Chapter 7: Going Public?
September 25, 1631: Partow House
The course of business building wasn't going smoothly for the Sewing Circle.
“The ceramic cases are deforming,” said Trent. “We should have thought of it before. When you make ceramics, you’re heating them to the edge of melting and keeping them there for hours. They become plastic at that heat and deform from their own weight.”
“Are we going to have to go to wood or cast iron then?” asked Brent.
“That will add a bunch of money per machine. Cast iron is more expensive than clay, and we’ve already spent a bundle on the ceramic casings. That’s money down the drain. Are you sure we can’t make them work? Sarah is not going to be happy.”
“I don’t know enough about ceramics to be sure of anything, that’s the problem,” Brent admitted. “How much vibration can they take? Will the wood separators really work? Can we redesign the molds so as to compensate for the deformation?”
October 7, 1631: Grantville High School
On the upside of the ledger, the Sewing Circle was only one part away from having finished sewing machines. Mr. Marcantonio said he would have the machine to produce that part ready in a couple of days. On the downside, they were going to have to find somewhere for a factory and they were perilously close to broke—past broke if you included the money that Mr. Marcantonio had said they could wait a while to pay.
The Higgins Sewing Machine Company had been using three storage containers to store parts and blanks. The production machines made by Dave Marcantonio’s shop were still in his shop, so to make and finish parts using them, they went there. Final assembly had been moved to the Higgins’ garage. This had saved quite a bit in rent, but was far from convenient. Now that would have to change. For one thing, Mr. Marcantonio was being crowded out of his shop. He really didn’t have room for all their production machines.
So, with regret, he had insisted that they find somewhere else to set up. He was feeling a bit guilty over throwing them out, and as he was very busy and not at all short of cash, he was willing to wait on payment for the last of the machines.
Which had led to this meeting of the “Sewing Circle.” (The kids had adopted the nickname as their own.)
“Grantville is out, till we’ve sold some sewing machines or gotten more capital from somewhere,” Sarah pronounced. “The rents are too high.”
“We may be able to use a couple of the storage containers for a while,” said David.
“Maybe so, but what we really need is a factory,” said Trent. “Over seventy-five percent of our parts are still hand-made. There are a lot of machines that we could make that would decrease the cost of production if we had the money and the room.”
“Some of the subcontractors have been asking about buying into the company lately,” said David. “It seems some of the other business have started offering profit-sharing and stock options. We don’t have any profits to share yet, but some of our suppliers figure we will.”
David was thinking mainly of Karl Schmidt. Other suppliers had shown interest, but Mr. Schmidt seemed a bit obsessive. At first he had thought that Mr. Schmidt was cultivating him for his mother’s sake; there was probably some of that in it, but that wasn’t all of it.
“So have some of the guys from the shop class,” added Brent.
“I think we should consider incorporation.” Sarah picked up her book bag and removed a notebook. Then handed David, who was closest, a typewritten sheet. “Read it and pass it on. What it is,” she said to the others, “is an outline of how I think we could incorporate. We set it up with a couple of hundred thousand shares. The first hundred thousand would be for the original owners. So we would each have ten thousand except for money bags here.”
She pointed to David, who buffed his fingernails on his coat and tried to look important. He managed to look silly, which was probably better for all concerned. “Who would have twelve thousand, and Mrs. Higgins would have thirty thousand and so on.”
“The other hundred thousand would be owned by the corporation. Which could sell it to raise extra money. Even at a dollar a share, even if we only sell a third of the shares, that’s a lot of money.”
“What about control?” asked Trent.
“We would probably keep it,” said Sarah. “Probably. Let me ask you something though. Why is control important?”
“So the grownups won’t take it away from us,” said Trent automatically.
“No. What are the grownups going to do? Buy up control so they can stop making sewing machines?”
“Tell us ‘Thanks, but we’re running things now. Go play with your toys.’”
“Right, and pay us each five percent of the profit,” Sarah answered. “David six percent and Mrs. Higgins fifteen percent. Altogether, with everybody, it’s fifty percent. It might be worth it to someone, but it’s not real likely. I figure we’ll probably sell half the hundred thousand shares. Which would still leave us and Mrs. Higgins with more of the stock than any other group, but even if we do lose control, we’ll probably get rich from it. So, if they want to tell us to go play with our toys, they are gonna have to buy us some really nice toys.
“There’s another reason we should incorporate, or at least, change it to a limited liability company,” she continued. “The way we set it up at first we are liable for any debts or damages. What if we get sued? It wouldn’t be so bad for us, we don’t have much, but what about Mrs. Higgins? One of the things a corporation does, is limit the debt to corporate assets. That would mean they couldn’t take the storage lot, or Mrs. Higgins’ dolls as payment for the company’s debts.”
They spent the rest of the lunch hour talking about corporate structure.
October 9, 1631: Delia’s Garage
They had removed some of the production machines to the storage lot as a stopgap measure. Mr. Marcantonio had finished the last production machine they absolutely had to have, and they now had parts for several sewing machines. They had spent the entire time from when school let out trying to assemble one. Now it was dinner time, and they still didn’t have a working sewing machine.
It was the same trouble they had been having from the beginning. Tolerances. The machined parts were acting as a centerline and the handmade parts could only vary from it so far. Mostly they fell within the limits, but if one part was off a little one way and another part was off in another way the combination meant that the sewing machine didn’t work. So they had to go through the parts, find ones that were off in complementary ways and fit them together. It was a painstaking and occasionally painful process. Replete with skinned knuckles, banged fingers and frustration.
October 11, 1631: Delia’s Garage
It worked. Five months of hard work, two afternoons, and about fifteen minutes of final assembly, and they had a sewing machine. The important thing was, in another couple of days they would have another; sewing machine production had finally started.
It was time to celebrate. There was a six pack of Coca-Cola that had been sitting in the Higgins pantry since the Ring of Fire and their icebox for the last week. It was about to get drunk.
Trent took over from Brent, and sewed another line of stitches down the folded rag. He then carefully removed it from the machine. From the garage they danced through the kitchen, startling Liesel, and into the living room. They danced around Delia, waving the sewn rag like the flag of a defeated foe, and in a way it was.
* * *
David and Johan were in Rudolstadt talking with a supplier, and Sarah was watching Judy the Younger again. Sarah’s work could be done at home, and Judy the Younger was proving to be more of a help than the expected hindrance. Which surprised Sarah to no end.
A phone call informed Sarah of the good news. She would call her parents. Other phone calls followed, to Mr. Marcantonio and Mr. Partow, to Mrs. Partow, to anyone in any way involved that could be reached by phone. Brent took the sewn cloth to show Ramona and the guards. By now there were ways to fairly rapidly get messages to people in Badenburg, Rudolstadt, and other nearby towns. It cost a few dollars and you had to know precisely where the person was. If you had a phone you could have the message which started with the local phone company charged to your phone bill. Which is precisely what Ramona did. She had realized that Karl was interested in the sewing machine project, and Karl was a responsible business man. He would know what to do.
David would have to wait until he got back from Rudolstadt to learn about the completed sewing machine.
By the time David got home, the party was in full swing. Most of the Grantville residents that were in any way involved with the sewing machine project were there. So was Karl Schmidt and his family, and a couple of other suppliers from Badenburg. They had come to see what their parts had made.
The guests circulated between the house proper and the garage. Delia had been the first to actually make something with the sewing machine. She professed to like her Singer better, hiding her pride in the accomplishment. She wasn’t really fooling anyone, but the hillbilly version of the stiff upper lip had its rules. Liesel didn’t make any such attempt. Liesel was not completely sure she trusted electricity. This could be used anywhere. All the guests had tried it, with Brent and Trent hovering nervously over them.
The Schmidt girls were entranced. Had they had their way, Higgins sewing machine model A serial number One would have been sold then and there. They did not have their way, however. Higgins A1 would never be sold—though in future years, some collectors would offer truly exorbitant sums trying to buy it.
Karl was, in his staid stolid way, rather entranced himself. He had seen the Singer work. He had known this was coming, but he had not seen the look on his youngest daughter’s face when something that would have taken her hours and would still not be done to her sisters’ satisfaction was done neatly and evenly, in less than a minute.
There was definitely a market, but how were the tailors going to react? There were none present today. There were guild rules and there were laws about who could make clothes, but no rules about using machines to make clothing. Not yet, anyway. Karl got to meet several people he had wanted to meet for some time. The Wendells, and Dave Marcantonio especially. He needed to know things before he decided what to do.
Food had been cooked, and brought by guests. There was not nearly enough Coca-Cola for all the guests, so it stayed in the fridge. Beer and Kool-Aid were available though. Conversation flowed. Problems were brought up. The cost of the sewing machines was still very high. The value of the company had jumped sharply from what it had been just the day before. Legal questions about children running a company, that had seemed less important when it was a hobby in all but name, were asked. Where would sewing machines be sold? How would they be sold? Sarah Wendell held forth on the subjects of dealerships and “rent with an option to buy.”
David Bartley wandered around the party, getting more and more worried as time went on. Aside from Mr. and Mrs. Wendell, there were some other members of the finance committee, and they were busy questioning whether children should be allowed to manage such a potentially valuable export. Mr. Schmidt was asking about the possibility of buying production machines from Mr. Marcantonio. Was he planning on going into competition with them? With the completion of the first working sewing machine, they had reappeared on adult radar, and were in real danger of being shot out of the sky. For their own good, of course.
David didn’t trust the motives of those that expressed doubts children could run a company. It seemed to him that many of them were searching for ways to jump onto the gravy train now it looked like it was going to pull out of the station and actually go somewhere. Others appeared to resent their success in the face of adult wisdom.
October 11, 1631: Wendell House
Judy called Hayley Fortney first. "It worked. I went to the party and saw it sewing."
"The sewing machine? That's so cool," Hayley said.
"Uh huh. Brent and Trent Partow were over the moon, but David Bartley was worried and I think Sarah is too."
"Why? Is there something wrong with the process?" Hayley asked. "Will there be a problem making more?"
"No." For the smartest girl in the ninth grade Hayley could be dense sometimes. "If that were it, the Partow twins would have been upset. It's got to be the grownups they're worried about. How much do you think a sewing machine factory is worth, Hayley?"
There was a short pause. Then Hayley's voice came back, but softly—even a little scared. "A whole lot more than a couple of hundred Barbie dolls. A whole lot more."
"Yeah. As long as it didn't work, no one cared that much. But . . ."
"Yeah."
"Look, I'm gonna talk to Sarah and see what she thinks. You call the other girls and let them know. If Vicky can find us a down-time Delia, we may be able to get in on the ground floor."
"You think?"
"If the grownups don't take it over there's a good chance." Judy paused. "Something Mom's always talking about at dinner. She says 'a successful project costs more than a failure.' "
October 12, 1631: Grantville High School
Sarah had bad news. “I’ve been checking into the laws regarding corporations. It is illegal in West Virginia for minors to be on the board of a corporation.”
“But we’re not in West Virginia,” insisted Brent. “We’re in Germany.” He knew better, he was just upset.
“It doesn’t matter.” Sarah shook her head. “Grantville corporate law is West Virginia corporate law without so much as a period changed. Maybe we should forget about incorporating.”
“Maybe not,” said David. That moved everyone’s stares from Sarah to him. “I was listening to some of the people at the party yesterday. They were worried about leaving the Higgins Sewing Machine Company in our hands. When we actually built a sewing machine, some of the grownups that were never too keen on the kids running a company started paying attention again. Incorporation may be a way to satisfy them, without having them take over. Sarah, are there any other jobs in a corporation that a minor can’t hold, like say Chief Engineer, CEO, CFO, any of that stuff?”
“I don’t think so. In fact there almost can’t be. What jobs there are in a corporation changes from corporation to corporation. How could they make it illegal when all the corporation had to do to get around the law is change the name of the job?”
“Is there a law against a minor owning stock or voting stock?”
“Not owning, I’m pretty sure. Voting I don’t know. I think it would be like other stuff kids own. Their parents could probably veto their selling it, and vote the stock for them, or maybe not. It could be something determined in the corporation’s bylaws. I can probably find out.”
“We can incorporate and select the people on the board of directors, and the people that don’t like the idea of kids running a company can look and see that the board of directors is made up of responsible grownups. ‘We ain’t running things, just doing our jobs the way the board tells us to,’ ” David grinned. “Of course, since the four of us and Grandma hold the biggest chunk of stock, we elect the board. Which will be Grandma, and a few other people. Maybe Mr. Marcantonio, and maybe your parents?”
“I don’t know,” mused Trent, a bit dubiously. “Mom and Dad are all right, but they take their responsibilities really seriously. So far, they have looked at this as your Grandma’s company, with us helping out. We get the occasional lecture about listening to Mrs. Higgins, and the great opportunity she is giving us. I think they have sort of assumed she has been making the decisions right along.”
“It’s the same with my parents,” said Sarah. “There may even be some truth to it. She lets us make the decisions, but she is sorta there. You do the same thing, David. When we get into a fight, you start bringing up stuff that we’ve forgotten, then, I don’t know, we’re agreeing again, and we have a plan.”
This came as a revelation to David. He hadn’t realized the others knew what he was doing, and he hadn’t realized that Grandma was doing the same thing. He wasn’t sure he liked it.
Brent looked at David and started laughing. Then Trent and Sarah joined him. All this time, David had thought he was getting away with something, and all the time, the others had been letting him do it. “Anyway,” David said as much to change the subject as anything, “now that we have a sewing machine, what do we do with it? And the next one, and the one after that. How do we sell them?”
“Rent with an option to buy,” said Sarah. “Layaway, and in-store credit, first in nearby towns, then through dealerships. If someone wants to pay cash up front we’ll take it, but I don’t expect that to happen often. They are just too expensive. I figure we’re gonna have to charge about four months wages for a journeyman tailor for each machine, or more. I don’t think we’ll sell many in Grantville. The big plus for our sewing machines is they don’t need electricity, that’s no big deal here.”
“What about the laws restricting who can sew what?” asked Trent.
“Not our problem. If someone wants to buy or rent one, we assume that they are only going to use it to sew in legal ways. Stupid laws anyway.”
“I don’t know,” said David. Then, seeing Sarah’s look, he held up his hands before him; fingers in the sign of the Cross, as if to ward off a vampire. “Not about the ‘stupid law’ part. About the ‘not our problem’ part. I figure the tailors’ guilds will do everything they can to make it our problem. Making clothing is big business. It employs a lot of people. Some of them are going to lose their jobs. A lot of them, actually. As best as I can tell, it seems to take about a man-week to make one set of clothing. Most of that six-day week is spent just sewing the seams. That is one tailor fully employed for every fifty-two men. For one suit of clothes per-year per-man. It’s less than that, but that’s because most people don’t get a new set of clothing every year. More like every two or three years. I’ve been talking to some of the German girls.”
That announcement brought “woo hoos” from the guys and a haughty sniff from Sarah.
“About their hope chests,” corrected David, which only made it worse. “About the sewing in their hope chests.”
David tried again to get the conversation back on track. “That’s mostly what’s in them, you know. Clothing, blankets, bed linen, sewn stuff that they take years making, and it’s not because cloth is so expensive. Well, not mostly. Mostly, it’s because it takes years to sew the stuff. The women will love the sewing machines, but the tailors won’t. Have any of you guys had a run-in with Hans Jorgensen?”
That bought the guffaws to a halt.
They had indeed had run-ins with Hans. In most ways, Hans was a standard down-timer kid trying his best to assimilate, but Hans hated sewing machines and sewing machine makers. It was a fairly convenient hate. He had no direct contact with sewing machines and there were only four sewing machine makers in Grantville, all teenagers. His father was a master tailor who was now reduced to working in the labor gangs because there was not enough work in the tailor shops. Why wasn’t there enough work in the tailor shops? Because the Americans had sewing machines, and aside from fitting and finishing, they didn’t need tailors. Clothing, for the moment, cost less in Grantville than it did anywhere else in Europe. The difference between the cost of the fabric in a suit of clothing and the price a tailor could get for a finished suit of clothing was not enough to pay for the labor of the tailor—not without a sewing machine, and Hans’ father didn’t have one. Also, as the cost of sewing had gone down, the demand for new cloth had gone up and so had its price.
“I know, Hans is an a-hole,” David continued, “but I feel a bit sorry for him. He was an apprentice tailor before his village got trashed, worked for his father. They get to the haven of Grantville, and find out that all the sewing machines are rented, and no one is hiring tailors. His dad is in a general labor gang, and Hans goes to school, and what is everyone in school talking about? A bunch of kids making sure that he will never be able to do the work his dad had taught him to do.
“Now that we’re up and running, housewives all over Germany will bless the name of Higgins, but tailors will hate our guts. I figure that there is about one tailor for every two hundred people in Germany, and right now, every one of them is needed. Once the sewing machine becomes common, it will be one tailor for every thousand or less. So, in towns where the tailors’ guild is strong, we’re liable to see laws against sewing machines.”
October 13, 1631: Delia Higgins’ House
Delia had talked to Dave Marcantonio and Fletcher Wendell, and been lectured by Quentin Underwood. The storage lot was a real waste of resources. Ray had insisted on shed-sized steel containers instead of sheds when they had set up the storage lot. They were more expensive, but with the thick enamel paint they were a maintenance dream. They were also made of great big corrugated steel plates an eighth-inch thick. Grantville needed the steel.
No one was going to just seize them. True, Quentin Underwood gave the impression he’d like to, but that was just Quintin being his usual bossy self. Delia would be paid, and paid a fair price—more than they had originally paid for them. Plenty to put in wooden sheds and make up for the lost rent. They wouldn’t force her to sell if she didn’t want to. But they were right, Grantville needed the metal.
They were right about something else, too. Grantville didn’t really need rows of little sheds for people to store their excess junk. What was really needed was industrial warehousing, big buildings, where raw materials could be stored for later use, and finished products for later sale. The amount of space that Dave and Fletcher were talking about would cost more than storage sheds to build, a lot more, but it would be worth more, too. To her and to Grantville.
It meant the rest of the dolls, or at least most of them, and maybe a bank loan to cover the difference. Fletcher said she could probably get a bank loan to cover the whole thing, but the monthly payment would be a killer. She would be much more likely to go broke if anything went wrong. Besides, Dan Frost had talked to her about the danger of keeping her dolls in the house when everyone knew she had the collection.
Delia knew it was the best course, but the dolls were committed. She had promised them to the kids if they were needed, and they might be yet, in spite of the fact that they were in production now. She almost dropped the idea without mentioning it. But Fletcher Wendell would probably tell Sarah and Dave would tell Kent, who would tell Brent and Trent. She hadn’t asked anyone to keep the discussions secret. If she didn’t bring it up, the kids would worry about it.
* * *
“You’ve all heard about the storage containers?”
The kids nodded. Delia told them about the possible warehouse, and what it would cost to build. Significantly more than had been invested in the sewing machine company. How long it would take. The rest of the winter and most of the spring. Even if she got use of some of the construction equipment. She told them that she could probably get a loan to cover the whole amount, but the more she could put in up front, the better it would work. “But don’t worry, I won’t use the dolls, they are promised to you.”
Brent, Trent and David looked at Sarah. Sarah was the CFO, and incorporating was her plan.
“Dad likes to quote If by Rudyard Kipling,” Sarah said, “The line that goes: ‘If you can make one heap of all your winnings and risk it on one turn of pitch and toss.’ Then Mom says: ‘If you do that I’ll divorce you. Even if you win. Diversify!”’
Sarah shook her head. “We all have to gamble now. Since the Ring of Fire, everything we do, every decision we make is a gamble. Maybe they always were and we just didn’t notice it before. But we don’t have to gamble dumb. Risking it all on one turn of pitch and toss may be very manly. But it’s not real smart. We women,” she continued with a haughty look at the boys, “say things like ‘never put all your eggs in one basket.’ The sewing machine company is one basket. It’s a good one, I think, but it’s only one. The warehouse is another. You’ve already put some of your dolls in Higgins Sewing Machine Co. Now it’s time to put some in Higgins Warehousing Co.”
Sarah gave Delia an almost pleading look. “But Mrs. Higgins, please keep some for you. Besides,” she continued in a much more practical tone, “the way things worked out, it will be very hard for us to go bankrupt. If we had gotten the loan, then defaulted, the bank could have taken everything we had, but since we didn’t get the loan, the sewing machine parts, the production machines we have so far, and one down-time made sewing machine are ours. We have no outstanding debt. Well, except for the money we owe Mr. Marcantonio for the last production machine. We have a plan for that though, and for some other stuff that has come up.
“We think we should turn the company into a corporation. If we convert to a public corporation, with say two hundred thousand shares, we’d take a hundred thousand of them to represent present ownership, and then gradually sell off some of the other hundred thousand as needed. Even at just a dollar or two a share, we should raise enough to handle any problems that come up. Also, I am pretty sure Mr. Marcantonio will be happy to take payment in shares for the last production machine he made.
“Every new part and every new production machine is that much more value the company itself has. So we can use the work we have already done, and the equipment we already have, to get more financing through a corporate loan secured with stock or the sale of stock. We’re in a much better position to do that now than we were when we started. Now we can show people working machines, and an inventory of parts.”
“What about the possibility of losing control?” Delia wanted to know.
“We’ve talked about that,” said David. “Early on, the thought of losing control really bothered us. We figured that if we showed it to an adult, they would pat us on the head and then ignore us. Or treat it like it wasn’t real. Like it was a school project or something. Part of it was that we weren’t really sure that it was anything more than a pipe dream. We were afraid that even if it could work, we couldn’t get anyone to believe that it would work.”
“But you believed in us,” said Brent, “and now it’s not a pipe dream.”
Sarah chimed in. “Between your shares, Johan’s, and ours, we would have seventy-seven thousand shares. Even if everyone else that owns a part of the company now voted for the takeover, which they won’t, they would still need to buy fifty-four thousand shares. That is a lot of money, and if they spend that much, they will still be leaving us”—Sarah waved to indicate that us include Delia—“and Johan thirty-eight point five percent of the net profit on the business, while they would be doing all the work.”
“But if eventually someone is willing to put up that much money to take control,” said Trent, “let them have it. With our shares, we’ll be able to raise the money to start another company making something else.”
What Trent didn’t say, but everyone understood, was that, having started one successful company, the kids would be listened to when and if they decided they wanted to start another.
“Besides there are people that want to buy stock,” said David. “Suppliers from the towns around Grantville and kids at school.
October 14, 1631: Grantville High School
Vicky snorted a laugh as Judy sat down. "Did you read this?" She waved The Daily News. "Reynfrid Drescher talking about the new play based on the Man from U.N.C.L.E. TV show. He writes ‘The lead is going to be in trouble if he meets the aunt, because a German hausfrau with a whisk broom could sweep the whole organization away.’" Vicky skipped down a little then continued reading. "Herr Krupp isn't up to any Solo role and Herr Baum, who plays Kuryakin, is about as Russian as sauerkraut."
"Never mind that. Has Ursula found us a front man?" Judy wasn't overly interested in the comments of Reynfrid Drescher, who she felt would pan a good play just to stick in a cutting line. Besides, she had seen The Covert Affair and thought Kurt Baum was kind of dreamy as the Russian agent.
"She's looking. And so is her dad and even her granddad. But they haven't found anyone yet. What's the hurry? It's not like we have any project to put the money in," Vicky said rather pointedly.
"Yes, we do. I found out last night. Higgins Sewing Machine Company is going public and I can get us in on the ground floor."