Evening star., 1920-08-22
BANKERS CHANGE
ATTITUDE TOWARD
AUTO INDUSTRIES
Beginning to Realize That
Business Is of Perma-
nent Nature.

ttCIit NdtutC t.
Bankers are beginning to realize
that the automobile industry is per-
manent according to John W. Prem
tiss. associated with Hornblower &,
Weeks, one of New York's leading
banking and brokerage houses
OF the automobile industry Mr.
Prentiss says:
Five years ago one of the biggest
banks in New York refused to ac-
cept well known motor stock as
collateral on an ordinary call loan.
few weeks ago the greatest bank
ing house in the world became asso-
ciated with the General Motors Com
pany as its bankers. What has caused
TINS transformation in the attitude
of the banker toward the automobile
industry? obviously il has been the
realization on the part of the banker
in the meantime of the fact that
he had greatly underestimated the
strength and qualities of permanency
inherent in the motor industry. which
makes 1T today. for instance. second
only to the iron and steel industry
in size
But more specifically it is due to
such facts. for instance. as that the
very company whose securities We're
not acceptable as banking collateral
five years ago has since that time
distributed in cash dividends more
than S55.OO0,000, all paid out of earn
1ngs, and has reinvested in its busi-
ness, also out of earnings, twice that
amount, until today its gross annual
volume of business is greater than
the gross business of any railroad
system in the world.
Slow to Change His Opinion.
The average banker is slow to
change his opinions and mode of life
That is perhaps one of the reasons
why most bankers are called con-
servative; That is also perhaps the
reason why ten years ago every one
In Wall street did not appreciate that
transportation by means of gas en-
gines was coming means of trans
, portation and that transportation by
steam engines was going to be less
profitable in the future on account
of the inroad made by the gas engine.
At any rate the banker had no con-
fdence in the gas engine proposition
and retained a good deal of his old
time confidence in the steam engine
proposition. The result has been that
I the so-called Wall street community
(our national investing public) has
lost money in railroad stocks and
bonds. while the element which saw.
the future in the motor car and which
lived in the middle west, instead of
on Manhattan Island made a lot of
money in motor car securities.
Considered Expensive Fad.
len years ago our wall street
banker had motor car which he
looked upon more or less as an ex-
pensive fad. Today he finds that he
must not only have one himself, but
that his wife or his daughter has
one, that his butcher has one. that
his grocer has one and that he is
absolutely dependent upon the motor
car. he can go nowhere without the
danger of being run over by a car
40 a matter of fact, he depends upon
IT almost entirely for his daily bread
and his daily transportation
In spite of this fact there are a
good many people in the banking
community who seem to think that
the motor car industry is not staple
and permanent business. A well
known banker in New York the other
day said to one of his best de-
positors. How long is your motor
car business going to last?'' The
motor car man replied, How long is
your banking business going to last?'
and added. as this bank going to be
IN business next year?' Whereupon
the highly indignant banker allowed
that he was and the motor man re-
piled. so is our company"
we hear a great deal of talk in
the newspapers these days of tight
money, that loans to automobile COM
panies are going to be restricted on
the theory that the Automobile is
non-essential. In the first place, very
few automobile companies borrow
much money: in the second place the
car is not a no4- essential. 1t is dis
tinctly essential. The word pleas
ure car" is rHsnomer; there is really
no such ming today. Twenty five
yearS(ago the farmer had a horse and
buggy to drive him to town. Today
he has the so-called pleasure car.
which costs less to run than the horse
and buggy. and which does ten times
the work
while some of the retail dealers
in automobiles borrow money and
while some people who buy cars that
they cannot afford, borrow money,
the manufacturing companies them
selves borrow very little money. One
of the reasons why the motor car
manufacturer does not borrow money
is that he sells his car for cash. So
cash game and he gets his money
with his bill of lading.
Another reason is that those COM
panies recently financed have almost
all been financed on a common stock
basis only a few of them have pre-
ferred stocks and practically none OF
them has any bonds outstanding.
Much discussion has been heard
for a good many years about the sat
uration point in the automobile pus1,
ness, but no saturation point VIII
probably be seen until there are
about thirty million automobiles in
the world, and today the United
States controls the markets or the
world for motor cars. This is the only
country which has learned to pro-
duce in quantity, to standardize It's
output, and therefore to produce
cheaply."