Independent Man: The Life of Senator James Couzens

• 10. THE REALIGNMENT
• Chapter
• Wayne State University Press
• pp. 56-65
• View Citation
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CHAPTER X

THE REALIGNMENT

At the next directors’ meeting it was voted unanimously “to throw down the gauntlet, come what may.”¹ Space in newspapers was purchased for denunciations of the Selden patent. These Ford advertisements assured prospective car buyers, “We will protect you.” Then, to offset the Licensed Association, the Ford Company took the lead among independent firms in organizing a rival association, “The American Motor Car Manufacturers’ Association.” Formed at a meeting in New York, this association, for years afterwards a major factor in the industry, picked Couzens for its first president.² Thus he became the official voice of the opponents of the “monopoly manufacturers.”

In the meantime, he dusted off his old law books and acquired others with which to begin reading law once more—patent law. Before long, he was able to talk on almost equal terms with the patent lawyers and often, at conferences, advised them on procedures and pleadings.³

When a trade publication asked the Ford Company for a public statement on its strategy, the answer was abrupt and to the point:

We regard the claims made under the Selden patent as . . . entirely unwarranted and without foundation in fact. We do not, therefore, propose to respect any such claims, and, if the issue is forced upon us, shall defend not only ourselves but our agents and customers to the fullest extent . . .

Yours Truly                   ,
J. COUZENS, Secretary⁴

Up to that time the Licensed Association had taken no legal action against the Ford Motor Company. But after the appearance of this letter, it acted. In the U.S. Circuit Court, Southern District of New York, two suits were filed at the same time: one against the Ford Motor Company, another against its New York agent, C. A. Duerr & Co. A week later another suit was filed against a Ford customer, the O. J. Gude Company, to restrain it from even using a Ford car it had purchased.⁵ So the legal issues were joined.

2

The ensuing battle was fought on the propaganda front as well as in court. New advertising barrages that specifically warned the public against the sale, purchase, or use of Fords were set off by the Licensed Association. Any “infraction” would lead to prosecution, these ads said. Fords were barred from the automobile shows held at Madison Square Garden. In reply, the Ford Company then advertised that it would put up surety bonds “to protect dealers, importers, agents and users from any attempt on the part of the TRUST to prevent you from buying the ‘car of satisfaction.’” The American Motor Car Association, under Couzens’ leadership, held its own annual shows—events that soon rivaled, at least in ballyhoo, the exhibits in Madison Square Garden.

The word “trust” was featured in much of the Ford advertising—shrewd exploitation of what was then becoming a popular political issue, thanks to President Theodore Roosevelt’s “trust-busting” program.

On this issue of “monopoly,” the Ford Company soon acquired an interesting and powerful ally, John Wanamaker. The great Philadephia and New York merchant, John Wanamaker, had fought a patent war with the so-called bicycle “trust.” Now he looked forward to another and similar fight. Already handling Fords in his stores, Wanamaker began to feature them in his advertising. In January 1904 the Licensed Association filed suit against Wanamaker, and he hit back with full-page advertisements saying:

“Get a Ford car and enjoy it. We’ll take care of the tomtoms. Don’t give $600 to the Bogey man.”⁶

3

All this uproar had an unanticipated result—perhaps the most important single thing that happened in the early days of the company. As Couzens said later, “The Selden suit was probably better advertising than anything we could put out.”⁷

All the attention given to the controversy made the Ford car the best-known make in the land. Many persons bought Fords because they were the only automobile they had heard about. Others bought Fords because they hated “monopoly,” or just to be contrary; still others because “Honest John” Wanamaker said they were good cars.

There was at least one other important result. Both Couzens and Ford came to feel great admiration for Wanamaker, who was then plumping a novel concept of business—that the purpose of business was to render “service to the public,” that it was a duty of merchants to distribute products at the lowest price possible.

Both Couzens and Ford began to think and talk the same way. The influence of Wanamaker, indeed, may have been the central inspiration for the later, and world-celebrated, concept of the Ford Motor Company—that of producing and selling cars at low cost: the foundation of the mass-production system in heavy industry.

Undoubtedly, too, Couzens’ attitude toward “big business” in general, as well as Ford’s, was shaped in part by the Wanamaker influence, just as Pingree earlier had left an impression upon Couzens with respect to the labor problem.

Immediately, the fight engendered a crusading spirit on the part of the company and its dealers and salesmen. Ford advertisements reflected a spirit of pugnaciousness that was pure Couzens. A typical Ford announcement in Harper’s said:

We hear a lot these days about “hand-made” motor cars. It’s funny, but these same concerns who, a year ago, prated of “quality, not quantity,” as if the two were incompatible, now build 1,000 to 2,000 cars per year and still expect you to believe it is “hand work,” “personal supervision,” and all that sort of rot. . . .⁸

One day an Ohio Ford dealer telegraphed to Couzens: “My competitor wants to bet $500 that their machine will make a trip to Columbus and return quicker than the Ford Model S. Is it safe to bet?” Couzens answered: “Is it any credit for the United States to whip Venezuela? Take a bet like that with any car selling between $1,500 and $2,500.”⁹ This spirit paid off in sales, of course.

Yet the Selden cloud was to remain as a vexation and a threat until the courts finally decided the issue. As Horace Rackham observed, “The company could not determine what the future would be.”¹⁰

Gray streaks showed up at Couzens’ temples. He began to be tormented for the first time by massively painful migraine headaches. He consumed enormous quantities of aspirin. But he continued to push Ford sales just as if Selden really had gone to Hell with his patent.

And the company kept growing.

4

And Malcomson? In the light of his dominant importance in the formation of the company, it is a curious thing how little he figured in its affairs after the company was launched. This is not to be explained simply by saying that Malcomson was “too busy” at the coal office, nor by the assumption that he was content to let his former assistant take over completely. Nor is it to be explained by the fact that Couzens had demonstrated his ability to take over—true though this was. The fact is that in the genesis of the Ford Motor Company, Malcomson was doomed to play the role of a Moses, with Couzens his Joshua.

Like some of its cars, the Ford Motor Company very early developed “internal trouble.” Ford’s “those fellows” comment had borne strange fruit. There had come to the surface almost immediately a bad case of temperamental incompatibility. This arose not only between Malcomson and Ford, but also between Malcomson and John and Horace Dodge, and to an extent between Malcomson and Gray.

But it was most acute between Malcomson and Ford. After the first year, neither could abide the other. In the words of Rackham, “Both wanted to be boss.”¹¹ And Ford, as soon would be apparent, was not at all the timid or lackadaisical man he had given the impression of being.

5

So long as the company appeared to be struggling, both Ford and Malcomson suppressed their true feelings, but the first appearance of prosperity brought a change. Directors’ meetings became marked by explosive bickering. “There was much pounding on the table, and at times Ford’s directors would get up and leave and refuse to come back.”¹²

Couzens, not surprisingly, touched off some of these explosions. When Malcomson took an order for an automobile to be delivered to a friend at a discount, it was Couzens who insisted that there should be no discounts to anyone, not even to a friend of Malcomson. “He protested so vigorously that the other stockholders voted to compel Malcomson to pay the difference.”¹³ Malcomson considered this a personal affront.

In arguments between Ford and Malcomson, Couzens invariably stood with Ford, in accord with the understanding the two of them had reached on that June evening in 1903. Indeed, it became clear that Couzens was Ford’s spokesman on all business matters, that if Ford kept silent, but Couzens spoke, it was really Ford, as well as Couzens, speaking. They began to seem like one person, and Malcomson resented this.

Couzens had begun to develop a deeper affection for Ford than he had ever had for Malcomson. Ford seemed to reciprocate that affection, although he did maintain a conscious line beyond which he would not let friendship carry him. Once, early in their relationship, he said to Couzens, “It is a mistake to make or have too strong attachments, because it weakens your will and your character.”¹⁴ Few persons ever heard them address each other in any way except “Mr. Ford” and “Mr. Couzens.” Yet, T. J. Hay, the Chicago dealer, felt “they were like brothers.”

Couzens saw that eventually either Ford or Malcomson would have to leave the company. If he himself wanted to stay, he had to choose sides. Actually, he had no choice, for Malcomson forced matters by his authoritarian and antagonistic attitude toward his protégé. Not long after the business was well under way, Malcomson flatly demanded that Couzens voluntarily return to the coal company.

Couzens refused.¹⁵ At a directors’ meeting later, Malcomson moved that Couzens be discharged as business manager.¹⁶ The antagonism was out in the open.

6

There were five directors, each with an equal vote regardless of the amount of stock owned: Malcomson, Ford, John Dodge, John S. Gray, and John Anderson. If he could get two other directors to side with him, Malcomson would win his point about firing Couzens and establish his own supremacy in the company—even over Ford. Ford, of course, stood by Couzens. “I told Malcomson that I did not want him, but that I wanted his man Couzens,” he later said.¹⁷ And banker Gray stood by Couzens too.

John Dodge might not have cared too much for Couzens at that time. But, as he once said in court, he “really did not like Malcomson,”¹⁸ perhaps because, when the contract with the Dodge brothers had come up for renewal in 1904, Malcomson argued that the Dodges should reduce their price since their risk was less. Couzens had sided with the Dodges in that controversy,¹⁹ and now John Dodge sided with Couzens.

Only John Anderson, Malcomson’s lawyer, sided with Malcomson.²⁰ So Couzens remained as manager.

7

In September 1905 Malcomson raised another row at a directors’ meeting because Couzens’ salary was raised to $8,000.²¹ Obviously, his objection was emotional. That year, the company had earned a net profit of $285,231.94.²² The other directors voted Malcomson down. After that, even Malcomson had to concede that his own former clerk had supplanted him completely as the dominant businessman of the Ford Motor Company.

Which way the wind was blowing, how firmly the Ford-Couzens alliance had already jelled, was made evident even before this, when the Ford Motor Company of Canada was organized in 1904. In this corporation, Ford was president and Couzens was vice-president. But Malcomson was left out.²³

In the parent company Malcomson was still treasurer, as well as a principal stockholder. But he really had little to say about policies. Ford and Couzens already had attained, substantially, their planned goal—independence from “those fellows.”

Malcomson then did an astonishing thing. He formed another automobile company, the Aero, with himself as president, and set up a plant for turning out air-cooled “Aeros” not far from the Ford factory. Apparently his plan was to use his dividends from the Ford Motor Company for financing his own company, not only to add to his income, but also to show Ford, Couzens, and the others how an automobile company should be operated. Unquestionably, Malcomson took this step in anticipation of his complete separation from the Ford Motor Company, either voluntarily, or by being frozen out despite his large interest.

8

A procedure for freezing, or squeezing, Malcomson, as well as some of the others, out of the company already had been devised in the fall of 1905. This consisted of an interesting plan for organizing another corporation, “The Ford Manufacturing Company.”

Ostensibly this second corporation was to make motors and other parts for the Ford Motor Company. Ostensibly, too, its creation was desirable for efficiency, as well as to make any expansion of facilities by the Dodge brothers unnecessary.²⁴ It was to be wholly controlled by the Ford Motor Company. But there was one important catch. Not all the stockholders in the parent company were to have an interest in the subsidiary. Malcomson, for one, was not to be included. Moreover, matters could be so arranged—for example, by the prices that the Ford Motor Company might pay the Ford Manufacturing Company for motors and parts—that the profits of the original company could be drained off into the subsidiary. Indeed, the subsidiary could swallow up the parent company.

The real purpose of the Ford Manufacturing Company was underlined by a comment made by Banker Gray. Vernon Fry had voiced to him his worries about the possible effect of the subsidiary on the parent company. “I have Mr. Ford’s promise,” said Gray, “that when they get things straightened out with Mr. Malcomson, the Ford Manufacturing Company is to be taken into the Ford Motor Company, just as if it had never existed.”²⁵

9

Not long after this plan had been devised, a resolution that formally requested Malcomson to resign as treasurer and as director was adopted by the board of the Ford Motor Company. “Moved by Mr. Rackham and seconded by Mr. Ford,” this request was justified, for the record, on the ground that Malcomson’s formation of another automobile company was “inimical to the best interest of the company.”²⁶

In the following week, The Ford Manufacturing Company was officially incorporated.²⁷ Later, a contract was entered into between it and the Ford Motor Company for it to supply ten thousand engines at a price not stipulated. And a building was fitted up for the subsidiary. Besides Ford and Couzens, the incorporators were the Dodge brothers, Rackham, Anderson, Bennett, and Wills.²⁸ Left out of the subsidiary were Gray, Fry, Strelow, Woodall, and, of course, Malcomson.

The morality of this procedure could be discussed and debated endlessly. Both Ford and Couzens unquestionably owed much to Malcomson. He was the real founder of the Ford Motor Company; he had given both men their start. However, it is doubtful if any of the principals in this drama looked at the matter at the time from the viewpoint of gratitude or loyalty—not even Malcomson. These were businessmen engaged in the game of business, playing the game according to the accepted rules. All played the game the same way and had the same objectives.

10

Malcomson put up a fight. In a letter to the board of directors, he indignantly refused to resign as treasurer and director. He denounced “such occurrences as the recent precipitate action of the board in doubling the manager’s [Couzens’] salary, despite protest and without waiting for a full board meeting.” Then he criticized bitterly the organization of the Ford Manufacturing Company. It was a scheme, he said, for causing “injury to those stockholders of the motor company that are left on the outside.” He threatened a lawsuit to block the manufacturing company plan.²⁹

His letter was ordered “placed on file.”³⁰ It appeared that Malcomson had won a victory, for he did not resign as treasurer.

However, when the year 1906 opened, Malcomson was for all practical purposes, except for his ownership of stock, out of the Ford Motor Company. He was concentrating on his own company. And he issued an optimistic statement to the trade press: “We start in 1906, put up a factory and turn out 500 cars in one year. I believe that is a record.”³¹ It was better than the Ford Motor Company had done. He advertised his product as “The Car of Today, Tomorrow, and for Years to Come.”³²

In that optimistic mood, in May 1906, Malcomson made what later proved one of the great blunders in business history: he sold his one-fourth ownership of the Ford Motor Company to Ford. Couzens handled this deal for Ford.³³ His trump card in the negotiations was the existence of the Ford Manufacturing Company. Malcomson, of course, knew what that meant—that the profits of the Ford Motor Company could be siphoned out of it into the manufacturing company, to the point where Malcomson’s one-fourth interest in the parent company could be made worthless.³⁴ Besides, Malcomson was fearful of the outcome of the Selden case.

He finally agreed to sell his one-fourth interest to Ford for $175,000. Thus Malcomson, the real founder, in the phraseology of the principal Ford historian, was “jettisoned” from the company. Thus, too, for the first time, Henry Ford won a dominating interest in the company that bore his name. John Gray died in the following July, and then Ford, also for the first time, received the title of president.

11

Later Malcomson made an effort to re-enter the picture. His two friends, Fry and Bennett, were indignant over the fact that the Ford Manufacturing Company was sold soon afterwards to the Ford Motor Company for $450,000. They decided to pull out, and it was Malcomson who bought their shares.³⁵ As a legal matter, it was highly questionable if these shares were salable to Malcomson, for each share bore the provision that if it were sold, it had to be offered to another shareholder—the provision that kept the Ford Motor Company a “closed corporation” for decades.³⁶ And Malcomson was not then a shareholder.

Ford and Couzens took the position that Bennett’s and Fry’s shares should have been offered to them, or to other shareholders, and that the sale to Malcomson was void. A new controversy with Malcomson ensued.

Couzens in the meantime had gone to Europe to set up agencies in England, France, Holland, Spain, Italy, Denmark, Germany, and Russia. In Denmark, he received a jubilant cablegram from Ford: Malcomson had conceded that the Fry and Bennett stock had to be sold to Ford and Couzens, at five dollars a share for the thousand shares.³⁷ The Malcomson “trouble” was over, forever.

A little later Couzens bought all of Strelow’s shares for $25,000. He succeeded Malcomson as a director and treasurer, and then also assumed the title of general manager. The recorded ownership of the company stood:

At last Couzens had attained his goal of moving up from the bottom of the list of shareholders.

12

After this the Ford Times contained as many references to “Mr. Couzens” as it did to “Mr. Ford.” It seldom mentioned anyone else. Everyone close to the company understood that they were the only ones who counted. Not a few understood something else. “. . . They used to tell it around the automobile shows and so forth that Couzens is the brains of the organization. Couzens is the front door. If you want anything you will have to see Couzens. This went on and on, without any inspiration from me. . . .” So Couzens himself said.³⁸

Actually, that was how Ford wanted things. If anyone came to Ford about a business matter, he said: “See Mr. Couzens.”³⁹

Board meetings became perfunctory affairs. “I would not work for a company where the board did much interfering with actions or policies,” Couzens said later.⁴⁰ In particular, he had in mind the Dodge brothers, and even Ford. The fact was, if the Ford Company then had a boss, the boss was Couzens.⁴¹