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article number 315
article date 02-11-2014
copyright 2014 by Author else SaltOfAmerica
Henry Ford Buys Out Ford Motor Company, 1919
by Keith Sward

From the 1948 book, The Legend of Henry Ford.

EDITORS’ NOTE: Our author writes his book with a bit of a negative attitude toward Henry Ford. Knowing that, we can still get a feel for the way Mr. Ford thought about people in a business environment. He had no patience for dead weight and evaluated shareholders as to their current contribution.

§ 1

ON SO RICH a diet of publicity and social acclaim, any ego might well have gorged itself; Ford’s, in the year 1914 and after, was no exception. The manufacturer had been stunned by some of his earlier successes.

Only six years had elapsed since he so underestimated his accomplishment that he had been willing to dispose of his holdings for something less than $2,000,000. Nor had Ford been quite up to the job of comprehending his achievement of the intervening years.

Asked to account for his career, he had already asserted more than once that he only listened to his “hunches.” Meanwhile, with a panorama of empire at his feet, Ford’s assurance and his self-esteem had risen. It positively soared as a result of the ground-swell of approbation that greeted the “Five-Dollar Day.”

Now as never before the Yankee mechanic who had “arrived” by rule-of-thumb became the man of destiny; he began to feel that the “inner guide” to which he alluded so often could never do him wrong.

The first to brush against this expanding sense of self-sufficiency on Ford’s part, ironically enough, was James Couzens, from whose brain the plan for a Five-Dollar Day had issued. It was a trivial but heated argument on the subject of pacifism that drove Couzens to the point of offering Ford his resignation on October 14, 1915.

Couzens took objection to the fact that Ford was about to circularize all the customers of the Ford Motor Co. with a pamphlet which came out against military preparedness and urged Americans to turn their backs on the current World War. During an angry interchange, Couzens threatened to step out for good unless such “stuff” was deleted from all of the company’s advertising matter.

Ford accepted his resignation on the spot. Both men had been expecting such a showdown. The particular issue over which they fell out was incidental.

Ford had been nursing a number of more fundamental grievances against his treasurer and vice-president. Months earlier he had told his friend E. G. Pipp, then editor of the Detroit News, that Couzens was so interested in politics—with “an eye on the U.S. Senate”—that he was losing his usefulness to the company.

To drive the point home, and disclosing incidentally that Couzens had been preying on his mind for some time, Ford then confided to Pipp that he had ordered “a check kept on Jim, and he has been at the plant only 184 days during the past year …” Yet neither politics nor pacifism nor Couzens’ “attendance record” was at the bottom of this estrangement.

James Couzens with Henry Ford. Couzens was instrumental in the start-up of Ford Motor Company and was an early investor but his interests and time turned to politics.

For at least a year the two men had been at loggerheads over a much more crucial question of company policy. They differed in their estimate of what the future held in store for the Model T. Ford took the longer view. He could see no limit to the market. As a result, he favored bold expansion. He wanted to plow back into the business every cent he made, as fast as he made it.

Couzens, on the other hand had a more conservative outlook; he was fearful lest Ford should overreach himself. It was his idea to expand, but cautiously. However, if Couzens had stayed on, he would have had little actual say in the matter. He would have had to defer to Ford, because Ford held control; he owned 58½ per cent of the company’s stock.

Meanwhile, Ford was chafing at the mere thought of having to impose his will on that of his tough-minded vice-president. In January or February of 1916, he told John F. Dodge that Couzens’ leaving had been “a very good thing for the company.” Henceforth, he said, the brakes were off; he would be free to expand at will.

Clashes of temperament had hastened the day of a final rupture between the two dominant personalities of the Ford Motor Co. Nor was the fault entirely Ford’s. Couzens, for his part, had been anything but the adroit or politic administrator. Waspish, cranky, tough, austere and headstrong, he had begun to needle Ford.

Ford often complained to others that his vice-president was too “stubborn.” On his way to a conference with Couzens in 1914 or 1915, Ford used to approach the appointed meeting place on tiptoe, inquiring along the route if the “Old Bear” was “in his den.”

The number two man at the Ford Motor Co. had found it difficult to share authority with anyone, even with Ford. In an autobiographical piece which he wrote for ‘System’ magazine in September 1921, Couzens freely admitted to ownership of the very traits of character that he disliked in Ford; he made no bones about his own love of power. He expressed a wholehearted contempt for democratic management.

For thirteen years none but Ford and himself, he wrote, had ever been permitted to touch the reins of authority within the company. At the same time, the former autocrat of the Ford Motor Co. was perfectly willing to sing Ford’s praises, in retrospect.

The conception of the Model T and all it stood for, he said, had been Ford’s own. The author of the ‘System’ article even minimized his own substantial contribution to Ford’s success. For this journalistic effort of 1921 he chose the self-effacing title, “What I Learned about Business from Ford.”


If Couzens had remained in a class by himself at Ford’s, his retirement could have been put down as proof of his own egotism or of his inability to bow to the will of other men, and nothing more. But in reality his stormy departure from Highland Park was a commentary on Ford as well.

It was in some degree a measure of Ford’s ability to withstand success. Couzens said as much at the time. Shortly after he withdrew from the company, he complained to the advertiser Theodore MacManus, “I finally decided that I could not be carried along on that kind of a kite. I was willing to work with Henry Ford,” he stormed, “but I refuse to work for him.”

Moreover, this break was only the forerunner of a wider conflict of personalities into which Ford was about to plunge. Couzens was first to draw the lightning at the Ford Motor Co. for the reason that, next to Ford himself, he was the tallest tree in the woods. Next in point of size and next to be felled was John F. Dodge.

§ 2

John Dodge and his brother Horace, whom Ford was to take on as adversaries in his next vault to power, were, apart from Ford and Couzens, the most ambitious and most talented of the original Ford stockholders. The two men had never been content to sit by, waiting for their 10 per cent interest in the Ford Motor Co. to drop plums in their laps.

After having assembled nearly all of the first Ford cars, this pair had continued to operate a factory of their own. They had amassed a fortune in the business of making Ford parts. By 1913 their plant equipment alone was valued at ten to fifteen million dollars.

In assessing the worth of their services, meanwhile, the Dodges had charged Ford all that the traffic would bear. John Dodge once confessed as much.


When a Ford executive in 1912 accused him of profiteering at Ford’s expense, or of making on a certain part a clear profit of sixty cents apiece over and above what Ford would have had to allow anyone else, Dodge is supposed to have replied with characteristic bluster, “Hell, those things don’t even cost sixty cents apiece.”

Yet, aside from the earliest years of their association with Ford, neither of the Dodges had ever felt secure or needed at the Ford Motor Co. Neither man had ever been drawn into the inner circle of Ford management. One had been relegated to the status of silent stockholder, the other to the lot of board member called in on occasion, but only to ratify some action that Ford and Couzens had agreed on in advance.

For John Dodge, the more forceful of the two brothers, the situation was intolerable. This co-founder of the Ford Motor Co. was a full-sized, aggressive, sharp-witted industrialist in his own right. Reputed to have been as keen a man in the factory as Ford and as sharp a businessman as Couzens, John Dodge was not modeled to tag along in the shadow of the Ford Motor Co.

He was itching for something bigger when he groused to E. C. Pipp, then a Detroit journalist, in 1912 or thereabouts, “I am getting tired of being carried around in Henry Ford’s vest pocket.”

Well before 1912 the Dodges had good reason to suspect that their lush days in the parts field were numbered. The business in which they had struck it rich was no longer so attractive. It was becoming strenuously competitive. Any number of feeder plants were now scratching for a Ford account, and the margin of profit on any Ford business at all was rapidly shrinking.

Gargantuan buyers, Ford and Couzens were beginning to squeeze their suppliers, playing one parts maker off against the next. The Dodges had no desire to pass their handsome profits on to Ford. Nor was Ford bound to do business with them on any terms.

The orders which they filled for the Ford Motor Co. were governed by an annual contract that was subject to renewal or cancellation at the will of either party. They could foresee the possibility of being cut off on short notice with a highly specialized idle factory on their hands.

Unwilling to forego either their earnings or their independence, the Dodges moved out of the Ford periphery voluntarily before they were shaken out. They had other plans for their own factory that was almost as up to date as Ford’s, for their cash-in-hand that ran to twenty or twenty-five million dollars, and for the profits they could expect to reap from their Ford stock.

After resigning as a member of Ford’s board of directors in 1913, John Dodge announced that he and his brother intended to manufacture a car of their own. Their automobile, he said, would not compete with the Model T; it would cost three or four hundred dollars more than the current Ford car.

John Dodge is supposed to have stated his goal with all the scorn and swagger at his command. ‘Fortune’ magazine credits him with the taunt, “Think of all the Ford owners who will some day want an automobile.”

The Dodge brothers were now producing their own automobile.

After they had been marketing their own excellent car for a year and a half, the Dodges had a shock that robbed them of some of their ready self-assurance. Henry Ford, accompanied by his chief engineer C. H. Wills, walked into their offices one winter morning in 1916 to explode a bomb on the premises.

Ford bluntly told the Dodges that neither they nor their fellow-stockholders could look forward to any substantial future earnings on their investment in the Ford Motor Co. Henceforth, he said, he would declare an over-all annual dividend of $1,200,000 and not a penny more. Every cent he made over and above that margin would be plowed back into the business.

The moment Ford had finished delivering this ultimatum, John Dodge then and there put his interests and his brother’s in the Ford Motor Co. up for sale. “If you are going to adopt as radical a policy as that,” he is said to have countered, “why not buy out all the holders and then do just as you please?”

Ford replied that he had no intention of adding any shares to those he already owned. As for the plan to limit future dividends to a small, annual, fixed payment, he said, the minority shareholders could take it or leave it.

Belligerent and thoroughly capable of defending his own, John Dodge immediately called Ford to book, playing a joke on his adversary in the process. On the evening of November 2, 1916, John Dodge and his wife were guests at the wedding of Edsel Ford and Eleanor E. Clay, the niece of J. L. Hudson, the department store magnate of Detroit. The bride and the Dodges had been neighbors of long standing.

Before the city had digested this social event, as reported in the society columns of the local press the following day, the Dodges filed suit against the bridegroom’s father. They asked the court to compel the Ford Motor Co. to issue reasonable dividends to its stockholders and to enjoin any further business expansion on Ford’s part until such profits were forthcoming. This legal action was to cost the Dodges $130,000 apiece.

Into Ford’s threatened moratorium on profits the Dodges could read no more than spite, a desire on Ford’s part to hobble their own efforts as independent manufacturers. They had resented and misjudged the Five-Dollar Day with the same feelings of persecution.

In both instances, the two brothers were convinced that Ford was determined to stanch his dividends for the sole purpose of embarrassing the Dodge Corporation.

On one score their fears were well-founded. Were Ford to win his battle against profits, their venture would, of necessity, have to trim its sails. More than that, by the fiat of one man, the true value of their previous investment in one of the most lucrative businesses in existence—to whose success they had themselves contributed—would all but evaporate.

Machine shop operators John and Horace Dodge. They supplied many parts for the Ford Model T. In 1914 they started their own motor company.

On Ford’s terms the most the Dodges could hope to collect from their 10 per cent interest in the Ford Motor Co. was $120,000 per annum. They could expect a meal of crumbs from a feast which was currently heaping Ford’s table with a clear profit of from thirty to sixty million dollars a year.

But the legal case against Ford did not turn on the issue of whether a few millions more or less in Ford dividends might make or break the Dodge Corporation. As this action at law began its deliberate course toward the Supreme Court of the State of Michigan; its implication gripped the attention of all the other minority shareholders of the Ford Motor Co.

For although these co-investors were content to stand by as spectators, their interests were as much at stake as the Dodges’. Ford had defied stockholders in general and the very principle of corporate management.

When the Dodges decided to contest this challenge in the courts, Ford was still something of a Populist, despite his millions. He had begun to lunge at the “money-power” wherever it bared its face. Under his ownership the ‘Dearborn Independent’ was about to take a stand on race and money that harked back to the ruralist’s ingrained prejudice against organized capital in general.

Ford was very much in character when his antipathy for rich men, as of this date, was turned on the profit takers in his own business. As a matter of fact, he had launched such an offensive within a week of Couzens’ resignation.

In November 1915, he had made the founding of Henry Ford and Son, a partnership in which he assigned the rights of the Ford tractor, an occasion for lambasting every one of the financial interests which had helped to bring the Ford Motor Co. into being.

At least n his tractor business, he had proclaimed, there would be “no stockholders, no directors, no absentee owners” and no more “parasites.”

In wanting to shake himself free of “unproductive” partners, Ford had common sense on his side. Of all the co-founders of the Ford Motor Co., he alone in 1916 was the one remaining “producer” of the lot. Couzens and the Dodges had been stricken from the active list. The remaining minority shareholders—Couzens’ sister, the heirs of the Gray estate, and the two attorneys, Anderson and Rackham—had contributed almost nothing to the business.*

* Anderson would not be seen riding in one of the conveyances to which he owed his millions. When asked by a tax examiner in 1927 if he could list the caracteristics of the Ford car, Anderson replied, “Never having driven the Model T in my life, I regret to say I cannot.”

Yet between them, through the year 1915, the minority owners of Ford stock had garnered $25,000,000 in cash dividends. Such fruits Ford may well have considered as adequate return on a $28,000 investment, in view of the fact that some of his co-holders had put up no money of their own whatsoever, and that all of them were now resting on the sidelines!

Against the claims of these absentee owners Ford could pit, on the other hand, a dream of industrial conquest which had, for him, no measure in dollars and cents. The decision of 1916 to reinvest in the business all but a fraction of his future earnings was, to some extent, the will of the empire-builder to get on with his work.

It was part and parcel of Ford’s realization that his factory was overturning the arts of mass production. Such a limitless undertaking, as he must have envisioned it, would only be cramped by the necessity of having to share his profits with a group of hangers on and “non-producers.”


During his appearance as a defense witness in the Dodge suit, Ford gave the court some insight into the sweep of his interest in mass production as an end in itself. Asked by counsel if he was going to “experiment” with the funds of the company on a certain immense project, he snorted, “We are not going to experiment at all; we are going to do it.”

Again, prodded by Dodge’s attorney to see if he meant to get on with another grandiose and breath-taking scheme of factory expansion, the manufacturer snapped, “Oh, certainly. There wouldn’t be any fun in it if we didn’t.”

Finally, in colliding with his stockholders, Ford was driven by sheer will-to-power. Other springs of action that impelled him toward such a course—the vision of the machine age, the contempt of the ruralist and the producer for “unearned” dividends, and the alleged desire to slip a halter on the Dodges—seem only to have fed and strengthened this central hunger for authority.

At least it may be said that Ford was to overcome his aversion for profits as such. Once in possession of the entire holdings of the company, the Ford family—Henry Ford and his wife and son—were to withdraw cash dividends for their private use for the next seventeen years at the rate of more than $25,000 a day!

Nor were Ford’s co-owners of 1916 in any position to hamper his scheme of pushing mass production to its logical conclusions. None could have challenged him, so long as he saw fit to part with reasonable dividends, for the reason that Ford held control; from 1906 on, more than 50 per cent of the voting stock of the company had been concentrated in his hands.

Now that Couzens and John Dodge had vacated their seats of influence at the Ford Motor Co., no minority Ford stockholder had the opportunity, the force of mind, the business judgment, or even the desire to take issue with Ford. But Ford was resolved to rid himself of his minority interests, nonetheless; pure temperament drove him in that direction. So said twenty-six-year-old Edsel Ford at the time:

When the stockholder fight within the company was at its height, Edsel was quoted by the New York Times as saying that he had the feeling it was quite possible to “get along” and “do business” with the minority interests of the company, but that “father” was of the opinion that it was altogether “impossible.”

§ 3

Whether or not Ford’s designs on his stockholders were primarily self-seeking—and few Americans would have even suspected such a possibility in 1916—he proceeded to root out his minority interests with a plan of attack that was both rigorous and wily. At the outset, he seems to have preferred combat to mediation. By refusing to buy out his former partners at a fair price, once he decided to whittle dividends down to the vanishing point, he let himself in for three years of wrangling and litigation.

He came no closer to a compromise even after the Dodges had dragged him into court. When Ford finally had to submit to cross-examination on the witness stand, he flared up the moment the possibility of a sale was introduced by Elliott C. Stevenson, the brilliant attorney who represented the Dodges.

“If you sit there until you are petrified,” he snapped at Stevenson, “I wouldn’t buy any Dodge brothers’ stock, if that is what you are talking about . . . I don’t want any more stock.”

All this while, the Dodges had been anxious to sell. Couzens and the heirs of the Cray estate had been casting about for prospective buyers for some time. But Ford apparently clung to the idea that he could put his fellow-stockholders out to pasture empty handed and get away with it. At least, in telling a newspaper reporter years later what he thought of the claims of his former co-investors, he said, “Personally, I never would have paid them a cent.”


As the Dodge action wore on, meanwhile, the minority Ford interests were more than a little ill at ease. They found themselves in the ambiguous position of owning stock that was potentially worth scores of millions, but which few outside buyers would dare to touch under the circumstances. Ford, in control, had chilled the prospects of sale to any new outside investors by having declared a ban on profits.

On February 7, 1919, the lesser owners of Ford stock could once again breathe normally. For on that day, the state Supreme Court, affirming the position of a lower court, saw fit to rebuke Ford’s “no-dividends” philosophy.

After reviewing the tremendous earning capacity of the Ford Motor Co., the bench invoked a rule of reason; it ordered Ford to declare an immediate, delayed, special dividend of $19,000,000, with interest at 5 per cent from the date of the decision in the lower court. The court based its position on a reading of the company’s financial statement for August 1, 1916.

This report had listed assets at $132,000,000, surplus at $112,000,000, cash and bonds at $54,000,000, and expected profits for the ensuing year at $60,000,000. The refusal of so prosperous a corporation to reward its owners with normal profits, the court ruled, had been illegal and “arbitrary.”

Justice Ostrander, the author of the majority opinion in the case, commented on this refusal by saying, “The record, and especially the testimony of Mr. Ford, convinces that he has to some extent the attitude towards shareholders of one who has dispersed and distributed to them large gains and that they should be content to take what he chooses to give them.”

To close the issue once and for all, the court then enjoined Ford from applying such a policy to his investors at any time in the future.

Now, it appeared, the lesser shareholders of the Ford Motor Co. were free to pick and choose. They could hang on and wallow in Ford profits, or they could peddle their Ford shares wherever they chose. But before these equally attractive promises had a chance to materialize, Ford attacked from another direction. In one of the sharpest strategic moves of his career, he plunged his stockholders into a state of outright panic.

To the utter consternation of the men who had just bested him in court, Ford threatened, with a flourish, to withdraw from the Ford Motor Co. and leave his minority stockholders high and dry. He was about to found, he said, a competing independent enterprise.

His first move in this direction, however, was little more than a feint. One month in advance of the final decision in the Dodge case, Ford had relinquished the presidency of the Ford Motor Co., though keeping his seat on the board. At a loss to understand such behavior, the other members of the board had accepted the resignation “with regrets” and elected Edsel in his father’s place at a salary of $150,000 a year.

From the public statements which the elder Ford released as he stepped down in favor of his twenty-five-year-old son, none could have guessed what was up. It appeared that the retiring president of the Ford Motor Co. had other worlds to conquer.

In his letter of resignation, dated December 30, 1918, he said, “It is my desire to devote my time to building up other organizations with which I am connected.”

His new aim, he said, was to develop a separate tractor business and “to become a newspaper publisher.” The vehicle for each of these projects was already at hand. The new partnership, ‘Henry Ford and Son,’ would see to the tractor interests, and for his medium as a publisher, Ford had just taken over the Dearborn ‘Independent.’

Edsel’s continuing association with the Ford Motor Co. was explained by Automotive Industries on the curious ground that it would assure for his father within the next six months a circulation of one million subscribers to the Dearborn ‘Independent.’ The only remaining interest which tied the senior Ford to the automobile business, it seemed, was the hope that the Ford Motor Co. might serve, under Edsel’s management, as a soliciting agency for a newly acquired rural weekly!

Henry Ford with his son Edsel.

But within a month of his defeat in the Dodge action, Henry Ford had more to say. From California, where he had gone for a vacation with his family, he threw an entirely new light on the activities he proposed to substitute for his “previous” work at the Ford Motor Co.

It was now his intention, he said, to market a “more up-to-date” popular car at one-half or one-third the price of the current Model T. The new super-Model T would be brought out, he said, under the auspices of still another brand new company—a concern in which only he and Edsel were to have a stake!

The first to break this news to the world, the Los Angeles ‘Times’ on March 4, 1919, referred to the new car as already far advanced in the mind of its creator. Ford had given birth to his “newest dream child,” said the ‘Times,’ while taking a short “rest” at Altadena, California.

Before long, the stories of “something new in the way of an automobile,” at a price as low as $250, began to depress sales at the Ford Motor Co. proper.

Potential buyers of the Model T slackened off, in their excitement over the prospects of the forthcoming “dream child” car. Edsel Ford tried to quiet his dealers by saying that it would take two or three years to bring the new car into production and that one should not credit every “Dearborn rumor.”

Meanwhile, the elder Ford was only playing at cat-and-mouse. He was preparing the ground so that he could buy out his minority share holders without having to come up against any stiff outside bidding. His nominal retirement from the Ford Motor Co. and his threat to compete with the Model T had simply walled off any independent purchasers of Ford stock.

The moment Ford felt certain that outside financiers and industrialists were no longer interested in his ostensibly priceless shares, he began to feel out his co-holders for a sale, and on his own terms. But he did so indirectly. He worked through purchasing agents who were pledged to keep the identity of their principal a secret.

As his brokers began to make their quiet rounds, Dearborn did its best to hush up the fact. Asked point-blank if all the publicity about forming a new company was not simply leverage for a “forced sale,” Edsel Ford retorted, “We will not buy a share of anybody else’s stock.” When reporters put the same question to Ernest Liebold, then Ford’s confidential secretary, Liebold replied “Mr. Ford never threatens.”


All but one of the minority Ford holders came to terms with Ford’s agents, though none, with a single exception, was aware of the fact that he was selling to Ford. Only Couzens, the hardest and the shrewdest of the lot, was able to better the terms that Ford proposed.

First of all, Couzens refused to sell at any price until the ultimate buyer agreed to show his hand. Tough to the last, he carried his point in demanding a thousand dollars a share over and above what Ford had to pay the others.

But Ford, thanks to adroit legal advice, had bargained sharply all along the line. On the whole, his former partners had to come to him, on his terms. Had they been able to sell their shares on the open market, they would have come off twice as well.

Several years later a financial syndicate was to offer Ford $1 billion for his interests. By such a reckoning, the minority shares of his company were worth four times over what he paid for them in 1919.

Even so, none of his minority owners had cause to brood over fate, With the solitary exception of Mrs. Rosetta V. Hauss, Couzens’ sister, each went his way a multi-millionaire. Couzens got $30 million, the Gray heirs, $25 million. To each of the other substantial holders—John Anderson, Horace Rackham, John Dodge and Horace Dodge, Ford paid out $12.5 million. For her twenty shares that had cost her a mere $100 originally, Mrs. Hauss received $260,000.

If the retiring shareowners of the Ford Motor Co. were reasonably content, so were the Fords. When the negotiations for Ford’s purchases were all but finished in the summer of 1919, four months from the day Ford had threatened to desert ship, the New York Times quoted Edsel Ford as saying, “Of course, there will be no need of a new company now.”

Ford’s new status represented a real shift of power; it left him in undisputed command of his business. He signalized this change by making pronouncements that were reminiscent of the Five-Dollar Day.

Now that “parasites” could no longer feed on the profits of his business, Ford felt free to denounce the ritual of ownership which the highest tribunal of the state had risen to defend at the behest of the Dodges.

He rededicated himself to mass production for the masses. Once more he promised to cater to the needs of society at large. It was his “ultimate desire,” he proclaimed, to convert the Ford Motor Co. into a “co-operative.” When that day came, he said, his employes would enjoy the privileges that had formerly been lavished on his partners. It was his heart’s desire, reported ‘Automotive Industries’, to keep on “cutting melons” with his workmen.

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