The Dodge brothers filed suit against the Ford Motor Company and Henry Ford, asking that the latter distribute as dividends 75% of the company’s cash surplus, or about $39,000,000. At the same time, the Dodge brothers obtained a court restraining order that forbade the use of funds for plant expansion.
Ford went public with his usual nose for opportunity, saying in an interview published in the Detroit News that his only aims in life were to
“enable a large number of people to buy and enjoy the use of a car” and to give “a larger number of men employment at good wages”.
Ford continued by saying,
“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 benefits to users and labourers.”
Such statements, probably never before expressed in business, won over the American public.
On the witness stand, Ford presented his idealistic yet profitable vision. In 1959, Father R. L. Bruckberger, a French priest, commented on Ford’s remarks in court,
“In all the world’s universities all young people seeking some knowledge of political economy should be required to learn this remarkable dialogue by heart. It is as important in economics as the Declaration of Independence is in politics”.
He further asserted that the trial demonstrated the capitalist economic system as described by Adam Smith, Ricardo, and Marx, to be, “not only obsolete but absurd and unsuited to America”. Bruckberger concluded that the case itself “should be as celebrated in political economy as the trial of Socrates in philosophy or that of Galileo in astronomy”, and that historians “may well decide that it was the most extraordinary trial of the century.”
The court exchange – the remarkable dialogue!
“Now,” said Elliott G. Stevenson, the Dodges’ truculent attorney, “I will ask you again, do you still think that those profits were ‘awful profits’?”
“Well, I guess I do, yes,” replied Ford.
“And for that reason you were not satisfied to continue to make such awful profits?” the lawyer inquired.
“We don’t seem to be able to keep the profits down,” apologised Ford.
“…Are you trying to keep them down? What is the Ford Motor Company organized for except profits, will you tell me, Mr. Ford?”
“Organized to do as much good as we can, everywhere, for everybody concerned.”
The dumbfounded attorney quit for the day. However, in his need to prove that a business firm’s primary responsibility is to its stockholders, he returned to the attack. “What,” he asked Ford, “is the purpose of the [Ford] company?”
“To do as much as possible for everybody concerned,” responded Ford, “to make money and use it, give employment, and send out the car where the people can use it… and incidentally to make money…. Business is a service not a bonanza.”
“Incidentally make money?” queried the attorney.
“But your controlling feature…is to employ a great army of men at high wages, to reduce the selling price of your car, so that a lot of people can buy it at a cheap price, and give everybody a car that wants one.”
“If you give all that,” replied Ford, who must have felt that Stevenson had admirably stated his policies, “the money will fall into your hands; you can’t get out of it.”
In October 1917, the Ford Company was ordered to give up most of its Rouge expansion plans, on the narrow ground that it exceeded the powers expressly granted the firm in its charter, and to declare a special dividend of $19,275,385. Henry Ford appealed. In February 1919, a state superior court held that the Ford Company could go forward with its Rouge plans, but had to pay the dividend recommended by the lower court.
The Dodge suit was a partial legal defeat for Ford. But Henry, as 58.5 % owner of the company, pocketed the greater part of the dividends distributed.