Monetary base insufficient

from the Powell collection

View from Pantops looking across the Rivanna to the Mill. Omer Allan Gianniny dates the illustration between 1878 and 1882. (The Charlottesville Woolen Mills had installed the first business telephone in town in March 1878, the mill building to the left burned in 1882.)
In 1878 the Charlottesville Woolen Mills was in the news for installing the community's first telephone system. Visiting the facility, a Jeffersonian Republican reporter wrote that when the manager "wishes to communicate with the mills he springs a signal button which is attached to the instrument and that strikes an electric bell at the mills. . . . Then [the manager] adjusts his instrument and every word over the line is heard distinctly by him."-Rick Britton

The Southern economy was especially depressed after 1873. In Virginia, where most of the fabrics of the Charlottesville Woolen Mills were sold, the quantity of circulating media was only $3.25 per capita in 1874. At the same time, in New England the figure was $63.46, and the national average approached seventeen dollars. Virginia had a total circulation of $3,900,000 but she paid $7,300,000 annually in federal taxes. "Almost none of this money returns to us in the shape of public expenditures,? lamented a local editor. Even the huge state debt was owned chiefly by non-residents of Virginia. Small wonder, then, that long-term investment capital was so cautious and short-term credit so expensive.--Harry Poindexter

Woolen Mills School

1701 Woolen Mills Road
May 17, 1887, Charles Fansler purchased lots ten and eleven from A.R. Blakey and S.V. Southall, trustees handling sales of Julia Farish's property, the Farm. In 1900, when Fansler sold a portion of the land to H.A.Maddex the house pictured above had been erected. Maddex, in turn, sold the property to the Charlottesville Woolen Mill which put the building to use as the Woolen Mills School (Albemarle County provided the teacher, the mill provided the building).


The success of the growing Charlottesville mill can best be understood in the light of business conditions in general and the woolen manufacture in particular during the Reconstruction period. The vigor of the American economy continued for a time after the war, only to be checked in 1869 by a recession. Profits fell, credit tightened, and contraction set in, "except perhaps In the South, which was producing more and spending relatively less than before the war." In the early seventies another era of over-expansion, particularly in railroad construction, produced a major panic in 1873. A lengthy period of stagnation followed.
--Harry Poindexter

good captain

February 1888, W.H. "Lee" Scruggs purchased lot three from Blakey and Southall, trustees who were handling sales of Julia Farish's property, "the Farm". Woolen Mills residents and architects Hays and Ewing designed this residence which is located on the northeast corner of lot three.

The era closed with high hopes. Stockholders felt that their mill, with all its shortcomings, had shown profits comparable with the best organized woolen mills in the country. With justifiable pride, Marchant basked in the warmth of praise for his "safe and generally economical administration.? In a rough sea he had proved a good captain.--Harry Poindexter

slowly and unsteadily improved

Shisler House, 1809 Woolen Mills Road

Under Marchant's skillful hand the mill steered a course to calmer waters. After 1874 the financial condition slowly and unsteadily improved, as the following table will show:



By January, 1875, a $12,000 surplus existed. While this fund yawed badly, ranging from $2,500 in 1878 to $24,800 by 1881, a glance at the thirteen years beginning in 1869 shows that dividends and divided surplus amounted to nearly a five percent return on the original capital. Moreover, earnings had sufficed during that period to write off over $6,500 in bad debts and accumulate a surplus one-third the size of the stock issue. As early as October, 1877, the mill was capable of discharging its funded debt if it so desired and in addition able to procure abundant raw materials. Business was so brisk that night shifts had to be used that year and salesmen were temporarily called in. The late seventies witnessed a short setback which was overcome by 1880. In that year, fortunate wool purchases and a market shift to fabrics made from coarse fibers brought high profits.--Harry Poindexter

the mortgage proved exceedingly worrisome

1604 & 1606 Woolen Mills Road, the Starkes-Baltimore and Harlow houses

The stockholders were impressed. Still, the faulty bulwarks had to be shored up if the mill hoped for financial stability. So they quickly authorized a mortgage of $20,000 and a $30,000 issue of preferred stock carrying a ten percent guaranteed dividend. Why this stock issue was proposed is a puzzle. Its interest rate was only slightly less than the current rate for loans; and because of the guarantee it was in one respect more insidious than loans. The preferred stock dividend would open an irreparable leak during bad years, while borrowing could be adjusted according to needs. The directors decided not to use this method. Instead, the mortgage alone was seized upon. Twenty thousand dollars worth of bonds were sold to three Charlottesville men: John Woody, Jr., N. H, Massle, and E. R. Watson. Carrying nine percent interest, the bonds were due in ten years but could be called in after five. As it turned out, the mill remained saddled with a mortgage for twenty years. In 1880 the first bonds were replaced by a new series bearing only seven percent interest. Watson, Massie, and Jefferson R. Taylor took the second issue. Before it was retired in 1894, the mortgage proved exceedingly worrisome. Even worse, the sum raised by the mortgage was too small to remove the immediate evils of an inadequate capital. Although a ten percent dividend was unwisely paid in 1874, the following year found the board seeking extensions on credits. In December, 1875, the directors were forced to sign a joint note to raise $1,000 to pay the employees! So scarce did funds remain that only two cash dividends--five percent in 1877 and six percent in 1880--could be paid between 1875 and 1881. Profits meanwhile were set aside to accumulate in a surplus fund or to be used for improvements. In 1876 the surplus account provided the base for a twenty percent increase in common stock.
--Harry Poindexter

labor fed and kept together

subject unknown, courtesy of Baltimore-Pritchett collection

As a result, sales went beyond production levels and disaster was averted "without stoppage of machinery, without loss of trade, without a protest, and [with] our skilled labor fed and kept together." This remarkable achievement Randolph credited to "our superintendent, a man in the prime of life, with skill, capacity, energy and integrity, whose fortunes are indissolubly staked on the success of the Charlottesville Woolen Mills."--Harry Poindexter

entail great suffering upon our help

As early as 1850 mill management had tried to provide decent housing for its employees. By 1880 it rented out three houses and seven tenement dwellings. Henry Marchant lived in one of the houses, and plant manager John Tyler and his family occupied another. Fifty-five out of 60 workers lived in the remainder.--Andy Myers

Marchant echoed the sentiments of Randolph and detailed the problems recently faced. He recalled a break in the dam race in January, 1873, which halted operations for a month when spring orders were being filled. At the same time "considerable loss" resulted when a sudden drop in wool prices caught the mill with a large stock of raw materials. Then, just as these setbacks were being overcome, the panic of 1873 threatened to sweep all gains away. That year proved to be "the most unprofitable that the woolen manufacturing interest of' the country has had to do battle with." As Northern mills closed right and left, the board of directors seriously debated a suspension of operations. Many factors played a part in their decision to maintain production, according to Marchant:

To shut down our gates would result in serious injury to machinery from rust and other causes; entail great suffering upon our help, and probably necessitate their seeking employment elsewhere, scatter the trade secured after years of toil, and injure our credit beyond hope of recovery. Yet to run when individuals and corporations controlling millions were stopping, seemed almost out of the question. With an indebtedness of $30,000 maturing at an early date, nothing seemed left us but to make the effort, by selling for close profits, and realize, as far as possible, from capital then invested in wool and woolens. This decided on, our prices were reduced to so near an approximate to cost as would ensure sale to a good class of trade, and every exertion [was] made to effect this object at the earliest possible moment.

--Harry Poindexter

agricultural penury

1601 Woolen Mills Road, Holloway House

Randolph patiently explained the situation to the stockholders in March, 1874. He insisted that the company was fundamentally sound in spite of the depressed condition of financial resources. Orders exceeded capacity. Improvements and additions in buildings and machinery, financed from undivided profits, had added $11,500 to assets. If an extra $30,000 in capital had been available earlier, he felt that the mill could have paid dividends of about eleven percent during those critical years. It was imperative, therefore, to raise this sum, but Randolph foresaw little hope of doing it because of the "almost general bankruptcy of the agriculture of a State which is mainly agricultural and [the] high rates of interest oppressing every branch of industry." Perhaps, he suggested, a "forebearance [sic] of dividend for three years" was the answer.
--Harry Poindexter

want of capital

T.J. Randolph as a young man. Thomas Jefferson Randolph (1792-1875), the son of Martha Jefferson and Thomas Mann Randolph, Jr., married Jane Hollins Nicholas (1798-1871) of Mount Warren on 6 March 1815. They lived at Edgehill and had seven daughters.

For a time so much debt was washed aboard that it looked doubtful whether the mill would ever do more than pay the interest and principal on these borrowed funds. A glance at the first years will reveal how serious the problem was. In 1869, after normal operating costs were paid, a sum of $9,000 remained. But interest payments consumed $4,000, leaving hardly half as net profit. After a disastrous flood washed out all production for twelve months in 1870, the next year proved almost a duplicate of the preceding period. During the years 1869, 1871, and 1872, interest outlay represented a lost dividend of almost sixteen percent!
"What a comment," cried T. J. Randolph, "on the entire want of capital in Virginia..." Stockholders moaned, too. The only dividend paid during the four-year period was one of ten percent declared for 1869. Even in that case actual payment was deferred for two years, unless the shareholder would accept it in the form of script redeemable for products of the mill at retail prices.--Harry Poindexter

immigration

At the turn of the century, Marchant had imported at least one worker from England, John Arundale. He had attended the Bradford Textile School in Yorkshire. According to notes of an interview with his daughter, Arundale designed the broadcloths that the mill sold to the United States Military Academy at West Point.--Andy Myers

For some time a problem existed in the inability of some stock owners to pay in full their subscriptions. While this proved annoying, it was not the fundamental ill. That lay in a ballast too light to permit the Company to ride smoothly in a stormy economy. Of the original $50,000 investment, some $30,500 went into buildings and machinery purchased from Marchant. Out of the balance the mill had to buy raw materials, finance and assume the costs of sales until cloth could be converted into cash. As a result, it was necessary to borrow large sums annually for operating expenses. The interest rate for such short term credit varied between ten and twelve percent during Reconstruction.--Harry Poindexter

inadequate capital

The vast majority of Mill workers were born in central Virginia. The two exceptions on the 1920 payroll were Krickbaum and Drumheller

The years between 1868 and 1881 proved to be the most turbulent and critical in the history of the Charlottesville Woolen Mills. The company was operating on the fringe of a highly competitive market in an industry in which Southern woolen mills suffered distinct disadvantages. A flimsy financial structure which siphoned off profits to creditors nearly caused the boat to sink. To a great extent inadequate capital was unavoidable in the retarded economy of Reconstruction, but also it must be viewed as a weakness self-imposed. --Harry Poindexter

day of rest

An interesting question arises. Why was Marchant not president of the company from the beginning? The main reason apparently was that he did not own controlling interest in the company. As in the case of his father previously, the price he paid for additional capital was loss of personal control. By prearrangement, the new company had bought out Marchant for $30,500 and assumed the debt owed to Furbush and Gage. Marchant reserved the right to buy 280 shares at par, but whether he did so is unclear. Apparently, the Flannagan interests at first united to secure control, but by 1875 B. C. Flannagan had sold his stock and left Charlottesville. It is not clear why Randolph became president in 1873, unless it was to give standing to the company. Meanwhile, Marchant?s excellent work as superintendent attracted great praise, and his own financial connections grew. That he secured ascendency in 1875 and retained it until his death was more a measure of his ability than of his financial power, for he never owned a controlling block of stock.--Harry Poindexter

Marchant shouldered the burden

Meanwhile as superintendent, Marchant had acted as the real helmsman, plotting a careful course through the troubled waters of panic and depression. Having impressed his associates with his abilities in both the administrative and manufacturing phases of the business, Marchant was thereupon elected president as well as superintendent.
While economy in salary outlay was a factor in giving virtually complete direction of the operations to Marchant, more important were his competence, his energetic and forceful personality, and his ambition to make the mill a success. The move proved a wise one. As much as one man could, Marchant shouldered the burden of the factory for thirty-five years, and its ultimate success was in large measure his personal accomplishment. --Harry Poindexter

Thomas Jefferson Randolph

The charter designated a board and officers for the first year. B. C. Flannagan became president, W. W. Flannagan was secretary and treasurer, and Marchant acted as superintendent. After three years Thomas Jefferson Randolph, grandson of Thomas Jefferson and an original stockholder, succeeded B. C. Flannagan.
Eighty years old, and a prominent Jacksonian Democrat, Randolph was experienced in banking and commerce. He brought to the office a winsome personality and the prestige of a famous family. Whether his choice reflected his ability or the financial value of an honorable ancestry is not clear. The latter was an asset frequently used to advantage among young industries in the postwar South, and one may assume that it was not overlooked in this case. During his presidency the company experienced the grave shock of the 1873 panic. When he died two years later in the midst of the crisis, the need for a virile successor was pointed up.
--Harry Poindexter

Woolen Mills directory

Edna and Arthur Holloway house, 1601 Woolen Mills Road. Edna lived to 109, Arthur was a "loom-fixer" at the mill

Until 1882 the board, although changing its membership frequently, was composed almost exclusively of local men. A casual glance at the officers of Charlottesville banks, insurance companies, and major manufacturing and merchandizing establishments shows that the Woolen Mills early became tied to an intimate financial system. A few examples will demonstrate this situation. Marchant, C. H. Harmon, Louis T. Hanckel and A. R. Blakey were directors of the Peoples National Bank of Charlottesville founded in 1875. At that time Marchant was president of the Woolen Mills and Blakey held a similar post in the bank. Subsequently, Judge John M. White, a director of the mill served as president of the bank from 1895 to 1913, and other personal connections could be listed. It is not surprising that this bank acted as the fiscal agent of the mill. Yet at the same time four other mill directors, William Hotopp, the two Flannagans, and N. H. Massie were on the board of the Charlottesville National Bank. In the seventies, the directors of a local fertilizer factory included as officers or directors both Flannagans, Massie, and two other directors of the mill. During the remainder of the century the men behind nearly every important Charlottesville industry included three or four members of the Woolen Mills directory. Subsequently added were representatives of a wine company, a street railway concern, and a garment factory. It is clear that the Charlottesville Woolen Mills was operated by sound business men with wide experience, men who represented the commercial class which initiated and directed the business revival in the community after the War of Secession. However, these men plotted no unholy alliance for financial power. In many cases they were active competitors in other business fields. Their close commercial ties were but natural developments in a small town. --Harry Poindexter

capable hands

Joe and Emma Amiss house, 1709 Woolen Mills Road

While the board developed the practice of meeting quarterly and on special calls (a feature which resulted in limiting effective membership to persons residing near the community), close supervision became lodged in the hands of the president, secretary-treasurer, and the factory superintendent. After 1875 nearly every phase of the business was placed directly in the capable hands of Marchant who served from that date until his death in 1910 as president and general superintendent. To assure the board a closer touch with daily problems, however, an Executive Committee of three directors was created in 1879 to advise the president. And two years later the unwieldy size of the directory was reduced to seven.--Harry Poindexter

locally owned

Unlike his father, Marchant never owned a majority interest in the Woolen Mill. At the time of his death HCM held 302 shares of Woolen Mills stock.-Albemarle County FB13 Page 448

What Northern capital seeped into the company prior to 1882 came mainly in the form of credit rather than the sale of stock. Thereby the mill deviated somewhat from the pattern followed by many industries in the New South, especially by cotton textile mills. The general method was to finance purchases of machinery from the North by selling the manufacturer stock in Southern enterprises.
Under the charter, capitalization was limited to a minimum of $50,000 and a maximum of $200,000, to be raised through the sale of stock at fifty dollars a share. Operations were placed under an eleven-man directory, selected annually by the stockholders and functioning through officers selected from and by the board. Five directors constituted a quorum. --Harry Poindexter

footnote

from the Baltimore-Pritchett collection, subjects unknown

These six members were as follows: T. J. Randolph; W. C. N. Randolph, a prominent physician; N. H. Massie, bank president, business man, and later a law partner of Andrew J. Montague, the Democratic politician who became governor of Virginia; William Hotopp, a banker; W. W. Minor; and R. Harris, about whom the writer could find no information. For a list of these directors see Minutes, I, 4. and passim. The above information was gleaned from a study of local newspapers, except for Massie?s connection with Montague which came from an examination of the papers of J. Taylor Ellyson in Alderman Library, University of Virginia.--Harry Poindexter