The Ghosts of Detroit

[Daveparts]

The Ghosts of Detroit
By David Glenn Cox


For the most part they have been forgotten; they are just empty, vacant memories like the empty, dilapidated homes which line her once proud streets. It was a land once ruled over by giants, captains of industry and labor and political thought.

Of course, some remember the obvious ones, Ford or Durant. Yet there were so many more who, by their brains and backs, created out of thin air an economic powerhouse unrivalled anywhere in the world. Young Mr. Ford was a tinkerer working away in his barn, but he dreamed of building race cars. His opportunity came in 1901 when Ford raced a 26-hp car of his own design in a challenge race. He was considered a farm boy out of his league, but when the other car broke down Ford won the race and became a local celebrity.

He had formed his first car company, The Detroit Automobile Company in 1899, and based on his local acclaim, backers now supplied the 26-year-old with capital. The company folded in 1901 because, according to backers who were requesting a car for basic transportation, Ford instead tinkered with race cars and squandered their money. Later the same year, with new backers Ford opened The Henry Ford Company, but this time there were strings attached to the financing. Aware of Ford’s foibles and inability to handle projects, the backers hired Henry M. Leland to oversee the company and to keep an eye on Ford.

Leland had been apprenticed as a gunsmith during the Civil War and had witnessed the birth of firearm mass production, using identical pieces joined to identical pieces. Under Ford’s management, pieces that weren’t an exact fit were either ground down, sanded or pounded with a hammer to fit. Ford's tolerances were to 1/8 of an inch; Leland’s tolerances, with his background as a gunsmith, were to .010. But Ford was a wild bull; he resented suggestions, he resented oversight, and most of all he resented Leland. Ford quit the company that carried his name in 1902, and at the suggestion of Henry Leland the company was renamed in honor of the great explorer and founder of Detroit, Antoine Laumet de La Mothe Cadillac.

The original Cadillac models were mid-priced cars, but because the fit and finish were far superior to other models, and they ran so smoothly because of the fit, they were quickly repriced upwards. Leland’s tolerances were quickly copied by other manufacturers and he was acclaimed as the finest machinist in all of Detroit, and that title earned him the lifetime enmity of one Henry Ford.

The third Ford Motor Company began life as Ford & Malcomson. Malcomson was a local coal baron with connections to capital. The plan was to self-finance, but Malcomson then learned what previous investors had learned. It always cost more and took longer than whatever Henry Ford said it would. Ford was again working on race cars, building an 80-hp auto that set a new land speed record of 91.3 mph. It captured headlines and convinced race car driver Barney Oldfield to drive the Ford “999.”

Outside of headlines and pictures in the paper, Ford & Malcomson were in financial trouble. Malcomson had gone through his fortune and became so worried about his name being associated with yet another Ford failure that he had his name removed from the business. With his reputation for being difficult to work with and his repeated business failures, Ford found himself at the end of his rope. He was forced to make deals with suppliers to supply him parts or it was the end of what most certainly would have been the last Ford Motor Company.

Across town Ransom E. Olds and David Buick were building cars, and since Henry Leland was now occupied with Cadillac, they turned to what was considered the second-best machine shop in Detroit to supply their parts. The owners, brothers Horace and John, had cut their teeth working on steam engines, and like the Wright Brothers they had built bicycles. They sold their bicycle company and opened the Dodge Brothers Machine Shop. At first they would work on anything and everything, but in 1902 they began to supply exclusively to their best customer, Ransom Olds, who had sold over 2,000 of his curved-dash Olds models, making him the top car producer in the country.

The Dodge Brothers had their own ideas about making cars, so when Henry Ford came to see them, hat in hand, they listened politely. Ford laid out his drawings for a new model called the model “A” Fordmobile. The brothers liked the concept and showed Ford their plans for a new transmission and a fragile partnership developed. The Dodge Brothers would supply Ford with parts, but they demanded cash up front on the first order, and rather than 60 days to pay, Ford was given 15 days. If, after that time, Ford defaulted on the debt, all parts installed or uninstalled reverted back to the Dodge Brothers. Ford had no choice; it was this or nothing.

Malcomson, sensing a reprieve from the financial gallows of Henry Ford, offered the Dodge brothers a 10% stake in the company for $7,000 in parts and $3,000 in cash. Malcomson was overjoyed to recoup some of his cash and a chance to sell his near worthless Ford stock. The Dodge brothers eventually, in the years to come, earned over $34.5 million on their original $10,000 investment.

Less than a month after the brothers had thrown in with Henry Ford; the Ford Motor Company had just $223 left in the bank with payroll coming due. On July 15, 1903 Ford sold his first model A to a dentist for $895.00 cash. And from that point forward the sales numbers exploded. In 1906, 1599 cars; 1907, 8,000 cars. By 1912, 78,000 cars and by 1914 Ford was building 1,000 cars for every workday. And Ford was not alone.

At the same time Ford was attempting to build race cars, an insurance salesman named Billy Durant saw a horse-drawn cart on the road. Durant was so impressed by the design of the cart that he purchased the rights and manufactured the carts along with a former hardware store clerk named Dallas Dort. They founded the Flint Wagon Works and in the space of two years the company had 14 factories and sold over 75,000 carriages a year.

David Buick had made his fortune in plumbing fixtures and held thirteen patents, including the process for affixing porcelain to cast iron bathtubs. Yet David Buick was neither businessman nor automotive inventor. By 1903 Buick had signed over his car company to his largest supplier, the Briscoe brothers. The Briscoes wanted their money and not a car company, so to them it seemed only logical that perhaps Durant-Dort might be interested.

Billy Durant was the antithesis of Henry Ford; Durant had the Midas touch and was considered an industrial genius. In 1904 they pushed David Buick to the back of the boardroom and put Durant in charge. The company was almost broke, but with Durant in charge they were able to raise $1.5 million for a company that had sold fewer than a hundred cars. Under Durant’s leadership in just two years the company was selling 250 new Buicks every week and still couldn’t keep up with their orders.

In 1907 a financial panic devastated the fledgling automotive industry. Durant proposed a scheme where the four largest auto manufacturers would exchange equal amounts of stock in each other’s companies, thereby each would own all and each other. It was a scheme that was destined to failure as well as being monopolistic. Henry Ford killed the deal, since he was the largest manufacturer. He demanded more from each, plus cash to boot. Inside the mind of Billy Durant was the germ of an idea. The more cars you build the less expensive each car becomes, and if you own the suppliers as well, you can control your costs even further.

On September 1, 1908 Durant founded General Motors and purchased the Olds car company, which had fallen on hard times. When Durant visited the Olds factory to see what plans they had made for new models, he was shocked to find out that there weren’t any. He remarked, “We just spent a million dollars for road signs.” Durant was undeterred, he returned to the Olds factory with a new Buick and ordered the workers to cut it into four quarters. He then moved the sides six inches further apart and lengthened the car by a foot. He then instructed them to use an Oldsmobile radiator and hood and told them, “There, that is your new car.”

The new Oldsmobile was priced $250.00 higher than the Buick and sold so well that Oldsmobile was profitable by the end of the year. Later the same year Durant bought the Oakland Car Company, which was also on the ropes. Their models had been disasters, except for one, which was so popular that it kept the company afloat all by itself. The model was called the Pontiac, and Durant cancelled all the other models and changed the name of the company to Pontiac. Durant then repeated what he had done with Oldsmobile before moving on to purchase Cadillac.


End of part 1

[Vidar]

1. Thanks for the memories

[happyslug]

2. The first boom in any new industry is similar

The key is NOT market share, but expanding the market, thus new people enter all the time. You do NOT need to take business from anyone else, for the big gain is in getting new customers to the market. This is what happen to large frame computers in the 1950s and 1960s, Personal Computers in the 1990s, the internet in the period between 2000 to about 2006, Steam Locomotives about 1840-1870, and even block and tackle in sailing ships in the 1600s.

The first cars were known as early as the 1780 (a french man made a steam operated one at that time, not to successful but it did work to a degree). The experimental period of a new industry can be quite long, but it is very small, gasoline engines were in use by the time of the Civil War and Automobiles were known from the 1890s onward (The first effective ones were in the late 1880s). I use the term effective, in the same manner as the electronic computers of WWII were effective, Very expensive and less cost effective then older technology, but in a narrow area it did its job better then the older technology (The WWII Computers were used for Code Breaking AND artillery calculations, both requires a lot of time and math usage, the computers could do both quicker then if done by hand thus were used). The early personal computers were similar, slightly better word processors then a Typewriter and slightly better at files recovery then index cards.

After the experimental period you have the Boom period of an Industry. In the Personal Computers that was the 1990s, the net from the end of the 1990s to about 2005, Main frame computers the 1950s and 1960s, and with cars the period roughly 1890-1940. The 1890s and into the early years of the 1900s, cars were at the end of their experimental period and getting into their boom period. The big difference between the two is doing the boom period the new technology is clearly superior to older technology is many fields and investors want in do to the possibility of rapid profits. The market for the new technology has been found (unlike the earlier experimental period where it is mostly individuals working mostly for things for themselves). This is what happen to Personal computers in the 1990s, the net since the late 1990s, and cars in the period 1890-1940. People tend to forget most people did NOT own cars till after WWII, most people either used mass transit (Primarily Streetcars) or went by foot when they wanted to go someplace. Rural areas were one of the first areas to embrace the car but more do to the fact the lack of people meant the roads did NOT have to be upgraded for automotive use (Unlike urban areas where roads were design with the idea most people went on foot and only heavy transport uses horses, streetcars had been a good retrofit, but cars needed even more of a retrofit just to make room for all the cars for people living in urban areas).

Sooner or later the boom period transforms into the Mature market. It is clear that the Automotive market made this transformation by 1954 (When the largest buyers of new cars became people who already had a car NOT someone who never had car, which had been the case prior to about 1954). Even in the 1930s only 1 out of 15 people owned a car, the Great Depression, WWII and the post WWII credit Restrictions (i.e. could not finance a car for more then 18 months in the late 1940s) all delayed the onset of the Mature Automotive market, but it did set in by the early 1950s. This is when the last streetcars started to go out of business (or transform to Buses). Please note Rural america made the switch earlier and later, earlier by those people who could afford to buy a car, later by the rural poor who ended up buying a car after rural transportation by Interurban Streetcars and later rural buses ended (Rural interurbans went out of business in the 1920s, the buses held on to the 1950s with some holding out till the 1970s, but most such bus services only survived do to Post Office Subsidies, the Post Office paid such rural buses, where they existed, to haul the mail and the carriers to the carriers routes, as the bus routes died out the Post Office ended up going to trucks and cars, excellent after the Postal Service replaced the Post Office after the 1970 Postal Strike).

Anyway, Boom period see a lot of people entering and exiting a market, and that is what happened in the period 1890-1930 for Automobiles. The same thing happen to the net roughly 1995-2001 (Remember the internet boom?). The key was NOT taking market share from other people in the market but to gain customers as those customers entered the market. Startups and changing roles are the rule during a boom period.

The problem is sooner or later the boom ends and the market entered into a Mature Market. Profits margins drop for the key is NOT an expanding market but maintaining market share. The only way to expands one's business is to take market share from other people in the same industry. This was the case with Automobiles starting in the 1950s (With some hints at this in the 1930s, especially as the 1930s went on). Sooner or later you end up with a handful of market participates during the Mature period, for example in the 1950s it was GM, Ford and Chrysler (With little Nash surviving As AMC, as both Kaiser entered and exited the market, and Studebaker went bankrupt). Foreign markers of care were rare, but a similar situation came into play in most of the world (With Japan having 8 or so car makers instead of the norm in most of the world of around 3-4).

The step after the Mature period is the Decline of that Industry, but while the industry is in deep trouble today, no one is saying it is in terminal decline and no one is acting as if it is (when an industry is in decline, there is a tendency for everyone to abandon the industry, leaving one survivor, who milks its domination till the industry is dead). Right now, the Japanese and Korean companies are surviving (More do to domestic laws of Japan and Korea that basically makes both hard countries to enter as to imports), Europe is holding its own but only the US companies are in bankruptcy (And in Chapter 11, which implies the court believe they will survive but debts exceeds assets and thus the debts need to be reset).

Just an overview on what the writers is talking about, that he is talking about the boom period of the Automotive industry, not is mature phase, which it is in now. People are replacing cars they already own (Or their parents did) NOT entering the car market for the first time, as was the case before WWII. The Automotive Industry today is in a mature Era, like the Railroad after the 1880s, an ear of growth, but not the huge profits of the 1850s. This article is like focusing on the NET Boom on the late 1990s instead of the net of today. It is like looking at Main Frame Computers of the 1950s, instead of main frames today. Lets keep it is mind, the Automotive industry will NOT return to the days of 1900, it is long past that era, and it is good to look back to see how that boom worked out, but more to study the more recent Net and personal Computers booms then what is going on in the Automotive Industry today.

[KakistocracyHater]

4. really excellent insights, I'm sure the poster knows Detroit

is past its prime, thus the whole "ghost" theme.

I think the lightweight horse carriages should be studied & used as the mastermold for electric vehicles, they were lightweight for the horse's sake, greater mpg for today. I think maybe ceramics could be used instead of metal, but I'm just guessing.

[happyslug]

5. Why not Steel Wheel on Steel Rail? It is still the most efficient when it comes to transport

We tend to forget WHY streetcars first appeared on American Streets. Do to the minimum amount of friction when you are running steel wheels on steel rail, you could have one horse do the work of four. I.e. prior to the introduction of horse drawn streetcars, omnibuses pulled by four horses were the rule. When it was found that steel wheels on steel rails permitted one horse to pull the same load do to the drop in friction, the streetcar system was born.

As to light weight vehicles, look at the bicycles, including the four wheel ones, those have to be light so people can peddle them. Some already have electrical drive as an option:


http://www.tecnoartsurrey.com/limo.html


http://www.industrialbicycles.com/4%20wheel%20bicycles.htm

Web sites for more sites:
http://www.bhsi.org/fourwhel.htm

[KakistocracyHater]

7. good option for sunny weather & healthy people

but for the disabled & rainy days/snow days...trains & cable cars/lite rails are good. What about for cold areas where biodiesel clogs up? Ethanol is crap, just hikes the price of corn.

I was thinking about the hexagon being very strong & using that in hollow car doors as it would function somewhat like armour, with the doors slightly rounded outward. Extend the back windshield to halfway down behind the back seats, drop but extend the rear trunk-more like the spacious 1940s & 1950s trunks. Lower the dashboard in front, extend the engine horizontally & switch away from circular dials to rectangles. Make the steering wheel a bar <---->. Wrap the windshields all around the car with steel springs at the 4 corners. Put the batteries in the floor, like other electric cars.

[Daveparts]

8. Have you Seen

GM's skateboard platform, batteries/ Fuel cell under the floorboard with four electric drive motors, Steering can be left hand or right hand. The platform can be used with a variety of models and are even interchangable. A minivan M-F and a pick up on the weekend.


http://www.autobloggreen.com/2007/02/21/futurecar-report-on-the-gm-skateboard-car-on-youtube/

[DemReadingDU]

9. that's interesting

it's probably way too expensive though

[tomreedtoon]

3. I hope you'll talk about the present-day ghosts, too.

I see the trails of the ghosts every time I roll past the empty auto dealerships in town. Big vacant lost, little teeny buildings where people were bullied out of their money, and lots of chains and steel posts in the cracking cement of the parking lots.

When driving up north on I-75, I saw little one-factory towns with the rusting remains of various plants - I can imagine producing things like tractors and buggy whips and other things no one buys any more. So I can imagine what the Ghosts of Detroit look like now.

[DemReadingDU]

6. Thank you for writing some history of our autos