product they knew would be in tremendous demand— rifles. Three months later, with President Wilson’ s approval, J. P. Morgan became the commercial agents in the United States for“ His Majesty’ s Government,” i. e. the sole purchasing agent for Great Britain. The following month, France and Russia signed similar agreements, enabling that bank to also provide their governments a streamlined structure for processing loans for purchasing equipment.
The Morgan partners considered running this purchasing operation either through established purchasing agents or through the offices of a large industrial corporation. They decided, however, to establish an in-house export department, and to hire the well-known businessman Edward Stettinius to run the operation. He organized the department’ s activities along functional lines and hired experienced executives to manage sections involving heavy artillery, propellants, chemicals, food and livestock, among others.
From January 1915 to April 1917( when the United States entered the war), the Morgan bank financed approximately $ 3 billion worth of purchases for the Allies, working with almost 1,000 prime contractors and thousands of subcontractors. More than 42 % of that business was done with 10 firms. The export department’ s staff of 175 people placed orders accounting for 21 % of all US exports and 84 % of all American sales of munitions and war materials.
The manufacturers who received most of those orders were usually the leading factors in their industries. Many prospered like never before, helping the United States economy recover from the recession of mid-1914. But trying to fill unusually large orders also caused problems. The managements of the aforementioned Remington and Winchester companies did not appear to understand the nature of war production orders, especially as they involved special products not normally sought by pre-war commercial customers.
Both companies began soliciting contracts from the British government as early as September 1915. But neither firm made any provisions for altering their civilian workload while trying to satisfy their military contracts. Thus, in order to handle the flow of new business, both were forced to embark on expensive facilities expansion programs. In doing so, both encountered meaningful manufacturing difficulties that caused them to
miss various delivery schedules in 1915 and 1916. The subsequent customer cancellations almost forced both firms into bankruptcy. Only the United States’ entry into the war saved them, since they could sell the unwanted production quantities to the US Army.
On the surface it would appear that the DuPont Company faced similar difficulties. Before the war, the company depended largely on the sale of black powder and dynamite. Demand for specialty military products, such as smokeless powder, TNT and picric acid was quite low; and the company’ s production capabilities for those materials were very limited. However, as a supplier of gunpowder in the Spanish-American War, DuPont had more experience than most in dealing with a surge in orders for special military products. Its executives knew that such orders would disappear as quickly as they had emerged.
Using that experience, President Pierre DuPont was in a good position to negotiate very favorable terms on the October 1914 order from France for eight million pounds of cannon powder. The contracted price was to be more than twice the price the US government had been paying. Moreover, France was to pay 50 % of the value of the contract up front, 30 % more when the powder was placed in the dry house and the remainder when the powder was ready for shipment. Thus, the customer, not the company, provided much of the capital financing for the new facilities that would be required to produce the material specified in the contract.
DuPont itself risked only the working capital it would need to meet the tight production schedule that called for large deliveries of powder during the subsequent 12 months. Throughout 1915 and 1916, DuPont signed contracts with similar terms with other Allied governments.
Women drilling engine parts in a Detroit aircraft factory, 1917.
Preparing for the Country’ s Active Participation
During the 28 months that J. P. Morgan was facilitating the purchase of war materials by the Allied armies, the citizens and government officials of the United States were engaging in a contentious debate about the advisability of participating in the worsening European conflict. Secretary of State William Jennings Bryan resigned in June 1915 to protest President Wilson’ s marginally more aggressive posture regarding preparedness. Secretary of War Lindley M. Garrison resigned in April 1916 to protest the President’ s
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