A 12,000% return on investment – The story of James Couzens

James Couzens and Henry FordThe name James Couzens is recognized from his activity as a Michigan politician and philanthropist. Here is the story behind the first great success which propelled Couzens into the spotlight.

The year was 1902. Henry Ford was formally re-organizing the Ford Motor Company. His friend and business associate, Michigan Coal Baron Alexander Malcomson, was to be a major stakeholder in the company.  The two were seeking additional stockholders. Malcomson then approached one of his employees, a young bookkeeper named James Couzens, with this opportunity.  Malcomson had hired Couzens six years earlier as a clerk for his coal company.

Couzens borrowed heavily from everyone he could and invested $2500 in the new firm.  On June 16, 1903, the company Ford and Malcomson was officially reincorporated as The Ford Motor Co.,  with Banker John S. Gray as president, Ford as vice-president, Malcomson as treasurer, and Couzens as board secretary. Couzens left the coal company to take over the business management of the new firm for a salary of $2400 while Malcomson and Ford directed the operations and manufacturing sides of the company.

Malcomson and Ford had many disputes about the direction of the new enterprise.  Ford felt the future was in transportation for every man while Malcomson felt that the highly profitable luxury cars were the way to go. In 1905, to hedge his bets, Malcomson also formed the Aerocar Co. to produce the more profitable luxury automobiles.  Other board members at Ford became quite upset because the Aerocar was targeted to compete directly with Ford’s Model K. They demanded Malcomson surrender his shares in Ford Motor. He refused. At the same time, Henry Ford was still upset at being dictated to by Malcomson. With Couzens’s help, Ford established the Ford Manufacturing Company without Malcomson’s involvement. This separate company was formed explicitly to make the parts necessary for Ford Motor. Ford Manufacturing then charged Ford Motor inflated prices, shifting all the profits over to Ford Manufacturing and leaving Ford Motor to break even at best. Malcomson, recognizing that he had been outmaneuvered, then conceded and sold his stock in Ford Motor to Henry Ford in 1906 for $175,000.

In 1906, when Gray died and Malcomson was successfully out of the company, Henry Ford then made Couzens his vice president and general manager. The success of this company made both Ford and Couzens quite wealthy, due in no small part to Couzens’s business acumen. However, the two men had differing interests and gradually grew apart. In 1915 Couzens left his position at Ford, although he still retained a seat on the board.

In 1919, Ford then bought back Couzens’s shares in the company for $30,000,000, a return of 12-thousand percent on his investment.

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