Michigan's lumber industry and the 19th century drew to a close together. Lumber barons had swept through the state like a hurricane, much as they had done in New England and New York, carting away the world's last great stand of white pine forests. In their wake lay dying towns, hundreds of miles of combustible debris, erosion-made swampland and wonderment on the part of those left behind that they had traded their heritage for a handful of bright coins. Lumber towns across the state, one of them, Caro, named for some inexplicable reason after Cairo, Egypt, faced extinction.
If a town was to have an even chance of finding a place in the 20th century then it needed an industry. Town mayors and other leaders across the state cast about for one. In Caro, talk about sugarbeets had drifted from Bay County where an entrepreneur named Thomas Cranage constructed a sugar factory in Essexville, a suburb of Bay City, another lumber town searching for an economic foothold to replace lumber. The results of Cranage's experiment sparked enthusiasm that quickly replaced the gloom that had settled into the hearts and minds of the leaders of faltering lumber communities.
Cranage traveled to Nebraska, Utah, New Mexico, and California where he witnessed the process and talked to the technicians and then hired them. He then created Michigan Sugar Company and, avoiding the mistake of many entrepreneurs, saw that it had adequate capital to survive the disappointments that so often accompany new ventures.
Michigan Sugar Company benefited not only from good planning but from good weather. The first sugarbeet harvest and processing season (called a "campaign" in the parlance of the beet sugar industry) in the state's history was, by every account, a remarkable success. Farmers harvested an average of 10.3 tons from each of 3,103 acres for a total of 32,047 tons of sugarbeets. The sugar content of the beets averaged 12.93 percent with a purity of eighty-two percent from which the factory extracted 5,685,552 pounds of sugar. A sugar content of 12.93 percent meant each purchased ton of beets contained 258.6 pounds of sugar. From that, the new sugar factory packaged 169 pounds, which equated to total sugar recovery of sixty-nine percent, an excellent result for a first campaign.
Principal among leaders in Caro, the center of business activity for Tuscola County, was Charles Montague. The town waited to learn what Mr. Montague thought of the sugar talk.
Montague was fifty-two years old when Michigan began to open its eyes to the prospects of sugar. He had already achieved success in many fields including banking, farming, lumber milling, merchandising and manufacturing. In addition to owning and operating the town's hotel, he operated the local telephone system and electric lighting company.
If a sugar factory was going to be built in a town, it needed a prominent citizen to get on board, someone's whose participation would create a groundswell of enthusiasm - enough to shake dollars loose from hidden places - enough to cause farmers to favorably consider raising beets that could make townsmen rich. As it would turn out, Caro was one of the few Michigan communities that did not need to generate investment from within the community. In Detroit, ninety miles to south, eager investors searched for ripe opportunities and closer to home in the nearby town of Vassar, lived a man whose roving eye never ceased to search for opportunity.
Richard Hoodless lived in comfort in Vasser, a small city named after Mathew Vassar, the founder of Vassar University. He had for many years traveled Europe's roads as a buyer of agricultural products for an English concern. He saw his first beet fields in Germany twenty years earlier, saw prosperous factories perched near towns, factories that hired laborers, purchased supplies and paid taxes to local governments and generally caused a rising tide of sustained prosperity in which no citizen directly or indirectly was denied a chance to dip into the treasure-trove formed out of beet fields.
Hoodless looked for ways to duplicate the success of Germany's farmers. As luck would have it, an advertisement appeared in a Chicago newspaper, placed by August Maritzen, a youthful architect, recently married, who had taken time out from his honeymoon to promote business for a manufacturer in Germany whose name could be pronounced by most Americans only if they first filled their mouths with marbles. It was A. Wernicke Maschinenbau Aktiengesellschaft of Halle, Germany. Hoodless replied to the advertisement and in return, Maritzen offered the significant sum of $4,000 (more than $80,000 in modern dollars) if Hoodless could generate enough interest to establish a factory in Caro.
On one hand, Hoodless had in Charles Montague, a man of wealth who dearly loved both opportunity and technology as evidenced by his control of the local telephone and lighting companies, new shining hallmarks of late 19th century technology, and on the other, in Wernicke, an experienced factory builder eager to construct a factory in the United States. For help, he turned to two friends, Fred Wheat linked to the Montagues by marriage for many years, and John Wilsey. Wheat was a lawyer whose wife was Maria Montague, a sister of Charles Montague.
Hoodless then assembled a citizens committee that became the predecessor to the Caro Sugar Company. A member of the committee, Fred Slocum, also served as editor of the Tuscola County Advertiser and helped promote the idea in his news columns. Farmers in Caro's neighborhood, aware of the great excitement occasioned by the Essexville experiment signed on as did Charles Montague and his associate, banker John Seeley who had earned his spurs in coal mining. He served as the vice-president of the Sebewaing Coal Company; an organization headed by Spencer O. Fisher who also was involved in Essexville's Michigan Sugar Company and would later become president of the West Bay City Sugar Company.
Once Montague picked up the ball, he ran for the end zone without considering competitive quotes for factory construction. Indeed, it was Wernicke representative, Max Schroeder who joined Montague and Seeley on an excursion to Detroit on a January evening in 1899. The night was blistering cold; the deal in the making was hot. The great fear was that some other town would beat Caro to the punch, drawing investment dollars away from Tuscola County. Time was of the essence.
For one week, the town held its breath as the trio met with important financiers in Detroit. Daniel Gutleben, in his The Sugar Tramp-1954 reported the receipt of a telegram by the organizing committee at Caro announcing that investment capitalists had invested in the factory and had awarded Wernicke the contract for its construction. Pandemonium "reigned supreme" according to the Tuscola County Advertiser. Seeley arrived alone on Tuesday's evening train with a story to tell, one that lives yet in Caro's memory, passed down by each succeeding generation and recorded in Daniel Gutleben's chronicles. It is a story that reveals how Charles Montague persuaded some big city wheelers and dealers into investing heavily in Michigan's second beet sugar factory.
No one questioned Wernicke's ability to build a factory four thousand miles from its base in a foreign country where the language, customs and economic conditions differed significantly from the home country. There was no one on the board of directors who possessed any experience whatsoever with beet sugar factories nor did the board foresee a need to engage corporate officers possessed of such experience. After all, Wernicke was the sugar expert, claiming more than 200 projects, including one just completed in Australia. It also did not matter because Wernicke, with enthusiasm running amuck, signed a contract guaranteeing the new factory would slice 500 tons of beets each day for a least thirty successive days at a cost of three cents per pound for sugar currently selling in Chicago for six cents per pound, retail.
That a new factory, even one built by someone lacking the disadvantages of building a factory in a foreign land, could operate at 500 tons per day during its maiden voyage was unheard of. Inevitable construction problems always created delays; fine-tuning would deter full slicing capability for weeks, sometimes months. Added to the mix were factory crews more accustomed to walking behind plows or knocking down trees with axes than operating boilers, engines, diffusers, vacuum pans, and evaporators all in perfect harmony. A year earlier, the Essexville factory builders had missed its guarantee to produce sugar for three and one-half cents per pound by fifteen cents and paid for it with a costly out of court settlement, a fact either unknown by Wernicke or dismissed in a moment of unwarranted confidence. Further, Wernicke agreed to finance $300,000 of the estimated $400,000 construction cost.
For Caro and its Detroit investors, it was too good a deal to pass up. It got better as time went on. The village council, as an added inducement, purchased 100 acres of land in two parcels, one of which belonged to Charles Montague, and gifted it to the factory owners, one of whom was Montague. The Caro Water Company sweetened the deal when it offered, free of charge, up to 500,000 gallons of spring water daily.
Thus did Caro, as a result of Montague's energy and Hoodless's ambition and the will of a town that would not be left behind, find itself the beneficiary of a factory largely paid for by outside investors. Foregoing the original name, The Caro Sugar Company, the organizers formed the Peninsular Sugar Refining Company on January 30, 1899 with 30,000 shares with a par value of $10. By August of the same year, the capitalization jumped to $500,000 and jumped again in February 1902 when it climbed to $750,000. Its final increment occurred in September 1902 when it advanced to an even one million dollars - 100,000 shares at $10.00 par value.
The moneymen included Detroit industrialists Charles Bewick who a few years later invested in the East Tawas sugar factory and Henry B. Joy, who in 1905 became president of the Packard Motor Car Company. Joy and members of his family invested in a number of Michigan's sugar factories, including those at Alma, Croswell, and Bay City. His brother-in-law and a co-founder of the Packard Motor Car Company, Truman Newberry, invested in Caro, as well, and along with Joy, became one of the company directors. Newberry would in 1918 catch fleeting fame as the successful bidder for a U.S. Senate seat for Michigan, defeating Henry Ford, another magnate who sought the same post. (Newberry fame lasted longer in Michigan's Upper Peninsula where they named a town Newberry to commemorate his father's thoughtfulness in chopping down all the hardwoods he could find and turning them into charcoal.)
David Cady and Gilbert Lee, owners of a large wholesale food distributorship in Detroit, controlled between them, nearly five thousand shares. Gilbert Lee moved into the president's chair while Henry Joy settled for a vice-presidency.
Within a few years the Sugar Trust came to town and everything changed. The American Sugar Refining Company referred to everywhere in newspapers as the Sugar Trust, moved into Michigan in 1901 and 1902 and began absorbing beet sugar factories at a rapid pace. Gone now was Charles Montague whose energy and drive assembled the parts that made the company. Gone, too, was John Seeley, his friend and partner. Richard Hoodless, who started it all, never made it to the stockholder list.
By 1903, the shareholder's list reflected some of the top names in the Sugar Trust. Chief among them was Charles B. Warren, legal counsel to the American Sugar Refining Company, whose 22,001 shares topped the 1904 shareholder list. The second ranking shareholder was Thomas B. Washington of Boston, Massachusetts, a director of the American Sugar Refining Company who held 15,667 shares. He would rise to the presidency of the Sugar Trust four years later upon the death of Henry O. Havemeyer, its founder. Third was Lowell Palmer, an executive with the American Sugar Refining Company who held 10,126 shares. Together, the three controlled 48% of the Peninsular Sugar Refining Company. An interesting feature of the shareholder list was the absence of the names of Caro residents except for a few latter day residents, employees of the sugar factory.
The American Sugar Refining Company, vilified in the daily press for its monopolistic tendencies and harried in federal courtrooms for perceived violations of the Sherman Antitrust Act of 1890, was held in high regard by its 13,000 shareholders who enjoyed a steady stream of dividends, 12% per annum since 1894. An under-appreciated aspect of the Sugar Trust was that it demanded that companies under its jurisdiction produce products of high quality at low cost and to that end provided expert advisors who traveled from factory to factory dispensing technical information, overseeing training and staffing, and inspecting the facilities.
But in 1899, the village of Caro's interest lay, not in the realm of high finance or corporate philosophy but in the hundreds of workers in need of boarding, food, and clothing and other necessities and luxuries that caused cash registers to ring all about the town. Men, money, equipment, and building materials poured into the hamlet. Forty-eight carloads of equipment plus six million bricks and one thousand cords of stone arrived in rapid succession. Three hundred workers, including bricklayers who earned fifty-cents an hour compared to fifteen cents for common laborers and five cents for apprentice electricians, created a buzz of activity that began when the snow melted in April and ended October 23 when Superintendent Georg Bartsch, a noted expert in sugar manufacturing with special acclaim won for expertise in crystallization and vacuum pan operation, declared the factory ready for operations.
Performance guarantees for new beet sugar factories plagued those who dared to issue them-and would soon plague Wernicke. The factory as described by Gutleben, while eschewing some American preferences in terms of materials, nevertheless represented the foremost in factory design. It possessed four quadruple effect evaporators made of wrought iron, supplying a combined 8,911 square feet of heating surface, two pans each 9-1/2 feet in diameter x 13 feet high containing 753 square feet of heating surface, and centrifugals that used steam jets for the final washing of the sugar. Six 700 cubic-foot spray-cooled vacuum-filled crystallizers installed on the pan floor expedited cooling, a modern feature that improved throughput. Nine water-tube boilers fitted with mechanical stokers provided an adequate supply of steam. A concrete floor, a luxury according to Michigan factory standards of the day, separated the factory from the mud and clay that lay beneath.
Two significant differences between a factory of American design and one of German design caused some immediate rancor. The first was that American management style called for superintendents who inspired the invention of the phrase, "manage on your feet, not on your seat" while the German method called for a field marshal who commanded from afar, sending lieutenants forward to collect information and to dispense managerial wisdom and dictates.
In addition, the European method of management called for much secrecy between management and the managed and in addition, technicians reserved their knowledge to themselves, sharing what they knew only with sons or those who paid handsomely for instruction. The departmentalized factory fit the European management style perfectly. For that reason, the Caro factory consisted of a number of separate rooms, or departments, the effect of which encumbered communication and increased the number of laborers required to operate the factory. Messengers scurried between rooms delivering orders and information, not always as timely as circumstances required. The arrangement, in later years, would make it difficult to expand the factory; expansion of one area generally occurred at the expense of another. Kilby-built factories, those constructed by Joseph Kilby of Cleveland, Ohio, considered by many the premier constructor of sugar factories, conversely, provided sufficient space that during two and more generations of successive development allowed for five-fold enlargement of capacity with only minor additions to the structures or foundations.
Wernicke's record from the standpoint of practicality and fairness, however, was outstanding. Between March 1, 1899 and October 23 of the same year, the German company had shipped a good portion of the factory from Germany. It then arranged for the design and construction of a complete operating facility in a relatively new industry in a foreign country in just under seven months, becoming the first of eight beet sugar factories constructed in Michigan in 1899 which then made it the second such factory built in Michigan after Essexville's. By standards existing in 1899 and more than one hundred years later, Wernicke's accomplishment stands as a monumental achievement. Other than ordinary upsets, the factory had operated as well, and in some cases, better than any start-up that took place that year.
Because of the loss of records, specifically, the sugar content of the processed beets, the results of the first campaign can only be estimated. Nearby Bay City reported sugar content of thirteen percent and eleven percent was reported elsewhere in the state. Applying an average of twelve percent, then, to the crop received at Caro, indicates the new factory recovered 66 percent of the sugar in the beets, comparing favorably to the 61 percent recovered at Benton Harbor but short of Alma where recovery reached 72 percent.
However encouraging the results may have been, the simple fact was Wernicke failed to achieve three conditions spelled out in the contract, failures that would result in a hurried walk to the woodshed. First, the factory did not slice 500 tons per day for 30 consecutive days, as guaranteed. Secondly, cost exceeded three cents per pound, and third, the factory was not ready to accept beets on September 1, 1899, as promised. Also, according to the company, the sugar produced lacked salability and much of it was lost in the process. It was then that Wernicke learned the litigious nature of Michigan's pioneer sugar manufacturers.
It may have been possible that the company would have relented somewhat in consideration of Wernicke's exceptional effort except that the directors contemplated operating losses because the State of Michigan decided to withhold payment of a promised bounty on any sugar produced after January 1, 1899. The bounty provided payment from the state treasury of one cent for each pound of sugar produced in Michigan from sugarbeets but had been declared unconstitutional by the Auditor General, a decision later upheld by the state supreme court. The decision represented a disaster to investors because one-cent equated roughly to one-third of the operating costs. The United States Supreme Court declined to consider the case, giving rise to the mistaken belief that the decision upheld the lower court's decision. The unremitted bounty money amounted to $40,436; a much needed offset to an approximate $65,000 loss.
When it came time to take Wernicke to court, the company directors chose as their legal advocate, Charles Evans Hughes, a brilliant jurist destined to become the Chief Justice of the Supreme Court. In preparing for his day in court with Wernicke, Hughes learned the German language and the beet sugar industry from the ground up to enable him to cross-examine German engineers appearing as expert witnesses. According to James Howell, a former Caro factory superintendent who authored a detailed account of Caro's factory history, Hughes spent a month at the Caro factory exploring every nook and cranny until he became expert in its design and function.
The ensuing court case, according to Gutleben, resulted in a forfeiture of the $300,000 bond underwritten by Wernicke, seventy-five percent of the contract price, causing Wernicke to withdraw altogether from constructing sugar factories in the United States. Howell, writing six years before Gutleben, gave a slightly altered account. He related that Wernicke remitted $150,000 and forgave $125,000 still due on the construction contract.
Shortly, Oxnard Construction Company appeared in Caro to affect changes to the factory, none of which were material in terms of the original construction. American made centrifugals, these by the American Tool Machine Company, often called "Amtool" in the industry, replaced those of German design. One major change had nothing to do with defects in the original design. It was the addition of the Steffen process for removing sugar from molasses. A chief problem of the era was the high ratio of sugar that escaped the manufacturing process and ended its days mixed in with molasses, the gummy syrup left over from the manufacturing process.
The second year's financial results were impressive. The new centrifugals and Steffens process (called the Steffen's House in the industry) proved their worth. Seven million pounds of sugar passed through the storehouse, the product of thirty-two thousand tons of sugarbeets that contained 14 percent sugar. The factory extracted 243 pounds of sugar from each ton of sugarbeets, a 35 percent improvement over the first year. The new Steffen process had not only recovered sugar from the approximate twenty tons of molasses produced each day but also recovered sugar from molasses left over from the previous crop.
Henry Oxnard founds a management dynasty at Caro
Henry Oxnard did more than merely redesign a factory when he applied his efforts to the problems then existing at Caro; he founded a management dynasty that would permanently influence not only the Caro factory but also the fledgling U.S. beet sugar industry. Nearly ten years earlier, in 1891, Henry Oxnard had recruited from Germany and France some of the finest and best educated technicians of the day who after arriving in America formed the nucleus of a cadre that would set about to train Americans in the production of sugar from beets.
Having formed his first-tier of management, Oxnard then proceeded to provide for the mechanical engineering department. For overall construction management responsibilities, he turned to A. P. Cooper who had served at the pioneer Ames, Nebraska factory in the capacity of assistant engineer. Cooper promptly surveyed the Caro factory and set in motion a plan to affect change, putting to work a duet of draftsmen that had accompanied him to Caro. One was Daniel Gutleben who would one day rise in the ranks of premier factory operators and still later, as the chronicler of the beet industry's history.
With the two top tiers firmly in place, Oxnard then saw to the placement of a group of promising laborers who lacked adequate training but who could perform with a high degree of satisfaction if given proper tutelage.
Charles Sieland, a thirty-six year old native of Germany employed by Oxnard to oversee the changes, disavowed his countrymen's tendency to withhold information except for financial reward. He adopted Henry Oxnard's philosophy of sharing information. Caro, in his mind, was not only a factory but also a university. A long roster of factory technicians and managers began their careers at Caro under his tutelage and then carried their shared knowledge to others when they moved from factory to factory. One of them was William Hoodless, son of the same Richard Hoodless who had started the ball rolling for gaining a factory in Caro. Within a few years he held responsibility for all factory operations and not long afterward accepted the presidency of the Pennsylvania Sugar Refinery in Philadelphia.
In 1906, the Sugar Trust consolidated most of its Michigan holdings into one company, the Michigan Sugar Company, reviving the name of the first company to construct a sugar factory in Michigan. The new Michigan Sugar Company included the Alma Sugar Company, Bay City-Michigan Sugar Company, Peninsular Sugar Refining Company, Carrollton Sugar Company, the Croswell Sugar Company, and the Sebewaing Sugar Company. At the time, the Trust through nominee shareholders held a majority interest in the Blissfield Sugar Company built a year earlier in 1905, and the East Tawas Sugar Company, a company, while failing as a business venture in 1904, was in possession of a fine Kilby-built factory the Sugar Trust had use for in Chaska, Minnesota where it operated for the next sixty-six years. The Carrollton Sugar Company also included the defunct Saginaw Sugar Company which owned yet another Kilby-built factory, this one destined for Sterling, Colorado where it served from 1905 to 1985. Charles Warren assumed the presidency of Michigan Sugar Company, a position he held until 1925.
By 1920, the sun had set on the Sugar Trust. After a generation of withstanding attacks by various federal agencies including the U.S. Justice Department and the Interstate Commerce Commission, the American Sugar Refining Company gradually sold of its many components to private investors and in that way Michigan Sugar Company loosened itself from the grip of the Sugar Trust. Its entire post-trust board of directors consisted of Michigan residents, none of whom had association with the Sugar Trust with the exception of its president, Charles B. Warren whose interest now lay further afield first as Ambassador to Japan, 1921-1922, and then Ambassador to Mexico in 1924. He lost a bid to become Attorney General of the U.S. in 1925 during a politically charged senate vote influenced by an aversion to Warren's past association with the Sugar Trust. His aspirations for roles in the public sector kept him away from the President's office, a role ably filled by William H. Wallace who carried the title, 3d vice-president and General Manager. The first and second vice-presidencies fell to a couple of heavy hitters on the shareholder list that had no involvement in day-to-day activities.
Caro survives time and change
Thanks to James Howell, Caro's superintendent beginning in 1944, who prepared a recorded history in 1948, it is learned that Caro began stockpiling beets in the factory yard in 1937, an important step for growers who after delivering the beets to the factory, could look to the needs of other crops whereas formerly it was necessary to supply the beets as they were needed.
During the period 1928-1937, the Caro factory, like nearly all the Michigan beet sugar factories suffered the ill effects of the Great Depression. However, from 1937 until the present time, Caro reported steady improvement in terms of modernization and expansion. Centrifugals for white sugar and a new pulp warehouse were added in 1944. A centrifugal is an apparatus designed to separate sugar crystals from syrup by filtering the syrup through a screen that spins with sufficient (usually about 1,200 rpm) speed to create a centrifugal force that propels the syrup through perforations in a spinning basket. The sugar crystals remain in the basket while the syrup recirculates through the process to recover more of the sugar. These and other changes have caused the average daily slice rate to expand to more than 3,600 tons each twenty-four hours from the 500 tons per day in the original design which makes it a relatively small factory compared to others in the United States that range from twice as large to four times as large.
If Caro has a secret for surviving more than 100 years, it is that the factory Oxnard rebuilt remained precisely that for many years and remains so today, meeting challenges as they arise , gaining the support of its community and changing when occasion and opportunity join together to compel change. In that way, the oldest surviving beet sugar factory in the United States hangs on in a fast paced industry.
Sources:
HOWELL, James, A History of the Caro Plant of the Michigan Sugar Company, an unpublished account of the Caro Factory history, May 1, 1948
GUTTLEBEN, Daniel, The Sugar Tramp - 1954 p.182 concerning purchase of sugar factories by the Sugar Trust, p. 177 concerning organization of Sebewaing Sugar and operating results, printed by Bay Cities Duplicating Company, San Francisco, California
MARQUIS, Albert Nelson, editor, The Book of Detroiters, pages 465-468, A.N. Marquis & Company, Chicago, 1908 - concerning the biography of Charles B. Warren
MICHIGAN ANNUAL REPORTS, Michigan Archives, Lansing, Michigan:
Peninsular Sugar Refining Company filed 1904 and Michigan Sugar Company filed 1924
MOODY, John, The Truth about the Trusts, in reference to the comment that the Sugar Trust began buying beet sugar companies in Michigan in 1902 and dividend payments between 1892 and 1900.
UNITED STATES. In the District Court of the United States for the southern district of New York
United States vs. American Sugar Refining Co., et al. page 1674, Petitioner's Exhibit #1494
Copyright, 2009, Thomas Mahar, All Rights Reserved
About the Author: Thomas Mahar served as Executive Vice President of Monitor Sugar Company between 1984 and 1999 and as President of Gala Food Processing, a sugar packaging company, from 1993-1998. He retired in 1999 and now devotes his free time to writing about the history of the sugar industry. He authored, Sweet Energy, The Story of Monitor Sugar Company in 2001, and Michigan's Beet Sugar History (Newsbeet, Fall, 2006).
Contact: Thomas Mahar E-mail tkmahar@aol.com
This blog provides a history for each of the 24 beet sugar factories constructed in Michigan beginning in 1898 and ending in 1920.
