148 •
The Expanded and Annotated My Life and Work
that people whose eye is primarily on the dollar and not on the job that
delivers it should not run any business.
The Introduction already showed that the “Whiz Kids” who took over
Ford after World War II based their decisions on financial metrics and,
thus, proved Ford’s warning accurate. It is, in fact,
the same kind of people
whose first thought as to how to cut labor costs is to send jobs offshore.
* * *
Bankers and lawyers can rarely appreciate this fact. They confuse inertia
with stability. It is perfectly beyond their comprehension that the price should
ever voluntarily be reduced. That is why putting the usual type of banker
or lawyer into the management of a business is courting disaster. Reducing
prices increases the volume and disposes of finance, provided one regards the
inevitable profit as a trust fund with which to conduct more and better busi-
ness. Our profit, because of the rapidity of the turnover in the business and
the great volume of sales, has, no matter what the price at which the product
was sold, always been large. We have had a small profit per article but a large
aggregate profit. The profit is not constant. After cutting the prices, the profits
for a time run low, but then the inevitable economies begin to get in their
work and the profits go high again. But they are not distributed as dividends.
I have always insisted on the payment of small dividends and the company
has to-day no stockholders who wanted a different policy. I regard business
profits above a small percentage as belonging more to the business than to
the stockholders.
The stockholders, to my way of thinking, ought to be only those who are
active in the business and who will regard the company as an instrument
of service rather than as a machine for making money. If large profits are
made—and working to serve forces them to be large—then they should be
in part turned back into the business so that it may be still better fitted to
serve, and in part passed on to the purchaser. During one year our prof-
its were so much larger than we expected them to be that we voluntarily
returned fifty dollars to each purchaser of a car. We felt that unwittingly we
had overcharged the purchaser by that much. My price policy and hence my
financial policy came up in a suit brought against the company several years
ago to compel the payment of larger dividends. On the witness stand I gave
the policy then in force and which is still in force. It is this:
In the first place, I hold that it is better to sell a large number of cars at
a reasonably small margin than to sell fewer cars at a large margin of
profit.
I hold this because it enables a large number of people to buy and
enjoy the use of a car and because it gives
a larger number of men
Money and Goods • 149
employment at good wages. Those are aims I have in life. But I would
not be counted a success; I would be, in fact, a flat failure if I could not
accomplish that and at the same time make a fair amount of profit for
myself and the men associated with me in business.
This policy I hold is good business policy because it works—because
with each succeeding year we have been able to put our car within the
reach of greater and greater numbers,
give employment to more and
more men, and, at the same time, through the volume of business,
increase our own profits beyond anything we had hoped for or even
dreamed of when we started.
Bear in mind, every time you reduce the price of the car without reduc-
ing the quality, you increase the possible number of purchasers.
There are many men who will pay $360 for a car who would not pay
$440. We had in round numbers 500,000 buyers of cars on the $440
basis, and I figure that on the $360 basis we can increase the sales to
possibly 800,000 cars for the year—less profit on each car, but more
cars,
more employment of labour, and in the end we shall get all the
total profit we ought to make.
And let me say right here, that I do not believe that we should make
such an awful profit on our cars. A reasonable profit is right, but
not too much. So it has been my policy to force the price of the car
down as fast as production would permit, and give the benefits to
users and labourers—with resulting surprisingly enormous benefits
to ourselves.
This policy does not agree with the general opinion that a business is to be
managed to the end that the stockholders can take out the largest possible
amount of cash. Therefore I do not want stockholders in the ordinary sense
of the term—they do not help forward the ability to serve. My ambition is to
employ more and more men and to spread, in so far as I am able, the ben-
efits of the industrial system that we are working to found; we want to help
build lives and homes. This requires that the largest share of the profits be put
back into productive enterprise. Hence we have no place for the non-working
stockholders. The working stockholder is more anxious to increase his oppor-
tunity to serve than to bank dividends.
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