With twelve investors in hand and only $28,000 of actual paid-in capital, on June 16, 1903, the Ford Motor Company was incorporated. (It was Malcomson’s idea to take his name off, not Ford’s.) John S. Gray was president—at his insistence, although it didn’t hurt to have a banker on the letterhead—Ford was vice president and general manager, James Couzens was secretary and business manager, and, in something of an irony given his proclivities, Alexander Malcomson was treasurer. As the company’s affairs played out, however, Gray and Malcomson had virtually nothing to do with the running of the company, either in product development or in financial management. Couzens, although without the title, became the actual treasurer of the company.
Ford later claimed that the vision he would bring to fruition in 1908 with the Model T was already fully formed when the Ford Motor Company was incorporated in 1903, and, Olds’s success notwithstanding, that it was unique and original. To buttress this argument, Ford pointed to the very first advertisement the Ford Motor Company unveiled, for which he had approved the copy himself:
Our purpose is to construct and market an automobile specially designed for everyday wear and tear—business, professional, and family use; an automobile which will attain a sufficient speed to satisfy the average person without acquiring any of those breakneck velocities which are so universally condemned; a machine which will be admired by man, woman, and child alike for its compactness, its simplicity, its safety, its all-around convenience, and—last but not least—its exceedingly reasonable price, which places it within the reach of many thousands who could not think of paying the comparatively fabulous prices asked for most machines.20
But, in fact, the idea to mass-market lower-cost automobiles was neither new, obscure, nor confined to either the Olds or the Ford company. The same month Ford would sell his first automobile, and a full five years before production of the Model T, a long, remarkably prescient syndicated article, “This Is the Age of the Auto,” ran without byline in newspapers across the nation.
The automobile is no longer an experiment, and motoring is no longer a pastime or a luxury. The old coaching roads and coaching inns will once more be thronged with travelers. We shall know the land we live in—its rural interests, its beauties, its antiquities. The man who has a business in the town will no longer be dependent upon a slow and rare service of trains. Therefore thousands of the town dwellers of today will be the country dwellers of tomorrow. This will bring into the market at good prices a great number of country places unlettable and unsalable today. There will soon arise, in consequence, an irresistible demand for better roads.
This, however, will be but a minor factor in the coming development of motor traffic. The motor vehicle for business purposes will soon be universal. A few years hence we shall look back with a smile to the practice of the railways and large firms in using horse-drawn vans. Commercial travelers will take their samples through the country in suitable motor-cars. Agriculture will be one of the chief industries to benefit by the coming revolution. I am even inclined to go a step further and hazard the opinion that the motor vehicle will kill the railway.21
The trade magazines, of which there were by this time more than a half-dozen, also regularly carried articles on the potential of the automobile—and other gasoline-powered vehicles—for business and on the farm. So while it was not Ford’s unique vision that attracted investors to his idea, his plans did contain an element that seemed a significant improvement on what was available from his competitors. “The cornerstone of the edifice was the engine. It was primarily because of their faith in the engine that the experienced Dodge brothers, in the teeth of a strong bid from Olds, had signed the vital contract of the new business.”22 But what Ford never admitted publicly was that the Dodges had corrected a number of flaws in Wills’s initial design.
Ford’s engine would have two cylinders, set horizontally opposite each other, to Olds’s one. This is not to say Ford’s machine would be superior. While Olds’s one-cylinder motor would not be able to reach the two-cylinder’s 8 horsepower or top speed of 28 miles per hour, its performance was more reliable. Each machine featured a transmission with two forward gears and one reverse gear, but Ford’s became notorious for transmission bands that slipped regularly, thus leaving the car without power. The Ford car was also prone to overheating, while the Olds was not.
Ford Model A, 1903
Work had been proceeding apace, and just weeks after the Ford Motor Company became a legal entity, completed “running gear”—motors, frames, transmissions, and axles—began to arrive at Strelow’s from the Dodges.*3 From there, the remaining components were attached and the car was painted. (During testimony in a later lawsuit, Ford would be forced to admit that “the Dodges had made the entire Ford car except the body, wheels and tires.”)23 The only problem was that while the vendors were producing, they were not being paid, because not all the investors had as yet deposited their money and no one had bought a Ford automobile. Couzens stalled as much as he could and remitted funds when he had to, but by July 11, after less than one month in existence, the company’s bank balance stood at $223.65. But on that day, Strelow paid in his $5,000 and Ford Motor survived.
Instead of naming the new model, Ford decided that since anything he produced would be constantly improved, he would use succeeding letters of the alphabet. Four days after Strelow saved the company from insolvency, the first Model A was sold, to a Chicago dentist named Ernst Pfennig. (Doctors and dentists were, by far, the professionals who most often availed themselves of the new technology.) Pfennig bought the standard model, $850, without the optional “tonneau,” a detachable rear seat, that would have added $100 to the price. The car was shipped to him on July 28, 1903.24 Other sales followed, and soon the survival of the company, at least in that pivotal first year, was no longer in doubt.
Ultimate success, however, would rest on the reception the Model A received in the trade magazines. Despite being exceptionally light at only 1,250 pounds, containing a number of new features such as an improved carburetor, and being billed by the company as “the most reliable car in the world,” the Model A was, in truth, neither better built nor more reliable than its competition.*4 Nor was it cheaper. The Oldsmobile was priced $100 less than Ford’s model even though Olds, as a licensed ALAM member, was paying royalties on each sale. So if significant flaws were exposed in the trades, word would make its way into the popular press and doom the Ford car.
But Ford’s runabout, and particularly its engine, received raves. Cycle and Automobile Trade Journal wrote:
The first one of the first lot of 650 Ford automobiles was placed on the road early in June, 1903…the latest representative of the American type of two-cylinder driven vehicles, which is unquestionably destined to hold a high place among the leading forms of self-propelled carriages. The two opposed cylinder motor has advantages in the way of balance and frequency of impulse delivered to the motor shaft, which produce distinctively smooth running and strong hill climbing, and there is no possible room for doubt as to the pronounced success of this form of motor for driving low-cost and high-duty vehicles of the runabout and detachable tonneau class.25
Horseless Age added that when the motor ran at high speed, about 1,000 rpm, it was “remarkably free from vibration and noise.”26
Cycle and Automobile Trade Journal also indicated that, although its technology was not new, the Ford machine and not the one-cylinder Oldsmobile was the future of low-cost automobiles. “Since the Ford wagon is the latest to be driven by two opposed cylinders, it should be among the best of its kind, as its designer had the vast advantage of a number of highly successful examples in the work of his predecessors, as well as in his own previously constructed two-opposed cylinder driven wagons, to aid him in selecting the elements and determining the detail forms of his latest motor, the last of a series of conspicuously speedy wagon drivers produced under his direction.”27 For contrast, the ad on the inside front cover of the journal was for a Win
ton 20-horsepower four-seater touring car, much more luxurious than the Model A but with a price of $2,500.
The significance of the Ford Motor Company—new, undercapitalized, and hastily thrown together as it may have been—establishing itself as a participant in an expanding market for low-priced automobiles was not lost on those for whom it would be competition, most prominently ALAM members Olds and Packard, a newer manufacturer.
Packard had been started in Warren, Ohio, by Col. J. W. Packard, a quick-tempered manufacturer of wire and cable. After purchasing a Winton in 1899, Packard thought it terribly flawed and decided that he could do better. He told the equally quick-tempered Winton as much, and Winton challenged him to try, so Packard did. Packard’s car, a one-cylinder runabout, aroused the interest of his friends, most of whom agreed that the new automobile was superior to Winton’s model, and by 1901, Col. Packard was in the automobile business, with his brother as his partner.
The following year Packard licensed a group of dealers, and his 12-horsepower machine with tonneau sold briskly, even though the price was not substantially below what Winton was charging. One of the purchasers was a man from Detroit named Henry Joy, whose late father had been president of the Michigan Central Railroad, where he had once engaged a young lawyer named Abraham Lincoln. Joy stopped in Warren on his way home from New York for a chat with Col. Packard, who, it turned out, was so pleased with his car business that he had decided to expand, assuming he could raise the necessary capital. Joy put together a group of investors with himself at its head, moved the company headquarters to Detroit, and engaged a young architect named Albert Kahn to build a new factory with reinforced concrete—the first of its kind. With the Warren plant continuing to operate, the Packard Motor Car Company entered the industry as a force.
Although Packard continued to produce its one-cylinder model, Joy, himself a rich man, wanted also to build cars that other rich men would want to drive. He suggested a luxurious model with a price tag in excess of $7,000. Col. Packard, whose success had been based on reducing both the complexity and the price of the machine, thought that idiotic, but Joy nonetheless turned much of the company’s efforts to producing a four-cylinder, 25-horsepower touring car.
Despite the diversion of resources, Packard’s Model F runabout—Packard, not Ford, was the first to use letters to denote their automobiles—remained popular, and Joy finally grasped that it would be sound business to exploit its potential. Henry Joy was not a man to do things in a small way, and he decided to launch a publicity stunt so grand that Packard would explode into the marketplace and leave both Olds and Winton far behind. When Frederic Smith, who by then had effectively taken over Olds Motor from his father (and from Olds), heard about Joy’s plan, he was determined to match it with a similar venture of his own.*5 Each of the two Brahmins accepted the necessity of slugging it out—as gentlemen—but neither man was prepared to accept an additional competitor in the market for smaller cars, especially an arriviste such as Henry Ford.
In mid-1903, as it happened, Henry Joy and Frederic Smith were also the most powerful voices on the executive committee of ALAM. To these men, the notoriety Ford had garnered from his race cars made him a target, someone to be squashed, not encouraged. The man who had beaten Alexander Winton and built the 999 just might be able to produce a car that cut drastically into their companies’ profits. What was more, Smith was none too pleased that Ford had stolen the Dodge brothers out from under Olds, which now meant out from under him. As a result, from the outset, Ford’s ability to gain entry into what amounted to a private club encountered quite serious obstacles. Nor would the presence of John Gray as president of the company provide a lever—the men who had faced down William Whitney were not about to be cowed by a local banker.
Ford had been aware of the Selden patent since 1900, and although no record of his early impressions exists, his later pronouncements and his antipathy toward the patent system in general make it fair to say he didn’t think much of it. It is a virtual impossibility that he viewed Selden’s unbuilt machine as controlling an invention of the sophistication of the automobile. Still, in February 1903, Ford met with Hermann Cuntz at an automobile show and let it be known that he would be happy to operate as a licensed manufacturer and pay the appropriate royalties. He was apparently either unaware of the antipathy in which he was held by ALAM board members or so willing to compromise in order to gain a license that he would accept any conditions to gain entry.
Cuntz seemed courteous and receptive but, in a surprise to no one outside Ford & Malcomson, Ford was soon rebuffed, although not yet in a manner that would cause confrontation. At that point, ALAM was continuing to portray itself not as an oligopoly, whose purpose was to restrict competition and safeguard profits, but rather as a trade organization, whose primary goal was protecting the public interest. As such, board members insisted that the decision to grant or withhold licenses to “the flower of the industry” was based on strict criteria of capitalization, manufacture, and performance. The association “will not try to shut out reputable and established manufacturers who build a reliable vehicle,” they proclaimed in the trade magazines. “It will license all such, but it will license no unreliable upstarts. In this way, the association will protect the public and be a boon to all purchasers of gasoline automobiles.”28 Those lofty sentiments notwithstanding, the association was never terribly precise as to what terms such as “reputable,” “established,” and “reliable” actually meant. In fact, the standards under which a firm was granted or denied membership often seemed arbitrary.
In a prime example, one of the few specific requirements ALAM was willing to enunciate was that a manufacturer must actually build its cars. Mere “assemblers” would be excluded because of the ease of simply cobbling together an inferior product with a poorly thought-out design from an ill-conceived conglomeration of parts.
Two weeks after he deposited $5,000 to purchase his Ford shares, John Anderson, the young lawyer who had entreated his father for the money, reported a “chance encounter” with Frederic Smith. The two knew each other well, so Anderson inquired about the licensing association. “Smith told him that the ALAM had been formed for the purpose of stabilizing the industry and barring fly-by-night operators and mere assemblers.” When Anderson replied that Ford was an assembly plant and asked what they were to do, Smith replied, “Well, we are disposed to be fair. We will take an inventory of their stocks, machinery, and equipment, whatever they may have, give them a fair value for it, and then they quit business.”29 The only problem with Smith’s altruism was that, to some degree, virtually every carmaker was an assembler, including his company, Olds. In fact, up until a few weeks prior to their conversation, Olds had been assembling components delivered from the Dodge brothers.
Although he must have been getting a sense that the game was rigged against him, after Ford Motor had been incorporated in June Ford tried again, this time submitting a formal application for membership in the Association of Licensed Automobile Manufacturers. At Smith’s and Joy’s instigation, an official and dispassionate investigation of Ford’s business was ordered. John Gray assured the board that he was happy to put up the $2,500 initiation fee and that the Ford business, regardless of a current lack of actual factory space, was sure to be a going and growing concern. Smith, many years Gray’s junior, later said, “Mr. Gray put their case so simply and fairly that I had a guilty feeling of sassing my elders.”30 However, that did not stop him from turning Gray and Ford down. If the Ford Motor Company persisted in manufacturing automobiles, it would do so in violation of the Selden patent and most assuredly be the subject of an infringement suit.
There is more than one account of what happened when Ford and Couzens received the news, but the most popular—and most colorful—was that James Couzens leapt to his feet and bellowed, “Selden can take his patent and go to hell with it!” Ford, who supposedly was sitting in a chair tilted back against the wall, leaned forward, stood up, said to Smith, �
��Couzens has answered you,” and moved for the door. Smith, once more with a pretense of affability, said, “You men are foolish. The Selden crowd can put you out of business—and will.” At which point, either Ford or Couzens leveled a finger in Smith’s direction and sneered, “Let them try it.”
Whether or not this exchange actually took place, the spirit of the reaction of Ford and Couzens is accurate. Both men were combative and, in the fashion of those who often bullied others, became furious when such behavior was aimed at them. Neither of them likely needed additional motivation to make their venture a success, but Frederic Smith and his cronies nonetheless provided it.
The attempt to join ALAM was a blunder, one of the rare occasions when Ford’s marvelous instincts failed him. The last thing he needed—or should have wanted—was to cede initiative, to compromise with a group of men whom he was capable of outthinking and outmarketing. But Ford was saved by an even larger blunder: Smith and Joy denied him entry.
Even as he was shown the door by Frederic Smith, the future glimmered on the horizon. Ford began to sell cars, eventually more than one thousand in his first year. At a profit of $150 per car, the company was actually able to declare a stock dividend in 1904.
* * *
*1 The song, released in 1905, had lyrics that were quite racy for the time, with lines such as “They love to ‘spark’ in the dark old park.” The chorus, which began, “Come away with me, Lucille,” also included, “You can go as far as you like with me.”
*2 Chapin would found the Hudson Motor Car Company in 1908 and eventually accepted the thankless job of secretary of commerce under Herbert Hoover in August 1932.
Drive!: Henry Ford, George Selden, and the Race to Invent the Auto Age Page 17