Roy D. Chapin: The Man Behind the Hudson Motor Car Company

XI. A Millionaire at Thirty

CHAPTER XI A MILLIONAIRE AT THIRTY THE huge, new Hudson factory was completed in the fall of 1910, and made a striking impression on the automobile world. It was designed by Albert Kahn who had laid out the little Thomas-Detroit plant for the partners. The new Hudson plant helped to establish Kahn as one of America's leading industrial architects. The factory layout was unusual for the period in that it gave consideration to beauty of structure, lighting and landscaping. It symbolized to the public and to Roy's business rivals that Hudson intended to be competitive in a big way. One of the logical steps in the company's progress was to increase the capital stock from $100,000 to $1,000,000, the increase of $900,000 being accomplished by the capitalization of surplus. The procedure was mainly an accounting transaction, but it gave a capital structure in keeping with the size of the business. It provided more shares of stock, in a more convenient distribution for financing. The company's financial statement as of August 1, 1910, gives some idea of its sudden growth. It revealed that Hudson had contracts for the sale of 7,165 cars, with delivery dates extending as far ahead as July 15, 1911. For these orders they had received over $180,000 on account. The company also had "cash, notes, drafts, and accounts receivable" from various customers amounting to more than $307,000. This was probably accounted for mostly by the balance due on automobiles to be paid for when delivered. To carry on this amount of manufacturing, the company had the staggering amount of $813,391 worth of merchandise, all on 97 98 ROY D. CHAPIN its factory premises. This high inventory amounted to more than $1100 per car for the automobiles then on order; but presumably it included materials for additional cars not yet sold, and possibly indicated over-optimism on immediate prospects . The 7,165 cars then on order, represented a substantial share of the business ahead, as the production in 1910 was 4,508 and in 1911 it was 6,486. In short, the $800,000 inventory was a major financial worry and most of Roy's correspondence during these early years of Hudson was concerned with banking problems. In addition to the three major partners, two others, namely R. B. Jackson and R. H. Webber, a nephew of Mr. Hudson, also acted as principals when financing was arranged for. Again and again the record shows endorsements by the five men for amounts of $25,000 to $200,000. Jackson and Webber, however, were really acting on behalt of J. L. Hudson, who hesitated to go on any note, lest it affect the credit standing of his store, and he endorsed for the Hudson company only on rare occasions. His arrangement of acting through Jackson and Webber was explained in a letter to Roy, dated December 23, 1910: "This letter is written to you to assure you that the understanding between us is this, that in the event of the Hudson Motor Car Company being unable to pay any of these notes, or their renewals, it is understood and agreed that any loss shall be equally shared by you, Mr. Coffin, Mr, Bezner and myself. Mr. Jackson and Mr. Webber shall not share any of the loss." These problems of working capital were, however, a symptom of the fact that the realization of the partners' dream was near at hand. At the end of 1910, Hudson's sales for the year had totaled $4,878,600. Profits were around $500,000. Valued on the basis of earnings in those days the business was worth $5,000,000; and Roy Chapin owned over 20% of the stock. Born in 1880, Chapin was now, in fact, an American phenomenon , a millionaire at thirty! A MILLIONAIRE AT THIRTY 99 Now Roy and his partners made serious and diligent efforts to keep the promise made to themselves that they would retire when they had made their fortunes. They could quit the company with good conscience. Within a year inventory had been reduced from over $800,000.00 to $343,000. Most importantly the Hudson volume of business was based on sound grounds. The improved processes of manufacture and the design of the car reflected the observations which Roy had made in Europe in 1909. In price policy Hudson was...