Ford Ponies Up, and the Birth of a Sweet Empire


On this day in economic and financial history ...

Milton S. Hersheybegan construction on what would become the center of his chocolate empire on March 2, 1903. Hershey had developed a superior formulation for milk chocolate with some of the proceeds from the sale of his Lancaster Caramel Company several years earlier and had selected his Pennsylvania hometown of Derry Church as the site of his milk chocolate plant because of its proximity to dairy farms. Hershey became the first chocolatier to market a mass-produced milk chocolate -- a costly luxury in those days -- when construction finished two years later.

Hershey grew rapidly, as you already know. The Hershey's Kiss came out in 1907, and by this point the company's expansion was already transforming Derry Church into Hershey, Pa., a "company town" that's grown to include a full-fledged amusement park and both indoor and outdoor sporting arenas. By 1927, Hershey decided to go public and was initially valued at $61.5 million, which translates to more than $800 million today.

The early death of Milton Hershey's wife pushed him further into his philanthropy, and by 1918 he'd transferred most of his assets to the trust overseeing his private boarding school. Today, the Milton Hershey School has one of the richest endowments of any primary education institution in the country. At $7.8 billion in 2008, it can easily cover the $110,000 cost of each of 1,850 students' educations per year for nearly four decades without having to worry about raising more funds. Not that it necessarily should be worried -- a single share from Hershey's IPO is now worth 360 shares, and that first-day holding has gained 7.5% per year for 86 years.

A strong day in a dark time
The Dow Jones Industrial Average made one of its strongest rebounds of the early Great Depression on March 2, 1932, rising 5.4% on news that Britain would be paying off most of the outstanding credit it had received from American banks half a year earlier. The Washington Post wrote of the bounce: "This evidence of reviving vigor in a nation whose financial troubles only last fall had caused widespread concern carried constructive implications. ... [T]rades apparently hastened to express their approval in a practical way." The Dow's 20% gain since the start of 1932 was finally starting to give investors hope that the worst was behind them.

Unfortunately, there was farther to fall. The Dow ended up 52% lower than its March 2 close when it bottomed out that July, despite having already endured a 77% loss since the peak of the Roaring '20s. The remainder of that slide was extraordinarily volatile -- the Dow suffered through an average absolute daily change of 2.4% from March 2 to the July bottom. By comparison, the Crash of 1929 (from the peak to the end of the year) resulted in an average change of 2.6% per day.

A sports car for the masses
celebrated the production of its millionth Mustang on March 2, 1966. The iconic "pony car" had been launched only two years earlier, making it an unqualified success for any model. Ford's earliest smash hit, the Model T, had reached the same milestone seven years afterentering production despite being the overwhelming choice of the early American auto buyer.

The pent-up desire for something with speed and sex appeal was undeniable in an America with a growing interstate highway system and a rising suburban middle class, and Ford's new model, priced at about $2,300 ($16,300 when adjusted for inflation), hit an untapped sweet spot in the auto market. At exactly a third of median family incomes in the mid-1960s, the first-generation Mustang was more affordable than its current incarnation, which now costs costs at least 42% of median household income. That might also explain why later sales, while consistently strong, have never approached the runaway success of the first Mustang. Sales of the pony car have declined from 169,000 in 2001 to a low of just 70,000 in 2011.

Despite this slowdown, the Mustang is still Ford's longest-running car nameplate and one of its all-time best-sellers. The 9 millionth Mustang drove off its lot in 2008 -- at this point, Ford had sold an average of more than 200,000 Mustangs every year for 44 years.

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