MTFCA Forum

I've been thinking of writing these threads for quite some time. However, I didn't expect four of them. Initially, I thought maybe two. Then two stretched, and, well, here we are (at least I am, nobody else may be left from this marathon....).

The three preceding links, from last to first.

"The last straw, Ford and Malcomson," October 1905 through January 1906:
viewtopic.php?f=2&t=31175

Henry Ford and A.Y. Malcomson 1905:
viewtopic.php?f=2&t=31107

The day Alexander Malcomson lost:
viewtopic.php?f=2&t=31027

We've gone from a day when Alexander Malcomson made a motion at a 1904 Board of Directors (BOD) meeting to produce 2500 "small cars" (models C and F), and received, no 2nd to his motion, through the end of 1905, when he secretly planned and incorporated a competing Detroit based car company, Aerocar, and was promptly requested to resign from his post on the FMC BOD and as FMC Treasurer.

Along the way, we've ascertained that Malcomson chose a four-cylinder air cooled motor for his automobile, contrary to historical reports that he "loved the six cylinder Model K." We've shown that final decisions regarding the number of model K and N wasn't decided upon until January 1906 (January 1906 FMC BOD minutes), again bringing the assertion that he "forced" Henry Ford to build the Model K into question.

Finally, we saw that while Malcomson brought up Ford Manufacturing Co. in his letter declining to resign his board position, he did not write that he was denied ownership in the company. In fact, it appears he and John Gray, the other two largest shareholders in Ford Motor Co., in all likelihood were offered ownership, and chose not to. We also saw that Ford Manufacturing was primarily a company owned overwhelmingly by Henry Ford, with 58% of Manufacturing's shares.

Now, for a few side by side comparisons as we entered 1906. One of the first things I wish to emphasize, Alexander Y. Malcomson continued, along with Henry Ford, to be the largest shareholder in Ford Motor Co.. There is no information that he was "forced" or coerced to liquidate, sell, give up or walk away from his ownership. In fact, there is no way he could be forced to give up ownership of his Ford Motor Co. shares. Malcomson, just like every other Ford shareholder, owned a valuable piece of property (Ford shares), that had been paying significant dividends, and in all likelihood would continue to.

Now, lets compare the products.

Ford Motor Co. brought out two revolutionary models for 1906, the six cylinder Model K, and four cylinder Model N. Both cars represented Ford values, light weight, rugged, few frills, and powerful weight to horsepower ratios and inexpensive in their class. The Model K, priced at $2,500 (over $75,000 in todays dollars), and Model N, priced at $500 (over $15,000 today). The Model K was one of America's first production six cylinders cars. With a dual ignition system, nicely appointed body and appearance, by far the least expensive six cylinder car on the market, and least expensive auto of 40 or more horsepower for 1906. The same applied with the Model N. With a 16hp four cylinder motor, the runabout was also the least expensive four cylinder car on the market. Needless to say, the industry was excited to view and review Fords new models.

Meanwhile, the Aerocar was a traditional offering. At $2,800 ($87,000 today), like the Model K, it was a mid-level priced car. With a 20 horsepower air cooled Reeves motor, sliding gear transmission, it was similar to many cars marketed in 1906 (with the exception of the air-cooled motor). My personal opinion of the Aerocar's appearance was a car high on design, with traditional mechanicals. With front half-doors and a steel cowl, it's appearance was modern in my opinion.

Below, Henry Ford speaking with a farmer, beside his 1906 Ford Model K:
Aerocar executives with 1906 Aerocar:

The two motors were 201 and 405 cubic inches:


Chassis comparison:


Next, 1906 and beyond.

Ford and Aerocar advertise nationally as the 1906 car show and sales season begin. And Henry Ford gets international coverage at the wheel of his six cylinder racer. One can't buy this kind of coverage ("The Great Outdoors" cover, Ormond Beach, 1906):

"The Sun" newspaper, April 1906:
"Detroit Free Press," May, 1906

By July, Ford is still buying significant advertising space. The Aerocar ad is at the bottom of the page. ("The Sun")

Next, Malcomson exits Ford, for a price.

I am still watching closely! And enjoying a bunch of things I had not seen before. Great stuff!

Finally, the inevitable happens. Newspapers and magazines report in July 1906 that Malcomson has sold his interest in Ford Motor Company. In this same article he announces that Aerocar capitalization in also being raised to $500,000 with an additional public stock offering. In other words, Aerocar is attempting to raise capital:

He is reported to have received $175,000. While this article reports his initial investment was $28,000, he put in about $7,000 for his shares. The money he received in todays value would equal about 5.5 million dollars.



Many Ford historians write that Malcomson was "forced out of Ford Motor Company." Malcomson negotiated with Henry Ford for the sale of his stock, over six months after he was formerly asked to resign from the Ford Board of Directors. In theory, he could have held onto his shares of Ford Motor Co. as long as he chose. However, receives millions (today's value) for an initial investment only a couple of years earlier worth a fraction of what he received does not seem like a "force" to me. As he stated in one of his articles above, he saw a good business opportunity.

At this point (July, 1906), Ford Motor Company was just beginning to sell their first Model N, due to production delays. The new car season was sell over. All Ford was able to get to market up to July 1906 were about 300 Model K, and 1905 model year Model F. I suspect Malcomson's sale, while in hindsight to sales made by other investors such as the Dodges' netted huge returns, was still a significant amount in 1906, and under the circumstances, probably appeared to be a great business move.

Next, an "eye-witness" tells what he knew of the Ford Malcomson relationship, and his personal opinion about Malcomson's influence on Ford Motor Company.

Charles H. Bennett was an original investor with Ford Motor Co.. He was one of the driving forces, and future president of Daisy Air Rifle, Plymouth, Michigan. He met Henry Ford and Alexander Malcomson the same day in early 1903, and rode with Ford in his Model A, prior to the start of Ford Motor Co.. Ford and Malcomson approached him a day later, asking if Daisy would be interested in owning 49 1/2 percent of the soon to be incorporated Ford Motor Co.. As circumstance would have it, Daisy didn't buy in, but Bennett was impressed enough to invest $5,000.

In 1952 he recorded his Reminiscence with Ford Motor Co.. He said he sold his shares to Malcomson when the problems with Ford happened, and continued on to tell about his dealings and friendship that remained intact throughout the remainder of all three mens lives. To put this on perspective, all three men were about the same age, with both Bennett and Henry Ford born in 1863, and Malcomson in 1865.

Below is an excerpt from his Reminiscence (courtesy The Henry Ford, all rights apply), with typed transcript below that:


"If I was to divide up the success of the Ford Motor Company and had to pick the men who were responsible for its success in the beginning, Mr. Wills would be one. Of course, the first one would be Mr. Ford, for this reason; he got away with something that no other manufacturer could get away with or ever did. The other would be, for the first two or three years, the selling of automobiles on customers' money. That I'd have to give Couzens credit for."

"I would say that the entire start of the Company for the first two years was all done by Mr. Ford, Mr Wills, and Mr. Couzens. I don't think Mr. Malcomson went up to that factory on Piquette Avenue twice a year. He had his coal business, and he was working on it day and night. How could he be of help to Mr. Ford? It was impossible. A man has only got a certain number of hours, and he had to sleep a couple of them. That's what killed him. There's no question in my mind; it was overwork."

The Bennett Reminiscence is remarkable, and he had a front seat to many events in early Ford history including this topic. He speaks of a night the Dodge brothers took R.M. Lockwood out on the town (Ford's early foreign sales agent), as well as setting up a meeting with William Durant and the subsequent offer to buy Ford Motor Co. for inclusion into the future General Motors.

Stealing the title of a song from the musical Hamilton, Charles Bennett was in "The Room Where It Happens."

Within a year of selling his FMC stock, A.Y. Malcomson's Aerocar is in bankruptcy. He restructured and attempted to market for both 1907 and 1908. In 1907 two new models were added, a roadster using the same 20 hp air cooled motor (Aerocar was never able to dispose of the original 500 motors contracted with Reeves Pulley), and a 40 hp touring car. The motor in the touring car? A 40 horsepower water-cooled four cylinder motor.

Malcomson never recovered the financial clout he had attained as Detroit and Toledo's largest coal dealer. He attempted many business endeavors including real estate, mining and other ventures, but never replicated the success he realized with sale of his shares of Ford Motor Company Stock.

I'll finish with a letter I came across at The Henry Ford a few years ago, and a recap of the Ford Malcomson partnership.

It is difficult to know, at a particular time and place in a given point in time, what is the best way to proceed?
By all early accounts, A Y Malcomson was a good businessman. Although he had invested heavily in the new Ford Motor Company, he was so busy with his coal business that he couldn't put the time and effort into his new automobile interests. He had worked hard for years to get where he was financially, and he saw Henry and others in the fledgling automobile industry making fortunes almost overnight. To him, it probably seemed unfair. If one does not consider the fifteen years of Henry's experimentations, and working for Thomas Edison simply to earn a living for a number of years while working on his experiments? One can understand A Y Malcomson feeling that way.
If A Y Malcomson had simply continued to work his coal business, his foundation, and patted Henry on the back and said "keep up the good work"? A Y M likely could have kept his investment in Ford, and continued to make some real money in his coal business (which with the growing automobile production would likely have also continued to grow!). If he had gone that way, he likely would have made millions from his Ford investment on top of the fortune he was still making as one of the largest coal merchants in the country.
Instead, Malcomson saw the automobile industry as an opportunity to start up a company, and make another fortune almost overnight! What he failed to realize, was that for every company like Oldsmobile, Reo, Maxwell, and a dozen others, there were dozens of others going broke almost overnight. He thought he saw the secret to success, instead he saw a mirage of sudden riches.
While Reo, Olsmobile, Maxwell and those dozen others were wonderful successes! Ford was unique. Henry and his company managed to pull off what no other company had done! Henry was not alone in his vision. Ransom Eli Olds had the same dream, a car affordable to the masses. He was never quite able to pull it off. Benjamin Briscoe also had that dream (Maxwell and Brush), along with visions of a conglomerate manufacturing all classes of cars. He also failed to accomplish and keep his dream.
So Alex Y Malcomson leveraged everything he had, and tried to buy an overnight success. Sometimes, timing is everything. And his timing was wrong. Overleveraged, at the wrong time (that was also Benjamin Briscoe's big mistake!)? He lost practically everything.

We can wonder? Speculate how things could have gone if he made other decisions? If Malcomson hadn't gone behind the backs of Henry and the others? How long would he have kept his shares? Would Henry have later tried to leverage out Malcomson for total control of the Ford Motor Company? Maybe the buyout to Malcomson would have been in the millions? MAYBE, Henry leveraging that amount would have broken him and Henry would have failed to reach the moving assembly line in the mid 1910s? Who knows? Maybe that would have given the advantage Benjamin Briscoe lacked and his company could have become the huge automobile company he envisioned, and not General Motors?

Henry did a lot of good for the world in the first two-thirds of his life. I think we should be happy the way those things went.

Wayne, good, and interesting points. When looking into Malcomson’s business decisions, I noticed he seemed always to be heavily leveraged, and always looking for the next opportunity.

The next thing I’m working on is essentially a letter from A.Y. Malcomson to Henry Ford. I believe it may answer some of our questions about the man, and create an interesting one concerning Henry Ford.
Thank you for your posts,
Rob

Ok, I lied...............

No, not about my opinions and the information presented. But that this 4th installment was it. I've realized there is a lengthy letter that needs additional information brought in (ok, in my opinion).

For anyone reading along, thank you for following, and I apologize for my "wordiness." I can't help it, there's so much, and to my way of thinking, this story is such a large part of our perception and understanding of the early history of Ford Motor Company.

On to the "last" segment.............
Cheers,
Rob

Since I'm going on to another segment, this may be a good place to "dump' a few odds and ends.

Below, a period photo of the very "un-Ford like 1906 Aerocar sliding gear transmission.


Earlier I mentioned that Albert Strelow had a reason to not be too happy with A. Y. Malcomson. Strelow was an original Ford Motor Co. investor, contributing the first Mack Avenue plant. He sold his stock in about the same time frame as Malcomson. The article below reports (top right paragraph) that he used his proceeds to invest in a mine:


However, that wasn't the only place he put his FMC proceeds. He invested $5,000, the same amount he invested in Ford Motor Co., in Aerocar, with very different results.

Similar to his investment in Ford Motor Company, A. Y. Malcomson's cash investment was minimal in Aerocar, but he held the majority of shares. According to this report, he held 23,000 of 40,000 shares issued. His cash outlay was minimal, contributing the land he purchased in 1904 for $14,000, as well as various contracts:

I know there's the post 5 and have read it thru Saturday evening. More to come I see. Yesss!
NEVER too wordy, you show historical facts and also provide opinion about the very early days of the FMC for those willing to look.
Very much appreciated on my end also.
Your efforts to find old information is something to be admired, I'm glad for it. That I lack with what I research.

Thank you Duey. I appreciate your comments, and the fact you've "suffered through" to this point. Now to put a "fork in it" on the 5th and last one. I thought this would take two or maybe three segments when I started. However..........