Richmond Palladium (Daily), Volume 46, Number 218, 25 July 1921 — Page 10

PAGE TEN

THE RICHMOND PALLADIUM AND SUN-TELEGRAM, RICHMOND, IND., MONDAY, JULY 25, 1921.

LIFE Oil BROADWAY REFLECTS CHANGES CAUSED BY REFORM

(By Associated Press) ' XEW YORK, July 25. The ubiquitous soul who does his bit toward the settlement of world problems by writins letters to newspapers has been re paling New York editors with observations, on. changes that recent years have wrought with Broadway and life along that thoroughfare. ' " Regard, he says, bow the movie shows have shoved articulate actors into the side streets. Pee what has become of the famous old restaurants. They , have gone, and uninteresting shoe shops and drug stores have taken their places. The table d'hote resorts where dinner and laughter and liquor kept patrons happily ensconced arouad the tables until bedtime, are now closins at 10 o'clock, and even earlier.

The Eood old crowds have vanished,

he writes. Diners seem to regard eat

ing as a duty. And it used to be

n exner ence. not witnout an oc

sasional thrill. 41 t I L- - -

One hotel has done away with the

jolly hunting room where the boys used- to get together, an4 the- space

has been rented to bourgeois p me.

chants.. And those virile chop houses

t definitely whether Mr. Ford needed funds. Within 10 days after that

meeting, postcards went out from the office calling 10.000 men back to their machines. Within six weeks more the

plant was again in full operation.

Sine that time, with production records smashed almost weekly, the company's increasing sales and production have become the marvel of the industrial world. On July 12, 4,461 cars were turned out in a single day, total

production for July will be close to 109,000 cars and still, Mr. Ford says, production is far behind orders.

What wrought this change? The answer is in two words

liquidation and economy.

ford did to his business what the

doctor does to a, man prostrated by over-eating and drinking he administered a stern regimen of fasting and

diet. He stopped buying. Then, by turning all his stock on hand, rough and manufactured, into cash and by

eliminating every element and unit, throughout the whole vast organization, that did not produce, he forced his industry, for a time, to live off its own fat. He met his obligations, not by borrowing money and thU3 perpetuating numberless extravagances that had crept in during the war, but by devising new methods of efficiency in buying, in distribution, in admnistraton and accountng and by eliminatng waste. Tell of the Storm. The story of how Henry anl Edsel Ford, wth methods long planned to meet the coming storm, engineered their industry into a position such

that there never was a moment when

SON OF PERKINS IS SECRETARY TO POSTMASTER HAYS

where banqueters ; robed themselves

ta nuga wmie ny.uuo am - j. Dressed for readv cash for its over lutev.beef stakes are now . ad-! JV3 ?L .fa I0r re.aay casn Ior us.

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mitting-women to their tables. The ! midnight shows have closed, and the electric signs lure only to a white goods fsale, cosmetics, -a movie show or chewing gum. - - And the clubs oh how they have changed! The cafe is deserted, the wags- have forgotten how to jest and make merry. The stewards say. they have as many diners as before,' but only , because men want company at dinner. Even the new night time trafllc regulations in the theatre district have kept the crowds away. Meanwhile the men who conduct business in this great hotel, shopping and theatrical district have banded together "to help bring about a fair and proper- municipal regulation of tho district "which will-not be detrimental 1o business interests, the life and happiness of the New Yorker and the visitor, and to perpetuate the name and lame of the world's greatest moneyspending center.". . Their organization was , incorporated as the "Heart of New- York - Business Men's association," and .includes those whose interests are embraced in the district between Thirty-fourth and Fifty-ninth streets, from Madison to Eight avenues. . - HENRY FORD : (Continued from Page One.)

needs, and thus, to theamazement of Wall Street, "turntd the corner," is a

kind of business and Industrial epic. Out at the plant of the Dearborn Independent, the other day, Mr. Ford sat, coat off, watching a never-ending pro

cession, moving along the roadway just ouside, of mowers, threshing machines and wagons, hauled by tractors, on their way to and from the harvest fields of his estate. The day was hot He was reluctant to talk. "I'm thinking now of the present and future," he said. "That financing matter is a thing of the past let it stay there." "But," some one suggested, "there are other plants, big and little, throughout the countyr, that today face the same problems you had; they might benefit by your experience." His face brightened, then broke into a smile, as he said: "Now you've said something. Maybe it would be worth while." So he sent for a lot of records and data illuminative of what was done by

the company in the 10 months just

passed, and with this before him, said: "If there's anything in my experience during the last year that will

help anybody, they can have it right off. My father used to say to me;,

.ever Buy things until you need

them; if you've got anything lying

around that you don't need, sell it.'

it would require but two weeks as it which showed us what we could do

hark ' "We'll have to have, some say

as to who the new treasurer shall be."

That remark closed tne interview. "I handed him his hat," says Mr. Ford, "showed him where the door was and told him to take his things and get out right quick. The next time I saw Edsel I told him that, in the future, he was to be the treasurer as well as president of the Ford Motor Co." ' That meeting was the show-down in a situation which, developing for months, had been watched with intense interest by industrial America. During the previous, summer and fall industry generally, the country over, had been gradually slowing down. In Detroit, plant after plant had closed down or reduced production to a minimum. The numbers of the unem

ployed was rising steadily. Everywhere there was talk1 of a "black winter." Only at the Ford Motor

company " proaucr.on rusnea on unabated. With full forces and three shifts a day it was the "wonder-plant" not only of Detroit but of the whole country. ' It engendered a strong feeling of confidence in the community. Then, in September, the country was startled and electrified by announcement of a big cut in the price tf the Ford car. The company announced that it made the cut in anJicipation of lowered prices of raw materials in the future, that for a time

Jt must manufacture at a loss, but that, in the hope of hastening a general return to the basic prices of reace times, it would take its loss now and it charged off to loss $17,000,000. That is, it put a value of $88,000,000 on stock, raw and manufactured, that had cost it $105,000,000, and continued full production on the hew basis. , , Shutdown Everywhere. In the weeks following Ford business was appreciably stimulated, but. generally speaking, on both the local and national basis, the closing down of Industry went pteadily on. Then, suddenly, overnight it seemed, sprang up p. host of rumors that even the Ford company was affected. .Vague, intangible reports spread over the country that, due to the cut in price and to other causes, grave financial problems now. confronted the Ford com

pany and, shortly, it must close down or go bankrupt or both. Reports

ostensibly emanating in New York,

Chicago, London and about every

place else except the South Sea Isl

ands. and always "on highly credible authority," had it that Mr. Ford, his

hack to the wall, was making a su

preme effort, using every resource at

his command, to borrow money in every market at home and abroad but always in vain; the end was not to be far off. And when, early in Decem- ' her,, came an official announcement 'that, on Dec. 23, the great plant at Highland Fark would close down "two weeks for inventory," in the popular mind, confirmation was given the rumors and, with a hundred variations.

George W. Perkins, Jr. Georjre W. Perkins, Jr., has been appointed executive secretary to Postmaster General Hays. Perkins is the son of the late George T7. Perkins, one of the founders of the Progessive party and a close friend of the late ex-President Roosevelt

turned out, it required six

"Now, all this time a financial prob

lem had been developing. Back in

1919 we had borrowed $70,000,000 on

notes with which to buy out all other interests. Of this we had paid back

$37,000,000. leaving $33,000,000 .still to pay, and falling due April 18. Then,

because of adjustments pending, we still had the final installment of the 1920 Federal income tax to pay, which.

with the installment due April 15, this

year, made $18,000,000 due the government. Also, we intended to pay our men their usual bonus on last year's work, which would amount to $7,000,000 more. So, all in all, between Jan. 1 and April 18, we had to meet obligations totaling $58,000,000. Tells of Resources. "What did we have to meet this?" asked the manufacturer, of himself, as he sat up, leaned forward, his eyes a-twinkle.. "At the time." he went on, "we had only $20,000,00.0in cash. That, I think, is where the Wall Street bankers wen.t wrong they couldn"t see where we could get $40,000,000 more to meet our obligations. It was their best bet that we couldn't they didn't know our men here "or the spirit behind our organ

ization" and the motor manufactur

ers face overspread with a smile. Faith and pride in his organization is

one of Henry Ford's most outstanding

characteristics

"Wall Street was all stirred up over the misinformation that we had to make a loan," Mr. Ford continued.

"The fact was, we didn't need a nickel. That's where the faith comes in. Spread over the country we had immense quantities of raw materials.

when we tried and, from then on, sales

steadily mounted above production. Assembling went on at all the branches and, on Jan. 23, we reopened the Highrand Park plant and began building up production there, but still sales kept . ahead Of production. Between Jan. 1 and April 1 we turned $24,700,000 worth of stock into cash put that down. ... "Then we looked over our foreign accounts and found our agents at foreign ports owed us $3,000,000 which we collected. We had also sold byproducts for which we had accounts receivable of $3,700,000 more, which we got in put. down those two items.

On top of that, we sold $7,900,000

worth of Liberty Bonds. If you total those you'll find they come to $59,-

300,000 more than enough to meet

our impending obligations, did not stop there.

"The war had led us into many ex travagances of administration and ac

ir i 1 J 1 1 1 T .- i :

narts an1 finhrf nor anrf T hart faith 1 1 leaueu uai; Ill U13 CUair

I knew that our organization could ! an,dAlaugl?,ed.

turn them into more than enough cash

to meet our needs.

'I'll

used to laugh at him but now I know

he was right. Then, too, there are

ways of meeting financial obligations

other than borrowing money. Increas ing efficiency to get decreased manu

factunng costs, and thus turning waste into dollars that's one of them.

As a general .proposition the time

when you need it is a poor time to bor

row money the man with the money

can demand too high terms.'

"Is there any one thing," I asked Mr. Ford, "to which you can ascribe

your success m mastering all your problems any basic formula or prin

ciple that I could express in a few

words." Faith, The Solution. "Oh, yes there is," said the manu

facturer, sitting up in his chair, very much interested now, and pointing his

finger in emphasis. "Yes there is

you'll find the central idea of the

whole thing in the Bible, in Hebrews,

11, 1 Faith. 'Faith is the substance of things hoped for the evidence of things not seen.' Faith is the thing

mat makes reality or what a man hopes for. I had faith that, the country and conditions in our industry would right themselves and they are

doing it every day." The manufacturer gazed out of the window a moment and then: "Our difficulties." he went on, "like those of other great plants, were a heritage of the war. War is not only damnable for the lives it costs, but

also for its after effects on society, on civilization. Every form of human activity is stimulated artificially. "Drink makes a man's senses keener he sees, hears and feels things

that are not real, but abnormal; he bases his actions on thoughts, ideas and impulses that are not sound. That's just what war doe3 to business and indutry. The banker, suddenly handling millions where before he handled but thousands, becomes loose and takes chances which formerly he would have thought unsound.. The manufacturer, faced by ever rising cost3 of materials, comes to take little heed .to expense and seeks only to make profits over costs. Labor, getting unprecedented wages, instead of increasing effort and production re

duces it, trying to get still higher wages. War, by its unwholesome stimulation, undermines everything. "Our organization suffered along with the rest. We took a lot of war work Eagle boats, motors, helmets, tanks and other things. This opened

up holes in our organization. We needed help office and shop, yet in employing we could not be as finely discriminating as we had been in peace times. An immensely increased overhead expense was built up stressed conditions seemed to compel it. In

peace times it would be a dead weight, utterly useless. Consequently, with the war over, we knew that as the country settled back to peace conditions some stern readjustments would be necessary and we were on the lookout for its beginning. s "The first iifBicatiohs came early in

1920 here and there a business or

manufacturing failure. They were chiefly concerns manufacturing luxur

ies or manufacturers of staple com

modities that had organized during the

war and had not yet got a footing.

People were ceasing to buy; firms of this character were first to go to the wall. Soon failures became more gen

eral. That meant something to us. It

raised a question: When will the

country curtail or cease buying staple

commodities when will they cease buying Ford cars?

"We didn't have long to wait. By

June sales were falling off at a great

rate. Everything began to slow down.

Yet in the face of that, do you think

the suppliers of raw materials would

cut their price or that labor would

give more for unparalleled wages? Not for a second. Material men demanded more and labor seemed to give less and less. Cost of manufacturing went soaring. "It was up to us to do something. So, in September, we cut the price of the car. On the face of things the cut wasn't justified. We still had large supplies of stock bought at high prices. The cut brought the price below the cost of manufacture. All over the country we were condemned; other manufacturers said we were crazy. But the whole country was on an inflated, distorted basis and we felt that, if we cut the price of the car, we could demand that material suppliers cut their prices to us. That would tend to stop the price-raising orgy, other prices would slump off and the readjustment would come with a minimum discomfort to everybody! "To an extent the cut brought the

desired result. Sales took a bound. A few other manufacturers cut. But, soon, sales fell off again and, as a whole, the artificial conditions continued. We soon saw that more drastic treatment was needed. "We made up our minds that our next step toward lowering prices must be more powerful and decisive. During the fal lone plant after another.

the country over, had been closing!

flown and, as winter set in, cessation of industry became general. But we kept right on, full tilt. Sales did not justify our large production, but we kept on making: 90.000 to 100.000 cars

a month because, when the halt came,

, we wished to have as much as possi

ble of our stock manufactured into cars. We wanted the next bump, when it came, to be one that no one selling us supplies could fail to understand. $50,000,000 Per Month. "Now, to see what happened, you must understand that our company buys in tremendous quantities. Right now we're buying $50,000,000 worth of materials a month. There are hundreds of concerns from which we take the major part of their output. Back of them are other firms who sell the greater part of their output to the suppliers from whom we buy. So, when we pull the switches in the Ford

plant, and stop our machinery, the; same thing happens in thousands ofi smaller plants the country over. It's! just like when you stand dominoes close together in a row if you knock I over the first one, the whole line falls. As long as we kept on buying, these ; plants would continue to hold prices 1 up. Some of them did cut. but. on

the part of most of them, we felt, it was only a bluff to make it appear that they had reached the new low basic price for peace times. "We saw that if the lowering process was to be hastened at all, we must do something drastic. So, late In December, we closed down, resolv-, ed not to resume production until, we: could buy materials at peace-time prices and, in the meantime, to have ; a thorough house-cleaning. We thought i

-

Mr. Ford, turning to the desk and

pushing acro33 pencil and paper. "Put down 'Cash on hand, $20,000,000.' We wished, as usual, to pay a bonus to our men on last year's work.

"This would take approximately $7,000,000 which we wished to pay as soon after Jan. 1 as clerks could make out the checks. That was our only Immediate outlay we had almost enough cash to pay it three times over. , "Then we turned our attention to liquidation. When we closed down, we had on hand approximately 93,000 finished cars. At Highland Park we had been shipping out cars and parts to dealers and branches as fast as they were finished. This plant was cleared of materials. Every department closed down. But we have 35

at 22 of which we both manufacture raw materials

parts and assemble. At these the

manufacturing of parts stopped, but the assembling of finished parts went on adding, week after week, through

January, to our finished cars. That

was why, during January, there was a Ford car famine in Detroit and to fill local orders we were driving cars here from Chicago and Columbus, O. His First Move. "Our first move was to sell some of our cars on hand. In our contracts with dealers, they agree to take a certain quota each year, each according to his district. We shipped to each dealer enough cars to take care of approximately 25 days' sales. . During January we sold nearly 60,000 cars,

made the second possible. Here's the way it worked out. . "Before we got control of the D., T. & I., it required an average of 22 days to haul raw material to the factories, make It into cars and get them to the

dealers. We had to buy three weeks

in advance of need and, with no way of knowing future conditions, we had to keep immense reserves on hand. The money tied up in these and the goods moving stood continuously at about $88,000,000. "But the early months of 1921 brought great changes. General cessation of industry made materials, and cars in which to carry them, plentiful. Then the D. T. & I. is really one great terminal it crosses every trans-continental line in the country. When stock consigned to us reaches

the D. T. & I it can be speeded along to destination. Parts, or cars, out-

But we bound, can be made into through

trains- and thus the running time to destination greatly reduced. Then, in the offices of the D. T. & I. they did

counting. We went through the: away with a deal of antiquated railplant, offices and shops, and made road red tape. Whole systems of useeconomies which I'll detail later, less accounting were abolished. The eliminating everything non-productive. offices themselves have been brought Then, we had acquired the Detroit, j to Detroit and the road is operated as

roieao & ironton Railroad, we sawia. single unit. All these elements. -: i : l : . e i . ...

combined, have reduced the time or our movement of stock from the suppliers f raw,, materials through the factory and the cars into the hands of the dealers from 22 to 14 days. And that isn't the end we'll cut it still more. Where, before, we had $88,000,000 tied up In moving and reserve stock required to make 93,000 cars a month, now we 'handle the stock required to make 113,210 cars a month for less than $60,000,000; $28,000,000 goes into cash account to be used for

other purposes as .paying debts, for

example," and Mr. Ford'sintense expression gave place to a smile. Another Arrjle to It. "But there's another angle to that.

Able to get stock so much more rapid-

possibilities of reducing the vast

amount which we had formerly kept tied up, invested in goods in transit. We found ways to cut the time our goods are in transit.. By that one move we released $28,000,000, took it from funds invested in stock in transit and put it to other uses. Thus, when April 1 came round, we had 87,300,000 to meet $58,000,000 in obligations. We paid them all weeks in advance.

'And all the while,"

New York bankers

he said, "these were fussing

show you what we did," saidi around tnere trvinS to get us to take a

loan.'

"But how could you create such im

mense sums of ready cash by mere!

economies"? I asked. j sCall This "Mere." "Mere economies," Mr. Ford repeated, with emphasis on the "mere." "There's nothing 'mere about our economies they're the big thing. Take that item of $28,000,000 released from investment in goods in transit. We were able to do that by a combination of two things. By using our railroad we were able to speed up movement of raw materials to the factory, movement of finished cars from the factory to the dealers and better methods in the factory cut the time needed to manufacture the material into machines. Then we stopped car

rying immense reserve supplies of

The first economy

ly we do not have to keep so much on j hand. Operating on a narrow margin we have to keep very close account of stock and, to meet this need we have completely changed our system of purchasing and accounting. Formerly we bought in vast bulk lots, using up stock as we needed it. But that would not do under our changed conditions. We have worked out a new system which, I believe, is not duplicated anywhere. There are 8,000 parts to the Ford car. Each one of those parts i3 given a number-symbol. Once each month we make a schedule of the exact number of cars we will make the next month. Then we figure out theexact amount of stock needed to make just the number of parts to fill that schedule and buy that amount of stock and no more.

"We're following my father's advice and not loading up with things we don't need. , i ', "Office and shops also came In for a house-cleaning. We went through the office and cut out hundreds of j0b3 created during the handling of war work. We' literally took out a trainload of desks and furniture and sold them. We told the men that occupied those desks, that back in the shops were plenty of good jobs at good pay. if they wanted to take them. Most of them did. Wcut the office forces from 1.074 to 528 persons. Telephone extensions were cut about 60 percent. Interesting, but useless systems of statistics were abolished as well as the forms made necessary by them. "We went through the shops in the same way. During the war production

we had a foreman for about every three to five men. Too many foremen sat at desks all day long looking on. We've sold all the desks and most of the former foremen are now at machines. We now have a foreman to about every 20 men. Everything and everybody that was not producing was put in a positon where they would produce or were eliminated. Costs Compared. "A comparison of our operating costs before and after the house-cleaning is really a startling lesson in what manufacturers can do if they look sharp to economy. Big plant or little plant the same thing can be done and tht same methods will win every time. Back in November. 1920, before the house-cleaning, our daily expense for labor and commercial overhead charges, cost of materials not included, averaged $463,200, to get out an average of 3,146 cars a day, or $146 a car. Look what we do in June, 1921 $412,500 a day, to produce an average of 4,392 cars a day or $93 a car, What do you mean by talking about, 'mere economy?'" and the manufacturer beamed all over. "And the men helped a whole lot,"

said Mr. Ford. "They respond to right treatment. We used to have to employ 15 men per car per day; now it requires but nine. Look at the saving on pay roll." The motor man again gazed out the window at the procession of agricultural implements and across the pond beyond. If he had any worrieX his face didn't show it. "How about the future?" I asked him. "It looks to me," he said, , "that we're at the beginning of a long period of prosperity."

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hehind them to get them on the news

wires and thus they were carried to the ends of the earth. Even sober, level-headed ' business men began to believe that within the Iord organization something fundamentally was wrong. Two weeks passed, but no reopening; and then announcement that the time of resumption of operations was "indefinite." Wall Street clamored that Ford was "broke" and that, if the plants ever opened up again, they would be in . new hands; that "Mr. Ford was ready to retire." Wall Street Learns. Just at this Juncture, according to Mr. Ford's associates, different New York banking, groups sent representatives to Detroit offering loans on different. terms. According to Mr. Ford, only one of these representatives ever discussed such an offer. He was the eentleman who was shown the door. In

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