Financial History Issue 112 (Winter 2015) | Page 16
year show substantial increase in demand
and sales, not only with respect to corresponding months of 1921, when business
was nearly at a standstill, but also as to
several divisions even in comparison with
the record year 1920.”
In the depths of the slump, some had
speculated the automobile market was
“saturated,” that the Ford Motor Company
itself was broke and that the best days of
the evidently now mature industry were
behind it. Roaring sales in 1922 hushed that
discouraging talk. By late March, Ford was
finding work enough to keep its employees busy for five days a week instead of
the depression-shortened three. By late
in April, there were reports of a developing labor shortage in Detroit. At least one
automobile supplier, Michigan Copper &
Brass Co., was recalling its salesmen from
the road; as it was that company had more
business than it could handle.
November 16 brought the cheering news
that GM would resume paying a dividend.
It was clear that the directors had not forgotten the company’s near-death experience over the preceding year. They would
authorize a payout of 50 cents a share
just this once and defer a decision on a
permanent rate of distribution. In 1920,
the company had produced an average of
31,867 cars a month with an investment in
inventory equal to about $5,548 per car;
in 1922, it was producing an average of
45,000 cars a month with an investment in
inventory of only $2,530 per car. “In other
respects,” the communiqué concluded,
“the corporation has materially fortified its
position and the outlook for the year 1923
is considered entirely satisfactory.”
More than “entirely satisfactory,” in
fact, the results proved to be. At a price
of 9½, at the depression lows of 1921,
GM shares were valued at just 4.3 times
1922 earnings and 3.6 times 1923 earnings — that is, at what those earnings
would prove to be (only a clairvoyant, and
an optimistic clairvoyant at that, could
Collection of the Museum of American Finance
president of General Motors, into the
swelling ranks of the formerly rich. But for
any with cash to invest, the opportunities
in 1921