Chapter 16: Aultman & Taylor Financial Status and Liquidation of the Company
This issue of Steam Traction contains the 16th, and final, installment of the late Dr. Bixler's chronicle of the Aultman & Taylor Company, as edited by Dr. Robert T. Rhode. Chapters 1-13 appeared in Iron-Men Album. During his lifetime, Dr. Bixler, a professor at Muskingum College in New Concord, Ohio, published a few of his chapters as separate articles in this magazine and others, but the bulk of his book remained unpublished until now. Dr. Bixler's manuscript offers rare insights into a significant manufacturing firm and the people who made it famous.
One of the problems that plagued the thresher companies was the collection of money that their customers owed on machinery, much of which was bought and sold on time. It was common practice to execute promissory notes covering the cost of machinery that were made payable to the company. Frequently those notes extended over a period of years. Following the close of the threshing season representatives of the firm made their rounds to collect money. On those trips it was not uncommon for them to encounter difficulties, even to the extent of being threatened with bodily harm. Sometimes, especially during a poor season, threshermen had trouble collecting money from the farmers. Then there were always a few customers who were negligent and did not meet their financial obligations. On many occasions the company was compelled to institute foreclosure proceedings that always entailed additional expenses. The collection of money due involved such costs as salaries and travel expenses for the collectors.1
The number of foreclosures for six years follows: 148 in 1897, 132 in 1898, 98 in 1899, 82 in 1900, 56 in 1901 and 84 in 1902, for a total of 600 foreclosures.
During the same six years, the amount of money paid out for collections was as follows: $19,690.83 for 1897, $20,463,93 for 1898, $22,183.44 for 1899, $23,012.53 for 1900, $11,208,90 for 1901 and $8,836.35 for 1902, for a total of $105,395.98. Discrepancies with respect to the number of foreclosures compared to the expenses involved may be attributable to the number of collectors employed each year, as well as the fluctuation in the costs of travel, meals, lodging, etc. Greater effort to collect outstanding debts may have been exerted during some years than was true of others to avoid as many foreclosures as possible.
The annual collections made for eight years for the Aultman & Taylor Company follows: $81,832 in 1895, $116,263 in 1896, $51,011.15 in 1897, $42,583.94 in 1898, $42,843.34 in 1899, $27,872.96 in 1900, $22,453.69 in 1901 and $15,649.32 in 1902, for a total of $400,509.40. The money for the liquidation of those debts continued to dribble in for another eight to 10 years.
The amount of collections made for the eight years for the Aultman & Taylor Machinery Company follows: $300,621.12 for 1895, $349,020.73 for 1896, $522,196.27 for 1897, $558,953.58 for 1898, $533,899.98 for 1899, $537,759.07 for 1900, $488,759.07 for 1901 and $511,311.94 for 1902, for a total of $3,802,521.76. The total collections for the two companies during the eight years amounted to $4,203,031.16.
The profit made by the Aultman & Taylor Machinery Company for each of the years for which figures are available was: $245,000 in 1892, $71,894 in 1894, $353,379 in 1896, $33,998.44 in 1897, $122,574.50 in 1899, $167,805.56 in 1900, $68,603.62 in 1901, $300,000 in 1903, $250,000 in 1913, $308,356 in 1915 and $214,000 in 1916. In the years for which figures are available, sales were highest in 1903 and 1915, amounting to $2,300,000 and $2,139,060, respectively.
Figures suggest that 1896 was a reasonably successful year. In 1909 the capital stock was reduced from $2,000,000 to $1,000,000, and it should also be pointed out that the net income for 1906 was $72,000; then in 1908 it was $37,100. Doubtless this was a reflection of the business recession of 1907.
Net sales in years for which figures are available follow: $674,400 in 1890, $1,017,800 in 1892, $924,800 in 1893, $654,400 in 1894, $875,700 in 1896, $1,256,100 in 1908, $1,307,200 in 1909, $3,312,700 in 1912, $3,032,800 in 1913, $1,964,300 in 1922 and $1,889,400 in 1923.
The net sales for 1916 amounted to $1,970,591 as compared to $2,139,060 in 1915, a difference of about $170,000.2 Due to unfavorable crop conditions during 1915 the company was compelled to carry over an unusually high number of completed separators. In addition they had on hand sufficient materials from which to build considerably more, which they were obliged to eliminate from their building schedule.
Moreover, the inventory in 1917 was $300,000 higher than it was at the same time during the previous year. The contingency of World War I was upon the company, and it was confronted with a critical financial situation. Yet, the firm paid a dividend on the preferred stock.
From 1912 through 1919 an earnest effort was made to increase the cash receipts from the company's sales. In 1919 the company made a gain of 15 percent over the previous year.
Yet, even with the improved collections, there still remained on the firm's books in 1916 33 percent of sales due to the company. The payment of those obligations extended over several years. In view of the stringent financial situation that the company encountered, it was most unfortunate to have been forced to carry such a sizable amount of unpaid obligations. Had those funds been collected, they might have enabled the company to tide over the crisis with which it was confronted, and perhaps the firm could have survived.
The company made no profits in 1921 and 1922 but instead suffered a loss of $180,000 in 1922 and $215,000 for 1923, making the total loss for those two years $395,000. Under those conditions no dividends were declared.
Some additional light may be shed upon the financial condition of the company by an examination of its output. The production for 1916 was approximately the same as it was for the previous year, except that the company built 64 more gas engines in 1916 than in 1915 and 99 fewer steam engines. Again, the estimated output for 1917 was about the same as it was for 1916. At their meeting in January of 1917 the directors authorized the manufacture and selling of the following quantities of machinery: 800 separators, 300 gas engines, 175 steam engines, 125 hullers, 25 bean machines and 50 sawmills.
The Record Book of the company constitutes an invaluable source of information, yet the record keeping of those who were charged with that responsibility leaves much to be desired. If it be true that the kind of records that a business keeps is in some measure indicative of the acuity of that company, then, aside from faulty judgment that entered into decision-making, there was a tragic lack of valid bookkeeping upon which firm decisions could have been made.
Notwithstanding the lack of certain information, perhaps enough has been presented to portray the increasingly untenable position in which the company found itself. Many of the facts were ominous, presaging the disaster that was soon to befall the company. The next, and final, section will be devoted to a detailed recital of the unfortunate events that culminated in the demise of the old company.
A final event in which the company was involved is worthy of mention, especially since no one outside of the management was aware of the impending events that brought the old company to its tragic end. What turned out to be the last advertisement of the firm's machinery at a fair appeared in the Mansfield News on Sept. 26, 1923, barely a month prior to the beginning of the liquidation of the company. It invited the public to attend the Richland County Fair and stated that Aultman & Taylor built 'America's foremost tractors and threshers,' and, as usual, the advertisement carried a picture of the starved rooster. Those attending the fair were urged to visit the company's exhibit and make it their headquarters. They were invited to meet Mr. Hawkins, the company's representative, who might have something interesting to tell the visitor.3
It was during the latter part of 1920 that the signs of a business recession became apparent. Restriction of credit, deflation of values and a readjustment of commodity prices to a lower level characterized the financial conditions of the country at that time. The trend, which began in 1920, continued and resulted in a severe business recession in 1921. Prices dropped sharply, and there was a general deflation.
During the first world war and for about a year thereafter there had been a shortage of raw materials essential to the building of machinery. That shortage was created largely by the diverting of raw materials into the manufacture of munitions for the war. To protect themselves, companies in almost every industry bought all of the raw materials that were obtainable. As a result of the hoarding of materials prices skyrocketed. The Aultman & Taylor Company had been involved in that rush for raw materials. In the midst of the 1921 recession the company had on hand an overpriced inventory. A forced adjustment to a lower market value for the firm's inventory led to a loss in excess of a million dollars. The acuteness of the situation that confronted the company was compounded by the fact that at no time did it have substantial cash resources. The firm's inventory expansions had been financed almost entirely by bank loans and sale receivables, which made the company's financial situation untenable.
Matters were brought to a head in the fall of 1923, when the bankers realized that the company had no future and decided to call their loans immediately while the security was still unimpaired. It is the judgment of Quintin Alexander that, if the liquidation had been conducted over a longer period of time, the deficit probably would have been much smaller, but the banks were unwilling to wait any longer for their money. Mrs. Harter was unwilling to assume the loans herself, and so without further consideration the company was forced into liquidation proceedings.
At the time of liquidation, the amount to be realized on the company's assets was $2,805,000. The debts and expenses, including a liquidation cost of $100,000, amounted to $2,390,000. The balance was $415,000. While the liquidation proceeding got underway, some of the figures were calculated differently, with the amount to be realized on the company's assets scaled down to $1,766,000. The debts and expenses, including the same liquidation cost, were reevaluated upward to $2,648,000, thereby leaving a deficit of $982,000.
In the final transactions of the liquidation inventories, receivables and other assets with a book value of $2,700,000 were disposed of for only $1,000,000. This was due partially 'to an incorrect valuation of machines and supplies, as well as poor quality of assets and notes receivable. However, the chief reason for the discrepancy between book and sale values was the haste with which the liquidation was accomplished.'4
The net loss to Mrs. Harter in the liquidation due to note endorsements amounted to about $1,000,000. This did not include the former value of her holdings of stock in the company. That constituted a substantial increase in her loss. This must have been a staggering blow not only to Mrs. Harter but also to her family, as well as to others who were closely associated with her. Ultimately, the 'inventory, accounts and notes payable and good will were sold to the Advance-Rumely Company at La Porte, Ind., for about $1,000,000 cash. The machinery was sold to various purchasers for about $1,000,000, and a part of the land was sold to the Ohio Brass Company for $150,000.'5
The Advance-Rumely Company moved the machinery and other items that it had purchased. That sale included the raw materials, finished products on hand, accounts receivable, all of the patterns which were destroyed patent rights, and a portion of the plant equipment.
The remainder of the assets, which included a part of the plant in Mansfield and a warehouse in Kansas City, were incorporated in the Harter Real Estate Company, which then became a part of the Harter Estate. Those assets including the remainder of the plant were sold to various purchasers. The building in which the separators were built is now in the possession of the Ohio Highway Department.
One can easily understand that the conditions described in the preceding pages gave little encouragement for the continuation of the company. There were unmistakable forebodings of the calamity that were tantamount to a danger signal, but the leadership, as well as a number of the employees, had become blase.
Morale among the employees had reached a low ebb. There was widespread lack of concern and urgency. A complacent attitude was rampant throughout the plant. When an effort was made to modernize and bring order as well as efficiency into the parts department, a number of the employees refused to cooperate. A system of standardization was inaugurated, so that each part would carry a fixed price, rather than determining the price upon the whim of a given employee. Once, when a customer requested a pinion for his traction engine, an employee led him into the yards and, after kicking around in the grass, found the desired pinion, whereupon inquiry was made as to its price. After lifting up the pinion the employee stated that it weighed about three pounds and was worth around S3. Interviews with a number of the old employees yielded testimony that leaves little doubt that this was not an isolated incident.
Testimony of several of the men who were prominent in the management of the company also provides considerable evidence that presaged the end of the firm. Marvin Lutz was for a number of years a director and occupied official positions in the company. He was on the inside and in a position to have firsthand knowledge of the affairs of the company. He was aware of the decisions that had been made and the mismanagement that had occurred, all of which he deplored. When the company was liquidated in 1923, he observed to his friends, ' This was to be expected, since it was rotten on the inside.' He must have considered the management of the company to have been woefully derelict in the discharge of its responsibilities.6
Still another example was shared with the author by Herbert Rupp, the chief testing engineer. His description of some of the deplorable conditions contained an almost endless list of malpractices. It was the opinion of Rupp that the man who was the company's sales manager was a 'flop' and a totally irresponsible individual. On one occasion the company shipped several carloads of separators to Amarillo, Texas. The firm did not even have a down payment on those separators, and in the end that shipment was a total loss to the company.7
One would be hard pressed to envisage any situation that would be more the antithesis of good business practice than that which characterized the final years of the Aultman & Taylor Machinery Company.
A company that ceases to experiment or explore new frontiers sounds its own death knell. One of the most unusual opportunities that the officials of the company bungled was a proposal presented by Curtis C. Baldwin of Nickerson, Kan., during the years between 1919 and 1922. For a few years prior to 1911 Baldwin labored on a machine that would harvest and thresh the grain in one operation. After working for a period of years he invented the 'Standing Harvester.' An application for a patent was filed on Aug. 23, 1910, and the patent was granted on Sept. 26, 1911. A second application was filed on Feb. 17, 1917, and the patent was granted on Jan. 7, 1919. The second patent contained improvements made over the previous one.
Baldwin's machine was to be a combined harvester, thresher and separator mounted on an ordinary carriage. The grain was cut in the same manner as was done with the binder or header and thrown rearward onto a canvas provided with slats. The canvas ran over drums or rollers.
Baldwin stated in the description of his patented machine, 'The object of this invention is to combine the operations of harvesting and threshing small grain from the standing stalks, thus avoiding the useless labor of handling the straw a number of times and diminishing the losses incident to the present methods of treatment, such as the fermentation in the shock or stack.'
The name which Baldwin gave to his machine was the 'Gleaner.' It was a forerunner of the present-day combine. Baldwin attempted to persuade the officials of the Aultman & Taylor Machinery Company to manufacture his machine, but he was unsuccessful. Rupp asserted that the officials were unable to comprehend the invention's significance or to foresee that, within a few years, the combine would take over the harvesting and threshing of grain and relegate the threshing machine to obsolescence.
Undaunted by the temporary setback, Baldwin built his first Gleaner while living in Wichita, Kan. It was demonstrated during 1923 in Oklahoma and Kansas and proved to be an outstanding success. A number of retail orders were taken. The first Gleaner patent was filed on Feb. 19, 1919, and granted to Baldwin on Dec. 3, 1924.
During 1924 Baldwin's company moved its manufacturing facilities to Independence, Missouri, and in that year approximately 500 Gleaners were built. The company was incorporated under the name of 'The Gleaner Harvesting Corporation' in 1925, at which location Allis-Chalmers continues to manufacture the famous Gleaner combine.
The Aultman & Taylor officials failed to recognize the golden opportunity that had been placed in their hands when Baldwin first approached the firm with his invention. Others whose minds were more attuned to the changing conditions of the time were able to seize that opportunity. One may well agree with the biblical injunction that 'where there is no vision the people perish.'8
Competition with other companies became a problem for the firm. While most of the Aultman & Taylor tractors were well built and performed well in doing the work for which they were designed, such as operating threshing machines and sawmills and for doing road work, yet they were cumbersome and ill adapted for much of the work required on the farms.
Companies sensitive to the needs of the farmer began building tractors more adaptable to the work on the average farm. Within a few years small tractors flooded the market. They were less expensive than the Aultman & Taylor tractors and could be afforded by a large number of users. At last becoming aware of the demand for a more versatile tractor, Aultman & Taylor began building the 15-30 tractor in 1917, but, as was shown in a previous chapter, a year and more was lost in experimentation and testing. According to Rupp, it did not meet with immediate success, since other tractors on the market were in many respects superior to it. At length the market for Aultman & Taylor tractors disappeared.
Aultman & Taylor reached a pinnacle of success under inspired leadership and then gradually came to an end due to human frailties and errors. The officials were unable to cope with the problems that confronted them with sufficient alacrity, so the company succumbed to the rapidly changing agricultural and industrial conditions of the times. No longer was it able to build machinery that met the needs of its customers, so it gave way to other more dynamic companies that were in harmony with the times.
It may be recalled that, upon the death of Aultman, Michael D. Harter became the leader of the firm. Under his inspired leadership the company prospered. When Harter relinquished his responsibilities in 1890, James E. Brown became president. This has been considered by some to have been the turning point in the affairs of the company. The firm did not go into immediate decline - in fact, it lasted for 27 more years. But the spark of genius that had placed and held it in its favored position was lost forever.
A recapitulation of the events of paramount importance in the decline and termination of the company is now in place. The disposal of the water-tube boiler business was a colossal blunder. The minutes of the directors and stockholders show that there was a rather unusual amount of haggling over the contracts and salaries of salesmen and agents for the water-tube boilers. It is difficult to escape the conclusion that unnecessarily high salaries and commissions were paid to their agents and salesmen. Moreover, the final transaction that led to the disposal of the business was little less than a travesty. A high commission was paid to an agent to sell the business, yet the Stirling Company was anxious to acquire the business, so that the services of an agent were not needed. At the time of the sale of the water-tube boiler business, it was claimed that additional space was needed for the manufacture of threshing machinery. In retrospect this does not appear to have been a valid reason for eliminating that part of the business, since it certainly would have been possible to have secured additional land for the expansion of the plant, had there been a justifiable need for it. In any case alert management in other companies was already sensing the far-reaching changes that were imminent in the processes of harvesting and threshing of grain. Had the company retained its water-tube boiler business, accompanied with the decline in the demand for threshing machinery, there is the real possibility that the water-tube boiler business would have increased. Thus, its retention could well have constituted a bulwark against the unfortunate circumstances that came to a head in the fall of 1923.
A second factor forcing the company into liquidation was the building of a huge inventory at high prices largely on borrowed money.
The historical record leaves little doubt that Aultman & Taylor machinery was often of the highest quality. It is generally agreed among experienced threshermen that the New Century was one of the best and most efficient separators ever built. Even though Aultman & Taylor machinery met the needs of the threshermen during a given period of time, yet, because of the rapid changes and improvements that came about in the manufacture of agricultural machinery, the firm's products became outmoded. During the company's latter years it is clear that its management was content to rest on past achievements.
The leadership of the company was impotent and unable to extricate itself from the tangled web in which it was caught. Soon after the middle of December of 1923 it was known by those in positions of leadership that the end of the company was near at hand, but it was not until Dec. 30, 1923, that the general public was made aware of the passing of the old factory. On that day an announcement revealing its passing appeared in the Mansfield News. It contained a brief history of the company and also stated that the firm was sold to the Advance-Rumely Company.9
The general public was informed that, within a short time, an announcement would be made with respect to the holdings of the company. One of them was made on Feb. 5, 1924, which stated that the Ohio Brass Company had come into possession of five acres of ground with a number of buildings located north of the Erie tracks. At that time the company still owned the Diamond Street side of the factory, as well as the land west of Main Street on which was located the old Cahall, Babcock and Wilcox boiler shops.10
Even though the citizens of Mansfield were informed concerning the sale of the old factory, yet there was, whether intentional or not, one glaring omission in the announcements. That was the fact that the transaction was indeed a liquidation of the company, so that the public was unaware of the real reason for the sale of the company until later. Only those who were officers and connected with the management had firsthand knowledge of the momentous events that consummated in the demise of the old company.
At the time of its liquidation the following persons were its officers: J.E. Brown, chairman of the board of directors; J.U. Fogle, president; E.A. Harter, first vice-president, G.C. Heck, second vice-president, B. Hurxthal, secretary and cashier; C.E. Shiplet, works manager and W.W. Worthington, chief engineer.11
News concerning the sale of the company and that the old plant would be closed did not come as a surprise to the citizens of Mansfield. In fact it was something of an anti-climax. Layoffs by the company were, by early 1923, becoming rather frequent. Mansfield had by that time new industries that were able to absorb most of the workers.12
Alexander puts the situation succinctly with refreshing candor when he states, 'In short the later history of the Aultman & Taylor Company is a chronicle of mediocre management. Never brilliant, it managed to sail along satisfactorily, with the exception of two gigantic blunders. The first, the Cahall boiler affair, dealt the company a blow from which it was unable to recover. The second, unwise investment in inventory with borrowed funds, finished it before its time.'13
The time is now at hand when we approach the end of this book. There is little more that can be told. We can only reflect on how the Aultman & Taylor
Company fell upon evil days and was unable to cope with internal problems and the changing conditions of the times. It had outlived its usefulness. It gave way to other companies more youthful in spirit and imagination.
So there comes a sense of poignancy as we contemplate the unfortunate events that culminated in the demise of the old firm. As this history of the Aultman & Taylor Company is brought to an end, whatever profit may result from a study of this narrative or whatever conclusions may emerge, they are now within the province of those who may read this chronicle. Finally, as the author sends forth this book, it is accompanied with his best wishes that it may contribute to the enlightenment, as well as the pleasure, of all who may ponder its significance.
1. Wik, Reynold M. Steam Power on the American
Farm. Philadelphia: University of Pennsylvania, Pa., 1953.
2. A basic source of information for this chapter has been a thesis written by Quintin Alexander while he was a student at the University of Pennsylvania. Alexander is a grandson of Elizabeth Aultman Harter and a great grandson of Cornelius Aultman. His thesis covered the Harter Estate, which included the assets in the Aultman & Taylor Machinery Company. The authenticity of his thesis is enhanced by the fact that he had access to the private papers, letters, old documents, etc., of Mrs. Harter that she had collected during her lifetime. The writer is profoundly grateful to Alexander for permission to use this valuable information. A second source of information from which the writer has drawn heavily for data is the Record Book, containing the minutes of the meetings of the stockholders and directors of the Aultman & Taylor Machinery Company from 1890 to 1917 inclusive. This book also includes the annual reports made by the president of the company. The Record Book is the most valuable single source concerning the Aultman & Taylor Machinery Company extant today.
3. Mansfield News, Sept. 26, 1923.
4. Alexander, Quintin. Unpublished thesis. University of Pennsylvania.
6. From conversations with Walter L. Blakely, who was a close personal friend of Marvin Lutz.
7. Interview with Herbert C. Rupp during October of 1968.
8. Proverbs 29:18.
9. Mansfield News, Dec. 30, 1923.
10. Mansfield News, Feb. 5, 1924
12. Standfield, Virgil. News Journal. Mansfield, Ohio. Oct. 25, 1970.