restricted access 6 The Dissolution of the U.S. Motor Company
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■ 6 ■ The Dissolution of the U.S. Motor Company F ebruary 1912 saw Briscoe present U.S. Motor stockholders the encouraging news that over the last five months of 1911 U.S. Motor had pared its accounts payable by $1.5 million and sold 6,512 automobiles. Further, orders for new vehicles were 25 percent ahead of last year’s sales. That was the good news. The bad news was that the board was suspending payment of the February dividend, claiming (which was quite true) that such an outflow of cash at this time could not be justified.1 The following month executive committee members voted to elevate Jonathan Maxwell to first vice president of U.S. Motor. He replaced Charles Stoddard, who had resigned to form his own car company with H. J. Edwards, U.S. Motor’s chief engineer. At that same meeting Frank Briscoe informed members that he was on the verge of a nervous and physical breakdown and required long-term rest. He asked to be relieved of his present responsibilities as head of the Brush and Briscoe manufacturing divisions and vice president of engineering. When asked, he said that ■ 83 84 ■ C H A P T E R 6 he had no idea when he would be able to return. (In July he officially resigned his U.S. Motor offices.) One week later, the Maxwell-Briscoe division informed the parent company that it did not have the cash to pay off its $200,000 promissory note coming due to U.S. Motor on April 15. Maxwell had borrowed the money to purchase materials, which now were sitting idle because there were not enough new car orders to use them up. Briscoe gave Maxwell a 30-day extension for repayment. As collateral until it could make the payment, Maxwell forwarded over $300,000 worth of its own notes receivable on money owed to it from the sale of its products, but not as yet collected. By the spring of 1912, financial matters were rapidly coming to a head. U.S. Motor again found that its cash funds were too low. The $6 million acquired the previous year through the sale of debenture bonds proved to be insufficient to pay all of the company’s bills. The administrative expenses accrued from centralizing all purchasing, engineering, statistical work, traffic sales, and numerous other activities were more than the company could afford. The manufacturing divisions, including Maxwell-Briscoe, were of no help. Sales of their products were depressed, and several models suffered from shoddy workmanship, requiring the additional expense of repairing them before they could be sent to the dealer. The situation was rather ironic. U.S. Motor represented a company with $23 million in business capital, 8,000 employees, an annual payroll of $6.5 million, and annual sales of $12.5 million—but it did not have the cash to pay the interest on its loans.2 To borrow more money to meet the loan obligations was out of the question. No source was available, and U.S. Motor credit was stretched to its breaking point. The banks were concerned, especially the firm of Eugene Meyer, which stood to lose its $6 million investment in U.S. Motor debenture bonds. Also concerned were the suppliers who, should U.S. Motor declare bankruptcy, would be the last to be paid out of what funds remained after the banks took their share. A special meeting of the leading U.S. Motor creditors was called on June 15 wherein Briscoe explained the financial condition of the company. He informed them that the company had $750,000 in notes D i s s o l u t i o n o f t h e U . S . M o t o r C o m p a n y ■ 85 coming due in June and needed a three-month extension because it lacked the money to pay them. However, he claimed that orders were mounting for U.S. Motor cars now that the warm weather had arrived, and that the remaining 1912 production of 22,000 cars would be disposed of by the end of summer. This would enable U.S. Motor to pay off all its notes. After hearing Briscoe’s plea, the bankers and suppliers agreed to give U.S. Motor a 90-day extension, but only if W. E. Strong of the Bankers’ Trust Company were given direct charge over the financial...