"Buying products with cash and getting only a 20% profit margin, isn't that too meager? Moreover, we're not talking about a cheap item, but cars that cost $600 each, and having to buy them in units of 12 is also too harsh a condition."
Everything he said was correct. At this point in 1897, a 20% margin was too meager, and the condition of purchasing 12 units simultaneously was also too unfavorable.
"Of course, you are right about that, sir. Although the 20% profit condition is meager, consider that the profit per unit is $120. Is there any product where you can make a profit of $120 by selling just one? For products in this price range, sales increase as the price is lowered, so we also minimized our profit to lower the price to $600. So the dealer's profit margin inevitably becomes low too.
And the simultaneous purchase of 12 units is for transportation efficiency, so if you return them, we will buy them back at $450 per unit. You understand that the $30 difference is a device to prevent returns due to simple change of mind, right?"
The old gentleman was silent, contemplating my proposal, and I added one more condition.
"You don't have to think too long here; you can just decide after seeing the reaction with the cars you've already purchased. And please know that other models are also included in the 12-unit simultaneous purchase condition."
The old gentleman showed interest at the mention of other models and said,
"Are there models other than this one?"
"We haven't announced them yet, but there are two more models. Model B is completed, but Model C is not yet finished, so you have to wait a few more months."
"Show me this Model B. Knowing such a thing exists, I can't suppress my curiosity."
Looking at his reaction, this grandfather is also completely hooked on cars.
I took the old gentleman to the warehouse behind the factory and showed him the newly made Ford Model B.
The Ford Model B was a more popularized version of the Continental model sold to the Morgan father and son. While the Continental model used the same 4-cylinder engine but pursued maximum comfort by adding additional devices to newly made high-end leaf springs, had the car body made by a skilled coachbuilder, and was maximally luxurious and flashy by even applying platinum, the newly made Model B had a slightly shorter body, used more popularized springs, and used brass instead of platinum for decoration. However, using a steering wheel instead of a stick for steering was the same as the Continental model.
Although it was a cheap version of the Continental, compared to other existing cars or our Ford Model A, it was an overwhelmingly luxurious car.
"While Model A is $600, this one is $2,200. As you can see, it's not a runabout but a touring model. It has a 4-cylinder 20-horsepower engine and can reach a top speed of 30 miles per hour. It has a dedicated top attached separately, and this is not an option but a standard specification."
The "top" refers to the roof of the car, but even called a top, in this era, it's not a hard top but a soft top. It was often added as an option originally, and even in Model A, it had to be added as an option, but in Model B, it is a standard specification.
Runabout and Touring are classifications that started from carriages; a Runabout is a 2-seater model without a rear seat, and a Touring is a model with a rear seat for two.
The old gentleman shouted pointing at Model B as if he fell in love at first sight.
"This, I'll take this too. Did you say $2,200? I'll write a check right away. Give me this."
I calmed the rushing old gentleman.
"This is the only one made as a sample yet, so I can't give this to you right away. If you order now, we will ship it together when shipping other cars to Chicago."
The old gentleman wrote a check, filled out the order form, and said,
"Still, it wouldn't matter if I tried riding it once now, right?"
"Of course. Try riding around the road with our employee."
As the company grew, we already had service staff besides production staff.
The old gentleman rode the car with the employee and returned with a face full of smiles, seemingly satisfied.
"People passing by on the street all looked at us enviously. Complete it as quickly as possible and send it. I'll take the dealer job too. When I go to Chicago, I'll set up a store right away and send a telegram. Send 10 Model As and 2 Model Bs. Ah, I'm ordering this separately from the one I ordered for myself."
"Then we will adjust the price of the 10 units you ordered in advance to the dealer price. This is a reasonable measure, so please don't decline."
The old gentleman, that is, George Clark of Chicago, thus became our Ford Motor Company's first dealer.
From this point on, we started to establish a dealer system in earnest, and sales volume began to increase terrifyingly.
When I first said we could produce 4,800 Model As annually, everyone around except Mom and Dorothy was worried. Mom and Dorothy trust me unconditionally in whatever I do these days, to the point they would believe me if I said I make meju (soybean paste block) with red beans. Dad trusts me mostly too, but he still gives warnings when something looks a bit risky; this isn't because he doesn't trust me, but because he's concerned I might have missed something.
However, as the dealer system was established and sales increased, even those who had such worries are now admiring my foresight and genius.
Anyway, I'm too awesome.
As we started handing over cars to dealers, people wanting to become dealers appeared from everywhere, and we carefully selected them and started entrusting dealers, establishing dealer networks in Philadelphia, Boston, Detroit, Pittsburgh, Cleveland, Washington D.C., and even far away in San Francisco, California.
Besides that, inquiries even came from Europe wanting to import our Ford Model A and Model B.
Furthermore, we were preparing Model C. Model C was changing Model A's steering system to a wheel type and increasing the engine to 2 cylinders. Changing the engine and steering system naturally changed the appearance to a more car-like shape.
That means a bonnet housing the engine appeared in the front. Since the engine is small, the bonnet is also small. Initially, there was an argument to enlarge the bonnet size like Model B to show off the appearance more even if the engine is small, but an argument arose that doing so might lower the value of Model B, so we decided to maintain the small size of the bonnet.
The problem was, with car types increasing and orders increasing like this, the problem of having to expand the factory arose again. However, expanding the factory isn't easy because, while it's okay for now, continuing to expand the factory like this would inevitably bring about site issues.
Although this neighborhood isn't a wealthy village, it is one of the busiest areas in Manhattan, so land prices are no joke. There is already a shortage of space to store completed cars. We urgently rented a vacant factory site a little distance away and are storing them there, but it was obvious that wouldn't last long.
Ah, my head hurts. Should I just leave everything to Dad and quit business? But Dad is busy with bank work too, so that won't do.
The best thing is just to move the entire factory to another region, but if we do that, I have to be separated from Dad and Mom. Dad is a Wall Street banker, so he can't leave Manhattan, and Mom can't leave Dad's side either. If we move the company to another region, the only person who can follow me is Dorothy, but putting aside whether Dorothy follows me or not, I'm still a child who needs Mom's embrace. I can't live away from home without Mom.
Although there is no such thing as being charged with child abuse for neglecting a child yet, before the law, I still can't sleep without Mom. Having future knowledge is just knowledge, and emotionally I am merely a 7-year-old child, and having the experience of almost being strangled to death by my birth mother last year, my emotions are entirely those of a 7-year-old kid.
Eventually, I discussed with Dad and decided to build a new factory in Brooklyn and move. Since Brooklyn has the Brooklyn Bridge, crossing by car is quick, so there was no issue in terms of distance. Moreover, many immigrants lived in Brooklyn, making it easy to recruit workers.
Brooklyn wasn't properly developed yet, so there was plenty of cheap land just a little inland from the coast.
Since cars sold a lot in the meantime creating quite a bit of surplus funds, we purchased a whole potato field about 2km from Brooklyn Port and started building the factory.
Of course, in the meantime, we continued to make cars, and cars sold as fast as we made them. Model A sold terrifyingly fast, but what was more surprising was the luxury model, Model B. Since Model B is expensive, I thought it would never sell more than 100 units a year, but completely breaking our expectations, 427 Model Bs were sold during the year 1897.
In the case of Model A, if we hand it to a dealer for $480, it sells to consumers for $600, and in the case of Model B, if we hand it to a dealer for $1,760, it sells to consumers for $2,200. But the cost is much cheaper. According to the 1897 settlement, the manufacturing cost of Model A was $270 per unit, and the manufacturing cost of Model B was $840 per unit. So Model A brought me a profit of $210 per unit, and Model B brought me a profit of $920 per unit.
We sold 4,910 Model As and 427 Model Bs in 1897. Combining all that, we gained a profit of $1,031,100 from Model A and $392,840 from Model B, achieving a total net profit of $1,423,940.
Faced with this tremendous profit, Dad, Mom, and even Dorothy were all astonished.
Dad opened his mouth without even hiding his surprise.
"When you said you would quit working at our bank and Morgan Bank, I tried to stop you because it brought stable income, but you certainly did well to quit."
Mom was also so surprised that she clutched her pounding chest and said,
"I'm so proud that you are my son. No, I'm proud even if you don't earn money, but earning this much money makes me even more proud."
Dorothy, who is family, also couldn't close her mouth at this surprising amount.
"I only heard the word millionaire, but I couldn't imagine earning such an amount in reality. Becoming a millionaire in just one year, Henry, you are truly an amazing child."
"Ah, come to think of it, I really am a millionaire. Dad, Mom, what shall we do to celebrate becoming a millionaire?"
Dad shook his head.
"Before that, let's distribute bonuses to my employees. When earning this much, it is necessary to share the achievements with the employees. How many employees are there in the Ford factory now?"
"Total 417 people. As the company grew, management and service staff increased besides production staff."
"Then give those employees about 2 or 3 months' salary as a bonus. And give a little more to people to take special care of, like Jimmy or Bill."
Bill refers to Uncle Bill of the foundry; I eventually acquired Uncle Bill's foundry. As work increased, Uncle Bill's factory alone couldn't handle the orders, so eventually, I acquired Uncle Bill's entire foundry and expanded it further. And Jimmy eventually officially became the factory manager of our company.
I nodded at Dad's words and answered.
"Yes, first I'll give employees 3 months' salary as a bonus, and give Jimmy and Bill $1,000 each as a bonus."
$1,000 is more than 2 years' salary for a decent skilled worker. Even in Manhattan where land prices are high, it's money that can get a small apartment in a poor area. Jimmy's family was very worried whether Jimmy could find a stable job and properly support a family because of his limp, but if I show them Jimmy earning that much, the whole family will be relieved.