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Home -> Burton J. Hendrick -> The Age of Big Business, A Chronicle of the Captains of Industry -> CHAPTER VII

The Age of Big Business, A Chronicle of the Captains of Industry - CHAPTER VII










In many manufacturing lines, American genius for organization and
large scale production has developed mammoth industries. In
nearly all the tendency to combination and concentration has
exercised a predominating influence. In the early years of the
twentieth century the public realized, for the first time, that
one corporation, the American Sugar Refining Company, controlled
ninety-eight per cent of the business of refining sugar. Six
large interests--Armour, Swift, Morris, the National Packing
Company, Cudahy, and Schwarzschild and Sulzberger--had so
concentrated the packing business that, by 1905, they slaughtered
practically all the cattle shipped to Western centers and
furnished most of the beef consumed in the large cities east of
Pittsburgh. The "Tobacco Trust" had largely monopolized both the
wholesale and retail trade in this article of luxury and had also
made extensive inroads into the English market. The textile
industry had not only transformed great centers of New England
into an American Lancashire, but the Southern States, recovering
from the demoralization of the Civil War, had begun to spin their
own cotton and to send the finished product to all parts of the
world. American shoe manufacturers had developed their art to a
point where "American shoes" had acquired a distinctive standing
in practically every European country.

It is hardly necessary to describe in detail each of these
industries. In their broad outlines they merely repeat the story
of steel, of oil, of agricultural machinery; they are the product
of the same methods, the same initiative. There is one branch of
American manufacture, however, that merits more detailed
attention. If we scan the manufacturing statistics of 1917, one
amazing fact stares us in the face. There are only three American
industries whose product has attained the billion mark; one of
these is steel, the other food products, while the third is an
industry that was practically unknown in the United States
fifteen years ago. Superlatives come naturally to mind in
discussing American progress, but hardly any extravagant phrases
could do justice to the development of American automobiles. In
1899 the United States produced 3700 motor vehicles; in 1916 we
made 1,500,000. The man who now makes a personal profit of not
far from $50,000,000 a year in this industry was a puttering
mechanic when the twentieth century came in. If we capitalized
Henry Ford's income, he is probably a richer man than
Rockefeller; yet, as recently as 1905 his possessions consisted
of a little shed of a factory which employed a dozen workmen.
Dazzling as is this personal success, its really important
aspects are the things for which it stands. The American
automobile has had its wildcat days; for the larger part,
however, its leaders have paid little attention to Wall Street,
but have limited their activities exclusively to manufacturing.
Moreover, the automobile illustrates more completely than any
other industry the technical qualities that so largely explain
our industrial progress. Above all, American manufacturing has
developed three characteristics. These are quantity production,
standardization, and the use of labor-saving machinery. It is
because Ford and other manufacturers adapted these principles to
making the automobile that the American motor industry has
reached such gigantic proportions.

A few years ago an English manufacturer, seeking the explanation
of America's ability to produce an excellent car so cheaply, made
an interesting experiment. He obtained three American
automobiles, all of the same "standardized" make, and gave them a
long and racking tour over English highways. Workmen then took
apart the three cars and threw the disjointed remains into a
promiscuous heap. Every bolt, bar, gas tank, motor, wheel, and
tire was taken from its accustomed place and piled up, a hideous
mass of rubbish. Workmen then painstakingly put together three
cars from these disordered elements. Three chauffeurs jumped on
these cars, and they immediately started down the road and made a
long journey just as acceptably as before. The Englishman had
learned the secret of American success with automobiles. The one
word "standardization" explained the mystery.

Yet when, a few years before, the English referred to the
American automobile as a "glorified perambulator," the
characterization was not unjust. This new method of
transportation was slow in finding favor on our side of the
Atlantic. America was sentimentally and practically devoted to
the horse as the motive power for vehicles; and the fact that we
had so few good roads also worked against the introduction of the
automobile. Yet here, as in Europe, the mechanically propelled
wagon made its appearance in early times. This vehicle, like the
bicycle, is not essentially a modern invention; the reason any
one can manufacture it is that practically all the basic ideas
antedate 1840. Indeed, the automobile is really older than the
railroad. In the twenties and thirties, steam stage coaches made
regular trips between certain cities in England and occasionally
a much resounding power-driven carriage would come careering
through New York and Philadelphia, scaring all the horses and
precipitating the intervention of the authorities. The hardy
spirits who devised these engines, all of whose names are
recorded in the encyclopedias, deservedly rank as the "fathers"
of the automobile. The responsibility as the actual "inventor"
can probably be no more definitely placed. However, had it not
been for two developments, neither of them immediately related to
the motor car, we should never have had this efficient method of
transportation. The real "fathers" of the automobile are Gottlieb
Daimler, the German who made the first successful gasoline
engine, and Charles Goodyear, the American who discovered the
secret of vulcanized rubber. Without this engine to form the
motive power and the pneumatic tire to give it four air cushions
to run on, the automobile would never have progressed beyond the
steam carriage stage. It is true that Charles Baldwin Selden, of
Rochester, has been pictured as the "inventor of the modern
automobile" because, as long ago as 1879, he applied for a patent
on the idea of using a gasoline engine as motive power, securing
this basic patent in 1895, but this, it must be admitted, forms a
flimsy basis for such a pretentious claim.

The French apparently led all nations in the manufacture of motor
vehicles, and in the early nineties their products began to make
occasional appearances on American roads. The type of American
who owned this imported machine was the same that owned steam
yachts and a box at the opera. Hardly any new development has
aroused greater hostility. It not only frightened horses, and so
disturbed the popular traffic of the time, but its speed, its
glamour, its arrogance, and the haughty behavior of its
proprietor, had apparently transformed it into a new badge of
social cleavage. It thus immediately took its place as a new
gewgaw of the rich; that it had any other purpose to serve had
occurred to few people. Yet the French and English machines
created an entirely different reaction in the mind of an
imaginative mechanic in Detroit. Probably American annals contain
no finer story than that of this simple American workman. Yet
from the beginning it seemed inevitable that Henry Ford should
play this appointed part in the world. Born in Michigan in 1863,
the son of an English farmer who had emigrated to Michigan and a
Dutch mother, Ford had always demonstrated an interest in things
far removed from his farm. Only mechanical devices interested
him. He liked getting in the crops, because McCormick harvesters
did most of the work; it was only the machinery of the dairy that
held him enthralled. He developed destructive tendencies as a
boy; he had to take everything to pieces. He horrified a rich
playmate by resolving his new watch into its component parts--and
promptly quieted him by putting it together again. "Every clock
in the house shuddered when it saw me coming," he recently said.
He constructed a small working forge in his school-yard, and
built a small steam engine that could make ten miles an hour. He
spent his winter evenings reading mechanical and scientific
journals; he cared little for general literature, but machinery
in any form was almost a pathological obsession. Some boys run
away from the farm to join the circus or to go to sea; Henry Ford
at the age of sixteen ran away to get a job in a machine shop.
Here one anomaly immediately impressed him. No two machines were
made exactly alike; each was regarded as a separate job. With his
savings from his weekly wage of $2.50, young Ford purchased a
three dollar watch, and immediately dissected it. If several
thousand of these watches could be made, each one exactly alike,
they would cost only thirty-seven cents apiece. "Then," said Ford
to himself, "everybody could have one." He had fairly elaborated
his plans to start a factory on this basis when his father's
illness called him back to the farm.

This was about 1880; Ford's next conspicuous appearance in
Detroit was about 1892. This appearance was not only conspicuous;
it was exceedingly noisy. Detroit now knew him as the pilot of a
queer affair that whirled and lurched through her thoroughfares,
making as much disturbance as a freight train. In reading his
technical journals Ford had met many descriptions of horseless
carriages; the consequence was that he had again broken away from
the farm, taken a job at $45 a month in a Detroit machine shop,
and devoted his evenings to the production of a gasoline engine.
His young wife was exceedingly concerned about his health; the
neighbors' snap judgment was that he was insane. Only two other
Americans, Charles B. Duryea and Ellwood Haynes, were attempting
to construct an automobile at that time. Long before Ford was
ready with his machine, others had begun to appear. Duryea turned
out his first one in 1892; and foreign makes began to appear in
considerable numbers. But the Detroit mechanic had a more
comprehensive inspiration. He was not working to make one of the
finely upholstered and beautifully painted vehicles that came
from overseas. "Anything that isn't good for everybody is no good
at all," he said. Precisely as it was Vail's ambition to make
every American a user of the telephone and McCormick's to make
every farmer a user of his harvester, so it was Ford's
determination that every family should have an automobile. He was
apparently the only man in those times who saw that this new
machine was not primarily a luxury but a convenience. Yet all
manufacturers, here and in Europe, laughed at his idea. Why not
give every poor man a Fifth Avenue house? Frenchmen and
Englishmen scouted the idea that any one could make a cheap
automobile. Its machinery was particularly refined and called for
the highest grade of steel; the clever Americans might use their
labor-saving devices on many products, but only skillful hand
work could turn out a motor car. European manufacturers regarded
each car as a separate problem; they individualized its
manufacture almost as scrupulously as a painter paints his
portrait or a poet writes his poem. The result was that only a
man with several thousand dollars could purchase one. But Henry
Ford--and afterward other American makers--had quite a different

Henry Ford's earliest banker was the proprietor of a quick-lunch
wagon at which the inventor used to eat his midnight meal after
his hard evening's work in the shed. "Coffee Jim," to whom Ford
confided his hopes and aspirations on these occasions, was the
only man with available cash who had any faith in his ideas.
Capital in more substantial form, however, came in about 1902.
With money advanced by "Coffee Jim," Ford had built a machine
which he entered in the Grosse Point races that year. It was a
hideous-looking affair, but it ran like the wind and outdistanced
all competitors. From that day Ford's career has been an
uninterrupted triumph. But he rejected the earliest offers of
capital because the millionaires would not agree to his terms.
They were looking for high prices and quick profits, while Ford's
plans were for low prices, large sales, and use of profits to
extend the business and reduce the cost of his machine. Henry
Ford's greatness as a manufacturer consists in the tenacity with
which he has clung to this conception. Contrary to general belief
in the automobile industry he maintained that a high sale price
was not necessary for large profits; indeed he declared that the
lower the price, the larger the net earnings would be. Nor did he
believe that low wages meant prosperity. The most efficient
labor, no matter what the nominal cost might be, was the most
economical. The secret of success was the rapid production of a
serviceable article in large quantities. When Ford first talked
of turning out 10,000 automobiles a year, his associates asked
him where he was going to sell them. Ford's answer was that that
was no problem at all; the machines would sell themselves. He
called attention to the fact that there were millions of people
in this country whose incomes exceeded $1800 a year; all in that
class would become prospective purchasers of a low-priced
automobile. There were 6,000,000 farmers; what more receptive
market could one ask? His only problem was the technical one--how
to produce his machine in sufficient quantities.

The bicycle business in this country had passed through a similar
experience. When first placed on the market bicycles were
expensive; it took $100 or $150 to buy one. In a few years,
however, an excellent machine was selling for $25 or $30. What
explained this drop in price? The answer is that the
manufacturers learned to standardize their product. Bicycle
factories became not so much places where the articles were
manufactured as assembling rooms for putting them together. The
several parts were made in different places, each establishment
specializing in a particular part; they were then shipped to
centers where they were transformed into completed machines. The
result was that the United States, despite the high wages paid
here, led the world in bicycle making and flooded all countries
with this utilitarian article. Our great locomotive factories had
developed on similar lines. Europeans had always marveled that
Americans could build these costly articles so cheaply that they
could undersell European makers. When they obtained a glimpse of
an American locomotive factory, the reason became plain. In
Europe each locomotive was a separate problem; no two, even in
the same shop, were exactly alike. But here locomotives are built
in parts, all duplicates of one another; the parts are then sent
by machinery to assembling rooms and rapidly put together.
American harvesting machines are built in the same way; whenever
a farmer loses a part, he can go to the country store and buy its
duplicate, for the parts of the same machine do not vary to the
thousandth of an inch. The same principle applies to hundreds of
other articles.

Thus Henry Ford did not invent standardization; be merely applied
this great American idea to a product to which, because of the
delicate labor required, it seemed at first unadapted. He soon
found that it was cheaper to ship the parts of ten cars to a
central point than to ship ten completed cars. There would
therefore be large savings in making his parts in particular
factories and shipping them to assembling establishments. In this
way the completed cars would always be near their markets. Large
production would mean that he could purchase his raw materials at
very low prices; high wages meant that he could get the efficient
labor which was demanded by his rapid fire method of campaign. It
was necessary to plan the making of every part to the minutest
detail, to have each part machined to its exact size, and to have
every screw, bolt, and bar precisely interchangeable. About the
year 1907 the Ford factory was systematized on this basis. In
that twelvemonth it produced 10,000 machines, each one the
absolute counterpart of the other 9999. American manufacturers
until then had been content with a few hundred a year! From that
date the Ford production has rapidly increased; until, in 1916,
there were nearly 4,000,000 automobiles in the United
States--more than in all the rest of the world put together--of
which one-sixth were the output of the Ford factories. Many other
American manufacturers followed the Ford plan, with the result
that American automobiles are duplicating the story of American
bicycles; because of their cheapness and serviceability, they are
rapidly dominating the markets of the world. In the Great War
American machines have surpassed all in the work done under
particularly exacting circumstances.

A glimpse of a Ford assembling room--and we can see the same
process in other American factories--makes clear the reasons for
this success. In these rooms no fitting is done; the fragments of
automobiles come in automatically and are simply bolted together.
First of all the units are assembled in their several
departments. The rear axles, the front axles, the frames, the
radiators, and the motors are all put together with the same
precision and exactness that marks the operation of the completed
car. Thus the wheels come from one part of the factory and are
rolled on an inclined plane to a particular spot. The tires are
propelled by some mysterious force to the same spot; as the two
elements coincide, workmen quickly put them together. In a long
room the bodies are slowly advanced on moving platforms at the
rate of about a foot per minute. At the side stand groups of men,
each prepared to do his bit, their materials being delivered at
convenient points by chutes. As the tops pass by these men
quickly bolt them into place, and the completed body is sent to a
place where it awaits the chassis. This important section,
comprising all the machinery, starts at one end of a moving
platform as a front and rear axle bolted together with the frame.
As this slowly ,advances, it passes under a bridge containing a
gasoline tank, which is quickly adjusted. Farther on the motor is
swung over by a small hoist and lowered into position on the
frame. Presently the dash slides down and is placed in position
behind the motor. As the rapidly accumulating mechanism passes
on, different workmen adjust the mufflers, exhaust pipes, the
radiator, and the wheels which, as already indicated, arrive on
the scene completely tired. Then a workman seats himself on the
gasoline tank, which contains a small quantity of its
indispensable fuel, starts the engine, and the thing moves out
the door under its own power. It stops for a moment outside; the
completed body drops down from the second floor, and a few bolts
quickly put it securely in place. The workman drives the now
finished Ford to a loading platform, it is stored away in a box
car, and is started on its way to market. At the present time
about 2000 cars are daily turned out in this fashion. The nation
demands them at a more rapid rate than they can be made.

Herein we have what is probably America's greatest manufacturing
exploit. And this democratization of the automobile comprises
more than the acme of efficiency in the manufacturing art. The
career of Henry Ford has a symbolic significance as well. It may
be taken as signalizing the new ideals that have gained the upper
hand in American industry. We began this review of American
business with Cornelius Vanderbilt as the typical figure. It is a
happy augury that it closes with Henry Ford in the foreground.
Vanderbilt, valuable as were many of his achievements,
represented that spirit of egotism that was rampant for the
larger part of the fifty years following the war. He was always
seeking his own advantage, and he never regarded the public
interest as anything worth a moment's consideration. With Ford,
however, the spirit of service has been the predominating motive.
His earnings have been immeasurably greater than Vanderbilt's;
his income for two years amounts to nearly Vanderbilt's total
fortune at his death; but the piling up of riches has been by no
means his exclusive purpose. He has recognized that his workmen
are his partners and has liberally shared with them his
increasing profits. His money is not the product of speculation;
Ford is a stranger to Wall Street and has built his business
independently of the great banking interest. He has enjoyed no
monopoly, as have the Rockefellers; there are more than three
hundred makers of automobiles in the United States alone. He has
spurned all solicitations to join combinations. Far from asking
tariff favors he has entered European markets and undersold
English, French, and German makers on their own ground. Instead
of taking advantage of a great public demand to increase his
prices, Ford has continuously lowered them. Though his idealism
may have led him into an occasional personal absurdity, as a
business man he may be taken as the full flower of American
manufacturing genius. Possibly America, as a consequence of
universal war, is advancing to a higher state of industrial
organization; but an economic system is not entirely evil that
produces such an industry as that which has made the automobile
the servant of millions of Americans.

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