OT - The tale of two auto companies and stock values, Ford and Aerocar

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Model T Ford Forum: Forum 2015: OT - The tale of two auto companies and stock values, Ford and Aerocar
Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 11:24 am:

This is what happens when it snows in Nebraska, more threads with old news articles.

Ford and Aerocar appeared to be on similar trajectories initially, with both building large new factories, releasing positive news clips, and generally what appeared to be well financed and managed production and sales.

Aerocar was the brainchild of A. Y. Malcomson, the primary financial backer of Ford Motor Company in 1903. Malcomson began his company in late 1905, producing cars by early 1906 and competing head to head with Ford and other automakers selling cars in the U.S.. Aerocar, like Ford, established branch stores in several major cities, and like Ford, moved to sell cars internationally.

Unlike Ford, Aerocar began with a $400,000 capitalization, compared with Ford's paltry sum of about $24,000 in 1903. I don't know how much of Aerocar's capitalization, or stock value, was backed up with cash, but considering there were a number of wealthy investors, and Malcomson's sale of Ford stock for $175,000 (summer of 1906), I would suspect a significant portion of the $400,000 was backed by cash (help me out accountants, Trent, or anyone.... :-)).

While Ford Motor Company stock wasn't traded publicly, Ford of Canada stock was offered in Detroit News classifieds, and a few ads are posted below. First, Ford announces the sale of several cars to England in 1905. An additional clip on the same day offers Olds stock at $12 per share:


In July 1905, Ford announces a 100% dividend to FMC stockholders. This is just one of several dividends that have been, and will continue to be made to investors. FMC appears to be printing money.....


In September of 1905, Ford Canada announces a 10% dividend. The company is one year old:


In October, 1905, someone wishes to buy Ford Motor Company stock. You think........ :-)


This broker ad in 1907 offers three automaker's stock, Olds, Aerocar, and Ford of Canada:


In 1908, toward the end of the 1907/08 "panic," another ad for stock. Olds is offered at the 1907 price, Ford Canada is offered at 6% less than a year earlier:


Not being a securities person, I'm not sure of the relevance of these prices, maybe the stocks were so thinly traded there is little correlation to true value, but I found them interesting. Next I intend to track a few similarities and differences between Ford and Aerocar between 1906 and late 1908.
Rob


Top of pagePrevious messageNext messageBottom of page Link to this message  By Keith Gumbinger, Kenosha, WI on Monday, November 30, 2015 - 01:38 pm:

Rob, In your first post in this thread, you ask for help from accountants, etc. Well, I'm one of those and can say that yes, back then, those stocks were thinly traded. Further, there was little reliable information to base stock purchases and sales on, except what a company was willing to release. Stock information was often based on hype and emotion (my hair dresser said that that Ford guy will soon go bankrupt again....I'd never buy stock in his company!) This led to the crash of 1929 and then resulted in the Securities and Exchange laws in the early 1930's.

Back then there were no Certified Public Accountants or audited financial statements. Nor were there rules regarding depreciation methods and revenue recognition, etc. I could go on and on, but you get the drift.

Today, with the Internet and reporting requirements for publicly traded stocks, the situation is completely different of course.

Keith


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 01:41 pm:

Keith,
Thank you for the info. And I thought you were JUST an old car guy.....:-)

I have a few other questions I'll pm.

Thanks again,
Rob


Top of pagePrevious messageNext messageBottom of page Link to this message  By Keith Gumbinger, Kenosha, WI on Monday, November 30, 2015 - 01:54 pm:

Rob.....you have more questions? Bring 'em on! :-)

Keith


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 03:39 pm:

Keith, I sent an email to your personal address.


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 06:15 pm:

By late 1905 Ford Motor Company was well on the road to success. Models A, C, B and F had been well received, and profits were rolling in, evidenced by several large dividends for investors.

Unknown to the other Ford investors, A. Y. Malcomson entered into agreement with Reeves Pulley Co. for 500 four cylinder, 20 hp engines on November 1, 1905. Meanwhile, Henry Ford, who along with Malcomson were the two largest (and equal) shareholders, was putting the finishing touches on models K and N, to be introduced at the winter auto show in N.Y. In January 1906.

On December 3, 1905, the Detroit News ran a story about Malcomson, and his newly organized Aerocar company, adding that the company intended to turn out 500 touring cars their first year. This equals the number of air-cooled engines contracted with Reeves:


Similar to Ford and the newly completed (and still expanding) Piquette Avenue factory, Malcomson planned a large, new and fully fitted state of the art factory. Plans called for the factory to be up and running in early 1906, and Aerocar reserved spots at the major 1906 auto shows. The reaction from the Ford Board of Directors was swift, with a call and letter for Malcomson's resignation from the board issued on December 5th, 1905.

On February 3rd 1906 Aerocar shipped four cars to Chicago, and by the 4th of Feb the Aerocar factory is up and running. What's more, Aerocar announces plans to begin building a second large factory building. In contrast, Ford only has a couple Model N and K available for the auto shows, and won't have Model K ready for delivery until mid April. Model N won't be ready to deliver until mid July:


In April Aerocar reports selling one car a week, with the intention to manufacture three a week soon. Percy Owen, formerly with Winton, is one of the many well known auto industry people Malcomson employs to help with sales:


Ford is also bringing their new model into production in April, with the first Model K sales. Ford will sell 17 Model K in April, 86 in May, and a high water mark with 101 Model K sold during June of 1906.

This is my plug for why A. Y. Malcomson did not have, in any meaningful way, influence over Henry Ford's decision to build the Model K. Malcomson, as we now know, contracted for and intended to begin his own auto company by November 1st, 1905. The Aerocar would be a touring car, with a 20 hp, air-cooled engine. Malcomson chose a three speed sliding gear transmission, standard steering, tubular front axle, and single battery/timer/coil ignition. I think it quite reasonable to think if Malcomson had forced the building of the large, and new type (six cylinder) K, his own creation would have had similarities with the Model K.

The Ford Model K, in contrast to the Aerocar, would have a six cylinder, 40 hp dual ignition magneto and bat/timer/coils, water cooled motor with two speed planetary transmission and new Ford patented planetary gear reduction steering. The only similarities would be the price, $2,500 for the K, $2,800 for Aerocar, and number of wheels. This side by side comparison of the two appeared in the N.Y. Sun newspaper on April 22, 1906:


Top of pagePrevious messageNext messageBottom of page Link to this message  By Keith Gumbinger, Kenosha, WI on Monday, November 30, 2015 - 07:34 pm:

Rob, I sent you an email.

Concerning the Aerocar, are there any of them left?

Just wondering.

Keith


Top of pagePrevious messageNext messageBottom of page Link to this message  By Ted Dumas on Monday, November 30, 2015 - 07:48 pm:

The best deal on Ford was in about 2008 when the stock was selling for $2 a share. Within a year or so it was at $14.


Top of pagePrevious messageNext messageBottom of page Link to this message  By Jon Crane on Monday, November 30, 2015 - 08:52 pm:

Ted
Ford stock was $2 share and I did not buy. I purchased KMart for $0.79 share..guess I made a bad decision. Then there is my GM Stock...GM can't go bankrupt..i still have a couple of the certificates Figure I might sell them on ebay in a few years.
Jon


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 10:18 pm:

Ted and Jon, it looks like Malcomson did quite well, even compared with a 2008 to 2010 $2 to $14 Ford stock move. Malcomson had about $7,000 actual cash investment in Ford Motor Company (1903) and received $175,000 when he sold his stock in 1906. This doesn't include a couple of 100% dividends he received between 1903 and 1906. $175,000 in 1906 would be the equivalent of about 4.4 million dollars today:


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Monday, November 30, 2015 - 10:25 pm:

Keith,
I am aware of two of the 20-24 hp air cooled cars. A touring in Australia and a 1908 Roadster in the U.S.. Both cars photos have appeared on this forum. My opinion is Aerocar marketed a very nice looking and appointed car. Henry Ford put his efforts in engineering, bringing two, four and six cylinder cars to the market ahead of most competitors.

In contrast, it seems Malcomson and Aerocar were more interested in appearance, appointment and flair. For instance, the air cooled engine used in most of the Aerocar's was an air-cooled engine marketed by Reeves in 1905, with no improvements through 1908 by Aerocar. Also, as will be seen, pure number of sales were dismal by Aerocar, compared with Ford.


Top of pagePrevious messageNext messageBottom of page Link to this message  By Manuel Voyages, ACT Australia on Tuesday, December 01, 2015 - 01:27 am:

One of the old car mags did a feature on an Aero Car recently. It gave a bit of history of the make.

Manuel in Oz


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Tuesday, December 01, 2015 - 09:33 am:

These are the only two Aerocar I'm aware of. The touring is in Australia. I believe it is the 1907 model D that sold for $2,000 in 1997 and $1750 in 1908:


This roadster is the 1908 version, listed below for $1750:


Aerocar continued to build less and less expensive autos, I suspect in part because of poor sales. Again in contrast, Ford continued to successfully market the Model K, raising the price for 1907 and 1908 from $2,500 to $2,800. Aerocar continued to use their supply of 20 hp air-cooled Reeves engines in both the Model D and roadster, adding a 40 hp water-cooled touring in 1907 and 1908. The larger touring initially sold for $2,750 in 1907, then $2,200 in 1908. This is a pic of the air-cooled engine (from the roadster pictured above):


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Tuesday, December 01, 2015 - 02:46 pm:

It appears Aerocar is on it's way. New facilities, top notch sales staff, and financial backing are all in place. The article on the left says Aerocar is turning out four cars per week, mostly the 20 hp runabouts, and that twenty six cars were recently sent to a California dealer. The second article announces Malcomson's intention to build a ten story building in April, 1907:


Aerocar stock advertised in the paper:


On August 6, 1907, a year and a half after sales begin, Aerocar files bankruptcy. Creditors include the same body maker used by Ford, C. R. Wilson. At the same time, Ford will sell more cars than any other automaker in the world:


These articles tell the story. The Aerocar plant to be auctioned, and 25 new Aerocar's will be sold at half of production cost. Investors end up receiving about twenty five cents on the dollar for their stock.


Meanwhile, Alex Malcomson will retain ownership of the building, eventually leasing it to Hudson:


(Message edited by Rob on December 01, 2015)


Top of pagePrevious messageNext messageBottom of page Link to this message  By Kenneth W DeLong on Tuesday, December 01, 2015 - 07:22 pm:

Two different size tires?? I wonder why it went under so fast?? Bud in Wheeler,Mi.


Top of pagePrevious messageNext messageBottom of page Link to this message  By Rob Heyen - Eastern Nebraska on Tuesday, December 01, 2015 - 10:30 pm:

Bud,
My suspicion is, way to much overhead, and an even bigger problem, a product that didn't sell.

At the same time Malcomson and Aerocar brought out a 20-24 hp aircooled car that failed to differentiate itself in the marketplace, Ford brought out the first inexpensive, four cylinder high quality runabout, and high power, inexpensive in it's class six cylinder car. Both performed great in the marketplace.

Meanwhile, we now know Aerocar only used 319 of the 500 aircooled engines contracted for with Reeves. We know this because Reeves brought suit against Malcomson in 1909 for failure to fulfill the contract, taking only 319 engines. We also know Malcomson/Aerocar was paying $325 for an unremarkable, 1905 technology engine. Meanwhile, Ford contracted for Model N engines and transmissions 15-18 hp, for $206. Ford also contracted for the entire chassis of the Model K for $437, including a 40 hp watercooled engine, transmission and differential. Aerocar apparently sold around 300 cars over a two and a half year period (Aerocar models were sold into 1908). Ford in comparison sold close to 1,000 Model K, and thousands of Models NRS.


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