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The Dodge Brothers and Henry Ford: A Brief History

skinned knucklesWhen most people think of old cars, the Ford Model T comes to mind. It is little known, however, that the Dodge Brothers of Detroit, Michigan, are in many ways responsible for Ford’s success, which eventually led to their own success in the automotive industry, and made for the brothers a vast personal fortune.

[Editor’s note: the following is by Ellis Brasher:]

All the Dodge men were strong and hardworking types who could trace the Dodge family back to 1629 in America. In the 1850s, Ezekiel Dodge ran a successful machine shop on the banks of the St. Joseph River in Niles, Michigan. Ezekiel was a good machinist upon whom the local fishermen depended to repair the steam engines in their boats. Ezekiel and his wife Anna had 2 daughters and 11 sons including Daniel Rugg Dodge.

Despite the success of Ezekiel's machine shop, times were hard and all the Dodge children had a tough life ahead of them. Daniel's father taught the young man to be a machinist and Daniel took over the business when the time came. Daniel married Maria Duval Casto; Della, their oldest child, was born in 1863, John Francis was born in 1864, and Horace followed in 1868. The boys grew up on the dusty streets of Niles and played along the river's edge — two red-haired urchins, who spent many hours at their Father's side learning the skills of the machinists trade. John was the quieter of the two and the better machinist. Horace was the leader, making sure the no one took advantage of the pair. The brothers were inseparable.

horace and john dodgeThe Dodge family moved to Detroit, Michigan, in 1886. One of the sons, Horace, was a gifted mechanic. Another son, John, was a skilled financier. In 1887, Horace created a dirt-proof ball bearing at his home workbench. John procured financial backing for a company to manufacture the first Dodge vehicle, a bicycle featuring the ball bearing. The bicycle was manufactured under the Evans & Dodge name in Windsor, Ontario, where they moved in 1899. Windsor is just across the river and U.S.-Canada border from Detroit. The bicycle was manufactured in a building leased from their former employer, the Canadian Typothetac Company. Modest profits from this venture allowed them to open a machine shop in 1901 (Latham 86).

Ransom Eli Olds, father of the Oldsmobile, wanted the best machinists to manufacture his car parts so in 1902 he contracted with the Dodge Brothers to make transmissions for his curved-dash Oldsmobile (McPherson 4). The Dodge Brothers had a small staff, but kept up with demand once production was under way and later expanded to meet higher demand (Bathroom Readers, 205).

During the time that the Dodge Brothers were perfecting their machining skills and contracting with companies to make parts for them, Henry Ford was trying to develop a successful car and car company. After meeting Henry Ford, the Dodge Brothers were intrigued by his car and its engine. They were so impressed by Ford and his proposition that they risked their business future on a contract with him (McPherson 4).

Under the terms of the contract with Ford, Dodge would receive all of Ford’s assets if Ford went bankrupt, as he had before in other ventures. The reason this was included in the contract was because Ford needed money to launch his car, money that he didn’t have. The Dodges agreed to give Ford the $7,000 worth of automobile parts and $3,000 in cash that he needed in return for a ten-percent stake in Ford Motor Company. The brothers didn’t know this, but they would eventually make millions of dollars from that initial investment (Bathroom Readers’ 204).

Dodge manufactured every part of the Ford car except for the buckboard wooden seats and the rubber tires. Dr. E. Pfennig bought the first Ford for $850. At the time of the sale, Ford only had left $223.65 in his bank account, and was almost bankrupt. However, cash flow went only one direction after that first sale, and that direction was up. Dodge received $10,000 in stock dividends the first year. Ford stock would eventually pay out millions more to them, but for the time being the Dodge Brothers profited handsomely twice: once by selling Ford the parts he needed to manufacture his car, and again by owning stock in his prospering company.

In 1914 Henry Ford finished his River Rouge manufacturing plant in Detroit. Its completion meant that he didn’t need Dodge to manufacture parts for his cars any more. Ford offered to lease the Dodges’ plant and run it himself, but the Dodge Brothers had other ideas (Bathroom Readers’ 296). By excluding Dodge, Henry Ford would only make his competition even tougher.

The Dodge Brothers knew all of the Model T’s weaknesses, so they set out to build their own car to compete with it. Dodge suggested several improvements to the Model T along the way, but Ford refused. The Dodge car, which they’d build in their own factory, would include all of these improvements. They would also use their profit from their dealings with Ford as well as dividends of the Ford stock they still owned to bankroll the new company (Bathroom Readers’ 296).

In 1913, Dodge announced they’d stop building Ford cars and would design, build, and sell their own car, and on July 15, 1914, the Dodge Brothers made their last Ford part (Pitrone, Elwart 56). The Dodge Brothers name was synonymous with quality, and the announcement that they would build their car was as important and as great as the announcement of the Comstock Lode. The Michigan Manufacturer and Financial Record claimed in August 1914 that “the Dodge Brothers are the two best mechanics in Michigan,” and that, “to a great extent, the splendid work of the Dodge Brothers [and] their quality production, has been the silent compelling factor behind the record-breaking sales of Ford.” (Pitrone, Elwart 64)

In July of 1914, Dodge Brothers was formed with $5 million in common stock. Later that year, on November 14, the first Dodge car rolled off the assembly line. It was better than the Model T in every way, but was only $100 more (Langworth 19).

Ford was not happy that the dividends he paid to Dodge were being used to bankroll his competition. In 1916 he announced that he would stop paying dividends to all shareholders. This hurt Henry Ford the most because he owned 51% of the stock in his company, but it hurt Dodge nonetheless because Dodge counted on the money to finance their company. The Dodge Brothers sued and got an appropriate $19 million in back dividends (Bathroom Readers’ 424).

In a scheme to buy his stock back and avoid paying future dividends to the Dodges, Ford announced in December 1918 that he was retiring from Ford and turning over control to his son, Edsel. He then left for an extended vacation. On March 5, 1919, the Los Angeles Examiner broke a story that Ford was organizing another company to build a cheaper, mass-produced car on a great scale that would sell for $250. If this was true, it would put the Dodge Brothers out of business. Soon after, “the Dodge Brothers and other minority shareholders found themselves mysteriously approached in the following weeks by would-be Ford share purchasers,” Robert Lacey wrote (Bathroom Readers’ 425). The Dodges saw through Ford’s plan, but decided to sell their stock anyway. Bidding on each of the 2,000 shares the Dodges owned started at $7,500. Dodge persisted and received $12,500 per share. As they suspected, Ford’s announcement of a new company was false after all (Bathroom Readers, 425).

The Dodges received $25 million from the sale of their Ford stock and about $10 million from dividends Ford paid them from 1903 to 1909. This all came from their initial investment of $10,000 in parts and cash. Then, in two decades they built a $200 million joint venture. The brothers made so much money from their dealings with Ford that business historians now consider it the most profitable investment in the history of American commerce (Bathroom Readers, 425).

While attending the 1920 New York Auto Show, Horace fell ill with pneumonia. John rushed to his bedside where he sat idle for days. John caught pneumonia almost immediately and died ten days later. Horace lingered on for a few more months and then died.

The brothers’ wives inherited all of the company but decided not to sell right away. Its estimated net worth at the time of the brothers’ deaths was $60 million. The wives finally decided to sell the company in 1924 (one year before Chrysler formally took over and renamed Maxwell Motors), and the Wall Street firm Dillon, Read, & Co. purchased it for $146 million in 1925. At the time of the transaction, it was the largest in history. Three years later in 1928, Dillon, Read, & Co. sold Dodge to Walter P. Chrysler, the head of Chrysler Corp. for $170 million. This was just in time for the Great Depression, which started after the Great Stock Market Crash in October 1929 (Bathroom Readers’ 425). Many automobiles went bankrupt during the depression, but Chrysler was strong, and survived it. Chrysler Corp. and Daimler-Benz merged in 1998 to form DaimlerChrysler, then split up in 2007, but Dodge is still alive today.

The Dodge Brothers’ story is unknown to many people even to this day and even to people who are familiar with Ford and his successful Model T. The Dodge Brothers were not from a wealthy family, but through hard work, they built a business empire that is still alive and prospering more than 85 years later, one that survived a depression and two world wars. This is the epitome of the American Dream, and shows that success in business isn’t necessarily who you know but what you know and how you apply that knowledge. The Dodge Brothers and Henry Ford are also a good example of tweamwork, as they laid the groundwork for the modern car and set the example for the modern car manufacturer to follow. The story of the Dodge Brothers is a very worthy inspiration to entrepreneurs the world over, and should not be overlooked or overshadowed by Ford the way it has been in the past.

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