Alexander Y. Malcomson

Alexander Y. Malcomson (1865 - 1923) was a coal dealer from Detroit who bankrolled Henry Ford's first successful foray into automobile manufacturing: the Ford Motor Company.

Malcolmson is occasionally referred to in the literature as "Alexander Malcolmson" or "A. Y. Malcomson".

Early life

Alexander Young Malcomson was born June 15, 1865, in Dalry, Ayreshire, Scotland and emigrated to Detroit at the age of 15, coming over with his widower father and staying with his uncle Joseph & family.Aerocar Company Factory/ Hudson Motor Car Company from [http://www.detroit1701.org/Aerocar-Hudson.html Detroit1701.org] , retrieved December 12 2007.] He immediately began working in a grocery store, then went into business for himself after purchasing a small grocery.Barnard, Harry, 2002, [http://books.google.com/books?id=n9tl1Rcsy3sC&pg=PA29&as_brr=3&ei=uQxgR6mBCpOKiQGBsPhZ&sig=NU_NMjXVfyv-4sFrDN3--zvRrnU#PPA29,M1 "Independent Man: The Life of Senator James Couzens "] , Wayne State University Press, ISBN 0814330851, pp. 29-33.] He soon switched to dealing in coal, eventually buying out several competitors and emerging as a major dealer, owning six coal yards by 1902. In addition to his coal yards, Malcomson invested in a variety of projects outside of the coal business.Weiss, Eugene H., 2003, [http://books.google.com/books?id=54qIumSvZSsC&pg=PA13&ei=IW1gR9C9D4fQiwGCsYDhBg&sig=M3-LBLM1ou41Rj1NW6mtrXb8Yao "Chrysler, Ford, Durant and Sloan: Founding Giants of the American Automotive Industry"] , McFarland and Co., ISBN 0786416114, pp. 13-22.] In 1895, Malcomson hired a young clerk, James Couzens (later mayor of Detroit and US Senator), to work at his firm.

Malcomson married Sarah J. Mickleborough in 1889 and had six children: Mary J., Helen J., Grace L., George W., Alexander Y., and Allan R. Malcomson. Sarah died ca.1902 and he then married Alice Schofield in 1903, a marriage which produced two daughters, Dorothy J. and Margaret A. Malcomson. Marquis, Albert Nelson, 1914, [http://books.google.com/books?id=N9iE594yCzYC&pg=PA334&ei=WBJgR6_2K4mWiQHa3YSAAQ, "The Book of Detroiters"] , A. N. Marquis and Co.]

Henry Ford

Malcomson knew Henry Ford when the latter had worked at the Detroit Edison Co. In 1902, with his involvement in the Henry Ford Company coming to an end, Ford approached Malcomson to bankroll a new automotive company. Malcomson, although overextended with his other investments, was able to raise $3000 With this capital, Malcomson and Ford agreed to form a company, Ford & Malcomson, to develop a new automobile.Bryan, Ford R., [http://www.hfha.org/birthformoco.htm "The Birth of Ford Motor Company"] ( [http://www.hfha.org/birthfomoco2.htm part 2] )( [http://www.hfha.org/birthfomoco3.htm part 3] ), retrieved from [http://www.hfha.org/mainav.htm The Henry Ford Historical Association website] , Dec 12, 2007.] Details of the partnership were written down and signed by each man, and witnessed by C. Harold Wills. With Malcomson's backing, Ford designed the Model A, an inexpensive car designed to be sold for $750. In 1903, the firm moved to a new building on Mack avenue, and soon Ford and Malcomson ("doing business as the Ford Motor Company") agreed to purchase over $160,000 in parts from John F. Dodge and Horace E. Dodge; additional purchases for smaller amounts were made from numerous suppliers.

However, the young firm quickly had trouble making payments to the Dodge brothers due to slow sales. Malcomson turned to John S. Gray, president of Detroit's German-American bank. Gray agreed to invest $10,500 in the automobile firm."Original Twelve Investors of Ford Motor Company," [http://www.thehenryford.org/exhibits/pic/2003/fordcheckbook/investors.asp The Henry Ford] , retrieved Dec 12, 2007.] Malcomson also convinced his young clerk, James Couzens, to invest, as well as the law partners John W. Anderson and Horace Rackham; in all, Malcomson brought a total of $28000 cash to the company. On June 16, Ford, 1903, Ford and Malcomson was officially re-incorporated as Ford Motor Co., with Gray as president and Ford as vice-president. Ford and Malcomson each owned 255 shares of the company (25.5% apiece), while Gray, Rackham, Anderson, Couzens, and other investors received shares proportional to their investment. The Dodge brothers each received 10% of the shares in the new company in return for materails provided.

Both Malcomson and Gray had larger businesses to run than Ford Motor Co. To keep Henry Ford in check, Malcomson installed his clerk James Couzens (also a shareholder) at Ford Motor in a full-time position. In any case, the company was an immediate success. Earnings in the first six monsths were over $100,000, and the company declared a 100% stock dividend; in the first year, the company made over $250,000 profit. Malcomson wanted to increase profits, and, believing luxury cars were the most attractive sector of the automobile market, directed Ford to design and build the larger and more expensive Model B and Model K. Ford was reluctant, but Malcomson was backed by his majority coalition on the Board, and Ford capitulated.

The end at Ford

In 1905, to hedge his bets, Malcomson formed Aerocar to produce luxury automobiles. However, other board members at Ford became upset, because the Aerocar would compete directly with the Model K. They demanded Malcomson give up his shares in Ford. Malcomson refused. However, Henry Ford was still upset at being dictated to by Malcomson. With Couzens's help, and without Malcomson's involvement, Ford established the Ford Manufacturing Company, explicitly to make parts for Ford Motor. Ford Manufacturing charged Ford Motor inflated prices, shifting the profits to Ford Manufacturing and leaving Ford Motor profitless. Malcomson, recognizing that he had been outmaneuvered, sold his stock in Ford Motor to Henry Ford in 1906 for $175,000.

Malcomson plowed his profit from the sale of Ford stock back into Aerocar,Mrs. Alexander Malcomson, Nov 3, 1930, [http://www.time.com/time/magazine/article/0,9171,882352-2,00.html Letter to the editor] , "Time Magazine".] building a factory and producing the Aerocar Model D and Model F. However, the cars were not very popular, and Aerocar went broke in 1908. He sold his factory to Hudson Motor Car and returned to the coal business, still owing money to his creditors.

However, Malcomson dove back into business, running his coal supply business. In 1913, he formed Malcomson and Houghten, a distributor of coal, coke, and building supplies. By his death, he had amassed an estimated $2,000,000, and his insurance policy of $633,250 was the fifth largest paid in that year.Richards, William C., 2007, [http://books.google.com/books?id=jhTTz5B2y58C&pg=PA84&as_brr=3&ei=TwtgR8SEM5L0iwGU49xX&sig=ANQZehcA6CKTeiarh43SQn_nJ0o#PPA81,M1 The Last Billionaire - Henry Ford] , READ Books, pp. 81-82.]

Alexander Malcomson died in 1923, at age 59, after a long illness."Milestones," August 13, 1923, [http://www.time.com/time/magazine/article/0,9171,727355,00.html "Time Magazine"] .]

References