by Steve Lehto
But neither Tucker’s can-do attitude nor his PR machinations had prepared Pearson for the uproar that followed. When he sent his article off to Pic for publication, an editor at the magazine asked where he should send correspondence received in response to the piece. Pearson told them to forward it to Tucker, thinking he might enjoy the feedback. He later said that Tucker received 150,000 letters and telegrams in response to the article. Most simply asked when and where they could buy a Torpedo.25
The Tucker Corporation
Publicity may have come easily, but as interest in the Tucker Torpedo built over the course of 1946, Tucker was wrestling with the more practical elements of launching his new company. One of the most pressing concerns: he still had no money to fund the project. So in the spring of 1946 he held a meeting at the Detroit Athletic Club to discuss financing for the Tucker Corporation with the men he had met with the previous December. Some of the men present assumed they could become equity holders simply by agreeing to work on the project. But Tucker needed money before he could do anything further; he wasn’t interested in giving away equity in the corporation. One man decided to end the arguments. He pulled out his checkbook and suggested that everyone put $5,000 into the project to get things rolling.
Several of the men stopped arguing when they realized it would take money to get a permanent seat at the table. No one else offered to contribute. So Tucker got up and walked out. “Good day, gentlemen,” he told them. Charles Pearson, writer of the Pic article, said some of the men stayed behind to discuss launching the company without Tucker.1 When those discussions proved fruitless, all the original founders—except for Karatz—left the project.2 To proceed, Tucker would need to re-form the Tucker Corporation.
It was all for the better. Although Tucker was approached by scam artists and shysters, the current flood of publicity was giving him access to some of the most respected names in the auto industry. And his name was already known to them—if perhaps not as well-known as the Pic article had suggested—because of his work with Harry Miller. Many of the high-profile people in the auto industry whom Tucker approached agreed to come work for him. As a result, his new boardroom would be stocked with an impeccable group of executives.
Perhaps the highest profile belonged to Fred Rockelman, who had worked at both Chrysler, as president of the Plymouth division, and at Ford, where he had been general sales manager. In early 1946 he was frequenting the Detroit Athletic Club, where, as he later wrote, “all of the automobile men gathered—the old-timers, the newcomers, the experts and the novices, but all automobile men.” An acquaintance in the industry, Robert Pierce of Briggs Body, suggested that Rockelman meet with Tucker. The three met, and Tucker explained the concepts behind his proposed automobile. The focus was on a rear-engine car with an improved automatic transmission. But the clincher for Rockelman was simply Tucker. “I was tremendously impressed with Tucker’s ‘sales pitch.’”3
Rockelman admitted he knew little about automatic transmissions or the other futuristic features of Tucker’s proposed car. But he figured those were just technical issues that could be resolved later. Tucker’s presentation convinced him, and he agreed to work for Tucker as soon as he had a plant. He would be VP in charge of sales.
By July 8, 1946, the Tucker Corporation had officially filed its papers of incorporation. The company authorized one million shares of stock with a par value of one dollar per share. According to company records, Preston Tucker purchased one thousand shares of the stock but did not pay for them at that time. Later, the SEC would note that the company, at the moment of its creation, “was financially sterile.”4 Nevertheless, Tucker had already invested much of his own money on the project, spending close to $100,000 on the endeavor by this point. Most of it had come from Ypsilanti Machine and Tool.5
The re-formed company held its incorporators meeting and elected a board of directors. Its members included Preston Tucker, Robert Pierce, and Fred Rockelman. Tucker was then named president of the corporation, Rockelman vice president of sales, and Pierce treasurer.6
Other high-profile auto executives joined Tucker as well. Hanson Ames Brown became executive vice president; he had been a VP at General Motors. Lee Treese was Tucker’s vice president in charge of manufacturing; he had been similarly employed at Ford. K. E. Lyman had gotten his experience at Bendix and Borg-Warner. Herbert Morley had been a plant manager for Borg-Warner, and Ben Parsons was a recognized expert in the field of engineering consulting, particularly with fuel injection.7 The Tucker Company was becoming an impressive organization. It would be even more impressive following its next acquisition: a monstrous manufacturing facility that would immediately grant credibility to Tucker’s enterprise.
Tucker Acquires a Plant
Now that Tucker had assembled a team of auto executives to help him make cars, he needed the physical assets with which to build them. He discovered a plant in Chicago that Dodge had used during the war to build B-29 airplane engines. It now sat idle. As an asset of the government, it was available if Tucker could negotiate a deal.
The engine plant, located at 7401 S. Cicero Avenue in Chicago, occupied 480 acres. Completed in 1943, it cost the government $76 million to build. One of its structures was among the largest buildings in the world, covering 3.5 million square feet. Its basement held a cafeteria capable of feeding twenty-seven thousand people daily.1 The sprawling complex contained a tool shop, aluminum and magnesium foundries, a heat treat facility to improve the material properties of metal, a die shop, light and heavy forge buildings, and administrative offices.
The War Assets Administration (WAA) was charged with disposing of surplus equipment and property that had been purchased to further the war efforts, so Tucker went to Washington, DC, and lobbied them to lease him the plant. He enlisted the aid of Walter P. Reuther, head of the United Auto Workers union; presumably, if Tucker got the plant up and running, he could employ a lot of UAW members. Reuther wrote to the WAA and carbon-copied his message to President Truman and other government leaders:
We are extremely desirous that this plant be used as a complete productive unit for the manufacture of automobiles. We believe such use will provide maximum amount of employment and provide for maximum utilization of productive capacity both for the best interest of the workers involved and the nation. Our understanding is that Preston Tucker’s proposal is the only one which appears to meet these objectives.2
Tucker could not afford to buy the complex outright. His powers of persuasion were at their peak, however. The WAA official with whom he was negotiating, Oscar H. Beasley, asked him how much cash he had available. Tucker told him $27,000 but explained that it wasn’t the cash on hand that guaranteed the Tucker Corporation’s success. It was the stellar group of automotive executives committed to the project. Tucker ran down the list of renowned auto executives who had come aboard. Beasley didn’t even bother to ask Tucker to confirm the $27,000 figure—he didn’t ask for financial statements either—and agreed to lease him the plant.3
* * *
Tucker gave the WAA a letter of intent to lease the plant dated July 1, 1946. The deal called for a $1 million payment to secure the lease. An initial payment of $25,000 was due July 3; $150,000 was due on August 1 and again on September 1. The balance of $675,000 was due on October 1, 1946.4
Tucker submitted a Western Union money order for the first $25,000, which he paid for with funds from Ypsilanti Machine and Tool.5 That bought him until August 1 to raise more money. For reasons no one could adequately explain, the $25,000 money order from Tucker was never cashed. Oscar Beasley later claimed that someone had temporarily misplaced it but never said why he did not seek a replacement. “As far as I know it was an entirely honest deal,” Beasley said, “and if Tucker benefited by the [payment] being lost for a while he was simply fortunate, because I don’t believe there was anything deliberate on anyone’s part. Something like this happening wouldn’t have been all that unusual, with the amount of work they had in the f
inancial section at that time.” Tucker’s critics later pointed to this incident, suggesting it must have been the result of corruption, but nothing ever came of the accusations. And since the transaction was in the form of a Western Union money order, which would have been paid for when it was issued rather than when it was cashed, he would only benefit from the mix-up if the money order were returned to him.6
While the parties ironed out the remaining details, the WAA allowed Tucker to move his key personnel into the plant to set up offices.7 He chartered a plane to bring his new board members Fred Rockelman and Robert Pierce to the site. There was a sense of urgency, but also that money was not an issue, and for Rockelman, it was eye opening. “This was the way Preston Tucker did business,” he said later. “When he was ‘wheeling and dealing,’ don’t spare the dollars.”8
Preston Tucker also moved his family to Chicago, to one of the most exclusive addresses in town on perhaps the most expensive residential block in the city. The apartment at 999 Lake Shore Drive was in a landmark district filled with important and historical buildings.9 The ten-story structure had just been turned into a co-op, and Tucker acquired 9A for his family, a large unit on the highest floor occupied by tenants. He bought the apartment from Bror Dahlberg, who’d made his fortune as one of the founders of Celotex, a company that made building materials from agricultural by-products.10 The reported sale price was $45,000.
Apartment 9A was about forty-three hundred square feet in size and provided views of Lake Michigan, Lincoln Park, and the mansions of North Lake Shore Drive. Floor-to-ceiling mahogany paneled the common rooms, consisting of the living room, dining room, den, and conservatory. The apartment had three bedrooms. Tucker also bought apartment 2C, which was a bit smaller than 9A, at perhaps twenty-six hundred square feet, for his mother.
* * *
Though Tucker spent lavishly on chartered flights and exclusive housing, his company, meanwhile, needed to raise money to make its upcoming lease payments. Floyd Cerf told the board that it would not be advisable to try a public stock offering yet. There wasn’t enough time and the company had too little to show investors. The factory represented progress, but what they really needed was a car.
Even if they couldn’t sell cars yet, though, they could sell dealerships. Tucker had saved all the letters he received after the Pic article, many of them from people eager to become retail sales agents for the Tucker Torpedo. Tucker sent the interested parties a letter signed by Rockelman, offering to let them invest in a Tucker dealership. The letter boasted of the company’s recently acquired plant:
One of the most important of recent developments has been our acquisition, by long-term lease from the Unites States Government, of the mammoth Dodge Airplane Engine Plant at Chicago. Thus we have established ourselves in the newest, finest and most completely modern factory in the world, with facilities and equipment unequaled in the automotive industry, and with a location in the very center of population, markets and sources of supply. We are now ready to accept applications for dealerships.11
The letter also made promises regarding the cars that had not been built yet:
The man who acquires our franchise can be confident that he will be merchandising an automobile so far advanced and superior to competition, that sales are unlikely to present any problem whatever for many months, if not years, to come . . . . If any automotive dealer can be certain of a lengthy period of excellent profits, under conditions virtually made to order for success and satisfaction, the Tucker dealer would seem to be that man.12
The response was overwhelming. Letters flooded the company from potential dealers, and many of them went to visit the plant in Chicago. There was a sense of urgency, since only a limited number of dealerships were being offered.
Those who responded to the letter were told that they would have to front fifty dollars per car they were willing to commit to, and that the money would be held in escrow until the corporation was certain that the project was viable. The dealers would have to agree to two years’ worth of cars to assure they would have enough on hand to succeed. Tucker hoped the offer would raise $15 million.13
But by the time the $150,000 lease payment on the plant came due on August 1, the Tucker Corporation had not yet raised enough money to make it. Preston Tucker did not have the money either.14 He asked Oscar Beasley at the WAA for guidance. Tucker later claimed that Beasley told him to send a check and that he would hold the check until Tucker had secured financing. If need be, Tucker could try borrowing the money from the Reconstruction Finance Corporation, a government agency that loaned millions of dollars to American industries to prop them up, help the economy, and maintain the flow of consumer goods. Tucker told Beasley he’d mail a check.15
Someone else at the WAA called Tucker inquiring about the payment. Tucker told them the check had been mailed but if they had not received it, he would send a replacement, which he did. Wondering if Tucker had $150,000 to make the payment, someone at the WAA called Tucker’s bank and found he had two accounts, one personal and one for Ypsilanti Machine and Tool. Each account held only a couple thousand dollars, far short of the payment they were seeking. The replacement check arrived and was accompanied by a note from Tucker asking the agency to hold it while they revisited the terms of the lease. Rather than complain, the WAA asked Tucker which terms of the lease they needed to revisit.16
The original lease agreement gave the plant to Tucker after the government had inventoried its contents, and the inventory had not been completed.17 Though Tucker had begun moving into the plant, he could not complete the process until the issue was resolved. As a result, he said, the timetable for payment had been thrown off. Beasley accepted his argument and offered new terms. On September 18, 1946, Tucker signed a new intent-to-lease agreement with the War Assets Administration, by which the Tucker Corporation would simply need to have $15 million, either in cash or available credit, by March 1, 1947. If that hurdle was cleared, then lease payments would begin. Tucker had been told by several different stock underwriters that a public offering could easily raise that amount. Tucker had even brought a letter from one of them and showed it to Beasley.
The WAA returned Tucker’s $150,000 bad check, along with his original money order from Ypsilanti Tool, which by this point had apparently been found.18 The Securities and Exchange Commission would later point to these actions as evidence of someone’s wrongdoing but could never explain how Tucker could have caused the payments to be held by the WAA.
* * *
Before long the Tucker Corporation had more reason to celebrate, as the dealer program became a huge success. In the last months of 1946, the company raised $240,000 for cars the dealers committed to buying. But the SEC in Chicago heard about the program and began investigating. It determined that the sales constituted a “security” under SEC rules. As such, Tucker Corporation should have filed a registration statement before embarking on the plan. No such statement had been filed.19 More troubling to the SEC: it found that much of the money had not been placed in escrow as the dealer solicitation letter had promised. The funds were simply being placed into a Tucker Corporation account. And on one occasion, Abraham Karatz had deposited $15,000 directly into Preston Tucker’s personal account.20
The SEC was unable to establish whether Preston Tucker himself knew how the funds were being handled, but it did notify the Tucker Corporation that the dealership sales agreements needed to be rescinded and reworked. Tucker agreed to do so; from that point forward, dealers would pay only twenty dollars per car they wanted rather than fifty, but they would be guaranteed nothing in return. There was no promise that the money would be held in escrow, and it was openly stated that the money could be used by the Tucker Corporation for any purpose.21 One Tucker employee who sold franchises said of the new system: “Before we sign a franchise they have their lawyer in my office and I have my lawyer. I tell them if we do not build an automobile you don’t get anything. You don’t even get so much as one bolt. There is n
o misunderstanding. They understood very clear that the only way they can win is for us to win.”22
It was an astonishing thing to ask of franchisees considering how little they were being promised. But interest in the dealer program had been so intense that Tucker knew he would have no problem with people agreeing to it. Sure enough, when all the previous contracts were rewritten, the dealers overwhelmingly agreed to the new terms. Some sources said Tucker raised $6 million this way.23
For the moment, there was nothing else the SEC could complain about.
* * *
Meanwhile, however, not everyone in Washington was happy that the Tucker Corporation had gotten the Chicago Dodge plant. Word came from Washington that powerful forces were in league to take the plant from him and give it to another company called Lustron. Lustron wanted the plant to manufacture prefabricated housing, and the National Housing Agency (NHA) wanted to give it to them to help alleviate the postwar housing shortage.
Wilson Wyatt, the man in charge of the NHA, lobbied for Lustron.24 In fact, he issued a decree giving the plant to Lustron and announced that the Tucker deal was off. Chicago news headlines shouted, TUCKER LOSES DODGE PLANT, much to the dismay of Tucker employees already working at the factory.25
The NHA demanded that the WAA cancel its agreement with Tucker. The WAA refused, and the matter became a political hot potato in Washington. The Reconstruction Finance Corporation supported the housing bid; it had lent $37.5 million to Lustron, while the company’s promoters had only invested $36,000 of their own money in the business. Others in Washington wanted the Lustron deal sunk simply because it was a bad business proposal. In many respects, it had more potential drawbacks than Tucker’s plan. When Lustron officials pitched the notion of prefabricated homes to the government, they hadn’t even designed one yet. They believed they could build the homes, they just didn’t plan on setting the architects to work until after they had gotten an assurance of government interest.26