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The New Deal and the Modernization of Small Business: The McCreary Tire & Rubber Company, 1930–1940*

Published online by Cambridge University Press:  11 June 2012

Ernest B. Fricke
Ernest B. Fricke
Affiliation:
Professor of History, Indiana University of Pennsylvania
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Abstract

By the onset of the Great Depression, the big four tire manufacturers had long become the dominant force in the American rubber industry; yet they did not have a monopoly. A substantial number of smaller firms had managed to survive, however tenuously, although their decline had continued through the hard times of the 1920s and their plight grew worse with the onset of the Depression. Like their giant rivals, however, the small, unintegrated firms serving limited markets sought to survive at least in part through the help of new federal agencies as well as with the aid of traditional institutions. In this article, which analyzes the story of the McCreary Tire & Rubber Company, Professor Fricke presents a view of the economic crisis from the perspective of small enterprise. If the experience of this manufacturer can be generalized, as Fricke suggests, small business not only had a different attitude toward the expanded role of government but also emerged from the Depression changed in the ways that it did business, a result of its experience with the new federal agencies and the economic crisis itself.

Type
Research Article
Information
Business History Review , Volume 56 , Issue 4 , Winter 1982 , pp. 559 - 576
Copyright
Copyright © The President and Fellows of Harvard College 1982

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References

1 For a recent study depicting big business along the lines suggested, see Bellush, Bernard, The Failure of the NRA (New York, 1975).Google Scholar

The attention afforded big business is not surprising. It represented a new and dominating force in American economic life. In general texts, where small business is usually ignored, One is left with the impression that the lesser concerns copied the larger ones, and that the experiences of the small firms, while somewhat related, were those of the giants but on a lesser scale.

As regards the Depression, this mirror-in-miniature concept for the smaller firm is not found in more specialized works. Here, in the very earliest works, such as Charles Roos's NRA Economic Planning (1937), it has long been recognized that the smaller companies did not play follow the leader. However, even these studies tend to stress the negative impact of government agencies on survival. Further research into other small firms will be needed to determine whether the positive aspects of the McCreary experience were exceptional or characteristic of the small manufacturer in the thirties.

2 Howard, and Wolf, Ralph, Rubber: A Story of Glory and Greed (New York, 1936), 431Google Scholar and Allen, Hugh, The House of Goodyear: Fifty Years of Men and Industry (Cleveland, Ohio, 1949), 54.Google Scholar

3 Allen, House of Goodyear, 54–59 and Willison Audit and System Company, “Report on McCreary Tire & Rubber Company, December 31, 1935” (typescript), 2. This company provided the yearly reports through 1935, after which they were done by Hosack, Sprecht, Conniff & Wood. They are housed in the Finance Department, McCreary Tire & Rubber Company, Indiana, Pennsylvania, and are hereafter cited as “Annual Report, year.” Harry McCreary lost $300,000 mostly due to the falling price of cotton. The money was borrowed in 1926 to settle a court case growing out of the affair. J.J. Mills, interview, Indiana, Pennsylvania, 1971 (typescript), 8–10, in McCreary Archives, McCreary Tire & Rubber Company, Indiana, Pennsylvania.

4 India Rubber & Tire Review, 33, no. 5 (May 1933), 27 and Tire Review, 41, no. 4 (April, 1941), 24; U.S. Department of Commerce, Bureau of the Census, Biennial Census of Manufacturers, 1931 (Washington, D.C., 1935), 679–680.Google Scholar The legality of the first of the low cost contracts to supply special brands, between Sears and Goodyear, became a cause célèbre before the Federal Trade Commission. In the late twenties, the plight of the independent tire dealer worsened as the major petroleum companies, acting through their gasoline stations, joined the competition.

5 Reconstruction Finance Corporation (RFC) Form L-173, June 26, 1935, Exhibits D and A, in Folder Applications: DLI 241, Old Ledger File Box, McCreary Archives. Statement, December 15, 1934, in Folder Rond Deal, ibid. The Old Ledger File Box hereafter cited as “OLFB-McCA.”

6 Ralph W. McCreary, “A Story of Men and Tires” (typescript, 1972), 15. I have here used the term “businessman” as Thomas C. Cochran recommends — a decision maker. Ralph took charge of production in 1919 and Harry took over as sales manager in 1928. A third man, Raymond Kelly, was also a businessman. On incorporation he became a director and functioned as credit manager. Ibid., 13–14 and Don V. Miller, interview, Indiana, Pennsylvania, November 15–16, 1977 (typescript), 25–26, in Regional Historical Archives, Indiana University of Pennsylvania, Indiana, Pennsylvania; Cochran, , The American Business System: A Historical Perspective, 1900–1935 (New York, 1962), 2.Google Scholar

7 U.S. Department of Commerce, Bureau of the Census, Biennial Census of Manufacturers, 1937, part I (Washington, D.C., 1939), 776. For the 1932 production and sales, see “Annual Report, 1934,” Exhibit D.

8 Lucille Foreman, interview, Indiana, Pennsylvania, November 23, 1977, (typescript), 14, in Regional Historical Archives, Indiana University of Pennsylvania. For the plan, see Statement, December 15, 1934, in Folder Bond Deal, “OLFB-McCA.”

9 For rubber prices, see India Rubber & Tire Review, 32, no. 3 (March 1933), 7–8 and Tire Review, 36, no. 2 (February 1936), 23. Prices did not return to 1930 levels until 1934. Rankin also held a degree in electrical engineering and by the end of his first year was on a salary of $125.00 a month. Floyd Rankin, interview, Indiana, Pennsylvania, November 22, 1977 (typescript), 11–12 and 15, in Regional Historical Archives, Indiana University of Pennsylvania.

10 RFC Form L-173, January 26, 1935, Exhibit A, in Folder Applications: DLI 241, “OLFB-McCA” and Miller, interview, 1 and 8. After six months his salary was increased to $150.00.

11 For the number of survivors, see Earseman, G. S., “History of the Code of Fair Competition for the Rubber Tire Manufacturing Industry” (typescript, 1935), 6, in Record Group 9Google Scholar, “Records of the National Recovery Administration,” National Archives, Washington, D.C. At this time McCreary had the fewest number of employees (Statistical attachment, “Rubber Tire Manufacturing Industry Code #174” to memorandum of G. S. Earseman to W. Bledsoe, April 20, 1934, p. 3, in Folder 2 of Statistics, Record Group 9) and the smallest capacity (Table I, “Estimated Daily Capacity of Individual Companies, 1933,” p. 5, in volume 36 of Record Group 9).

12 Roos, Charles, NRA Economic Planning, reprint (New York, 1971), 309.Google Scholar The price slide is traced in N.R.A. Research Planning, “Rubber Tire Industry,” in Folder 2 of Statistics, Record Group 9.

13 Earseman, “History of the Code of Fair Competition,” 8–9 and 17–19. There were times when even as important a producer as Firestone was not a member of the trade association.

14 Legal Division to A.L. Kress, memorandum, May 12, 1934, p. 13, in Folder Trade Practices A-L, Record Group 9. For the charges, see ibid., 3.

15 “Rubber Tire Industry,” 44–45, Record Group 9. This is a Minimum Price Study done by the NRA.

16 Roos, NRA Economic Planning, 335 and 337. The emergency pricing scheme was an adjunct of the Retail Trade Code rather than the Manufacturing Code and the decree was changed from time to time.

17 Emphasis was Harry C. McCreary's. See McCreary to E.D. Bransome, September 7, 1934, in Folder 6 of Exceptions, Exemptions and Stays, Record Group 9, and ibid., August 14, 1934.

18 Ibid., September 7, 1934. He estimated that tire prices rose only 3 per cent from September 1933.

19 “Summary of Wage Increases or Decreases from May 1, 1933 to January 31, 1934 for Rubber Tire Manufacturing Code #174”, 3–4, in Folder 4 of Reports, Studies and Surveys, Record Group 9. Office employees on the same dates received 44 per cent and 20 per cent increases. McCreary's increases were so high because of the rate cuts put into effect as the brothers began to implement their expansion plan. The hikes, particularly the second, came rather late in the manufacturing year, and McCreary actually showed a profit of $278 in 1933. See “Annual Report, 1933–1935,” Exhibit B.

20 For 1933, see C.T. Douds to A.L. Kress, july 10, 1934, in Folder 6 in Exceptions, Exemptions and Stays, Record Group 9. This letter is also the source of forty-nine persons on the payroll in July 1934. Statistical attachment, “Rubber Tire Manufacturing Code #174” to memorandum of G.S. Earseman to W. Bledsoe, April 20, 1934, p. 3.

21 H.C. McCreary to the NRA, July 5, 1934, in Folder lof Exceptions, Exemptions and Stays, Record Group 9. For the description of the workweek prior to the NRA, see Rankin, interview, 12 and 18.

22 Memorandum of G.S. Earseman to Captain J.F. Battley, December 21, 1934, in Folder 1 of Exceptions, Exemptions and Stays; R.M. Jeffrey to Chemical Division Administrator, December 26, 1934, in Folder 2 of Exceptions, Exemptions and Stays; R.W. McCreary to Att: G.S. Earseman, April 19, 1935, and G.S. Earseman to R.W. McCreary, April 24, 1935, in Folder 6 of Exceptions, Exemptions and Stays, Record Group 9.

23 Prospectus, December 15, 1934, in Folder Bond Deal, “OLFB-McCA.” For the production, marketing, and profit figures, see Ledger I, loose sheet by rear cover, McCreary Archives; RFC Form L-173, January 26, 1935, Exhibit A, in Folder Applications: DLI 241, “OLFB-McCA;” “Annual Report, 1933–1935,” Exhibit B.

24 This was a national problem and a major reason for subsequently permitting the RFC to make direct loans. See Jones, Jesse H. and Angly, Edward, Fifty Billion Dollars: My Thirteen Years with the RFC, 1932–1945 (New York, 1951), 183–184.Google Scholar

25 R. W. McCreary to the Pittsburgh Community Mortgage and Loan Company, December 16, 1933; T.W. Kirkpatrick to R. W. McCreary, December 18, 1933; RFC Form 143, question B 21; list of pros and cons in Ralph's hand attached to clippings from December issues of the Pittsburgh Gazette discussing direct RFC loans, in Folder Pittsburgh Mortgage and Loan, “OLFB-McCA.” Minute Book [1930–1944] of the McCreary Tire & Rubber Company, Indiana, Pennsylvania. Hereafter cited as “Minute Book I.”

26 For both quotations, see W. K. Gilmore to R.W. McCreary, March 14, 1934, in Folder Pittsburgh Mortgage and Loan, “OLFB-McCA.” See also A.R. MacLaren to Pittsburgh Community Mortgage and Loan Company, February 26, 1934, enclosed in W.K. Gilmore to R.W. McCreary, February 28, 1934, ibid.

27 R. W. McCreary to A. A. Drake, Jr., January 22, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.” “Minute Book I,” June 1, 1934 and January 24, 1935.

28 R.W. McCreary to A.A. Drake, JR., January 22 and 14, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA;” prospectus, December 15, 1934, in Folder Bond Deal, “OLFB-McCA.” Permission of the RFC was needed because it had previously lent money to the First National Bank of Indiana.

29 R.W. McCreary to Major Creditors, January 28, 1935, in Folder Standby Agreements and Letters Asking for Them, “OLFB-McCA.”

30 R.W. McCreary to A.A. Drake, Jr., January 14, 1935; A.A. Drake, Jr. to R. W. McCreary, January 4, 14 and 19, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.”

31 Quotation from McCreary Tire & Rubber Company to Major Creditors, undelivered letter of March 25, 1935, in Folder Section 77B Deal, “OLFB-McCA.” RFC Form L-173, January 26, 1935, Exhibits A and B, in Folder Applications: DLI 241, “OLFB-McCA.” Another cause for hopefulness was the trust they placed in a Pittsburgh friend lobbying for them in Cleveland. R.W. McCreary to A.A. Drake, Jr., January 25, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.”

32 RFC Form L-173, January 26, 1935, Exhibit A, in Folder Applications: DLI 241 and R. W. McCreary to A.A. Drake, Jr., January 22, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.” Repayment was to take four years, with the bank and trade creditors receiving $.10 for each dollar paid the RFC. R.W. McCreary to Major Creditors, January 28, 1935, in Folder Standby Agreements and Letters Asking for Them, “OLFB-McCA.”

33 The agreements were not in a uniform style. The first was dated January 30 and the last February 7, 1935. See Folder Standby Agreements and Letters Asking for Them, “OLFB-McCA.”

34 McCreary Tire & Rubber Company to Major Creditors, undelivered letter of March 25, 1935, in Folder Section 77B Deal and Minutes of the Reconstruction Finance Corporation, 38 (1935), 22 and 28–29. Record Group 234, “Records of the Reconstruction Finance Corporation,” National Archives, Washington, D.C.

35 Minutes of the Board of Directors, March 26, 1935, in Folder Section 77B Deal, “OLFB-McCA.” A pencil annotation gives the filing dates. Attached to the undelivered letter of March 25, 1935 is a preliminary plan of reorganization.

36 R. W. McCreary to A.A. Drake, Jr., March 29, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.” Minutes of the Reconstruction Finance Corporation, 29 (1935), 248–257, Record Group 234. RFC Form L-210, April 23, 1935, Exhibit A, in Folder Applications: DLI 241, “OLFB-McCA.”

Technically, the RFC participated in the loan of the First National Bank in Indiana. The RFC preferred such loans but had difficulty achieving such cooperation, of over 9,000 loans to industry made before World War II, only 2,500 were shared. See Jones, Fifty Billion Dollars, 183–184.

37 R.W. McCreary to A.A. Drake, Jr., April 11 and 25, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.”

38 Minutes of the Reconstruction Finance Corporation, 39 (1935), 3200, Record Group 234.

39 R.W. McCreary to A.A. Drake, Jr., April 11, 1935 and R.W. McCreary to Major Creditors, April 19, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.”

40 A. A. Drake, Jr. to R.W. McCreary, April 23, 1935 and R.W. McCreary to A.A. Drake, Jr., April 25, 1935, ibid. All their previous loan applications and the bankruptcy plan called for paying the suppliers in full. Even in this loan, they prevented a scaling down of values.

41 A.A. Drake, Jr. to R.W. McCreary, April 26, 1935, ibid. In Bibb's experience, preferred stock was never redeemed and seldom paid dividends.

42 Ibid., May 1, 1935 and R.W. McCreary to A.A. Drake, Jr., April 25, 1935, ibid. The guarantee quickly became a sore that irritated the relations between the two firms until into August. Briefly, Bibb sought to commit the brothers to a definite schedule of repurchase, which the brothers refused. (A.A. Drake, Jr. to R.W. McCreary, May 1, 1935, ibid.) The most the brothers would do in this regard was to promise purchase after five years if the firm had not already done so. (Guarantee of Ralph and Harry McCreary to Meyer & Brown, September 5, 1935, ibid.) The squabble involved ignoring each other's correspondence; keeping McCreary on a C.O.D. basis; threat to take business elsewhere; untypical McCreary behavior or appeal to father's memory. See A.A. Drake, Jr. to R.W. McCreary, June 6, 11, 21 and 25; July 1, 13, 18 and 29, 1935; R. Kelly to A.A. Drake, Jr., June 6, 1935; and R.W. McCreary to A.A. Drake, Jr., June 22, 27 and 28; July 16 and August 1, 1935, ibid.

43 “Annual Report, 1935,” Exhibit B and Minutes of the Reconstruction Finance Corporation, 52 (1936), 2668–2671, Record Group 234. The company received an extension to 1940.

44 There were forty-five workers in January 1935 and fifty-three in October 1936. RFC Form L-173, January 26, 1935 and October 27, 1936, in Folder Applications: DLI 241, “OLFB-McCA.” “Total Tires Cured [1935–1940],” n.d., loose sheet at back cover of Ledger V, McCreary Archives. Raw materials are found in Ledger I. There were 24,993 tires made in 1935 and 39,022 in 1936. “Annual Report, 1936,” Exhibits A and B. My calculation.

45 McCreary Tire & Rubber Company to the RFC, Cleveland, October 15, 1936, in Folder No. 562: 2nd Loan, “OLFB-McCA.” The application, dated October 27, 1936, was approved in Washington on November 20, 1936, and placed into operation by vote of McCreary's stockholders on December 8, 1936. Minutes of the Reconstruction Finance Corporation, (1936), 1687–1691, Record Group 234 and “Minute Book I.” Production is found in Ledger V, 2–14; and profit in “Annual Report, 1937,” Exhibits A and B. My calculations.

46 Miller, interview, 10 and 12. For the resolutions establishing the power to borrow on trade acceptances in 1937–1938, see “Minute Book I,” April 15, August 30, and November 2, 1937; September 14, November 17, and December 9, 1938. For employment, production, and profits, see RFC Form 174, in Folder Loose Sheet, “OLFB-McCA;” Ledger V, 16–28; “Annual Report, 1938,” 6. My calculation. This, 1938, was the highest profit for the decade, In 1939 and 1940 profits were $16,000 and $2,000.

47 Miller, interview, 26 and 11; McCreary, “A Story of Men and Tires,” 16.

48 Rankin, interview, 17 and 20.

49 For reduced hours and increased wages, see Miller, interview, 4–5 and “Minute Book I,” December 20, 1937. “Minute Book I,” December 24, 1938 and January 18, 1939; Minutes of the Reconstruction Finance Corporation, 83 (1938), 699–700 and 84 (1939), 676, 1341–1342, Record Group 9. “Minute Book I,” May 1, 1940 and Minutes of the Reconstruction Finance Corporation, 99 (1940), 1723–1724, Record Group 234.

50 Foreman, interview, 7; Miller, interview, 19–20 and Mills, interview, 4–5. Modernization was still incomplete when this era closed. Many positions were undifferentiated. For instance, Blaine Wetzel, the cost accountant, served as buyer and traffic manager. (Miller, interview, 2–3, 15 and 39.) The time clock, payrates based on time-motion studies, and the mechanization of ledgers, beginning with accounts receivable, were instituted during World War III.

51 Jones, Fifty Billion Dollars, 184, 515–516 and 522.

52 A.A. Drake, Jr. to R.W. McCreary, June 25, 1935, in Folder Bibb on Standby and Preferred, “OLFB-McCA.” The brothers gradually repurchased the stock and in 1946, McCreary took it over. “Minute Book I,” July 26, 1946. Minutes of the Reconstruction Finance Corporation, 70 (1937), 399–400; 86 (1939), 82–83; 90 (1939), 387–388 and 99 (1940), 1723–1724, Record Group 234.

53 Indiana Evening Gazette, October 31, 1974.