The medium priced car of today stands as the best exemplification
of the approval of the Society of Automobile Engineers. This is an
organization that has done so much for the manufacturer that most of
the makers of cars are members. They point to the self-starter and
the electric lighted car as the triumph of the Society of Automobile
Engineers. And certainly from the original starter and the early
lighting effects, enormous strides have been made in the industry.
Fully equipped cars predominate now, where only a few years ago even
tops were not provided with the car as sold on the floor.
The self-starter is considered one of the greatest of the improvements
added to a good automobile. With this feature the car has become so
useful to women that the manufacturers have realized big returns.
Better than that, say some critics, is the verdict that the
self-starter returned—the chauffeur is no longer an indispensible
feature in car driving. Women master the handling of a car and with
the machines requiring less mechanical attention, one might say, every
season, woman accepts the gasoline car as her own. The number of
women drivers has grown so wonderfully that the makers of cars have
registered the woman driver as a constant factor. There’s no cranking
of the car necessary, and the wearing of fine raiment and white shoes
is Milady’s prerogative, even if she drives her car to the party
herself. She handles a multi-cylinder car quite as readily and with
the confidence of a man. The tires, always a problem, have demountable
rims, or they may be set in spare wire wheels, and troubles on the road
from blowouts and punctures no longer deter the woman driver. It would
be difficult to get the details on the number of women drivers added to
the list each season, but one of the best known automobile makers says
that it is so large that he would make his fortune safe if he only made
cars henceforth for women pilots. The entrance of the woman in such an
important manner in the automobile driving situation has made the gas
car maker lose all fear of the greater development of the electric car.
Woman has played an important part in the real estate world, distinctly
due to her eagerness to drive cars, by starting a movement towards
suburbs. The suburbs are “farther out and yet closer” as one maker put
it.
GOOD ROADS INDUSTRY’S GREATEST AID.
When the full effect of the work of good roads advocates is felt in
this country, and regular appropriations are to be available in a
regularly scheduled manner in most of the states, the biggest thing
the automobile industry ever had to help it will have taken up its
task in earnest. Less than ten per cent of the roads in this country
are improved, say the good roads statisticians. One says that at least
two-thirds of the reasons for present road developments are automobile
reasons. When the proportion rises and the Lincoln Highway and scores
of other long distance highways, intended to add to the cross country
touring practice, are made into complete roads that make for genuine
touring pleasure, the automobile industry will reap great benefits—more
than the most enthusiastic ever dreamed would come from concrete, brick
and other forms of specially prepared highways.
The war? Makers have varied opinions on the effect of the termination
of the war in Europe. A majority have expressed the opinion that our
exports of trucks and pleasure cars will take a big jump soon after
peace is declared. But seeking for a peace after the years of warfare
has become the least of the American auto maker’s trouble. Great war
orders have been received and filled by the American makers of trucks.
In 1914-15 the war orders rose to 14,000 trucks, as compared with only
784 in the season 1913-14. War orders still are being filled by some
American truck makers, or were until the “ruthless submarine warfare”
broke out anew, and after millions of dollars worth of the old models
bought up in the United States and absorbed by the European powers had
been swallowed in the mystery of the continent, United States truck
makers began on later design models. In that way they are able to admit
that the war has been a great blessing to the motor truck feature of
the industry. “All a part of the great scheme of economics that makes
for the approach of the complete automobilization of the country,” is
the way one manufacturer puts it.
The automobile industry is set—it is fourth in importance in the United
States. It will handle itself, so to speak. The makers know they must
give value for every car and truck they build, and the people have
become ready to continue in the industry every maker who plays the
industry as it should be—not as a “game.”