The Collapse of J.E. Potts

From: Along the Historic Riviere Au Sables By Neil Thornton

CHAPTER: 12 Collapse of J. E. Potts

To an older generation now at rest, the day J.E. Potts Salt and Lumber Company failed on November 27, 1890, was one of the blackest in the history of AuSable-Oscoda - almost as black as the day 21 years later when fire destroyed the two towns.

Circumstances surrounding the financial reverses of one of the largest lumber companies in the world are difficult to understand nearly a century later - so indelibly did J .E. Potts stamp his identity upon Michigan's lumber industry that his very name represented money made from pine holdings.

Collapse of the firm came one year prior to the very peak in lumber production at AuSable-Oscoda, but it should be noted that the fortunes of the industry were all downhill after 1891, an era of national financial depression.

Writing in 1906, Harry R. Solomon of AuSable said that the ambitious Potts "strived to increase his business so that his institution would be world-famed; he was a benefactor to mankind, a martyr to the cause which he advocated."

Solomon was the principal speaker during the 1906 "homecoming week on the 'Sable" and, in his remarks, said that many remembered when Potts "first landed on this soil to take hold of the large industry that had already been established." With tremendous business sagacity, said the speaker, Potts "looked into the future and foresaw what a God-send it would be to the community to build a railroad into the wilds of the forests, so that he not alone would be materially benefitted, but that the inhabitants throughout the district would be brought into closer communication with one another."

Therein lies the key to the financial ruin of one of the state's industrial captains of the last century. The tremendous expense of constructing a private railroad into the heart of the state to tap the white pine forest proved to be so huge that Potts' enterprise had no chance of success. The late Frank Hebner, who was once a locomotive engineer on Potts' railroad, the AuSable and Northwestern, believed years ago that the real key to failure of the AuSable lumbering firm was the expense involved in building a railroad grade to climb the Seven Mile Hill, north of the AuSable River and approximately seven miles from Oscoda.

This railroad grade is still visible today and an inspection of the vast earthen work, now covered by trees, will give an understanding of the immensity of the project. Thousands of man hours, working with teams of horses, must have been required to move tons of sand to the fill area.

Potts, originally a resident of Simcoe, Canada, came to Iosco County in 1875 and purchased the Backus Brothers mill at the mouth of the AuSable River. The original owners were the pioneers in the lumber business there, having constructed their first mill in 1865 and, following a fire, replaced it with a second mill.

The Canadian paid the Backus firm $30,000 for the mill and its considerable pine holdings along the Pine River. He then remodeled this mill at a cost of $15,000 into one of the world's largest and later added a large salt block, plus modernizing facilities.

J.E. Potts, mill owner at AuSable.

Its location at the mouth of the AuSable River, later known as Potts' Point, was the most ideal spot for a sawmill along that stream. The operation had an annual capacity of more than 75-million feet of lumber and its docks were close to the river mouth for loading the finished product onto the lake carriers.

Potts operated his giant firm individually until 1883, when the J.E. Potts Salt and Lumber Company was organized, which formed the nucleus for one of the largest mill organizations in the world. This reorganization came as the need for additional capital arose to construct narrow gauge railroad tracks inland.

Potts, who resided at Detroit where the principal office of the company was located, was president of the new firm and George A. McBean of AuSable was vice-president. The firm had capital stock of $350,000 of which Potts owned $306,225. No information is available concerning the firm's indebtedness.

The firm tapped the vast reserves of timber in Oscoda County and its terminal became known as Potts' Head-quarters, later known as McKinley, site of its repair shop.

At its beginning, Potts' railroad was 50 miles in length, but it continued to expand inland as the forest was rapidly being depleted of merchantable timber. The road was to reach Lewiston before the lumbering day bubble collapsed.

In its last year of existence, Potts' mill at AuSable produced 98,000,000 feet of lumber to set a new world's record. The firm operated day and night as the mill was illuminated by electric lights.

Other lumbering firms, including the Louds, Penoyar Brothers, Gratwicks, John C. Gram, Moore and Tanner, plus Pack, Woods and Company, were to operate at AuSable-Oscoda for several more years, but Potts' firm had run its course.

Creditors of the firm demanded payment of outstanding debts and the firm could not comply. Potts was reduced to a financial shambles, losing everything in the collapse of his business. He was living with his children in 1906, when those attending the AuSable reunion offered a prayer that he would be granted "health and strength in his declining days."

In 1892, H.M. Loud and Sons Lumber Company purchased the mill machinery, railroad, equipment, timber and valuable lands formerly owned by Potts. The Louds broadened their business operations by building branch railroad spurs and opened good farming land to settlement.

Business boomed at McKinley for about 10 years, or until the railroad repair shop burned. It was to become one of the ghost lumbering towns in Michigan.

The late Harry K. Loud of Oscoda supervised dismantling of the old Potts mill in the late 1890s and the gear operated Lima locomotives purchased by Potts in the 1870s and 1880s were finally silenced by the 1911 fire at AuSable-Oscoda, which wiped out the Loud operation.

Few people in that community today even know the location of Potts' Point, or the man for whom it was named. The old railroad grades remain today in the cutover lands north of the AuSable River, visible reminders of a man who once had a vision, but who lost all he possessed in one of the riskiest businesses ever devised - Michigan lumbering.

The mill of J.E. Potts is pictured here in 1886.

Addendum:

The demise of John E. Potts noted in one of the above paragraphs was somewhat premature. There were other business chapters for him following the collapse of his Au Sable mill though none quite so spectacular.