Arthur Vining Davis

• Born: May 30, 1867
• Birthplace: Sharon, Massachusetts
• Died: November 17, 1962
• Place of death: Miami, Florida

American aluminum magnate and real estate developer

Davis’s vast wealth resulted from his involvement in the evolution of the Aluminum Company of America (Alcoa), of which he was chief executive officer for more than fifty years. He developed markets for aluminum products in both household and industrial uses. In later life, he became an important property developer in Florida and other locations.

Sources of wealth: Metals refining; real estate

Bequeathal of wealth: Relatives; friends; charity

Early Life

Arthur Vining Davis was the son of a Congregational minister, Perley B. Davis, and his wife, Mary Francis. Davis attended Roxbury Latin School in Boston and graduated from Amherst College in 1888. Through a family friend and parishioner, Alfred Hunt, Davis took a job in Pittsburgh in 1888. He earned $14 a week as one of the first five employees of the newly formed Pittsburgh Reduction Company (PRC), which used an innovative electrolytic process to refine aluminum.

First Ventures

PRC was built around an invention of Charles Martin Hall, who in 1886 patented a process for producing inexpensive aluminum. In 1887 this metal was selling for $8 a pound. Hall, with hands-on assistance from Davis, produced PRC’s aluminum, a process that required constant expert attention. Both men initially worked twelve-hour days (or nights). They were able to refine about fifty pounds of aluminum a day. The company cut the price to $2 a pound, but still found few buyers.

Nevertheless, PRC’s operations were sufficiently successful that it was able to take on more employees, enabling Hall and Davis to pursue more creative activities. By September, 1889, the firm was producing 475 pounds of aluminum per day and was enlarging its production facilities. The firm’s fortunes further improved in 1890, when the banking firm of two brothers, Andrew Mellon and Richard B. Mellon, agreed to provide credit. By then, Davis was in charge of internal operations. During the 1890’s, Davis’s efforts focused on improving the production processes and reducing costs, and he spent much time close to the production line. Davis and other company officials sometimes borrowed money in their own names to cover payrolls.

Davis’s effectiveness as a manager led PRC’s stockholders to grant him 104 shares of stock in March, 1890. The stock was not traded publicly, but the Mellons valued it at $60 per share. Thus Davis was nominally worth more than $60,000. Another ten thousand shares of company stock were outstanding. Davis was appointed assistant general manager of PRC in 1893. By 1897, PRC was producing eight thousand pounds of aluminum a day. When Hunt died in 1899, Davis became the dominant manager of the firm. In 1910, he was formally designated as president of the company.

In 1896, Davis married Florence Holmes. After her death in 1908, he married Elizabeth Weiman, who died in 1933. Both marriages were childless.

Mature Wealth

In its early years, PRC recognized the crucial importance of patent protection, and it was the target of a patent infringement suit initiated in 1897. In 1903, PRC reached an accommodation with the Electric Smelting and Refining Company, enabling each firm to use the other’s patented processes. From its beginning, PRC vigorously expanded its production capacity. By the end of 1892, the price of aluminum had fallen below $1 a pound, and output more than doubled in one year, reaching 138,000 pounds in 1893. Facilities were developed at diverse locations where electric power was cheaply available. In 1893, PRC became the first major customer for electric power from the new Niagara Falls hydroelectric complex. The firm built a facility at Shawinigan Falls, Canada, in 1901.

Expanding production was futile unless the market for aluminum could expand. Davis and his associates experimented with the manufacture of products made from aluminum, converting their oldest plants from refining to fabrication. The plant at New Kensington, Pennsylvania, was equipped with a forge, tube mills, rolling mills, and a significant casting operation. Davis supervised the process by which aluminum was rolled out in sheets to manufacture products like aluminum tea kettles. Quality control considerations led the company to enter the cookware business in 1895, producing under the Wearever brand. A wholly owned subsidiary, the Aluminum Cooking Utensil Company, developed door-to-door sales by college students, an activity that was thriving as late as 1938.

By 1898, PRC employed 260 workers. Davis’s aggressive pursuit of new markets was demonstrated the following year, when he contracted to provide aluminum cable conductors to a utility company in San Francisco, even though PRC was not set up to make these products. Davis hastily arranged for PRC to install a rod mill and other wire and cable machinery at its plants, and soon the company had become a well-established manufacturer of aluminum wire for electrical uses. PRC also responded aggressively to the opportunities provided by the rapid growth of automobile production after 1900. In addition, the firm acquired bauxite deposits in Arkansas and began processing alumina, a white granular material properly called aluminum oxide, in East St. Louis, Illinois.

PRC’s output of basic aluminum pig escalated rapidly, from 216,000 pounds in 1893 to one million pounds in 1896 and five million in 1900. By 1909, the firm had four thousand employees. The company had become profitable by 1893, but almost all of the profit was plowed back into the firm during the 1890’s. Significant cash dividends began to be distributed in 1899. In 1907, PRC changed its name to the Aluminum Company of America; by 1910, the firm was commonly referred to by its acronym, Alcoa. Davis’s wealth increased alongside the growth and profitability of the company.

Charles Martin Hall died in 1914, leaving two hundred shares of Alcoa stock to Davis. Hall’s estate was estimated at $30 million, and most of it went to educational institutions. Davis was designated as one of the two trustees who administered the bequests. Although Davis’s wealth at this time probably did not match Hall’s, Davis was certainly a millionaire by then.

During its first half century, PRC/Alcoa effectively held a monopoly on aluminum refining. After its basic patents expired in 1909, Alcoa was targeted for antitrust prosecution in 1912. Davis was undoubtedly one of the architects of his firm’s nonconfrontational response. The company accepted a consent decree in June, 1912, agreeing to discontinue some practices of which it had been accused, without admitting guilt.

Following America’s entry into World War I in 1917, Davis played a central role in negotiations for sales of aluminum to the government. In April, 1917, Alcoa sold two million pounds to the government for 27.5 cents a pound, although the market price was around 60 cents. In September, Davis negotiated a price of 38 cents, but he agreed to refund any excess over costs as determined by the Federal Trade Commission. Most of these sales were ultimately settled for 32 cents. Alcoa’s accommodating stance was rewarded, as the company was given wide latitude in determining customer priorities in times of shortage. The war gave strong impetus to the development of aircraft, with aluminum playing a large part in both fuselage construction and engine design.

Davis was involved in many aspects of Alcoa’s international expansion after the war. He negotiated with tobacco tycoon James Buchanan Duke to acquire in 1925 Duke’s project for hydroelectric development in Canada. This acquisition led to the installation of extensive production facilities at the new town of Arvida in Quebec, with the name “Arvida” derived from the first two letters of Davis’s first, middle, and last names. Davis took an intense personal interest in the town, making sure it developed recreational, religious, educational, and medical facilities.

Despite his involvement in the development of this new Canadian town, Davis was the principal influence that led Alcoa to back away from multinational operation. In June, 1928, Alcoa transferred control of thirty-four companies to the newly created Aluminum Limited of Canada. Stock in the new company was distributed pro rata to existing Alcoa shareholders, including Davis. His younger brother Edward became head of the new firm. In 1929, Alcoa’s organizational structure was changed, and Davis became chairman of the board, but without reduction in authority.

In 1925, Davis was involved in a scheme to sell off part of the Alcoa stock held by the Hall trust (the estate of Charles Martin Hall, of which Davis was a trustee) to a syndicate, of which Davis was a member. The trust beneficiaries supported the scheme, which enabled them to sell stock that paid very low dividends and receive the proceeds in cash. As a result of these sales, Davis was able to buy 61,000 shares on very advantageous terms. However, when the stock rose in value, the trust beneficiaries complained that they had been swindled. Davis was pressured into relinquishing the bulk of his newly acquired stock, valued at $3 million.

In April, 1937, Alcoa was indicted for antitrust violations, initiating one of the longest cases on record. In the summer of 1938, Davis was the principal witness for his company’s defense. He was on the stand for six weeks, and his testimony extended to more than two thousand pages in the trial transcript. In July, 1942, the district court dismissed all the government’s charges. In his decision, the judge remarked on “the great number of witnesses . . . competitors as well as customers of Alcoa, who have completely exculpated Alcoa from blame and have praised its fairness as well as its helpfulness to the aluminum industry. . . . Such conduct of those witnesses, nearly all of whom were entirely independent, is in great part a tribute to Mr. Arthur V. Davis.” The judge also described Davis as the man “who, chiefly and primarily, has built up and made Alcoa what it is today.” The federal government appealed to overturn the judge’s decision, and the case continued to be heard in appellate and district courts. Finally, in 1950, a district court judge ruled against the divestiture of Alcoa.

During World War II, aluminum was once again a strategic war material, especially for the construction of aircraft. Alcoa expanded production capacity to a vast degree, building twenty-two plants that were temporarily owned and operated by the federal government. Aluminum output climbed to seven times its prewar level. Davis spent much time in Washington, D.C., coordinating aluminum sales with the government. He received a Presidential Certificate of Merit for his wartime achievements. After the war, the disposal of the government’s aluminum plants was a critical element in creating new competitors and settling the antitrust case without overt penalty to Alcoa. Davis was instrumental in providing royalty-free patent access for the new competitors.

Davis largely withdrew from direct management of Alcoa by the end of the 1940’s and retired from the company in 1957. He moved to Florida and became a major real estate investor. His holdings included significant properties in the city of Miami, and he had other property interests in the Bahamas and Cuba.

Legacy

Davis was a stocky man with a bulldog appearance and personality. He was notoriously egocentric and bullying. His wealth developed as he shaped Alcoa into a remarkably successful firm that provided valuable products and good jobs. Davis was able to identify and motivate talented employees to achieve technological progress and efficiency. By 1935, Alcoa was the nation’s twenty-seventh largest industrial corporation. Despite the appearance of monopoly, neither its profits nor its pricing reflected monopoly behavior. Alcoa was remarkably diplomatic in its dealings with customers, competitors, and the government.

Davis left an estate of about $400 million, much of it deriving from his real estate activities through his Arvida Corporation, a Florida real estate development company. He was reportedly the fifth-richest man in America. About $300 million of his estate was distributed to his foundations.

Bibliography

Carr, Charles C. Alcoa: An American Enterprise. New York: Rinehart, 1952. Carr was a longtime director of public relations for Alcoa, but his book is solid narrative, not mere puffery.

Graham, Margaret B. W., and Bettye H. Pruitt. R and D for Industry: A Century of Technical Innovation at Alcoa. Cambridge, England: Cambridge University Press, 1990. Stresses Davis’s involvement in the firm’s steady attention to improving technology.

Jacobs, David G., ed. The Foundation Directory. 31st ed. New York: Foundation Center, 2009. The Davis foundations are described at pages 477-478.

McGoun, William E. Southeast Florida Pioneers: The Palm and Treasure Coasts. Sarasota, Fla.: Pineapple Press, 1998. Chapter 27 examines Davis’s real estate activities.

Smith, George David. From Monopoly to Competition: The Transformations of Alcoa, 1888-1986. New York: Cambridge University Press, 1988. Demonstrates Davis’s skill in managing a monopoly without his company looking like one.