My Life and Work by Henry Ford (surface ebook reader TXT) 📖

to borrow money but it so happened that at the moment we were without a treasurer. To that extent the bankers had envisaged our condition correctly. I asked my son Edsel to be treasurer as well as president of the company. That fixed us up as to a treasurer, so there was really nothing at all that the bankers could do for us.

 

Then we began our house-cleaning. During the war we had gone into many kinds of war work and had thus been forced to depart from our principle of a single product. This had caused many new departments to be added.

The office force had expanded and much of the wastefulness of scattered production had crept in. War work is rush work and is wasteful work. We began throwing out everything that did not contribute to the production of cars.

 

The only immediate payment scheduled was the purely voluntary one of a seven-million-dollar bonus to our workmen. There was no obligation to pay, but we wanted to pay on the first of January. That we paid out of our cash on hand.

 

Throughout the country we have thirty-five branches. These are all assembling plants, but in twenty-two of them parts are also manufactured. They had stopped the making of parts but they went on assembling cars. At the time of shutting down we had practically no cars in Detroit. We had shipped out all the parts, and during January the Detroit dealers actually had to go as far a field as Chicago and Columbus to get cars for local needs. The branches shipped to each dealer, under his yearly quota, enough cars to cover about a month’s sales. The dealers worked hard on sales. During the latter part of January we called in a skeleton organization of about ten thousand men, mostly foremen, sub-foremen, and straw bosses, and we started Highland Park into production. We collected our foreign accounts and sold our by-products.

 

Then we were ready for full production. And gradually into full production we went—on a profitable basis. The house-cleaning swept out the waste that had both made the prices high and absorbed the profit. We sold off the useless stuff. Before we had employed fifteen men per car per day. Afterward we employed nine per car per day. This did not mean that six out of fifteen men lost their jobs. They only ceased being unproductive. We made that cut by applying the rule that everything and everybody must produce or get out.

 

We cut our office forces in halves and offered the office workers better jobs in the shops. Most of them took the jobs. We abolished every order blank and every form of statistics that did not directly aid in the production of a car. We had been collecting tons of statistics because they were interesting. But statistics will not construct automobiles—so out they went.

 

We took out 60 per cent. of our telephone extensions. Only a comparatively few men in any organization need telephones. We formerly had a foreman for every five men; now we have a foreman for every twenty men. The other foremen are working on machines.

 

We cut the overhead charge from $146 a car to $93 a car, and when you realize what this means on more than four thousand cars a day you will have an idea how, not by economy, not by wage-cutting, but by the elimination of waste, it is possible to make an “impossible” price. Most important of all, we found out how to use less money in our business by speeding up the turnover. And in increasing the turnover rate, one of the most important factors was the Detroit, Toledo, & Ironton Railroad—which we purchased. The railroad took a large place in the scheme of economy. To the road itself I have given another chapter.

 

We discovered, after a little experimenting, that freight service could be improved sufficiently to reduce the cycle of manufacture from twenty-two to fourteen days. That is, raw material could be bought, manufactured, and the finished product put into the hands of the distributor in (roughly) 33 per cent. less time than before. We had been carrying an inventory of around $60,000,000 to insure uninterrupted production. Cutting down the time one third released $20,000,000, or $1,200,000 a year in interest. Counting the finished inventory, we saved approximately $8,000,000 more—that is, we were able to release $28,000,000 in capital and save the interest on that sum.

 

On January 1st we had $20,000,000. On April 1st we had $87,300,000, or $27,300,000 more than we needed to wipe out all our indebtedness. That is what boring into the business did for us! This amount came to us in these items:

 

Cash on hand, January $20,000,000

Stock on hand turned into cash, January 1 to April 1 24,700,000

Speeding up transit of goods released 28,000,000

Collected from agents in foreign countries 3,000,000

Sale of by-products 3,700,000

Sale of Liberty Bonds 7,900,000

 

TOTAL $87,300,000

 

Now I have told about all this not in the way of an exploit, but to point out how a business may find resources within itself instead of borrowing, and also to start a little thinking as to whether the form of our money may not put a premium on borrowing and thus give far too great a place in life to the bankers.

 

We could have borrowed $40,000,000—more had we wanted to. Suppose we had borrowed, what would have happened? Should we have been better fitted to go on with our business? Or worse fitted? If we had borrowed we should not have been under the necessity of finding methods to cheapen production. Had we been able to obtain the money at 6 per cent.

flat—and we should in commissions and the like have had to pay more than that—the interest charge alone on a yearly production of 500,000

cars would have amounted to about four dollars a car. Therefore we should now be without the benefit of better production and loaded with a heavy debt. Our cars would probably cost about one hundred dollars more than they do; hence we should have a smaller production, for we could not have so many buyers; we should employ fewer men, and in short, should not be able to serve to the utmost. You will note that the financiers proposed to cure by lending money and not by bettering methods. They did not suggest putting in an engineer; they wanted to put in a treasurer.

 

And that is the danger of having bankers in business. They think solely in terms of money. They think of a factory as making money, not goods.

They want to watch the money, not the efficiency of production. They cannot comprehend that a business never stands still, it must go forward or go back. They regard a reduction in prices as a throwing away of profit instead of as a building of business.

 

Bankers play far too great a part in the conduct of industry. Most business men will privately admit that fact. They will seldom publicly admit it because they are afraid of their bankers. It required less skill to make a fortune dealing in money than dealing in production. The average successful banker is by no means so intelligent and resourceful a man as is the average successful business man. Yet the banker through his control of credit practically controls the average business man.

 

There has been a great reaching out by bankers in the last fifteen or twenty years—and especially since the war—and the Federal Reserve System for a time put into their hands an almost limitless supply of credit. The banker is, as I have noted, by training and because of his position, totally unsuited to the conduct of industry. If, therefore, the controllers of credit have lately acquired this very large power, is it not to be taken as a sign that there is something wrong with the financial system that gives to finance instead of to service the predominant power in industry? It was not the industrial acumen of the bankers that brought them into the management of industry. Everyone will admit that. They were pushed there, willy-nilly, by the system itself.

Therefore, I personally want to discover whether we are operating under the best financial system.

 

Now, let me say at once that my objection to bankers has nothing to do with personalities. I am not against bankers as such. We stand very much in need of thoughtful men, skilled in finance. The world cannot go on without banking facilities. We have to have money. We have to have credit. Otherwise the fruits of production could not be exchanged. We have to have capital. Without it there could be no production. But whether we have based our banking and our credit on the right foundation is quite another matter.

 

It is no part of my thought to attack our financial system. I am not in the position of one who has been beaten by the system and wants revenge.

It does not make the least difference to me personally what bankers do because we have been able to manage our affairs without outside financial aid. My inquiry is prompted by no personal motive whatsoever.

I only want to know whether the greatest good is being rendered to the greatest number.

 

No financial system is good which favors one class of producers over another. We want to discover whether it is not possible to take away power which is not based on wealth creation. Any sort of class legislation is pernicious. I think that the country’s production has become so changed in its methods that gold is not the best medium with which it may be measured, and that the gold standard as a control of credit gives, as it is now (and I believe inevitably) administered, class advantage. The ultimate check on credit is the amount of gold in the country, regardless of the amount of wealth in the country.

 

I am not prepared to dogmatize on the subject of money or credit. As far as money and credit are concerned, no one as yet knows enough about them to dogmatize. The whole question will have to be settled as all other questions of real importance have to be settled, and that is by cautious, well-founded experiment. And I am not inclined to go beyond cautious experiments. We have to proceed step by step and very carefully. The question is not political, it is economic, and I am perfectly certain that helping the people to think on the question is wholly advantageous. They will not act without adequate knowledge, and thus cause disaster, if a sincere effort is made to provide them with knowledge. The money question has first place in multitudes of minds of all degrees or power. But a glance at most of the cure-all systems shows how contradictory they are. The majority of them make the assumption of honesty among mankind, to begin with, and that, of course, is a prime defect. Even our present system would work splendidly if all men were honest. As a matter of fact, the whole money question is 95 per cent.

human nature; and your successful system must check human nature, not depend upon it.

 

The people are thinking about the money question; and if the money masters have any information which they think the people ought to have to prevent them going astray, now is the time to give it. The days are fast slipping away when the fear of credit curtailment will avail, or when wordy slogans will affright. The people are naturally conservative.

They are more conservative than the financiers. Those who believe that the people are so easily led that they would permit printing presses to run off money like milk tickets do not understand