1906 was pivotal for Ford Motor Co. How the stage was set for the iconic Model T.
Posted: Mon Jul 18, 2022 12:21 pm
My opinions, with a few facts sprinkled in.
I've been working on this for some time, and am going to call this portion "Follow the Money."
We are fortunate to have monthly audit reports for Ford Motor Co., beginning with March, 1906, and continuing into 1908. With Ford Motor Co. (FMC) fiscal and model years beginning and ending on September 30 and October 1, respectively, this means we don't have the complete 1906 fiscal year month by month. But fortunately, we do have all we need to track the production, and just as importantly, the profit of both 1906 models, K and N.
First, let's look at the big picture at FMC. Ford Manufacturing Co. was created in late 1905 for the purpose of manufacturing/assembling portions of the Model N. The Piquette plant was now one year old. Dodge Brothers was also fully engaged producing components for both models K and N, as well as finishing production of Model F cars.
Alexander Y. Malcomson was actively engaged in the management of his Aerocar venture. As a result, he was unanimously asked to resign in writing by the other board directors in December 1905 when news of his venture leaked out.
In January 1906, Ford introduced two revolutionary models. The Model N created a sensation nationwide, the first four cylinder car (at a time when one and two cylinder cars were still prevalent) car to sell for $500 or less. Also receiving extensive press was one of the first four U.S. made six cylinder cars on the market in 1906. (Some argument persisted at the time as to who was first, Ford, Franklin, Stevens-Duryea or National) Regardless of who was first, Ford produced the least expensive six cylinder model in the world, matching the N as the best price leader among their peers.
As calendar year 1906 unfolded, FMC promoted models "K" and "N" at the auto shows, receiving rave reviews for both. Meanwhile, Ford Manufacturing Co. lagged behind getting the Model N to market (as well as the other N component providers including Dodge Brothers, who produced Model N front axles and differentials). The first Model K didn't reach market until mid April, and the N was later still reaching market, with the first N shipped in July 1906.
As a result, 1906 was a "down" year for FMC financially. Below is the final 1906 FMC monthly audit (September, 1906). There are two portions of the report I"m going to "drill down" on. The top half of the page lists sales for the month. It also documents the total sales revenues (how much FMC received from dealers/buyers), as well as other information, culminating in the final entry, "Gain" (bottom line). Below, the top half of the Sep 1906 report:
(Courtesy The Henry Ford, all rights apply)
What we learn form this half of the audit page includes the sales revenues for models B, F, N and K sold during the month of September, 1906. Breaking them down, 7 Model B sold for an average of $1,277 per car. Model B originally sold for 20% off list price of $2,000, or $1,600 per car. This appears to demonstrate that the seven "B" sold this month were reduced in price to $1,277. To the far right, the "bottom line," or "Gain" column shows these seven "B" made FMC $43.50 per car. While this doesn't seem like much (and it's not), this is just one month. What I've learned after reviewing several months of audit reports is this number varies a significant amount per car per month.
Next, four Model F sold for an average of $756 per car. "Gain" was reported at $73 per car.
373 Model N sold for an average of $394.60 per car. "Gain" or profit was just a little over $1 per car.
16 Model K sold for an average of $1,986.40 per car. "Gain,' or profit was $348 per car.
This in one of twelve months. The second half of the audit page tells us what happened for the entire fiscal year. Fortunately we have the months available to determine how many "K" and "N" were sold (March through September monthly audit pages). Unfortunately, we don't have the previous Fiscal Year (FY) pages, October 1905 - February 1905, so we are unable to know for sure how many F and B sold (although we can project pretty accurately, but that's a subject for another time).
Below, the "year to date" portion of the Sep 1906 audit page:
(Courtesy THF, all rights apply)
I'm going to focus on Models K and N in this portion of the audit. We know FMC sold 712 Model N and 301 Model K during FY 1906. The low production numbers, especially for Model N, was due to delays getting the model to market. As a result, FMC revenue for 1906 was down from 1905. However, the stage is set for FY 1907, when FMC will report it's first profit year exceeding one million dollars.
712 Model N reported total sales of $296,113.70. That equates to an average per car of $416 per car. With a dealer discount of 20%, this equates to an average retail price of $518 per car. The "Gain" or profit per Model N was $1.77 per car.
301 Model K were reported sold (this led all six cylinder car sales in the world, the first of two straight years in which FMC was the largest six cylinder car producer in the world). The average per "K" received by FMC was $2003 per car. The "Gain" or profit per car equaled $340 per car.
For FY 1906, the Model K provided 85% of FMC's new car profits. An important thing to take away from this is the fact Model K was making well $340 per car. In today's dollars, over $10,000 per car profit to FMC.
Meanwhile, nothing happens in a vacuum. In July, following the death of FMC Board of Directors President John Gray, A. Y. Malcomson sold his shares of FMC and Ford Canada to Henry Ford, increasing his investment in his own automobile company, Aerocar, of which he was President.
Henry Ford has already announced to the press that he intends to build an inexpensive touring car, and is looking for a 100 acres location to build the largest automobile plant in the world.
In late September 1906, Ford announces they will produce only two models for 1906 (ending Model F), models K and N. FMC also announced the Model N retail price would remain at $500, but that the Model K would be raised $300 to $2800 per car.
I'll have more, but a few rhetorical questions I'll throw out there. If Henry Ford "hated" or was forced to to built the Model K, as many Ford historians write, why did he continue it into 1907 and 1908? One answer could be because the components were already contracted. However, if that's the case, why did he (by now, most historians indicate Henry Ford was in control of the company) improve the design, and add $300 to the price? As we see in the 1906 audit information, FMC was making over $300 per car in 1906. Why not just finish production at the current price?
This audit information certainly dispels any notion that the Model K was not a profitable model. Performance in 1907 will indicate the model was one of the fastest, record setting production automobile Ford would build for many years to come. In fact, in 1907 the Model K will set a world record, the only production Ford to do that for the next several decades.
That's my story and I'm sticking to it.........
Below, Henry Ford beside a test driver on Tireman Ave, with a 1906 Model K set up for testing:
I've been working on this for some time, and am going to call this portion "Follow the Money."
We are fortunate to have monthly audit reports for Ford Motor Co., beginning with March, 1906, and continuing into 1908. With Ford Motor Co. (FMC) fiscal and model years beginning and ending on September 30 and October 1, respectively, this means we don't have the complete 1906 fiscal year month by month. But fortunately, we do have all we need to track the production, and just as importantly, the profit of both 1906 models, K and N.
First, let's look at the big picture at FMC. Ford Manufacturing Co. was created in late 1905 for the purpose of manufacturing/assembling portions of the Model N. The Piquette plant was now one year old. Dodge Brothers was also fully engaged producing components for both models K and N, as well as finishing production of Model F cars.
Alexander Y. Malcomson was actively engaged in the management of his Aerocar venture. As a result, he was unanimously asked to resign in writing by the other board directors in December 1905 when news of his venture leaked out.
In January 1906, Ford introduced two revolutionary models. The Model N created a sensation nationwide, the first four cylinder car (at a time when one and two cylinder cars were still prevalent) car to sell for $500 or less. Also receiving extensive press was one of the first four U.S. made six cylinder cars on the market in 1906. (Some argument persisted at the time as to who was first, Ford, Franklin, Stevens-Duryea or National) Regardless of who was first, Ford produced the least expensive six cylinder model in the world, matching the N as the best price leader among their peers.
As calendar year 1906 unfolded, FMC promoted models "K" and "N" at the auto shows, receiving rave reviews for both. Meanwhile, Ford Manufacturing Co. lagged behind getting the Model N to market (as well as the other N component providers including Dodge Brothers, who produced Model N front axles and differentials). The first Model K didn't reach market until mid April, and the N was later still reaching market, with the first N shipped in July 1906.
As a result, 1906 was a "down" year for FMC financially. Below is the final 1906 FMC monthly audit (September, 1906). There are two portions of the report I"m going to "drill down" on. The top half of the page lists sales for the month. It also documents the total sales revenues (how much FMC received from dealers/buyers), as well as other information, culminating in the final entry, "Gain" (bottom line). Below, the top half of the Sep 1906 report:
What we learn form this half of the audit page includes the sales revenues for models B, F, N and K sold during the month of September, 1906. Breaking them down, 7 Model B sold for an average of $1,277 per car. Model B originally sold for 20% off list price of $2,000, or $1,600 per car. This appears to demonstrate that the seven "B" sold this month were reduced in price to $1,277. To the far right, the "bottom line," or "Gain" column shows these seven "B" made FMC $43.50 per car. While this doesn't seem like much (and it's not), this is just one month. What I've learned after reviewing several months of audit reports is this number varies a significant amount per car per month.
Next, four Model F sold for an average of $756 per car. "Gain" was reported at $73 per car.
373 Model N sold for an average of $394.60 per car. "Gain" or profit was just a little over $1 per car.
16 Model K sold for an average of $1,986.40 per car. "Gain,' or profit was $348 per car.
This in one of twelve months. The second half of the audit page tells us what happened for the entire fiscal year. Fortunately we have the months available to determine how many "K" and "N" were sold (March through September monthly audit pages). Unfortunately, we don't have the previous Fiscal Year (FY) pages, October 1905 - February 1905, so we are unable to know for sure how many F and B sold (although we can project pretty accurately, but that's a subject for another time).
Below, the "year to date" portion of the Sep 1906 audit page:
I'm going to focus on Models K and N in this portion of the audit. We know FMC sold 712 Model N and 301 Model K during FY 1906. The low production numbers, especially for Model N, was due to delays getting the model to market. As a result, FMC revenue for 1906 was down from 1905. However, the stage is set for FY 1907, when FMC will report it's first profit year exceeding one million dollars.
712 Model N reported total sales of $296,113.70. That equates to an average per car of $416 per car. With a dealer discount of 20%, this equates to an average retail price of $518 per car. The "Gain" or profit per Model N was $1.77 per car.
301 Model K were reported sold (this led all six cylinder car sales in the world, the first of two straight years in which FMC was the largest six cylinder car producer in the world). The average per "K" received by FMC was $2003 per car. The "Gain" or profit per car equaled $340 per car.
For FY 1906, the Model K provided 85% of FMC's new car profits. An important thing to take away from this is the fact Model K was making well $340 per car. In today's dollars, over $10,000 per car profit to FMC.
Meanwhile, nothing happens in a vacuum. In July, following the death of FMC Board of Directors President John Gray, A. Y. Malcomson sold his shares of FMC and Ford Canada to Henry Ford, increasing his investment in his own automobile company, Aerocar, of which he was President.
Henry Ford has already announced to the press that he intends to build an inexpensive touring car, and is looking for a 100 acres location to build the largest automobile plant in the world.
In late September 1906, Ford announces they will produce only two models for 1906 (ending Model F), models K and N. FMC also announced the Model N retail price would remain at $500, but that the Model K would be raised $300 to $2800 per car.
I'll have more, but a few rhetorical questions I'll throw out there. If Henry Ford "hated" or was forced to to built the Model K, as many Ford historians write, why did he continue it into 1907 and 1908? One answer could be because the components were already contracted. However, if that's the case, why did he (by now, most historians indicate Henry Ford was in control of the company) improve the design, and add $300 to the price? As we see in the 1906 audit information, FMC was making over $300 per car in 1906. Why not just finish production at the current price?
This audit information certainly dispels any notion that the Model K was not a profitable model. Performance in 1907 will indicate the model was one of the fastest, record setting production automobile Ford would build for many years to come. In fact, in 1907 the Model K will set a world record, the only production Ford to do that for the next several decades.
That's my story and I'm sticking to it.........
Below, Henry Ford beside a test driver on Tireman Ave, with a 1906 Model K set up for testing:
