As the auto industry celebrates its 100th anniversary, it's ironic that many view the explosion of civil litigation as a serious threat to productivity. Some 80 years ago, a lawsuit and events preceding it were a catalyst in the industry's early rapid growth.
When John and Horace Dodge successfully sued Henry Ford in 1916, the money the brothers won helped turn their car company into one that rivaled Ford's in stature.
Folklore suggests that Ford's money built what would become one of his great competitors and, in a sense, that's correct. The Dodges' suit compelled Ford to release dividends to his shareholders. Angry with what he considered meddling, Ford bought those shareholders out, and the Dodges had a windfall that financed another expansion of their own firm.
In truth, John and Horace Dodge had long since established themselves through their own sweat, skill and obstinacy. Dodge Brothers played a crucial role in Ford's early success as a supplier of engines, transmissions, axles and chassis. The Dodges introduced their own automobile in November 1914 and sold 45,000 the first year - more than any car before it.
It is said that John promoted the Dodges' business and arranged the deals, and Horace made sure they delivered on what was promised. In business, they were patient, never in a hurry to change things once they had them right. Yet in private life, the Dodge brothers could be rash and hot-tempered. They were redheads, after all, and both were heavy drinkers. In their early days in Detroit, John and Horace were known to frequent - and occasionally wreck - warehouse-district bars.
More than anything, the Dodge brothers were known for directness and honesty. If they raised a ruckus in anger, they were back the next day to make amends. Their generosity kept loyal workers in their shops. During World War I, Dodge Brothers built artillery at no profit.
Like so many pioneers of the American auto industry, the Dodge brothers were machinists. They were born in Niles, on the St. Joseph River in western Michigan; John Francis in 1864 and Horace Elgin in 1868.
The sons of Daniel Rugg Dodge began to develop their trade in their father's boat shop. When John was 20, he and Horace persuaded their parents to move - first to Battle Creek, Mich., then to Port Huron, Mich., and finally to Detroit in 1886.
Even after John and Horace started their own families, they preferred each other's company to anyone else's. They ate lunch together nearly every day of their lives.
In the 1890s, bicycles were the primary mode of transport in Detroit. Horace relied on one to get to the shop where he was employed, but he was not impressed with its reliability. By 1897 he had developed a dirt-resistant bearing for axles and sprockets. John concluded that if bikes were to be built with Horace's bearing, the Dodge brothers should build them. With backing from a Canadian businessman, the brothers started Evans & Dodge Bicycles across the Detroit River in Windsor, Ontario.
Three years later, the company was purchased by Canadian National Cycle Co. The Dodges received $7,500 cash plus royalties for the use of their bearing. It was the seed from which their fortune would grow. They bought machine tools and leased space at Lafayette and Beaubien streets in Detroit. The first Dodge machine shop opened in 1901 with 12 employees.
Within a year, Dodge Brothers was offered a major contract. It could build 3,000 transmissions for Ransom Olds' Curved Dash Runabout, but the deal required a significant investment in equipment. If ever luck played a role in the Dodges' success, it was then. At precisely that time, Canadian Cycle folded. The Dodges were offered the company's machine tools in lieu of royalties owed on Horace's bearing.
By 1903, when Henry Ford was trying to start an automobile company with backing from a coal dealer named Alexander Malcomson, the Dodges had a reputation for first-class work at a fair price. Ford ordered 650 chassis at $250 apiece from the Dodges. According to some accounts, Ford couldn't pay the first bills when they became due. In lieu of cash, the Dodges accepted $10,000 worth of stock in Ford Motor Co., 10 percent of the outstanding shares. Other historians say the Dodges put up $7,000 in components and a $3,000 note for their share of Ford Motor Co.
Dodge Brothers actually built most of Ford Motor's first cars, including engines, chassis and all running gear. Ford merely attached bodywork provided by another supplier. For years the Dodges' relationship with Ford was cordial; John served as vice president at Ford Motor. Yet by 1913, the Dodges had grown wary of Ford's intent to become self-sufficient.
By that time Dodge Brothers had relocated to a giant factory in Hamtramck, Mich., that would become the famed Dodge Main. Horace and John built the world's first auto company proving grounds and set about planning their first car. It was ready in 1914.
The Dodges knew better than to challenge Ford with a low-priced car for Everyman. Their car was a mid-priced tourer (open with a folding top). It was the first car mass-produced with an all-steel body. It had a 12-volt electrical system, heat-treated vanadium gears and a 35-horsepower side-valve four-cylinder engine. The Dodge was as rugged as any car built at the time.
It was rugged enough to carry Gen. John Pershing around Mexico as he chased Pancho Villa and his bandits in 1915-16. During the Mexican campaign, a young lieutenant named George Patton led 15 men in three Dodge cars in the U.S. Army's first mechanized cavalry charge. Such exploits made for great promotion, and sales took off. In 1915, Dodge was in fourth place in car sales.
John and Horace were still major shareholders in Ford Motor. The brothers were indifferent to the ways of high finance; they always paid for expansion with profits, and never borrowed. And as his company grew, Henry Ford adopted the same position. In early 1916, he told John and Horace that Ford Motor would suspend payment of dividends. All profits would be reinvested in the company. The volatile Dodges didn't take kindly to the plan.
A judge eventually ordered Ford to release $20 million in dividends and interest, of which the Dodges received $2 million. Ford threatened to set up a new company to build cars, and forced his shareholders to sell him their stock. The Dodges got another $25 million. Through the years, they had received $9.5 million in dividends on their Ford stock.
John and Horace had long since taken to the trappings of powerful industrialists. They built lavish mansions, bought country estates and commissioned one of the largest, most powerful yachts ever built. But, as usual, most of the Ford windfall went back into Dodge Brothers. By the end of 1919, the company had sold nearly 400,000 cars and employed 17,000 workers. When the brothers died in 1920, Chevrolet and Dodge were virtually tied for second place behind Ford in sales.
John died first, though it was Horace the doctors feared for. In January, visiting New York for an auto show, Horace contracted influenza. John never left his brother's hotel room, and within a week Horace was getting better. But by then, John had the virus, and he lapsed into a coma. He died of respiratory failure on Jan. 14, 1920, at age 55.
Horace never fully recovered from the flu, or his grief. Years of hard drinking had taken a toll; he died Dec. 10, 1920, when his liver began hemorrhaging.
Frederick Haynes, a longtime employee, managed the company for several years and introduced large-scale truck production. In 1925, the family sold Dodge Brothers to Dillon, Reed, a New York banking house, for $146 million.
Walter Chrysler's new car company took over Dodge Brothers for $170 million in stock in 1928. Dodge Division was born, and industry leaders likened Chrysler's move to a minnow swallowing a whale. Dodge gave Chrysler the dealer network and production capacity it lacked and laid the foundation for Chrysler to become one of the Big 3.
A tangible legacy of John and Horace Dodge was Dodge Main, which remained one of Chrysler's largest plants until it was closed in 1980. On a more inspirational level, John and Horace are standard examples of what hard work and vision can accomplish. They embodied the American Dream, for better or worse.