Holt vs. Jones

M. GRATTAN O’LEARY March 15 1929

Holt vs. Jones

M. GRATTAN O’LEARY March 15 1929

Holt vs. Jones

Twin word sketches of the principals in a colossal struggle for control of Canada's most stupendous asset—hydro-electric power



FOR more than a year, Ottawa has been the cockpit of a battle, which for drama, for romance and stakes of millions, for the bitterness and character of its warfare, and for the picturesqueness of the contending personalities, has had no parallel in our time.

Not since the spacious eighties when Donald Smith and his confederates made Ottawa their last desperate stand for the C.P.R., not since William Mackenzie and Donald Mann made lobbying an art, has this city, plagued by intrigue and lobbying and propaganda, had anything approaching it. All the agencies of political and economic warfare, all the tactics that highly-paid ingenuity could muster, have been marshaled into a mighty combat between power magnates, millionaires, high-powered lawyers, veteran lobbyists, cunning propagandists, everything and everybody in any way calculated to win the coveted prize.

It is a struggle for electrical power. A struggle for control of what has now taken its place as Canada’s most stupendous asset, which industrial kings recognize as the key to future wealth. On the one side has been the colorful figure of Frank P. Jones, promoter of Beauharnois, the most gigantic power scheme in the Dominion’s history; on the other Sir Herbert Holt, most towering of all the captains on the field of Canadian finance. Jones, backed by all the power of the Taschereau government in Quebec, would build a great power canal on the St. Lawrence between Lake St. Francis and Lake St. Louis; would develop 500,000 horsepower almost at once; would instal 1,000,000 horsepower eventually; would threaten the power supremacy and prosperity of Holt. Holt, always the desperate fighter, thriving on turmoil, asking no quarter and giving none, accepted the challenge. The consequence has been a struggle, the end of which is not yet.


NLIKE his great rival Sir Herbert Holt, who was born in Kildare, hard by the spot where Donelly defeated Cooper, the English champion, in a historic and epic contest, Frank P. Jones is a product of Canada. He was born in Brockville and is racy of the

soil. It has been said of Holt that he is cold, that he is without emotion. Jones, warm, human, emotional, is the antithesis of that. There is nothing of the Olympian about him, nothing of that brooding aloofness, of that frigid, merciless demeanor associated with financial giants. Jones, in fact, might be the popular politician, all things to all men, jovial, gay and likeable, rather than the hard industrialist gaming with millions as stakes.

The truth is that there are two Jones. There is the Jones who has fought his way up from an Ontario farm, who came from shoveling coal at five dollars a week to count his wealth in millions; and then there is the McConnachie in him, a side to his nature which loves adventure for adventure’s sake, which does not count success by dollars, which broadens his horizons beyond commerce and finance.

Jones, for instance, will tell you that his mother was the greatest of all dairy farmers and his father the greatest of men; and he will tell you, too, that his early years on the farm were the happiest of his life. His people were not poor. They were what Englishmen call good yeoman stock, hardy pioneers, and they sent their son to the public school and, for a year or two, to the Royal Military Academy. But higher education, the arts and sciences, made no appeal to Jones. His mind was of the sort that takes in by experience rather than by books; and at eighteen years of age he found himself shoveling coal—firing a boiler—in a small manufacturing plant at Gananoque. For a week of six ten-hour days he got five dollars.

Canadians, concentrating attention upon politicians and Parliaments, are oblivious to the meaning of such a conflict. They debate and appraise the virtues and defects of their political chieftains; follow their careers with interest; think of them as the arbiters of their destiny. It is all a divorcement from reality. For it is frequently behind the scenes, in the lobbies of Ottawa hotels, behind the green-baize doors of departmental offices, in the counting rooms of industrial palaces in Toronto and Montreal that our economic destinies are influenced. Who can hold that industrial emperors like Holt and Jones, demigods of our financial ledgers, fieldmarshals of industry and finance, are not more potent in shaping our everyday economic lives than all our politicians put together?

Who, then, is Sir Herbert Holt? Who, and what, is Frank Jones? What manner of men are these who exercise such sway over our industrial development? What of their origin and personalities? What of their power for good or ill in Canada’s national life?

Fifty-three years ago Herbert Holt—to take this super-industrialist first—came to Canada, a penniless Irish immigrant. For thirty years or more he worked as an engineer, contractor, and railway builder; laying the foundation for future achievement, but remaining one of the minor figures in our era of railway development. Then, of a sudden, Holt seemed to arise from some magic mountain and to stride down upon the plains of finance with the momentum of a Goth army. To-day, with the Royal Bank as the turbine in a veritable Niagara of industry, there is embraced in his control, street railways and power plants, coal mines and ore mountains, water powers and forests, great paper mills and textile factories—all octopized into the greatest empire of ownership that British North America has known. Canada’s most powerful and richest citizen, no man, not even himself, can fix the extent of his wealth. There is not a productive agency in any vital thing that people need or use or buy, upon which he has not set his hand; not a province in Canada in which he has not set his foot; hardly a great enterprise from the Atlantic to the Pacific which does not feel the touch of his genius or fear the ruthlessness of his rivalry.

A man of towering physique, whose seventy-twro years sit lightly on his shoulders, with square iron jaw and steely blue eyes that speak of Celtic pugnacity, Holt is a dominant, domineering figure. “Wolves hunt in packs, but lions go alone,” and this man goes through life lonely and aloof, plowing his own furrow, impatient of opposition, confiding in no one, appealing to no one, seeking sympathy from no one; making or losing millions as a matter of daily routine.

“Holt,” said Sir Donald Mann, “is a single horse that won’t team;” and that sums up his character. A furious worker, indefatigable, tenacious, tireless, he finds an outlet for demoniac energy and ambition in a complexity of enterprises staggering to the ordinary mind. Long past the point where more money can have meaning for him, with greater riches than he or anyone else knows, continued financial victories mean only one thing to him—power; and those who know him know that the flame will not die until other worlds are conquered.

A Spartan Multi-millionaire

T-JIS private life is Spartan in its conduct. Living in

-*• an unpretentious residence, he has no country home, no cottage by the sea or in the mountains, seldom plays golf or dines out, rarely takes a holiday, and has a hearty articulate contempt for the business man who is “tired.” To him, business is the be-all and end-all of life, the centre of his thoughts and ambitions; and in the board rooms of countless enterprises, matching minds with executives and directors, appraising chances and profits, taking daily desperate risks, he finds his recreation.

Despising and shunning publicity, he never gives interviews; never speaks of his past; never discusses his plans. “I have been commissioned to write a sketch of you,” said a newspaper man. “Well,” he replied, “as long as you print nothing libelous I suppose I cannot prevent you. But I will not aid you.”

It is partly because of this taciturnity, of a passion to work behind the scenes, that nobody knows with precision what Herbert Holt is worth. It is more than probable, however, considering his ramifications, that daily fluctuations of the stock market clip off or add millions to his fortune with every turn of the clock. He may not be, as some hold, a full-fledged billionaire, but that the wealth which he controls runs into hundreds of millions there can be scarcely a doubt.

He is either in complete control or a powerful factor in 145 companies in Canada, including such gigantic organizations as the Royal Bank of Canada, the Canadian Pacific, the Montreal Light, Heat and Power, and the Canada Power and Paper Company— the combination possessing assets that run well into billions. Dominion of Canada currency, notes and coins in circulation, does not exceed $300,000,000. Holt, through his various corporations is believed to command at least two dollars for every dollar of Canadian currency issued—a measure of the vastness of his power. His name is sufficient to turn a company from financial failure to success.

When it comes to “popular opinion,” his attitude is not that of the Vanderbilt who summed up his financial creed with “the public be damned,” but, once he has decided he is right, he is indifferent to attack. When, a few years ago, Lord Atholstan assailed him in the Montreal Star, he maintained a contemptuous indifference. The stock of the Montreal Light, Heat and Power Company went down and thousands of its holders lost money. Holt, unterrified by the drive against him, bought up all the stock that he could lay his hands upon, and when the attack ceased, as all attacks must, and the stock soared upward again, he cleaned up a cool million dollars.

He Started As An Engineer

THE truth is that Holt is indifferent whether the public loves or hates him. And while it is more than probable that it fears him more than it loves him, there are also indications that it is often prone to trust him. A few years ago the Brazilian Traction stock collapsed because of a revolution in Sao Paulo. There was panic among the stockholders; people could not sell out fast enough; the company was threatened with ruin. In the midst of the excitement it was announced that Holt had joined the directorate—and the panic was over. Selling ceased, the stock turned upward, public confidence was restored.

Holt was not always a power. When, at the age of nineteen, he landed in Canada away back in 1875, success seemed far on the horizon. Canada was then passing through a period of depression; the prairies were unknown and unpeopled wastes; British Columbia was barriered from the rest of Canada by what were thought to be impassable Rockies; the construction of the Canadian Pacific was still in the realm of dreams. Holt found his first job as an engineer under James Ross, that great contractor who later became one of the C.P.R. builders and finally the first of our coal barons. Ross had a contract for a rambling line of railway running north from Lindsay, Ontario, to the Haliburton timber limits; and when this job was finished, he undertook, in 1879, to build a road from Parkdale, Toronto, to Credit Valley; and Holt, who had made good, was made superintendent of engineers on the work of construction.

He made his home in Toronto, and those who knew him then, have described him as a plain, industrious young man, tall, thin, shy and silent, and conspicuous for a profusion of red freckles. His chief characteristic, it is said, was his thrift. He made the acquaintance of William Mackenzie—afterward Sir William—but the two men, though friendly, were poles apart in their natures. Mackenzie then, as ever afterward, was the born gambler, always plunging, always taking a chance; and when Holt had saved up $600, Mackenzie borrowed it from him to put into some scheme that his fertile brain had devised.

When Ross became superintendent of construction on the C.P.R. in 1883, he took Holt with him. Donald Mann had preceded them as a C.P.R. contractor by several years; and when in 1884 Holt and Mackenzie also started contracting on their own account, the three men linked forces to build the C.P.R. line from Edmonton south to Calgary and thence to McLeod, and from Regina to Prince Albert. At the close of these operations the partnership was broken up. In the words of Mann, they “just separated.” But all of them were to be heard from again.

Mackenzie and Mann stayed with the railway game, built the Canadian Northern, borrowed millions, flared across the financial firmament and went down in disaster.

Ross undertook the reorganization of the Toronto and Montreal transportation systems.

Holt, already comparatively wealthy, and interested in gas and electric power possibilities, invaded Montreal.

Holt Invades Montreal

SINCE the day of its formation, in 1848, the Montreal Gas Company had had a chequered career. Holt, satisfying himself that it could be made to pay, determined to capture it with characteristic vigor. His plan was to consolidate the dozen or more small companies producing and distributing gas and electricity, and all competing in both rates and service. It was a battle of the stock market, a scuffle in the pit, and Holt, aided by the generalship of C. R. Hosmer, came out completely victorious. He acquired control of the Montreal Gas Company and later of the Royal Electric Company, of which Sir Rodolphe Forget was president; and around the two he built up the Montreal Light, Heat and Power Company with its paid-up capital of $64,000,000. It was not a peaceful triumph. Holtr found a formidable rival in John Coates, who, backed by public opinion clamoring for lower rates, formed a new company and produced the keenest competition. Holt, however, fought his battle with all the Irishman’s love of conflict and in due time Coates shared the fate of other competitors—bankruptcy and absorption.

Nor did he complain. “I had more cash money than I’ve ever had since,” he says. “I paid sixteen dollars a month for board and was never hard up. I was working and I was happy. Anyway, the accumulation of money was never my ambition.”

Jones didn’t stay shoveling coal. He looked around for a new job and finally, like Max Aitken whom he knows intimately, he started to sell insurance. Just what he might have become in the insurance world had he remained in it, one cannot tell; one day he quarreled with his chief and quit. “A man,” he explains, recounting his experience then, “should always pick out a line of business that looks to hold much of the future—that is why I took up electricity.”

When He Earned Sixty-Six Cents a Day

T-JE TOOK it up in a modest way. His first experience with it, in fact, was to hire out with the Canadian General Electric Company at six cents an hour. The working day was from seven in the morning until seven at night, so Jones earned the princely sum of sixty-six cents a day. “It wasn’t such a bad wage,” he says, “and what I wanted was experience, not money.”

And he didn’t try to save. “I believe with Henry Ford,” he says, “that really successful young men don’t bother to save money. Personally, I never put money in the bank when I was a boy. I figured the world owed me a living. I was willing to work hard and meant to collect it.”

After Jones had learned something about electricity he realized that, if he was to get anywhere in the industrial world, he should know salesmanship. And luck, which has frequently smiled upon him, favored him immediately. Jones had come to know one of the men who traveled for the Nova Scotia Steel and Coal Company—afterward the Nova Scotia Coal and Forge Company. This traveler, noticing Jones’ abilities, had mentioned him to his firm, and one day a telegram came from Graham Fraser, manager of the firm at Montreal, asking Jones to see him. They hired him to cover Quebec and Ontario at sixty dollars a month. That was in the early 90’s.

It was the turning-point in Jones’ career. Jones, a new world opened to him, worked with demoniac energy. His past experience in shops came to his aid; he understood working conditions in industries which were to be his customers; knew something of overhead and costs; could explain things to his public.

He became a rare salesman. To this day .Jones speaks contemptuously of rules of thumb for efficiency, of the card-index mind; he scoffs at phrases about “driving power” and “personality” and “approach.” But there was one thing which he determined upon. He decided that he must find out why he could not sell any particular man. He concluded that there is usually some concrete, dollars-and-cents reason why a sale cannot be made, and he never left a prospect until he found out what it was. The result was that he usually sold.

He was not an ordinary salesman. Ordinary “knights of the grip” were not expected to delve into such complicated matters as railway rates and tariffs. Jones did that. In those days the Dominion Railway Commission had not begun to function and there were no published rate tariffs. Each shipper negotiated his own rate with the railway companies, and a railway would not divulge the rate of one competitor to another. This aroused Jones. When a customer told him he could buy cheaper elsewhere, Jones analyzed the costs of his own and the other product, found out the freight rate and made a note of it. Within a year he had accumulated more facts about railway rates as they applied to merchandizing than was in the possession of anyone not in the business of railroading. He began writing to his superiors denouncing discriminatory schedules.

Thomas Cantley, now member for Pictou, was general manager of Jones’ company. Cantley, impressed by Jones’ facts, came to Montreal to confront the railways with them; the result was better terms, and, what was more important from the standpoint of Jones’ future, he' was put in charge of the company’s freight rate department and had his salary raised to $150 a month'

Jones didn’t stop at freight rates. One day he got a copy of the Canadian Customs Tariff; read it over and over again. Its intricacies, bewildering anomalies and compromises and discrepancies aroused him, and once more he demanded action. “Why not go to Ottawa,” he told Cantley, “and protest against such absurdities?”!

Again Cantley was impressed. He himself had tried long and often to iron things out of the tariff, but without success. But this young man was different; no telling what he might do. “If you are so critical of the tariff,” he wrote to him, “go to Ottawa whenever you please and see what you can do.”

.Jones—Tariff Expert

SO JONES became the tariff expert of his company. One day he came to Ottawa and saw Fielding. The little gray man heard him patiently at first, then with interest. There were occasions when Jones got what he wanted; other times when he lost. But always the interviews were interesting. “Mr. Fielding,” said Jones, one day, speaking of rebates on iron and steel, “if you will abolish the rebates, we will accept a cut in our general tariff of three dollars per ton—from ten dollars to seven dollars.”

Fielding smiled and shook his head—and Jones understood. He understood that in politics there are other considerations than pure business. He has never forgotten that interview.

In 1901, a new steel company came into existence— the Dominion Iron and Steel. Jones became its traveler. He was a success, almost a phenomenal success; and a few years later, in 1903, he became general sales agent, with headquarters in Sydney. He was then but thirtytwo. To most men the position of general sales agent of a corporation like the Dominion Iron and Steel would have been the summit of success—but not to Jones. The following year found him assistant to the president; a year later he was general manager.

And again he was a success. The Dominion Iron and Steel had not been overly successful; annual deficits averaged $500,000, shareholders were restive. Jones reached his own conclusions as to the trouble. There were too many employees and too little production. When he took over the management of the company, there were 3,500 on the payroll and production was 20,000 tons of steel. In five years as manager, Jones never had a production of less than 30,000 tons, and his greatest payroll was 2,800 men. The result in dollars and cents was an annual profit of not less than $2,500,000.

One year there was a crisis in the company. The coal company which supplied the needs of the Dominion Iron and Steel declined to continue supplies; a lawsuit followed. To Jones the issue meant success or failure. He feared that he might not be able to make the best of his case. He was not an educated man; was unused to making speeches; doubted his capacity for expression. So he went to Premier George Murray of Nova Scotia and said: “George, I want a young college man who knows all about the coal and steel industry who can state my case in court.”

Murray smoked his pipe and thought awhile. “Well, Frank,” he said at last, “I can get you a man; but are you sure you need one?”

Jones said that he wasn’t sure, but why should he take any chances? “If you want my advice,” said Murray, “it is this. You know your own business better than anybody else. Never mind about fine phrases and apt words. Go through with it yourself and do your own talking.”

“That,” said Jones the other day, “was one of the most valuable lessons I ever learned.”

The case came on. Jones, taking the floor, was a sensation. He seemed to know more about the steel industry than the rest of the litigants combined. The Dominion Iron and Steel won its case. Jones was more powerful than ever.

He Finds Millions in Cement

TANE day, traveling to Halifax, Jones met an interesting man. They talked about many things, including business, and after they parted, Jones learned that the stranger’s name was Aitken—Max Aitken. It meant nothing to Jones. But a few years later Max Aitken wired Jones, asking him to come to Montreal to become general manager of a huge industrial merger to be called Canada Cement. It was the beginning of a career which, for Jones, was the chief adventure of his life.

The story of Canada Cement is well-known. It dominated the Canadian market with seventy-five ppr cent of the domestic production. The mills that were merged cost about $14,000,000. Wnen Jones sold the company in 1927—he had been with it seventeen years — he had made $47,000,000 in profits and the purchase price was $51,000,000. Nor was the price too high. It was, in fact, so low that the purchasers recapitalized the company to an amount greatly in excess of the purchase price. “My mistake,” Jones said, “was that I valued the plant and equipment, but overlooked the intangible assets, the organization I had built.”

Yet Jones had come out all right. The penniless, uneducated youth who had left an Ontario farm at the age of eighteen found himself at fifty-eight with anywhere from twenty to thirty million dollars, and with a name and prestige to conjure with in the realm of finance. Nor could he keep out cf Big Business. That restless, vital, innovating personality, with its fresh ideas andq unorthodox views, could no more be kept from the turmoil of industry than a duck could be kept from water. There came Beauharnois.

The Montreal Light, Heat and Power Company probably stands as Holt’s outstanding achievement. Over a thirty year period its shareholders have received an enormous return, the original shares of $100 being now worth $1,140.

Holt’s career as a banker dates from 1902. In that year the Sovereign Bank opened its doors, and he became its president. For a time the institution made spectacular progress; sky-rocketed into the financial sky and then collapsed earthward. At the crest of its success, however, Holt had resigned its presidency to become a director of the Royal Bank of Canada. In 1908 he became its president.

The story of the success of the Royal Bank dates from that year. When Holt took over its leadership, its paid-up capital was $3,900,000; reserve $4,390,000; assets, $46,000,000. To-day, twenty years later, its paid-up capital is $24,400,000; its reserve $24,400,000; its assets $766,376,000. It took over the Union Bank of Halifax in 1910; absorbed the Colonial Bank of London branches in the West Indies in 1911; the Traders Bank in 1912; the Quebec Bank in 1917; the Northern Crown Bank in 1918. To-day, it is a mighty factor in international business, with branches in England, France, Spain, South America, the West Indies, the United States and Newfoundland.

Canada Cement and Besco

IN 1927, Holt, in co-operation with J. H. Gundy, purchased the Canada Cement Company. To consummate this deal, Holt and Gundy put up the staggering sum of $40,000,000 in hard cash. The old company was extinguished; a new one formed, with new capital; preferred stock and bonds were issued for $41,000,-, 000. In addition, two shares of common stock were given with every five preferred shares purchased; 84,000 shares of common stock being thus given away. Holt and Gundy still hold 516,000 shares of common, and at present daÿ price could sell their remaining interest in the company for $17,544,000. They risked $40,000,000—and they won.

Finally, there is Besco. No one knows just how much Holt and Gundy laid out to gain control of this vast holding company for more than a dozen subsidiary enterprises; but it must have run well into $50,000,000. Besco’s capitalization is $126,183,000, including its subsidiaries. It is said, and not lightly, that Holt’s personal influence alone will make Besco a paying proposition. Already, indeed, one sees the magic hand. A government subsidy on coal will bring the company’s products to Montreal, where Holt’s other companies will provide a market.

Yet Holt sees other worlds to conquer. He has—if report be true—a gigantic scheme to weld all Canadian iron and steel companies into one vast merger on the model of the United States Steel Corporation, with assets of more than a billion — one of the mightiest things in the country.

How, it has been asked, can one human mind master and direct all the complex and varied enterprises which Holt either owns or helps to control? How can a man keep in touch with the operations of 145 companies, embracing hotels, water powers, pulp and paper companies, fur stores, investment companies, electric enterprises, bridge and textile companies, moving pictures, railways, flour mills, shipping and coal companies, land and lumber organizations, shipyards and life insurance companies? How, especially when they are scattered in every province from the Atlantic to the Pacific? The answer is Holt’s unerring genius in judging and picking executives. He selects his lieutenants; outlines his scheme and policy; promotes, them if they make good, breaks them if they fail.

More could be written of Holt. There could be told the story of his association with Beaverbrook; of his knighthood— somewhat wrapped in mystery; of his alleged attempts to gain control of certain Canadian newspapers; of a certain struggle over the presidency of the C.P.R. But perhaps enough has been outlined in this necessarily brief and incomplete sketch to portray the character of the man, of his indomitable-will, of the golden sceptre which he wields, of the influence he exercises over the economic life of this Dominion of Canada.

If Holt and his confederates should win this last great struggle, if Jones and Beauharnois should go down, then his power and pre-eminence in Canada’s industrial life will be absolute and unchallenged. But for the moment victory is in the balance.

Now It’s Beauharnois

BEAUHARNOIS, the project that has been before Ottawa these months, and which has produced the most titanic struggle between rival power magnates that Canada has seen, is a tremendous scheme. Briefly, it is that the company be permitted to divert 42,000 cubic feet per second from the St. Lawrence between Lake St, Francis and Lake St. Louis to develop 500,000 horsepower; and that this in time be increased up to 2,000,000 horsepower; the total cost to run into tens of millions.

Quebec gave the company statutory support, and Jones gave it the prestige and driving power of his presidency; but it encountered rough waters. The success of Beauharnois—the granting of a permit from the Federal Government, whose duty it is to say whether the scheme interferes with navigation—would be a blow at rival power interests in Montreal. Hence the opposition of Holt. Hence the struggle, with millions as the stakes, and with every resource that capitalists can bring to bear, that has been waged here.

Jones hás faith in his project. “Where,” he was asked, “where will you find capital to promote such a venture?”

“I will find it in Canada,” he replied. “And we won’t have any difficulty. It is not the big undertakings that are hard to finance; it’s the small ones. I always wanted to get into the power game. It means a lot for Canada—the saving of millions that we pay for coal. And it means cheaper manufacture; more factories; more employment; more wages and trade. The present trouble is that power prices are too high. If Beauharnois can get into production we will cut the price in half, and, believe me, we will do Canada good.”

Thus Frank Jones at sixty. It has been a long steep road up these forty years, with hard knocks and adversity aplenty; but the man’s energy still burns. Jones, although not the towering personality of his great antagonist, Holt, is no mean adversary; he knows how to fight. Whether he will win this, the greatest battle of his career, only time can tell.