Reckoning

by David Halberstam

  Charles Sorensen, who had become one of Ford’s top production people, had a Model T chassis pulled slowly by a windlass across 250 feet of factory floor, timing the process all the while. Behind him walked six workers, picking up parts from carefully spaced piles on the floor and fitting them to the chassis. That was the birth of the assembly line, the very essence of what would become America’s industrial revolution. Before, it had taken some thirteen hours to make a car; now they had cut the time of assembly in half, to five hours and fifty minutes. Not satisfied, they pushed even harder, lengthening the line and bringing in more specialized workers for the final assembly. Within weeks they could complete a car in only two hours and thirty-eight minutes. Now the breakthroughs came even more rapidly. In January 1914, Ford installed the first automatic conveyor belt. It was, he said, the first moving line ever used in an industrial plant, and it was fashioned after the overhead trolley that the Chicago meatpackers employed to move beef. Within two months of that innovation, Ford could assemble a car in an hour and a half. It was a stunning accomplishment, but it merely whetted their zeal. Everything now had to be timed, rationalized, broken down into smaller pieces, and speeded up. Just a few years before, in the days of stationary chassis assembly, the best record for putting a car together had been 728 hours of one man’s work; with the new moving line it required only ninety-three minutes. Ford’s top executives celebrated their victory with a dinner at Detroit’s Pontchartrain Hotel. Fittingly, they rigged a simple conveyor belt to a five-horsepower engine with a bicycle chain and used the conveyor to serve the food around the table. It typified the spirit, camaraderie, and confidence of the early days.

  The new age beckoned. Henry Ford could now mass-produce his cars, and as he did so, he cut prices dramatically. In 1909 the average profit on a car had been $220.11; by 1913, with the coming of the new, speeded-up line, it was only $99.34. But the total profits to the company were ascending rapidly because he was selling so many more. When the company began making the Model T, its cash balance was slightly over $2 million. Nineteen years and more than fifteen million cars later, when Ford reluctantly came to the conclusion that he had to stop making the T, the company balance was $673 million. And this was not merely a company’s success; it was the beginning of a social revolution. Ford himself knew exactly what he had achieved—a breakthrough for the common man. “Mass production,” he wrote later, “precedes mass consumption, and makes it possible by reducing costs and thus permitting both greater use-convenience and price-convenience.”

  The price of the Model T continued to come down, from $780 in the fiscal year 1910-11 to $690 the following year, then to $600, to $550, and, on the eve of World War I, to $360. At that price Ford sold 730,041 cars. He was outproducing everyone in the world. In 1914 the Ford Motor Company with 13,000 employees produced 267,720 cars; the other 299 American auto companies, with 66,350 employees, produced only 286,770. Cutting his price as his production soared, he saw his share of the market surge—9.4 percent in 1908, 20.3 in 1911, 39.6 in 1913, and with the full benefits of his mechanization, 48 percent in 1914. By 1915 the company was making $100 million in annual sales; by 1920 the average monthly earning after taxes was $6 million. The world had never seen anything remotely like it. The cars simply poured off the line. An early illuminated sign in Cadillac Square showed a woman with a scarf around her neck. It said: “Watch the Fords Go By.” Ford’s dreams, in a startlingly brief time, had all come true. He had lived his own prophecy.

  There was a moment, however, in 1909 when Ford almost sold the entire company. William C. Durant, the entrepreneur who put General Motors together from several fledgling companies, felt him out about selling the company. An earlier offer of $3 million had fallen through because Ford wanted cash and Durant wanted to pay in stock. This time, his company more successful, Ford demanded $8 million. But again he wanted cash, or in his phrase to Durant, “gold on the table.”

  “How do you mean that?” Durant asked.

  “I mean cash,” Ford answered.

  The GM board thought the price too high and again pulled back.

  Ford’s timing in holding on to his company, it turned out, was exquisite. The coming of Ford was almost perfectly synchronized with the discovery in the American Southwest of vast new reserves of oil. America became, with those discoveries, the one industrialized nation in the world with cheap sources of energy. Now every man could afford to drive an Everyman’s Car.

  If, as Naohiro Amaya of Japan’s Ministry of International Trade believed, the American century and the oil century were one and the same thing, then that century began on January 10, 1901, in a field just outside Beaumont, Texas. The field was named Spindletop, because of the scrubby pines that grew there, which looked like spindles. For years local children had liked to go out to Spindletop and toss lighted matches into the field; as the matches hit the strong petroleum vapors seeping up through the soil, a handsome flame would be ignited. But anyone who believed that there was real oil beneath the ground was thought an eccentric. Oil was not found in Texas; it was found in places like Pennsylvania, West Virginia, and Ohio. Those states were all Standard Oil territory, and the Rockefeller people had no interest in the Southwest. “I will drink any drop of oil west of the Mississippi,” boasted John D. Archbold of Standard.

  But Patillo Higgins, a Beaumont man, insisted that there was oil underneath Spindletop, and for several years he tried to prove it. It had cost him $30,000 of his own money, and he owed friends an additional $17,000. As each attempt failed and he was forced to go to others for financial help in order to continue drilling, his own share of the operation shrank. Higgins’s faith never flagged, but he became more and more a figure of ridicule in his hometown. His neighbors nicknamed him “Millionaire.” The drilling got harder and harder; just before New Year’s Day they had gone through 140 feet of solid rock, to a level of 1020 feet. On January 10 it happened. A geyser of oil roared out of the ground and shot a hundred feet above the derrick. No one had ever seen anything like it before; with it, the word “gusher” came into use.

  At first no one could figure out how much oil the field was producing. Some said 30,000 barrels a day, some said 40,000. Captain Anthony Lucas, who had become a partner of Higgins, said 6000, because he had never heard of a larger hole in America. In fact, that one gusher was producing 100,000 barrels a day, roughly 60 percent of the total American production. One new well at Spindletop produced as much as the total from all the 37,000 wells back East in the Rockefeller territory did. Within a short time there were five more hits. Eventually analysts found that the oil from the first six holes, some 136 million barrels annually, more than twice surpassed what Russia, then the world’s leading petroleum producer, could generate. Indeed, before Spindletop, the total for American production had been 58 million barrels a year, 48 million of them controlled by Standard Oil.

  Beaumont, Texas, immediately became the first of the Southwestern oil-boom towns that erupted into colossal affluence. Almost overnight it swelled from a tiny town to a raw instant city of fifty thousand. It was a world of men eager to make their fortunes—oil boomers. “Hi, boomer,” strangers said to each other in greeting. Men looked at each other and wondered who would become a millionaire by nightfall. A commissary clerk in town had bought four acres for $60 and sold them for $100,000. A woman who was a pig farmer and garbage collector, named Mrs. Sullivan but known as Mrs. Slop, sold a lease on some of her acreage for $35,000 and went back the next day to collecting garbage. In the middle of the boom a man stood on the porch at the Crosby House waving a hundred $1000 bills and asking for a single acre in the proven territory. All deals were cash. The local barber, who had twenty chairs in his shop, always filled, had a terrible time changing $1000 bills. There was always a water shortage, and at the height of the boom water sold for $6 a barrel while oil was bringing 3 cents a barrel. Because there were not enough toilets, enterprising young boys could make $10 a day by standing in line for the toilets and then sell
ing their places to impatient men. Where there were boomers, there were also hookers, and the hookers brazenly went right into the fields to find the men. Thus did the new age dawn.

  Within a year, five hundred corporations were in the oil business in Texas. Printers in Galveston, Houston, and New Orleans were kept busy printing stock certificates. There were dollar stock certificates and even penny certificates. Spindletop alone had changed the nature of the American economy and, indeed, the American future. Before the strike, oil was used for illumination, not for energy. (Until 1911 the sales of kerosene were greater than the sales of gasoline.) Spindletop inaugurated the liquid-fuel age in America. If the energy of the new age was to be oil, then America suddenly was rich in it. John W. “Bet-a-Million” Gates, an adventurer-gambler of the era, said prophetically that this new find would bring all Americans together as neighbors, once they built a good road system.

  Oil was a much more desirable fuel than coal. Because it could flow, it was more easily transportable. It was cleaner, and, at least in the beginning, it was cheaper. Three barrels of oil had the heating capacity of one ton of coal, and the oil cost only half as much. Because of oil, the number of men tending the furnaces on a steamship could be reduced from a hundred to four. Loading a ship with coal had taken a hundred men several days; now one man in one day could load a ship with oil. The industrial as well as the consumer possibilities were endless; oil meant that the machine age could arrive, that small machines, consumer machines such as the ones being invented by Henry Ford, could have practical and inexpensive daily application. Within a year after Spindletop, oil was being put to all kinds of new industrial and consumer purposes, and the economy began switching from coal and to oil. An entire society was in the process of being modernized, industrialized, mechanized, and electrified.

  In geopolitical terms, the oil discoveries made America the most powerful nation in the world, though America did not yet realize it. Everywhere the balance of power changed. World War I was the first oil war. Marshal Joffre won the Battle of the Marne by commandeering every taxi in Paris and driving his troops to the front. The Allies, Lord Curzon said later, “floated to victory on a wave of oil.” The chief of the German general staff, Erich Ludendorff, later blamed Germany’s defeat on its lack of oil, and the French foreign minister, Aristide Briand, noted, “In our day, petroleum makes foreign policy.”

  As the sources of energy in America changed, the sources of power changed as well. In the late nineteenth century, in the coal age, the great scandals had involved the railroads, as tycoons carved up the land, deciding where the cities would be and who would be rich and who would be poor. The coming of oil instigated the century-long decline of railroad power. The first great scandal of this century, Teapot Dome, was about oil rights. At the 1920 Republican convention an oilman offered fifty-two delegates to General Leonard Wood, the heir of Teddy Roosevelt, for, among other benefits, the right to name the next Secretary of the Interior, jobs of the first importance to the oil industry. (“I’m an American soldier, and I’ll be damned if I’ll betray my country,” said General Wood. “Get the hell out of here.”)

  By the thirties, as more and more new fields were discovered, no other country in the world was as rich in oil and gas or as successful in taking wealth out of the ground as America. Inevitably the small boomers were soon replaced by bigger, better-financed operators, and they in turn were often replaced by giant corporations. Standard Oil, to no one’s surprise, moved swiftly into the new oil territories. The problem in the twenties and thirties seemed not supply but distribution. Huge pipelines were being laid throughout the country at a cost of about $9000 a mile.

  Oil was the new currency of the industrialized world, and America was rich and the other industrialized nations relatively poor. Though the French had pioneered even more than the Americans in the early development of cars, they lacked both the market and the sources of oil to match the Americans’ surge into the oil age. The scope of all those finds had kept the price of oil low. So much wealth was being generated that not only did the oilmen create a standard of wealth all their own, but the masses profited as well. If there were a handful of men who made countless millions off the oil strikes, most Americans seemed not to care, for they too had become beneficiaries of the windfalls, and their lives were rapidly improving. Though Americans seemed at that moment blessed, they soon began to take their subterranean wealth for granted, as they did many of their other blessings. Few Americans realized that their country in those years was different or particularly fortunate. Those whose lives were eased by cheap oil soon forgot that they had lived in any other manner.

  People in other industrialized nations were more aware of America’s blessing. Being less sure of their sources of energy, they were warier about its dispensation. America hastily turned its industrial plant and its electrical grid over to oil; Europeans waited until after World War II, and then only under the joint pressure of striking left-wing coal miners and American political policy did they begin to convert from coal to oil. As oil was a potential source of vulnerability for those who lacked it, European nations pegged the price of gasoline high; consequently in Europe the car did not become a middle-class vehicle until twenty or thirty years after it became one in America, and European cars were smaller and more fuel-efficient. As America moved rapidly to mechanized agriculture, its farming flourished. Modern farms became bigger, and small, old-fashioned farms began to die. In many parts of Europe, by contrast, farmers continued even into the fifties and sixties to cultivate small plots with horse-drawn implements.

  The availability of cheap energy and an inexpensive mass car soon transformed the American landscape. Suddenly there were roads everywhere, paid for, naturally enough, by a gas tax. Towns that had been too small for the railroads were reached now by roads, and farmers could get to once-unattainable markets. Country stores that sat on old rural crossroads and sold every conceivable kind of merchandise were soon replaced by specialized stores, for people could now drive off and shop where they wanted to. Families that had necessarily been close and inwardly focused in part because there was nowhere else to go at night became somewhat weaker as family members got in their cars and took off to do whatever they wanted to do. The car stimulated the expansiveness of the American psyche and the rootlessness of the American people; a generation of Americans felt freer than ever to forsake the region and the habits of their parents and strike out on their own.

  If America differed from Europe even before the coming of the auto in that its people were cut off from the past and felt they had a right to determine their own lives, then the auto added profoundly to that difference. In Europe young men and women felt themselves prisoners of the past; they had grown up in a certain class in a certain village, and they would stay in that village, and they would go as far in their education as their parents had, and they would do what their parents had done for a living. But the car abetted the new physical and social mobility of America. One need not live where one’s father or grandfather had lived; one need not do what they had done for a living. If a small town seemed confining, all the modern American had to do was get in a car and drive somewhere else. In the breaking down of class barriers and the further separation of America from its European origins, the car was yet another formidable instrument.

  The extraordinary expansion of the oil industry greatly increased Henry Ford’s importance and success. He was providing the cars, Texas was providing the gas. The only limits on him were those imposed by production, and he continued to be obsessed by manufacturing. He wanted to put as much of his money as he could back into the factory. He hated bankers and financial people anyway, and he did not want to waste the company’s money on stockholders. They were, to his mind, parasites, men who lived off other men’s labor. In 1917 the Dodge brothers, who had manufactured many of the early components for Ford and who had been rewarded with sizable amounts of stock, sued him for withholding stock dividends and pouring too much money int
o his factory. The suit was a famous one, and some $40 million was at stake. During the trial, Ford testified that putting money back into the plant was the real fun he got from being in business. Fun, the opposing attorney retorted, “at Ford Motor Company expense.”

  “There wouldn’t be any fun if we didn’t try things people said we can’t do,” Ford answered.

  That was the trial in which he referred to the profits he was making as “awful,” and when questioned about that by attorneys for the other side, he had replied, with absolute sincerity, “We don’t seem to be able to keep the profits down.” Ford lost the suit, and the court ordered him to pay $19 million in dividends, $11 million of which went to Ford himself. The decision probably influenced him, as much as anything else did, to take as complete control of the company’s stock as he could, so that as little money would be wasted as possible. Money to stockholders was a waste, money gone idle; money for the factory was not.

  Out of that suit came both the means and the determination to build the Rouge, his great industrial masterpiece, a totally independent industrial city-state. Nothing in the period that followed was too good for the Rouge; it had the best blast furnaces, the best machine tools, the best metal labs, the best electrical systems, the most efficient efficiency experts. At its maturity in the mid-twenties, the Rouge dwarfed all other industrial complexes. It was a mile and a half long and three quarters of a mile wide. Its eleven hundred acres contained ninety-three buildings, twenty-three of them major. There were ninety-three miles of railroad track on it and twenty-seven miles of conveyor belts. Some seventy-five thousand men worked there, five thousand of them doing nothing but keeping it clean, using eighty-six tons of soap and wearing out five thousand mops each month. By the standards of the day the Rouge was, in fact, clean and quiet. Little was wasted. A British historian of the time, J. A. Spender, wrote of its systems: “If absolute completeness and perfect adaptation of means to end justify the word, they are in their own way works of art.” Dissatisfied with the supply and quality of the steel he was getting from the steel companies, Ford asked how much it would cost to build a steel plant within the Rouge. About $35 million, Sorensen told him. “What are you waiting for?” said Ford. Equally dissatisfied with both the availability and the quality of glass, he built a glass factory at the Rouge as well. The price of glass had been roughly 30 cents a square foot early in the life of the T; soon it had soared to $1.50 a foot. With the glass plant at the Rouge, the price of glass came down to 20 cents a foot. Barges carrying iron ore would steam into the inland docks, and even as they were tying up, huge cranes would be swinging out to start the unloading. The process was revolutionary. On Monday morning a barge bearing ore would arrive in a slip, and the ore would go to the blast furnace. By Tuesday it would be poured into a foundry mold and later that day would become an engine. John DeVenter, a business historian, wrote in awe: “Here is the conversion of raw material to cash in approximately thirty-three hours.” Some sixty years later Toyota would be credited for its just-in-time theory of manufacturing, in which parts arrived from suppliers just in time to be part of the final assembly. But in any real sense that process began at the Rouge. Toasting Philip Caldwell, the head of Ford who in 1982 was visiting Japan, Eiji Toyoda, of the Toyota company, said, “There is no secret to how we learned to do what we do, Mr. Caldwell. We learned it at the Rouge.”