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larger number of men employment at good wages. It permits the planning of production, the elimination of
dull seasons, and the waste of carrying an idle plant. Thus results a suitable, continuous business, and if you
will think it over, you will discover that most so-called urgent financing is made necessary because of a lack
of planned, continuous business. Reducing prices is taken by the short-sighted to be the same as reducing the
income of a business. It is very difficult to deal with that sort of a mind because it is so totally lacking in even
the background knowledge of what business is. For instance, I was once asked, when contemplating a
reduction of eighty dollars a car, whether on a production of five hundred thousand cars this would not reduce
the income of the company by forty million dollars. Of course if one sold only five hundred thousand cars at
the new price, the income would be reduced forty million dollars--which is an interesting mathematical
calculation that has nothing whatsoever to do with business, because unless you reduce the price of an article
the sales do not continuously increase and therefore the business has no stability.
If a business is not increasing, it is bound to be decreasing, and a decreasing business always needs a lot of
financing. Old-time business went on the doctrine that prices should always be kept up to the highest point at
which people will buy. Really modern business has to take the opposite view.
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
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and better business. 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 profits
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 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 reducing 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 benefits 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 opportunity to serve than to bank dividends.
If it at any time became a question between lowering wages or abolishing dividends, I would abolish
dividends. That time is not apt to come, for, as I have pointed out, there is no economy in low wages. It is bad
financial policy to reduce wages because it also reduces buying power. If one believes that leadership brings
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responsibility, then a part of that responsibility is in seeing that those whom one leads shall have an adequate
opportunity to earn a living. Finance concerns not merely the profit or solvency of a company; it also
comprehends the amount of money that the company turns back to the community through wages. There is no
charity in this. There is no charity in proper wages. It is simply that no company can be said to be stable which
is not so well managed that it can afford a man an opportunity to do a great deal of work and therefore to earn
a good wage.
There is something sacred about wages--they represent homes and families and domestic destinies. People
ought to tread very carefully when approaching wages. On the cost sheet, wages are mere figures; out in the
world, wages are bread boxes and coal bins, babies' cradles and children's education--family comforts and
contentment. On the other hand, there is something just as sacred about capital which is used to provide the
means by which work can be made productive. Nobody is helped if our industries are sucked dry of their
life-blood. There is something just as sacred about a shop that employs thousands of men as there is about a
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