Richmond has done more than any Southern city in recent years, not excepting Baltimore, to a.s.sist the cotton mills of the section in their operation and growth. The mills with which one young official is connected, centering about Anderson, South Carolina, have at some seasons of the year owed Richmond as much as $3,000,000 or even $4,000,000. He said that the First National Bank of Richmond, probably has more Southern cotton mill paper than all the banks of Atlanta combined.[326]

The next paragraphs consider the princ.i.p.al channels through which capital came to the development of the Southern industry from outside sources, more or less of its own accord, rather than being the subject of solicitation on the part of the Southern manufacturers.

Undoubtedly, one of the chief influences contributing to the physical growth of the cotton manufacturing industry of the South has been the willingness, perhaps the eagerness, of commission firms and manufacturers of cotton machinery to encourage enlargements and extensions of plants; and in the enumeration of counts against these houses, this consideration figures in the mind of the Southern mill man. When the second and effective agitation for a cotton mill at Gaffney, already referred to, was proving successful, it was determined not to seek aid from commission merchants because they "--want too many enlargements; they want more goods; the more they sell, the more they get. This does not always suit the local stockholders."[327]

An interesting allusion, showing the effect of the desire for enlargment on the part by commission houses and machinery manufacturers, is contained in an Augusta dispatch to The News and Courier, Charleston, in April, 1881. "At the meeting of the Sibley Manufacturing Company today (it was the first annual meeting of the stockholders)[328] it was decided to increase the capital stock to one million dollars. Stock for the additional amount will first be offered, and, if this is not promptly taken, seven per cent. bonds will be issued." The resolution for the increase was offered by Mr. Samuel Keyser of New York, and seconded by Mr.

David Sinton, of Cincinnati, two of the largest stockholders in the company.[329] Mr. Keyser and Mr. Sinton were two of the six directors of the company.[330] The mill was first planned to be three stories high, with 23,936 spindles and 672 looms; the doubled capitalization was to allow of an increase of stories to four, in spindleage of 30,000, and in looms to 1,000; $66,500 was proposed to be spent on the village-tenements, operatives' homes, boarding house, etc.[331] While there is no specific evidence to show that these directors represented commission houses or machinery manufacturers, or that they would take the seven per cent. bonds in case the community would not absorb the additional stock to be issued first,[332] indications point to this having been the case.

It has been seen how the builders of the Gaffney Manufacturing Company's first plant refrained from including commission merchants in the venture, and still earlier in this chapter it was said that the two-story addition, next built, was a product of the earnings of the original plant in its first three years of operation. When, however, the third addition to the plant was made, a great mill costing $800,000, the persistence of the projectors was weakened by the four years since the first mill was erected, or perhaps success had altered judgment, with some local subscriptions, the machinery people took a considerable amount of stock.[333]

A striking case here is that of the Rock Hill, South Carolina, Cotton Factory, "the 'Pet' of the town," it was called by the correspondent of a State newspaper, who continuing said: "This factory is owned and controlled by the citizens of the town, except $15,000 in stock owned in Charleston. It has a capital of $100,000 has over 6,000 spindles, with 1,500 more to be added in a few days. The best evidence of its success is that not one dollar of its stock can be bought." This clearly, was a mill born of local effort, with about the right capitalization for a plant of its small size. The conclusion of the notice, coupled with information taken from the same paper of two days later date, is significant: "It is the intention of the company, at an early day to run the factory day and night in order to keep up with its orders. The company, I learn, expect to increase their stock to $200,000 and build a duplicate factory."[334] A large part of the stock for this enlargement was subscribed by Northern capitalists.[335]

The circ.u.mstances attending the enlargment of the Loray Mill, at Gastonia, have been alluded to in another connection, John F. Love, a Gastonia man, and the son of R. C. G. Love, who had been very prominent in the Gastonia development, was the primary projector of the mill, he having a larger part in the enterprise than G. A. Gray, the greatest of the Gastonia mill builders. He got the building up, but the factory had not commenced operation, when the company had to be reorganized. It was intended when the mill was started to have 25,000 spindles; it was now wished to increase the spindles to 50,000. The local investors were scared off by this proposal, but the machinery manufacturers encouraged the enlargement, supplying the machinery and taking preferred stock in payment. The Whitin and Draper companies own most of the stock of the mill, and the Whitin representative in Charlotte is president of the mill. Commission houses hold some of the stock. The Loray Mill is the largest and the poorest in Gastonia; it makes coa.r.s.e cloth from the local short-staple cotton on some 2,000 looms,[336] while the small mills built by local capital for the most part are making good profits from some of the finest yarns, of long-staple cotton, spun anywhere in the Southern States.

It has not always been the machinery manufacturers alone or together with the commission houses who facilitated the installation of more looms and spindles. Sometimes the ends aimed at by the commission merchants could be accomplished only through machinery, and they have been willing to undertake the financing of the enlargements or alterations in plant singly. The so-called Plaid Trust was sought to be formed; it was to handle the plaids of all the Southern mills, and was to be a New Jersey corporation. The plan did not carry, and the Cone Export and Commission Company went into the Southern field to handle the products of the mills generally. The older sheetings and plaids had been sold largely in the South, or almost so; the commission firm, to supply a larger trade, found it must re-organize the product of its client mills. It was attempted to persuade a mill at Durham, North Carolina to increase its denim output, but this was not done. In order to provide canton flannel, a new goods for the South, the commission house induced some interests to establish a mill at Greensboro, North Carolina. This prospered, and the house itself built a denim mill at the same place. All this time the mills were being urged to diversify their product, and the commission firm was financing them in the machinery changes which frequently had to be made. The client mills served were slow in establishing, as the commission firm urged them to do, individual finishing plants, and until this growth came about, the Southern Finishing Mills, founded by the Cones at Greensboro, served them; it was discontinued as a finishing plant when the mills had their own finishing works, which they presently built and operated successfully.[337]

There is another way in which unsolicited outside capital frequently has lodged in the Southern mills. The conditions under which this would come about are well described by a banker now in Richmond and formerly the president of the Chamber of Commerce in Raleigh, North Carolina; "Usually the people who made the spirit for cotton mills in this way (through appeals to town pride and by town rivalry) were those least able to partic.i.p.ate financially. Many mills started without sufficient capital and never did have enough till they failed in the hands of the original promoters and were bought up by other people, those who had been responsible for the enterprise losing out entirely."[338] Thus as far back as 1882 Colonel Walter S. Gordon, one of the projectors of the Georgia Pacific Railroad, purchased the Stansbury Cotton Mills, Carrollton, Mississippi, which cost originally $210,000. "The Georgia Pacific Railroad", says the notice of the purchase, "will run almost by its doors, and will give compet.i.tion in freights."[339] Evidently here was a mill which was commenced by local effort and had declined until it could be bought at a lower figure than its cost and held out the prospect of becoming profitable by the coming of new transportation facilities.

The Kessler Mill, the third built at Salisbury, North Carolina, offers a case in point. The first mill built in the place was a produce of the most whole-hearted local support centering about community pride; the second mill was an outgrowth of the success of the first, and was advantaged by the spirit aroused by the first mill, not too far spent. The Kessler Mill was organized by a faction which split off from the projectors of the first enterprise; local capital already seriously depleted was not quick in offering because of lack of interest in the project.[340] Under these circ.u.mstances the mill ran an indifferent course until taken over by a large manufacturer of a nearby town, who could command outside capital.[341]

A mulatto started a cotton mill at Concord in the same State; no white people of the place took shares; the negroes all over the State who subscribed were allowed to pay in little instalments. The operatives were negroes. The promoter was faithful to the enterprise, but came to be heavily in debt, foreclosure followed on ill success, and the mill pa.s.sed to the hands of the same capitalist who took over the Kessler Mill of Salisbury.[342]

CHAPTER VI

_FINANCING THE MILLS (Continued)_

An eminently successful mill president in Augusta was full of pessimism toward all the problems broached to him, but three characteristic sentences as to the capacity of Southern cotton manufacturers for financial administration fit the case of too many mill officials, undoubtedly:

"The people of the South have got no business sense; I am a Southern man, and I say that. Back yonder before the war what money they had was in land and n.i.g.g.e.rs. They knew nothing about financial management on close make-or-lose propositions." This judgment is borne out by that of one of the foremost newspaper editors of the South, who is also a large investor in cotton factories, who said: "The history of the industry abundantly vindicated what Edward Atkinson said about the South not knowing the difference between a penny and a nickel. None of the projectors, with the exception of H. P. Hammett and a few like him, could carry to the mills more than a general business and executive capacity." Because of prosperous conditions, he said, most of them made money in their ventures, despite their lack of business experience, but he added "... when depression came, when it was necessary to discriminate between a penny and a nickel, the mill went to blazes. It was the exceptional man who could endure the test of the penny rather than the nickel."

Similarly, a Charlestonian who had just returned to the city after attending the reorganization of one of the most famous mills in the South, in which he is a heavy investor, was moved to declare: "Mismanagement and incompetency (the Southern people are the poorest business men in the world with a few exceptions) ... are responsible for most failures."

Mr. August Kohn, in Columbia, who is himself a broker and the historian of the South Carolina mills, while recognizing the fact of these shortcomings in Southerners, as obtaining in the past and yet not overcome, held out a more hopeful view for the future: "Lack of capital and lack of trained management have been the great difficulties where mills have failed. We are developing management of the trained sort in experience and in the improvement in the business tone of our people."[343]

With this introduction, it is convenient under the general topic of financial administration, to dispose of several random points at the outset of the chapter.

Until the outbreak of the European war, two great cotton mill combinations in North and South Carolina, were those controlled by Mr. James W. Cannon, and centering about Concord and Kannapolis, North Carolina, and that of the late Mr. Lewis W. Parker, with princ.i.p.al offices at Greenville, South Carolina. The former consists of thirteen plants, and the latter, which is no longer in existence, once numbered as many as sixteen mills. These combinations were financed on opposite plans. A gentleman trained by Mr.

Parker, and at one time in a leading position in the management of the mills in the Parker Merger, so called, explained that "... Lewis Parker in his merger thought that amalgamation would reduce over-head expense; that he could get cheaper money and cheaper supplies by buying in quant.i.ties."

He "... was offered immense sums of money at 3 per cent. when his merger went together, although before he had never gotten money at least than 5 per cent. for the individual mills."

In distinction from this plan, the Cannon mills have not been const.i.tuted into a merger in the same sense, though they are all under the presidency of Mr. Cannon, who said: "The management of each of the ... mills is distinct, though there are practically the same stockholders in all the mills. Lewis Parker had a merger, and tried to run it all from one office.

my view is that each mill must have its own management and separate attention to secure success." He admitted that "There is not much saving on concentration where each corporation is a separate organization. Each mill has its own directors. Each mill must stand on its own financial strength. In many instances where the quant.i.ty is large, supplies are purchased for all the mills together, but where the quant.i.ty is less, this is not done."[344]

These two plans are brought nearer together, however, by Dr. Beattie's opinion that in practice Dr. Parker's idea of the saving to be derived from the merger would not work out, from the fact that all officers and higher employees of the combination would want increased pay for additional work, and not in proportion to the extra labor and responsibility imposed.[345] To this is to be added the caution that Mr.

Cannon probably does, in borrowing and in administration generally, accomplish many economies not indicated in his statement.

An editor said that there was no "graft" particularly in the promoting of the mills; that the minutest details of an enterprise were watched by the people of the community. This tends to be a confirmation of the view the writer brought to take of the development of the industry in the South, that it was to a larger extent the child of the public initiative and concern than most economic movements.

Mr. Thompson says that "The North Carolina mills have been almost invariably managed honestly in the interest of all the stockholders."[347] This is true of the entire South. There have, however, been two instances of fraud, one chargeable to Northern selling agents, but the other, unhappily, though also inexplicably, the result of wrong-doing on the part of a Southern man who had drawn together a number of mills. The former case was one in which a New York commission firm which had taken the president of a successful plant under its patronage, and placed him at the head of a mill in which the firm was sinking large sums, was angered at his effective attempts to free the second mill from the influence of the selling agents, and sought vengeance by ruining the original mill of which he was president. In the second instance, it is said, the president of the merger, during years in which his a.s.sociates and the general public had every confidence in him, had been owing, unknown to a soul, $400,000 to the holding company and to the const.i.tuent mills. When there was a directors' meeting of the holding company, the const.i.tuent mills would appear to be the ones involved, and when the several companies met, the sum seemed due to the general company. One of his intimate co-workers stated that "His failure shook this whole section, not only in a business way, but in a moral way."[348] And of both incidents, it was believed by another that to them was attributable a loss of interest by the Southern communities in mill building.

The depression following the panic of 1873 gave trouble to most of the cotton mills established in the years before the period of the industrial revival. During the hard times, for instance, some of those who had gone into Colonel Hammett's enterprise for the Piedmont Factory declined to pay their subscriptions. For the three months during which the machinery was being installed, the only pay the workmen got was credit for groceries at a small store in Greenville, two officers of the company giving their individual note of $500 as guarantee.[349] Colonel Hammett drew upon every resource of business and personal friendship to tide the venture over from 1873 to 1876.[350] He went so far as to mortgage his horses and carriage to buy the belting for the plant.[351]

In some of the mills, the treasurer has the largest part in financial administration. In such cases he is frequently a younger man, a product of the newer South, who has pushed his way up in the enterprise to the position of real power, leaving the president, who is perhaps a man better equipped in community esteem than in specific training, as nominal head of the concern. This has happened at Gastonia, North Carolina, a particularly progressive spinning place. But in most of the companies, especially the smaller concerns, the president is in chief control of financial affairs.

He often stamps his personality deeply on every department of the business of the mill and village and region even. A case in point is that of Mr.

Charles Estes, when interviewed 98 years old, and for twenty years before his retirement in 1901, president of the John P. King Manufacturing Company, Augusta. With some show of pride, he related how during his active career the manager of the R. G. Dunn commercial agency in Augusta one day called him into the office and let him see the report of the King Mill. It read: "John P. King Mfg. Co. Capital Stock $1,000,000. 3 per cent. semi-annual dividends. President calls directors together once in six months and tells them what he has done." "And that was the way I ran the mill," he declared.[352]

The Salisbury, N.C., Mill has a singular plan. Financial administration is concentrated in the hands of a finance committee composed of the president, treasurer and agent, or manager. The directors do about as the finance committee indicates; they hold a less important place because of the ill health of several of their number. Though nominally the whole finance committee pa.s.ses on questions, the president does not attend regularly, and one of the directors not on the committee always agrees in the action of the smaller group.[353]

The effect of strong personality in a promoter and of the business reputation of his enterprise upon impressionable Southern communities has been mentioned in a previous report. This came out clearly in the ease with which money could be borrowed. It was said by an old gentleman who knew Colonel Hammett in South Carolina very well that "The few capitalists we had then (we didn't have many) just came to his a.s.sistance whenever he asked them."[354] With respect to certain wholesale merchants of New York, Philadelphia and Boston, the writer was made to believe that they have so much confidence in a particular North Carolina manufacturer, that they give him any amount of capital he needs.[355] Mention has already been made in another connection, of the fact that Mr. Parker was offered large sums of money at 3 instead of 5 per cent. when he broached his merger successfully. The recent depression of the famous Graniteville mill, one of the first in the South, was accounted for by the statement that everybody was ready to lend money to Graniteville as an old and reliable mill, and never thought of requiring it back, until all at once all the lenders wanted their money, and this fortuitous trend made reorganization necessary.[356]

During the war the old Augusta Factory was sold into new hands at, ostensibly, $200,000. The new company capitalized the plant at $600,000, about what it was worth. It must have been a device to lend financial prestige to the mill that Governor Jenkins of Georgia was given $100,000 stock for his influence as a director. He did nothing to earn this, was the writer's a.s.surance.[357]

Perhaps it was to facilitate financial management of his mill that William C. Sibley preferred New York and Cincinnati subscriptions to large blocks of stock, to local subscriptions in smaller amounts, when soliciting backing for the Sibley Mill at Augusta.[358]

Turning now from the subject of financial administration of the mills to that of profits; it is not clear that gratifying earnings were usually due to good management; it is, however, true that poor profits or no profits were due oftener than otherwise to faulty executive control. It is meant by this to indicate that the industry in the South has shown itself, on the side of profitableness, singularly responsive to the material condition of the section, and to the state and trend of public opinion.

The degree of success of the mills has displayed the fundamental fact that the South has in the past forty years been above all else in a process of growth, and has given fresh proof of the intimate connection between the fortunes of the companies and the changes in the whole section--economic, mental and spiritual. The profits of the mills have const.i.tuted a good barometer to the evolution of the South since Reconstruction. Graphically represented, the earnings of the plants would exhibit a curve of decided aspect. It is sought by specific references to make this curve appear, and afterwards to sum up the results with several reasons therefore.

Tompkins, by many believed to have been the best authority on cotton manufacturing in the South, wrote: "It has been abundantly proved by experience in the Carolinas that cotton mills on every cla.s.s of goods manufactured there, can make a profit of 10 to 30 per cent. This has been done by the smallest as well as the largest mills on the coa.r.s.est and the finest yarns, single as well as twisted; and on the heaviest as well as the lightest weight cloths; and on dyed and undyed yarns and cloths. The variation in profit between 10 and 30 per cent. is caused by variation in prices of cotton and of manufactured goods, and also by variation in management."

In another pa.s.sage he has said: "From the experience of the best mills that have been running in the South for twenty years and over, and which have always been kept well up to date, it would appear that about 15 per cent. is the average annual profit in clear money for the whole time."[359]

The writer was given the opinion by Mr. Thackston of Greenville, South Carolina, in whose knowledge and judgment great reliance is put, that for the last ten years the average earnings for well-managed Southern mills have been $2.50 per spindle, which, reckoning the average cost of the plants at $20 to the spindle (leaving aside other capital invested) is a profit of 12.25 per cent.[360]

A banker of Winston-Salem, which is an industrial community, could not understand how the Southern mills succeeded "as well as they have." When there were mentioned to him several mills which have been consistently profitable, he found special advantages accountable for their favorable showing. In one case it was tidewater freight rates, in another skilful cotton buying by a manager of long experience. It was his belief that the average profits of Southern mills from 1880 to 1914 (omitting, that is, the years since the outbreak of the war) were not as much as 10 per cent.[361]

So much for the gains over the whole period. The earnings at several points in the development of the industry show a wider range.

A nephew of Mr. Tompkins, quoted above, who has succeeded in considerable measure to his uncle's manufacturing interests, and who is of too practical a turn of mind to be affected by the enchantment of distance, speaking of the success of mills right at the opening of the era, said that some made from 30 to 70 per cent. profit.[362] In a previous chapter, it has been seen how many mills at this juncture increased their plants from earnings. A Utopian tinge may be suspected in an article appearing in The Daily Const.i.tution, Atlanta, in March of 1880, which, in urging upon Southern communities the establishment of spinning mills, stated: "At prevailing prices there is nearly or quite six cents per pound profit over all expenses in spinning No. 14 yarn, or three cents per spindle per day; this would give $9 per spindle per year, and as spinning mills can be built for less than $18 per spindle, no other figures are required to demonstrate the statement that the spinning mills in the South bid fair to realize this year fifty per cent. on the capital invested. Nearly all of these mills are running night and day, and every one of them is realizing handsome profits. These are facts."[363] The goods of the Wesson Cotton Mills, Mississippi, took a premium at the Centennial Exhibition in Philadelphia in 1876. The company started with one mill and a capital of $300,000. This plant made 30 per cent. profits, so another was built and the stock increased to $1,000,000.[364] A North Carolina newspaper trying to encourage cotton manufacturing in that State, stated in 1880 that upon the $2,288,000 invested in the mills in South Carolina, the profits ranged from 18 to 25 per cent.[365] The Boston Journal of Commerce in 1881 gave the opinion of an Englishman visiting the Eagle and Phoenix Mills, Columbus, Georgia, that the No. 3 Mill, then new, was the best equipped in the world, and said that "The profit of these mills last year was 20 per cent. on a capital of $1,250,000 or $5.76 per spindle."[366]

Saffold Berney, in his Handbook of Alabama, published in 1878, made a rather elaborate computation of the earning capacity of a 4,000-spindle, 125-loom mill, making 6,000 yards of cloth per day.[367] It may not be uninteresting to see how he worked out a considerable rate of profit for a small plant. His calculations are:

3,000 yds. 7-8 shirting at 6 cents $ 180.00 3,000 yds. 4-4 sheeting " 7 " 210.00 -------- Total gross income $ 390.00

Cotton on a basis of 10 1-2 cents, 15 per cent. waste $220.94 Labor and mill expenses 63.44 Office and general expenses 9.62 Coal, gas, oil, starch & supplies 19.00 Insurance 3.11 Charges in selling goods, 2 1/2 per cent 9.75 Wear and tear machinery 5 per cent 13.69 339.55 ------ ------- Leaving a net profit per day of $ 50.45

Or for 300 working days or one year of $15,135.00

Figuring the cost of this mill at $20 per spindle, and leaving aside, as before, money otherwise invested about the business, there is a capital of $80,000, upon which a profit of $15,135.00 is 18.8 per cent.

"Profits in the past," says Mr. Thompson, "have been so large that often before the last payment on the stock is due, a sum sufficient to pay all obligations has been acc.u.mulated." He cites as a particularly favorable instance, that of a mill which required no further instalments on subscriptions after a little more than one-third of the instalment-payment period had run out.[368]

A little incident is interesting as involving two of the most important and picturesque personalities and one of the chief mills connected with the rise of cotton manufacturing in the South, and it bears directly on the topic now being considered. It seems that the founding of the Piedmont Factory by Colonel H. P. Hammett in South Carolina inspired a notice from Mr. Edward Atkinson, of Boston, in which he reasoned that cotton manufacturing in the South could never pay. This came under the eye of Colonel Hammett. To the article he pinned his annual balance sheet, showing a profit of 20 per cent., and sent the two to Mr. Atkinson.[369]

In regard to these first years of the large establishment of cotton mills in the South, it is common to hear the opinion that the big profits made attracted the energies of the people to mill building.[370] Going a little further back, the mills in operation just before the textile era, though few in number, showed gains that bore a part in the boom about 1880.[371]