The record of the Bonners Ferry Lumber Company stood at the opposite end of the spectrum. The one-band sawmill began operating in 1904, and paid-in capital rose to its peak of $332,000 in 1905. Nothing worked as hoped. Driving logs down the rocky Kootenai proved highly wasteful, and the Great Northern declined for technical reasons to haul logs through tunnels. Spring floods annually submerged much of the drying yard and damaged log-holding facilities. The burning of the mill in 1909 required large expenditures for a new and larger plant, which in turn led to further purchases of timber. An outlay of $200,000 for timber in Canada was lost when Canadian authorities denied permission to move logs across the border. Almost all timber holdings were uneconomically scattered, causing high logging costs. A small percentage of white pine, a high percentage of other species, and unprofitably low market prices harassed operators except in wartime. Efforts to ameliorate the impact of adverse freight rate differentials in the markets of Montana and the Dakotas never succeeded. And no dividends ever went to stockholders. The Weyerhaeuser family did receive 6 per cent on loans, which rose to a peak of $1,500,000 and remained high until the mill was closed down in 1926, after producing a total of almost 733,000,000 board feet of lumber. 13
Had the properties of the Edward Rutledge Timber Company not been merged in 1931 with those of two other firms, its performance might have gone down in history as even worse than Bonners Ferry's. Acquisitions of timberland rose to 109,748 acres by the end of 1915, some of which had been sold and some logged as a result of fire damage in 1910, 1913, and 1914. ln 1915, the directors of the company embarked on a utilization program. They engaged Huntington Taylor (son of a Vassar College president, undergraduate friend of Rudolph Weyerhaeuser, and experienced in lumber manufacturing at Cloquet, Minnesota) to supervise erection of a sawmill at Coeur d'Alene and to initiate systematic logging operations on Marble Creek. The mill, which began sawing on April 1, 1916, turned out 666,495,000 board feet of lumber by the end of 1930, but high cost of logging in rough mountainous country, excessive brooming of logs mistakenly driven down Marble Creek with the aid of spectacular flumes, some disastrous fires, a managerial, error in deciding to build a railroad to salvage some fire damaged timber, heavy long-term debt, and depressed market prices for lumber all combined to produce an aggregate net loss before the merger occurred. Although some stockholders did get interest on substantial loans to the firm (its long-term debt reached a peak of $4,849,980 in 1923), they received not one dividend between 1902 and l93l.14
While the Rutledge firm was making a great display of red ink, Clearwater Timber Company was absorbing capital at a prodigious rate. Although the original investors had intended to begin manufacturing much earlier the Clearwater Company really acted only as a timber acquiring and holding agency until 1927. By September of that year, having made many small sales as well as innumerable purchases, it held 236,125 acres, estimated to contain some five billion feet of merchantable timber about equally divided between white pine and other species. Carrying charges were then running at better than $300,000 per year, having reached a total of $2,395,000 from 1913 to 1927 inclusive. By this time the Northern Pacific and Union Pacific had jointly built railroad connections from Lewiston to Headquarters on the North Fork of the Clearwater near important stands of timber. A modern electric five-band sawmill had been erected at Lewiston and the whine of its saws began to tickle the eardrums of the men on August 8, 1927. Logs coming to it from the woods had been moved by horses, tractor, flume, rail, and river.
ln spite of using the most advanced techniques and technology in woods and mill, the Clearwater Company still failed to make money. Paid-up capital amounted to $9,000,000, long-term debt to $8,233,000 and earned surplus to $2,337,000 in the red at the end of 193015. Desperate measures were needed, for the Great Depression was at hand.
In comparison with the Clearwater and Rutledge companies, Potlatch Lumber started impressively The manager, William Deary, purchased a mill and timberlands from the Palouse River Lumber Company and by 1906 had erected a gigantic belt-driven mill at Potlatch, the location of one of the outstanding company towns in the lnland Empire. Four years later a second mill, this one electrically driven, had been built at Elk River. By 1907, in the name of a one million dollar Maine corporation - the Washington, Idaho, & Montana Railway Company - Deary had constructed 45 miles of logging railroad running from Palouse, Washington, to Bovill, Idaho, where it connected with the Chicago, Milwaukee, & St. Paul Railroad. He had also bought 16 retail yards in nearby areas and built others.
From 1908 through 1927 Potlatch Lumber sawed an average of 131,000,000 board feet of lumber annually but the company was always a marginal enterprise. By 1908 paid-in capital stood at $8,000,000, where it remained until 1931. Aggregate net income for the years 1908-1930 inclusive was slightly less than $5,000,000, a sum about equaling the amount earned in the four years 1917-1920. During the next decade Potlatch Lumber operated in the black only in 1923 and 1925, losses far exceeding earnings for the period.
A variety of difficulties accounted for the poor earning record of the Potlatch firm. Initial investment was heavier than anticipated; by the time systematic accounting had been instituted in 1908, more than $8,000,000 had been put into the railroad, inventories and mill, timber and timberlands. Soon such stockholders as F.E. Weyerhaeuser began to observe shortcomings that proved perennial: Deary's decisions were often hastily made and inefficiently implemented, and his policy of "clear cutting" often resulted in losses on unmerchantable logs. The Potlatch plant, one of the last of belt-driven commercial sawmills, was not as efficient as those electrically driven. At Elk River deep snows shut down the plant for several months each year.
Along with other Idaho companies, Potlatch Lumber was at a competitive disadvantage in midwestern markets with southern pine produced at lower costs and shipped at lower freight rates. Not until 1922 did the Northern Pacific, for example, grant joint rates to the W.I. & M. Road. Pacific Coast mills had the advantage of low rates via the Panama Canal to east coast markets after World War I. To make matters worse, A.W. Laird, who became general manager when Deary died in 1913, lavished his interest on the town of Potlatch and delegated authority to a sawmill manager whose product was so poorly graded that, by the early 1920's, salesmen had become reluctant to handle Potlatch lumber. A new mill manager improved the product but much damage had been done.
In summary, certain basic reasons, exclusive of particular accentuating circumstances, accounted for the miserable showing of many Idaho lumber companies up to and including the 1930's. The trees harvested yielded a low percentage of clear lumber. Only Humbird Lumber had a preponderance of white pine, the most easily marketable species; a market had to be developed for the lumber produced from the high percentage of ponderosa, fir, and larch in many stands. Logging costs were always relatively high as a consequence of rough terrain, high transportation costs, and the small volume of timber per acre that required much shifting of crews and equipment. In every instance, high freight costs to the Middle West and East in comparison with those on lumber from the South, the Midwest itself and the Pacific Coast tended to limit potential profits. This high cost Idaho lumber had to compete in a national market characterized by sawmill capacity in excess of effective demand, with the result that realized prices often yielded a return to Inland Empire mills below cost of production.
By 1931 stockholding families - Lairds, Nortons, Mussers, Weyerhaeusers, and others - were ready to combine the three weak north Idaho firms. Managers of Humbird Lumber elected to cut out and liquidate, but on April 29 Potlatch Forests, Inc. (PFI), a continuation of Potlatch Lumber Company under a new name, took over the properties of Clearwater Timber and Edward Rutledge Timber companies. As of January 1, 1931, the starting date of PFI for accounting purposes, the books showed capital stock at $26,595,000.16
In point of fact, in spite of severely depressed markets in 1931, managers of PFI could note several circumstances promising well for their enterprise. Even before the passage of Idaho's basic forest fire law in 1907, leaders of PFI's antecedent companies had informally joined others in voluntarily protecting their timber from fire. After that date they had also taken an active part in the various formal, private, voluntary, cooperative associations - Pend Oreille Timber Protective Association, Coeur d'Alene Timber Protective Association, Clearwater Timber Protective Association, and Potlatch Timber Protective Association. And they had not only welcomed but supported every enactment to bring about cooperative fire protection with State and Federal agencies - such acts as the Weeks, Clarke-McNary, McSweeney-McNary, and other laws.17 As a result, the system was working as well as could be expected, given the extremely complicated character of the problem.
During the 1920's Idaho lumbermen had also vigorously tackled the problem of taxation. One of the most energetic of many campaigners on the topic was G.F. (Fritz) Jewett. Active in both Clearwater Timber and Edward Rutledge Timber Company, he urged, both publicly and privately, that the Idaho legislature should pass a realistic forest tax law. Finally, in March 1929, partly as a consequence of the serious difficulties which all lumber companies had encountered since 1920, and partly as a result of the "educational" campaigns of Jewett and men of like mind, Idaho legislators enacted a law providing for a low tax on cutover and reproducing lands (assessed at $1.00 per acre) and a 121/2 per cent yield tax when the trees were cut. At least in part through the persuasiveness of lumbermen themselves, the way was paved for treating timber as a crop, as a renewable resource. Planners J.P. (Phil) Weyerhaeuser, Jr., and C. L. Billings, the manager and assistant manager of Clearwater Timber, and later of Potlatch Forests, could start selective cutting, advanced logging practices, and a program for sustained yield of Idaho forests.18
In 1929, the same year the tax system was modified, Phil Weyerhaeuser and C.L. Billings started Clearwater Timber on operations in perpetuity. As early as 1916, David T. Mason had pointed out that, under conditions and practices at the time, the average earnings of Idaho lumber companies were too low to encourage continued utilization of trees in the state. After a temporary period of prosperity from 1917 to 1920, the unfavorable conditions for profitable operations in Idaho reasserted themselves. Through his consulting firm of Mason & Stevens, David T. Mason then became an ardent advocate of selective logging and sustained yield - cutting of merchantable trees and reforestation according to carefully formulated principles - and laid out a forestry program for Clearwater. Weyerhaeuser and Billings lent willing ears, initiated selective logging in Clearwater Timber holdings, and in October 1929 successfully applied to the National Forest Service for enough timber to round out sustained yield operations for their firm. Enlightened forest management was launched in Idaho, in accordance with detailed plans drawn by E.C. Rettig, chief forester of the company. In little more than a year all PFl woods operations were following the same pattern. Following the lead of Weyerhaeuser Timber Company, PFI officially announced its first tree farm in 1943.
C.L. Billings, who became the general manager of PFI in 1933, when Phil Weyerhaeuser left the company to become general manager of Weyerhaeuser Timber Company, soon assumed the position of a dominant personality among operating lumbermen of the Inland Empire. Blunt of speech but warm in personality, he improved public relations of PFI and successfully maintained close cooperation with State and Federal forest services (he had served with the National Forest service before entering the employ of the Rutledge and Clearwater companies). Conservation of timber resources was a basic policy with him. Similarly, he experienced little difficulty in relations with labor, having only two serious brushes with unions during his period of leadership, 1933-1949, perhaps the reason was that he and Phil Weyerhaeuser had built Clearwater Timber's labor policy in 1927 on a report by Rettig detailing the most advanced techniques of all firms in the Pacific Northwest.19
For all his modern policies, Billings had to work for ten years before Potlatch Forests, Inc., began to show consistent profits. Accounts presented net earnings in black for only one year (1937) during the thirties. War demand and rising prices then coincided to make entries possible in black ink instead of red. Starting in 1940, dividends have been paid annually. ln fact, profits were favorable enough that sums could be set aside for postwar expansion.
The expansion, carried out by William P. Davis from 1949 to 1958, involved the conversion of PFI from a local ldaho lumber operation to a national, integrated forest products activity. All sawmills have been periodically improved, many new items (such as plywood) added to the company's lumber product lines. Under Davis's eye, a pulp and paper mill was erected at Lewiston in 1949-1950 and subsequently expanded. Not only white and ponderosa pine but red fir, larch, white fir, cedar, and spruce were increasingly used in PFl products. (Broad utilization of species had begun before World War II.) Through purchases, mergers, and large capital investments under Davis and his successors, the company has enlarged its timberland holdings to more than 900,000 acres in Idaho, Washington, and Arkansas. Professional managers who are not members of stockholding families have moved the firm into manufacturing and marketing such products as food board, milk carton blanks, folding cartons, napkins, paper plates and bond and fine papers from the Atlantic to the Pacific.
Selective logging, sustained yield, full utilization of trees, and integrated operations had won the day. Retained earnings in the company at the end of 1958 totaled $52,690,000, largely accumulated in the preceding decade. From 1931 to 1958 the net worth of the company had increased almost three times. The new ideas seemed to be profitable. To what extent had managers in southern Idaho lumber companies applied them? That is the next question.20
Barber Lumber Company started operations in 1905 but almost immediately met a series of difficulties. It built a mill six miles from Boise and began driving logs to it. River driving "broomed" the logs, and silt accumulated behind the dam of the storage pond. Heavy snow hindered logging, and ponderosa logs stained blue if cut one season and driven the next. Therefore, as early as 1907 executives of Barber Lumber got a charter for a railroad - the Intermountain Railway Company - but then decided to postpone construction of the road, to suspend attempts to buy additional state timberlands, and to stop manufacturing operations. The trigger for the decisions was a Federal suit, instituted against Barber Lumber, W.F. Borah (the company's attorney), and Frank Steunenberg, for conspiracy to defraud the government in acquiring timberlands. Borah was acquitted almost immediately, but not until 1912 was the Barber Company cleared of the charge. By that time the total investment, some of it made with funds supplied by the Laird-Norton group and the Weyerhaeusers in 1906, had exceeded $1,600,000, and no earnings were in sight.21
Meanwhile, for stockholders of Payette Lumber & Manufacturing, F.M. Hoover, general manager from 1904, had added valuable timber year after year. At the end of 1913 the company owned 154,000 acres, expected to yield 1½ billion board feet of lumber. On the assumption that logs could be driven down the Payette River, Hoover had also arranged for building a dam at the head of Black Rock Canyon on the North Fork and an 18-mile road along the stream to Smith's Ferry. Though no logs were ever floated down the river, he later thought the improvements were a factor in inducing the Union Pacific to push its rails northward after 1911 to the Payette Lakes - thus assuring the company of log transport facilities when a mill was erected. By 1913, stockholders could visualize the possibility of such construction, of utilization of the timber, and of some earnings if a merger with Barber Lumber could be effected.22
That action was taken on December 24, 1913, when the Boise Payette Lumber Company was incorporated in Idaho. With its paid-in capital of $7 million, Boise Payette bought the stock and property of Payette Lumber & Manufacturing for $3 million, those of Barber Lumber for $1 million, leaving a residue of $3,000,000 for constructing a large new mill at Emmett and for other purposes. Total timberlands slightly exceeded 200,000 acres. The new firm had been made possible by Barber Lumber's successful acquisition of 12,000 acres of important state timberland, by assurance that a railroad would be built from Arrowrock Junction to Centerville, and by confidence that sawing could begin as soon as logs started to arrive at the mill.
C.A. Barton, the new manager, officially launched Boise Payette operations on March 9, 1915. The Intermountain Railway was completed on May 1; it brought logs from Centerville to Arrowrock Dam on its own line and from there to the mill over rails of a road constructed by the Federal Reclamation Service, which was building the dam. Sawing started immediately. In view of the competitive disadvantage of Idaho lumber with southern pine in midwestern markets, Barton decided to push sales in the intermountain area. In 1915, John Kendall began a system of retail yards; Clement Gamble was soon operating them, building the total to 72 by 1920.23
Aided by retailing profits during several years when manufacturing was in the red, Boise Payette had satisfactory earnings through 1923, with the exception of 1921. From 1924 to 1929 inclusive, however, annual net profits after taxes averaged less than 1 per cent of invested capital, and during the next five years red ink dominated the books. Losses averaged $600,000 annually for the three years 1930-1932.
Various factors accounted for this increasingly dismal situation. Not only was the investment in timberland substantial, but the investment in the railroad ($1,037,499) was larger than originally contemplated. Logging costs remained relatively high because of scattered growth and rough terrain beyond the capacity of the trucks and caterpillar tractors of the 1920's. National oversupply of lumber kept prices low. Finally, even the market in the intermountain area, where the company's 5 retail yards were located, grew weaker and weaker as farms in the area sank deeper and deeper into the depression. In 1931 Barton resigned as vice-president and general manager, a very discouraged man, and President Carson, equally dejected, died a year later.24Page one | Page three