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3
Ford Motor Company
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The Ford Motor Company’s primary claim to the corporate hall of fame has always been its invention of the assembly line, a remarkably simple yet stunningly effective innovation that completely changed the course of manufacturing. In ensuing years, Ford has additionally become known as a global goliath, an amalgamator of some of the best known brands in the auto business, and even a leader in the industrial charge toward the Internet. These days, however, it is also developing a new and somewhat surprising reputation for environmentalism.
In an industry never associated with “green” activism, many consider Ford’s drive in this direction downright astonishing. It began in May 2000, when recently installed board chairman William Clay Ford Jr.—great-grandson of founder Henry Ford—conceded for the first time that sport utility vehicles emit more pollution than cars and can be dangerous to others on the road. He pledged to make these SUVs, which accounted for 20 percent of the company’s sales and most of its profit, cleaner and safer. He followed through by promising to boost their fuel efficiency by 25 percent over five years. And he challenged his competitors to do likewise.
The initiatives caught many off guard, but Ford has always been good at assessing public taste and adjusting its output accordingly. The Model T, its first success, dominated the embryonic automobile market by providing inexpensive and reliable transportation for the earliest drivers. When sales lagged, the company developed flashier and more comfortable alternatives. And as demand continually evolved, so did Ford. It introduced new features, became one of the first automakers to expand overseas, modernized its facilities, opened a finance subsidiary, and even purchased complementary companies to help expand its market share.
Today—with a stable of brands that includes Aston Martin, Jaguar, Lincoln, Mercury, Mazda, Land Rover, and Volvo, as well as the Ford brand name—the company is the world’s number-one truck manufacturer and second largest car maker. Its Ford Motor Credit division is the top auto finance company in the United States. It has implemented computer programs that are as innovative as its development of the assembly line. And, according to consumer demand, it is leading its industry toward greater environmental responsibility.
The Ford Motor Company began operation in 1903, when Henry Ford and 11 associates raised $28,000 to open a tiny manufacturing plant in a Detroit wagon factory. Initially the company’s vice-president and chief engineer, Ford had been looking forward to this nearly all his life. A few weeks later, he sold his first two-cylinder Model A to a Chicago dentist. Over the next 14 months, he sold 1,700 more.
Born in 1863 in Greenfield Township, Mich., Ford always preferred mechanical pursuits to the farm duties he was expected to perform with his five younger siblings. His fate was sealed at age 13, when he saw a steam engine traveling under its own power. Ford jumped off the wagon on which he was riding with his father to examine it, and decided right there to become an engineer. Three years later he left for Detroit and a job as an apprentice machinist with the Michigan Car Company. After two years, he accepted a better position as an engineer with the Edison Illuminating Company.
During his stint with Edison, Ford began work on a gasoline-powered vehicle. In 1896 he produced his first: the Quadricycle, which had four bicycle-like wheels, a tiller for steering, and two forward gears. In order to focus full-time on advancing his ideas, he left Edison in 1899 to open the Detroit Automobile Company. That enterprise failed, as did a second one started two years later. But his third attempt, which he named after himself and opened with sufficient capital to weather initial difficulties, proved a winner.
The first few years of Ford Motor were heady ones indeed. The firm expanded rapidly, opening Ford Motor Company of Canada just one year after its founding. By 1907, it was exporting cars to Europe. Within a decade, it had plants in Australia, South America, and Japan. At the same time, Ford kept tinkering with new designs. He used one letter of the alphabet after another to designate them, although many never made it out of his shop. One that did was the Model N, a spunky four-cylinder vehicle that sold for $500. Since he was almost solely responsible for these early products, it was not surprising that Ford soon became the company’s president and majority owner.
His big breakthrough came in 1909 when he unveiled the Model T. Also known as the Tin Lizzie, it really captured the public’s attention and Ford quickly received an astounding 10,000 orders for them. Demand forced him to open a larger plant in nearby Highland Park, but even that proved insufficient because of a production process that had individual workers assembling one entire car before moving on to another. Ford put his engineering skills to work on the problem and in 1913 found a way to speed up production by using and improving upon a recent manufacturing innovation called the assembly line. At first, it had workers walking from one partially built car to the next in order to install the same component over and over; eventually, he improved the procedure by putting everything on conveyor belts so parts and cars would travel directly to workers. The system proved so effective that in a single year Ford was able to produce 168,000 cars—helping the Model T account for one-third of the entire American automobile market.
Ford was hardly finished, though. He bought out his partners and built the world’s largest industrial complex. He purchased the Lincoln Motor Company and began producing trucks, tractors, and even airplanes. (He even ran for the U.S. Senate, but lost.) And when Model T sales lagged due to increasing competition shortly after the millionth one was produced, Ford developed a faster and more comfortable version that he named after his first product. This new Model A was announced in 1927, and 400,000 orders were placed even before production began. Almost 2 million were sold until the stock market crashed two years later.
But even the Great Depression could not stop Ford. Ford introduced the powerful V-8 engine and medium-priced Mercury line which boosted sales…that is until World War II temporarily halted civilian production. During the war, his plants turned out B-24 bombers, jeeps, tanks and related machinery. And in 1945, passenger cars again graced his assembly lines. Ford died two years later at age 83, however, and did not have long to savor the resurgence.
The system he developed, nonetheless, continued functioning smoothly. Innovative models like the Thunderbird sports car were regularly unveiled, and shortly after the company went public in 1956 in the largest stock issue to date it produced its 50millionth vehicle. Grandson Henry Ford II took over, with day-to-day responsibilities going to heavy hitters, such as Robert McNamara (who resigned in 1961 to become Secretary of Defense) and Lee Iacocca (who left in 1978 to assume the presidency of Chrysler). A series of down years followed—as they did for all American automakers—thanks to industry-wide arrogance and increasing Japanese competition. But innovative cars, such as the Taurus and Escort, along with the F-series pickup truck, helped bring Ford back. By 1986, earnings exceeded those of General Motors for the first time in six decades and it purchased Aston Martin, Jaguar and other companies. Just five years later, though, another period of malaise and stagnation led Ford to announce its largest one-year loss ever. Desperate for recovery, the company finally decided that enough was enough.
Beginning in the mid-1990s, as Ford produced its 250-millionth vehicle, the company initiated a series of changes that were more far-reaching than anything since Henry first cranked up his assembly line. Chief among them was Ford 2000, an ambitious plan to eliminate duplication in operations worldwide. They also included development of several innovative new models, an agreement with Nissan to sell Fords in Japan, and the acquisition of Hertz, the world’s largest rental car company. These moves were soon joined by the purchase of Europe’s largest auto maintenance chain, and plans to launch a similar effort in the United States; the acquisition of Sweden’s AB Volvo, which gave Ford additional luxury lines along with increased European presence; aggressive movement into previously under served countries like China, India, and Vietnam; and joint ventures with Microsoft and Priceline.com to build cars specifically for online customers and deliver them through local dealerships.
Ford additionally began using computers to cut costs and development times for everything from crash simulations to initial car designs. (The former, which cost $60,000 apiece in 1985, could be run for only $10 in 2001; the latter, which once took 12 people 12 weeks to complete, now could be accomplished in three weeks by a single person.) To further increase computer literacy among its employees, Ford also announced a trailblazing program that permits all workers to purchase a home computer, color printer and Internet access for just $5 a month.
The most striking program of all has been Ford’s newly expressed effort to “merge industrialism with environmentalism,” as the chairman and family heir told Newsweek in the spring of 2000—but that is hardly the end of its ongoing transformation. Barely a month after that announcement the company became one of the first major manufacturers to offer full medical benefits for same-sex partners of its employees, and one month later said it might begin building cars in Japanese plants run by its partner Mazda Motor Corporation as soon as 2002.
Henry Ford may not have agreed with all these moves. But he probably would be pleased that, through them, his company remains firmly atop the industry he helped establish.