[D8332M], Memorandum, Edison Electric Light Co, Sherburne Blake Eaton, January 19th, 1883


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[D8332M], Memorandum, Edison Electric Light Co, Sherburne Blake Eaton, January 19th, 1883

Editor's Notes

"S.B. Eaton's memorandum on proposed Lamp Contract." Discusses original lamp contract of March 8, 1881 and Lowrey's present draft contract. 2nd section of new contract transfers existing lamp contract, now with TAE personally, to a corporation. "I believe this corporation has not yet been formed, but that it will be formed" soon as Light Co approves. "This is a very important change. Under the old contract the Light Company has the personal liability of Mr. Edison as a guarantee for faithful performance. Under the new, it will have the liability of a corporation.." "Suppose the management of such new corporation were transferred to new and strange parties, what would then be the position of the Light Co? They would find themselves in the hands of strangers; the business of manufacturing lamps, which is the most vital part of all our operations, possibly in the hands of incapable or even hostile parties; and the entire business of the Light Co. and of its licensees everywhere, possibly paralyzed, if not destroyed. The Light Co. should be reluctant to accept this change, without adequate guarantees. Mr. Edison, however, gives good reasons why the change should be made." Re lamp prices; old contract is 35 cts; new calls for 40cts: "The lamp is costing more than Mr. Edison anticipated" so Eaton approves of increase. Re Lamp Co. profits: entitled to 5 cts per lamp, but any profit above that shld be split btwn Lamp and Light Co's. "Mr. Lowrey..states that there is no intention in the new contract to deprive the Light Co. of its shares of profits, as feared by me." Thinks that Light Co shld be able to "be entirely free, without restriction, to start other lamp factories" in case Lamp Co. can't meet Light Co's demand. Eaton balks at reimbursing Lamp Factory for past experimental expenses, esp for "methods of manufacture;" doesn't want to pay for "all sorts of mistakes in buying machinery, equipment &c." Also balks at paying half of Lamp Co's future experimental expenses; Lamp Co has other customers after all. TAE marginalia: "We dont care a continental for all over the world customers." Balks at giving customers a guarantee of 600 hours life; lamps fail way before this and Light Co is in position of replacing lamps; Lamp Co shld reimburse us if we have to make this guarantee. TAE marginalia: "we will guarantee if anyone will tell us how to make the lamps do it always-- we will guarantee 8 1/2 per hp lamp 400 hours or lose all profit on them" "The Light Co. ought really to do all its manufacturing itself, including the manufacture of lamps. If it does not, its business at no very remote period, will be at the mercy of outside manufacturing companies. This is especially true of the Lamp contract. The lamp is peculiarly the vital part of the Edison system of lighting. The Light Co. ought to control its manufacture. Indeed the Company itself should be the manufacturer." Thus wants provision in the contract allowing buyout of Lamp Factory at 2x its appraised value of the plant. Now Eaton objects to 5 cts profit: at volume of 10K lamps a day, this is an annual profit of $150K, or 60% of the $250K capital.




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Thomas A. Edison Papers, School of Arts and Sciences, Rutgers University
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