Panic of '07 paved way for Jeep in Toledo

TOLEDO TIMES - The stock market tanked. Banks, burned by bad loans, tightened credit. Automakers faced severe competition and financial woes. The health of the economy was questionable, and some experts feared a recession.

Sound familiar? Sound like what's happened so far in 2007? Well, yes, but it also happened in early 1907, and it kept happening until the end of that awful year. It was called the Panic of 1907. Perhaps this year's economic hiccups will remain just that, a temporary problem. But the financial calamities of a century ago did a lot of economic harm around the United States, including the failure of 16 national banks in the last 10 weeks of the year. But a lot of good came out of the mess.

The Pope Motor Co. car company was purchased by John North Willys to ensure a supply of cars to his dealerships. ( TOLEDO-LUCAS COUNTY PUBLIC LIBRARY COLLECTION ) Zoom | Photo Reprints

Congress finally gave its full attention to banking problems and started working seriously on legislation that led, six years later, to the creation of the Federal Reserve system. And although the financial crisis hastened the demise of Toledo's Pope Motor Car Co., it opened the way for automotive genius John North Willys to buy the assets of the failed firm two years later, creating the famed Willys-Overland Co. that eventually became the basis of the modern-day Jeep operation. The Panic of 1907 evolved in stages, beginning with a stock-market crash in March, and in October there was a more severe one. In the meantime, many banks began experiencing a liquidity crisis, and depositors were edgy. Many large corporations, too, had cash-flow prob-

Willys Zoom | Photo Reprints

lems, and the nation sank into a recession. As stocks plummeted that October, many depositors wanted to get their money out of banks. A run on a big New York bank, Knickerbocker Trust, forced the bank to close, and a number of others soon followed. A hero emerged in New York, when famed financier John Pierpont Morgan averted a total banking collapse by raising $12.5 million and arranging for a consortium of banks to put up an additional $25 million to lend to cash-squeezed institutions. A year after the crisis, Congress passed the Aldrich-Vreeland Act, setting up a commission to investigate the disaster and propose solutions. Out of that effort grew the Federal Reserve Act, in 1913, creating a central banking system. By 1907, Toledo had several automobile manufacturers, including the Pope Motor Car Co. that gained a national reputation for its so-called "mile-a-minute" car. Col. Albert Augustus Pope, a Union Army officer in the Civil War, had turned a cartel of bicycle manufacturers into a car maker with more than 1,500 workers in a 250,000-square-foot complex in the 900 block of West Central Avenue. But the Pope firm faced a triple whammy. It was still reeling from a strike in late 1906 and early 1907 when the financial squeeze started, and competition was heating up in the young automotive industry. The Pope company went into receivership in 1907, and even though it continued to make cars until 1909, it never fully recovered. However, the Panic of 1907, which ruined many an entrepreneur, was doubly fortunate for one: Mr. Willys, who had been a car dealer in Elmira, N.Y. He had ordered 400 touring cars made by Overland Automobile Co., which moved from Terre Haute, Ind., to Indianapolis in 1906. He sent a $10,000 down payment to secure the deal. But the crisis of 1907 intervened, and the cars weren't delivered, so Mr. Willys traveled to Indianapolis to meet with Overland officials. He soon realized if he wanted his cars, he would have to take the company over. By 1909, his firm was making more than 4,000 cars, and he opened a second factory, in Marion, Ind. But when he learned the Pope operation in Toledo was broke, he came to Toledo in May, 1909, and bought the Pope-Toledo plant for $285,000. "I made a million dollars the day I bought it," Mr. Willys once told a reporter. Within a couple of years, Mr. Willys cranked up production in Toledo to the point that his firm was the nation's second-largest producer from 1912 to 1917, second only to Ford Motor Co. By 1941, six years after his death in 1935, Willys-Overland was starting to produce World War II Jeeps. An estimated 10 million Jeep vehicles have rolled out of Toledo since. Not a bad result from the Panic of 1907.