[D8940AAA], Letter from Harry Ward Leonard, Leonard and Izard to Samuel Insull, January 4th, 1889
Chicago, Jan. 4th, 1889####Mr. Samuel Insull, 17 Dey St, NY####Dear Sir:--####When Humbird & Gorton gave up their agency, we were offerred the agency we at present hold by a letter from the Edison United Manufacturing Company, signed "C.E. Chinnock, ice-Prest.", the date of this letter being Sept. 24th. The terms proposed were not satisfactory to usand we discussed the matter for some time by letter. We were desirious of handling all the business in our own name and buying the apparatus from the United Company. Under date of Oct. 15 th. Mr. Chinnock wrote us "Of course if you are ready and willing to pay for apparatus and materials as soon as you receive it, we will be perfectly willing to have the installations closed in the name of the Agents". As this was just what we wanted to do and were prepared to do, we accepted the porposition under date of Oct. 18 the. Then Mr. Chinnock under date of Oct. 22 nd. Retreated from his former position and insisted that contracts should be made in their name. We replied under date of Oct. 24 th. And following, and endeavored to seccure some other proposition from him which would be satisfactory; but being unable to secure any proposition which we considered a reasonable one, we declined the agency in our letter of Oct. 31st. Finally at request of Mr. Chinnock I went East, and between us we agreed to the terms of a contract and under date of Nov. 19 th. The Edison United Manufacturing Co. through Mr. Chinnock made us a proposition which was acceptable to us and which we formally accepted by our letter of Nov. 29th. We enclose herewith copy of this proposition from the United Company, which we have marked "Exhibit A". A few days later Mr. Chinnock wrote us wishing to modify the letter in such a way that the renewal business in our territory would be altogether out of our hands. This we declined to do and from November on we kep writing to the United Company endeavoring to have them fill the contract made, sending them list of materials required for stock, etc. They sent us no stock of any character whatever, and involed us in a great deal of expense and trouble by delays and by not filling our orders for stock which we were depending upon, and finally when February arrive we found ourselves in a position of having thoroughly definite contract under which the United ompany agreed to do certain things, and they had not filled a single one of the special agreements contained in their proposition of No. 19 th.####When Mr. Chinnock was out here in February at the Edison Convention, we spent a couple of days in discussing between ourselves and with Messrs. Upton, Bergmann & others,the terms of a contract between us. Finally upon Feb. 10 th. we mutually agreed with the terms of a con-trait. We send you a copy of this contract herewith, marked' "Exhibit B. This was the third contract we had agreed to, the first one be. ing our acceptance of their proposition to do the work in our own name and pay cash for the goods second the acceptance of exhibit A and the third-exhibit B. After everything was 'thoroughly agreed to, Mr. Chinnock declined to sign contract, stating that he wished to relieve himself of responsibility as far as possible,but assured us that it would be put through exactly. in accordance with exhibit B. When he got back East he sent us another contract which was entirely different in a great many vital points. This we declined to accept. The, ratter was under ,discussion for a couple of weeks and finally under da.te of Feb. 24th he sent as a proposition,a copy of which we send herewith marked "Exhibit Co. 'This was not satisilactory and?, for a month more we discussed the matter by letter. Finally on March ' 26 th. they stated that we must either accept that contract. or none, and under date of the 28 th. we sent a conditional acceptance which he accepted as a definite acceptance of the proposition in his letter of March 30th. This "exhibit C" is the: contract we are at present operating under.##Several months ago Mr. Chinnock without cause and without any notice whatever, sent us notification that he would discontinue from that date the allowance of $333 a month. We replied denying that he had any right to do without notifying him that in case the $333 a a month were discontinued that we should no t continue as agents under the remainder of the terms of the contract. Upon Oct. 19th. he served upon us written notice that our agency would be discontinued after ninety days from that date. Since that time, I believe no written communication has passed between us in regard to the matter other than our acknowledgment of the receipt of the notification. Therefore upon he 18th. of this month our agency with the United Company will terminate as matters at Present stand. Mr. Chinnock we believe pre- tends to claim that he had a verbal understanding with us that the $4,000 per year must run for only one year. We denied. absolutely any such agreement having been made by us. The contract clearly states that we are to receive $333. per month. Even had any verbal agreement of the character been made, Mr. Chinnock would have deprived himself of any benefit of it by the last clause of the agreement, which he insisted upon having worded to the effect "that any agreements verbal or written at variance with the above are to be considered null and. void." We wrote Mr. Chinnock a long letter detailing the various expenses incurred by us and which the allowance was intended to cover. The date of this letter was Oct. 16 th., and we enclose a copy of it herewith marked "Exhibit D", which will give to you the arguments from our standpoint as to the necessity of such an allowance being granted by the United Company in supporting an office here in Chicago.##We beg to call your Attention to the fact that ,the Chicago Agency of the United Company is different from any other agency in the country. Chicago is recognized as headquarters of all this Western country, and every first class concern operating throughout the country is expected to have headquarters at Chicago as well as at New York. Furthermore all supply houses carry a large stock and all goods are sold F.O.B. Chicago. In addition to this natural tendency demanding a comprehensive representation at Chicago with full stock of supplies, etc. is the fact that the Western Edison Co. handled the territory immediately surrounding Chicago for a number of years and carried a fulll stock of all kinds of materials which the plants required and had full authority to transact any business which might be presented. This fact, as I say, makes it absolutely necessary that the United Company have in Chicago not only a full stock of all kinds of materials which can be shipped by express on short notice but it must also have representatives with pretty broad authority to act as promptly as necessary, and it is essential that such representative by not dependent in any way upon New York for estimates, determina- tions and similar points of informatio which are required in important cases unexpectedly. All other prominent electric light companies have in Chicago a representative with practically unlimited au-thority, and if they lose the job upon which they are competing, it is merely because they do not wish to take it at a price which they have full authority to make but do not choose to. We, on the other hand, find ourselves with certain well defined bed rock price,which is the lowest price under any circumstances at which we can hope to secure the apparatus. The United Company has never in any case given us the slightest assistance of any character in securing any plant in our territory. We have been repeatedly assured by Mr. Chinnock of his inability to make any further reduction in price, and have therefore never made any such request except in a general way asking for a general reduction in the price of the apparattus on the Nos. 1,2, 3 & 4 plants. On the other hand the United Company quotes 45 % off list to any party in our territory who request figures, thereby making the price of the apparatus definitely fixed at 45% off list. This is the maximum rate we dare quote, as otherwise the United Company will underbid us, and the prospective purchaser will lose all confidence in us. Thus under existing methods,15% commission upon the price obtained by taking 45% off list, is the greatest commission we can hope to make in selling Edison apparatus for the United Company. Any further profit than this which we make is made as constructors, and as the purchaser almost invariably demands a price upon the apparatus and upon the construction separately, our construction bid is in competition with other first class constructors. We therefore claim that as Agents of the United Company, that the most we can possibly make, which should be credited to the fact that we are agents of the United Company is 15% upon the price of the apparatus. The selling price ff the listed apparatus is about $4.00 per lamp. The commission would therefore amount to 60 cts. per lamp in dynamo capacity. The expense of maintaining our office and employing the necessary traveling salesmen amount to $12,'000.a year. If we sell in our territory 20,000 lamps a year, the commissions, upon the apparatus sold, would pay the expense of maintaining our office,but we as a firm would not have made one cent out of such commissions. In addition to the commissions, however, we receive quite a fair profit from the sale of renewal supplies in our territory, and if we were allowed to handle this renewal business absolutely and build it up as much as possible, we presume we could make the profit derived from the sale of Edison patented renewal supplies, not including lamps, net us $200 or $300 per month. With a larger territory this renewal business would of course amount to pro- portionally more under present arrangement. Therefore if we sell 20,000 lamps capacity per year, the commissions derived therefrom would pay the expenses of doing the business, and we would have left for ourselves as a profit in the business, all profit derived from sale of Edison patented renewal supplies, together with the allowance of $4,000 per year. Or, to put it in another way, the total expenses being $12,000, if the United Company pays $4,000 of this, we would have to sell 13,300 lamps capacity pep year in order that the commissions would pay the remaining $8,000 of expense in maintaining the business. Our profit then would be the profit due to renewals and the commis-sions on all Iamps beyond 13,000 per year. Carrying it a step farther, we claim that we would have to sell 10,000 lamps capacity per year before we could make a cent for ourselves under the present arrangement, and if we continued the agency without the $4,000, as Mr. Chinnock insisted, we would have to sell 16,000 lamps before we could net a cent to ourselves, allowing $3300 for renewal profits, which is extremely Iiberal and based upon futures principally. With prevailing methods such as the Tripartite Agreement, 15% royalty in towns over 10,000, etc., it is utterly impossible to sell anything like such a number of lamps in our territory at the present discounts from the list. The various Motor Companies have an article to sell with far more advantages over existing power, both as regards convenience and cost of operation, than the incandescent light has over gas, and having but slight competition, compared with that in the incandescent field, these motor companies give their agents 25 & 30% comission upon the selling price. As an indication of the competition we have to meet, I enclose figures of the various companies competing for a Central Station plant at Lyon, Iowa. Our bid has a profit of about $800 in it and we have spent over $200 in endeavoring to secure the work, and have but slight hope of getting it. The Edison Company will find that unless it secures real prestige by favorable decisions in the Courts and until such time, it will be necessary to present figures within 10% of the figures presented by the Westinghouse, United States, Fort Wayne Jenney & Thomson-Houston in order to secure a contract Lyons was rather a favorable case, the distance not being very extreme. We presume we are safe in saying that in average practice the Edison bid for small cash central station which is the best field in incandescent lighting if properly worked, is fully 30% higher than the bid of the Westinghouse, Thomson-Houston, United States and Fort Wayne Jenney. In small plants our competitors, if the Edison Manufacturers statements be correct, must lose Money, but they seem to be willing to do this for the sake. of the renewal profits. I wrote one of our best agents who is up in the lumber mill regions in Wiscon- sin, a very strong letter urging that he sell Edison plants at cost if necessary rather than to get left. I enclose you herewith extracts from this letter of ours together with his reply, which speaks for it- self. We have sent to the United Company any quantity of similar letters from other agents. Our concern and all our employees are thoroughly loyal to the Edison Company, and, should like to remain with it exclusively provided we could make a fair return by so doing. But when we find it necessary to spend about half the profit on construction for the privilege of selling Edison apparatus in our ter-ritory, and find plenty of construction work to be had independent of the agency, we are forced to the conclusion that if Mr. Chinnock's proposition is the best we can secure, it would be best for us not to accept it. We have made repeated requests for additional territory, as we could readily handle four or five more states from this office with no appreciable additional expense. We had hoped that next year our territory might be increased, and that the business organization of the Edison Company in the East might place us in such position that we would be able to meet the competition and do well for ourselves and the Edison Company as well. We have made a great many sales in other agents territory. In one case we sold a plant in Montana,and after having made sale Mr. Chinnock declined to fill the order for the ap- paratus. We spent a good deal of money in securing the sale was wasted. In every instance where we have made a sale in other agents' territory we have received only one-half commission, and in one instance, the agents, Hughs & Browning, declined to give us any portion of the commission, and the only profit we made was that due to construction. The fact that no other agent has made any sale in our territory, that no agent ever asked us for the privelege of attempting to make such a sale, nor that any agent ever quoted figures for a plant in our territory as far as we know, tends to show that our territory has at any rate received more attention than the territory surrounding. We should like very much if it were possible to effect some arrangement by which we could represent the Edison Company under terms satisfactory to both of us in Minnesota, Dakota, Iowa, Illinois, Wisconsin, Indiana, Michigan, Ohio & Kentucky. Dakota at present has received but little attention, and as nearly all communication with Dakota is through Chicago, Minneapolis & St. Paul, we think we are very well located to take care of this state. St. Paul & Minneapolis are the headquarters of all business in Minnesota and the Northwestern part of Wisconsin, and we have a well organised force in Minneapolis and St. Paul in charge of Mr. Andrews. We have the exclusive right to all Edison Isolated business in Minneapolis & St. Paul for a term of years by contract with the local companies. Chicago is the natural center of all business in Illinois, Indiana, Iowa, Wisconsin & Michigan also portion of Ohio. We should like to establish a branch office in Cincinnati representing the United Company there and also the local Edison Company at Cincinnati, who are doing practically no isolated business, although there is a large amount of isolated work being done by other companies in Cincinnati. The fact that Chicago is more convenient to Ohio parties than New York, is evidenced by the fact that we are receiving a very large number of inquiries from Edison plants in Ohio, and a good many of them, Central Station Plants, who would deal with us in preference to New York, although they realize that New York is headquarters of business. Upon the 18th. of this month unless we have assurance of some satisfactory arrangement being made, we shall expect to be relieved by some representative of the United Company. We hope to meet with sufficient encouragement to enable us to remain in neutral attitude of all companies doing work for all, and shall not make any arrangement with any one special company unless we secure marked advantages thereby. If the United Company will send a first class manager to handle the sales and give us the construction work for this section of the country for the Edison business, provided our prices are reasonable, we can state positively that we will make no arrangement to represent any interest antagonistic to the Edison, but shall expect to do construction work for any or all. Such a position on our part will tend to bring the competition down to first cost of apparatus and individual superiority of the different systems. Thomson-Houston and the Westinghouse Companies and others of lesser importance, have assured us of their willingness to have us act in such capacity, doing construction for all and have promised us all work which the price would warrant them in giving us.##We shall hope that such an arrangement will be satisfactory to the United Company, and if that some arrangement may be made by which we may continue to act as agents for the United Company.
[D8940AAA], Letter from Harry Ward Leonard, Leonard and Izard to Samuel Insull, January 4th, 1889
Thomas A. Edison Papers, School of Arts and Sciences, Rutgers University