Monopoly on Wheels: Henry Ford and the Selden Automobile Patent

IV. The Opening Battle

IV The Opening Battle IN 1899 the grand resources of the Electric Vehicle Company stood at more than $100,000,000, virtually all of it on paper. We have seen that the electric automobile could not find a market justifying this nominal capitalization unless the guaranteed outlets projected by the Whitney-Ryan syndicate developed rapidly. But many limitations and difficulties, chiefly those stemming from the storage battery, made the electric vehicle a mechanical and commercial failure for passenger and trucking use. By 1903 there were only 2,200 automobiles in the United States operating with batteries produced by the Electric Storage Battery Company.1 So limited a market could hardly support, the imperial ambitions of the Electric Vehicle Company. Shortly after 1900, advances in factory technology improved the construction and performance of the gasoline engine. Sturdier cylinder castings became available when American foundries abandoned the cupola for the reverberatory furnace and produced a better quality of foundry iron. Automobile makers began to insist on a higher grade of craftsmanship in engine components.2 Unreliable "hot-tube" ignition became outmoded when the improvement of coils, spark plugs, and other appliances enabled a general shift to electric ignition. These and like developments contributed to the ascendancy of the gasoline automobile over those powered by steam or electricity. The Whitney-Ryan promoters, it became apparent, had pinned their hopes on the wrong type of vehicle, and their miscalculations were shortly reflected in the financial affairs of the Elecric Vehicle Company. The means they chose to redress their error precipitated the first clash over the Selden patent. 7i Monopoly on Wheels 1 Throughout the summer and autumn of 1899 the Electric Vehicle Company gave every outward sign of prosperity. Dividends of eight per cent were declared on both the preferred and common stock, and its securities enjoyed a market boom. This flourishing activity, however, was contrived and meretricious, the product of stock manipulation. Although the officers of the Electric Vehicle Company were confident that its subsidiaries would soon show a profit, their hopes were never fulfilled. When dividends on Electric Vehicle stock were suspended late in 1899, the subsequent market decline in its securities touched off widespread misgivings about the actual condition of the Electric Vehicle Company. Leaping to the attack, Horseless Age scarified the Whitney promoters. "They have become grotesque," it said, "and if they have any saving sense of humor they will retire and leave the field to the mechanics and manufacturers to whom it rightfully belongs." This suggestion was underscored by another drop in Electric Vehicle stocks that brought them far below par. The schedule of 8,000 cars which the company had announced for 1900 was cut to 2,000, and sharp reductions were made in the factory force at Hartford. "Where thousands of Lead Cabs were to be in service," snorted Horseless Age, "we find but fifties, groaning around with every sign of wear and tear, half the time in the hospital and indifferently patronized at that."3 In 1900 the company fell under a shadow when a $2,000,000 loan made to it by the State Trust Company, a New York bank controlled by the Whitney syndicate, resulted in what one journalist termed as "one of the greatest banking scandals of a decade." The loan was made on notes secured by Electric Vehicle stock and signed by Daniel H. Shea. A dummy director of the Electric Vehicle Company, Shea was actually the office boy of Thomas F. Ryan. The loan was a technical violation of the New York state banking laws. The transaction was savagely attacked in the press and brought the Electric Vehicle Company into disrepute. Under the headline, "How An Office Boy Got $2,000,000," the New York Herald charged that the loan was linked to stock manipulations. 72 IV The Opening Battle "The financiering methods of the Lead Cab promoters," it said, "are beginning to leak out at last." * The subsidiaries of the Electric Vehicle Company fared poorly. In 1900 the Chicago factory was sold to the General Electric Company , and the Illinois Electric Vehicle Transportation Company, which had been operating at a loss, was liquidated early in 1901. When the New England Electric Vehicle Transportation Company was dissolved, its final statement showed that expenditures were double the amount of income. At its demise, this sub-companyhad only twenty-five vehicles instead of the hundreds that had been promised for its...