Essay on "History of Ford Motor Company"

Essay 6 pages (1882 words) Sources: 5 Style: MLA

[EXCERPT] . . . .

Ford Motor Company

Henry Ford began working on steam engines as an apprentice in Detroit in 1879, at the age of seventeen. After bouncing between jobs for several years, Ford found himself an engineer with the Edison Illuminating Company. He would later be named Chief Engineer, and with his newfound money he began to pursue his pet project, a self-propelled vehicle with an internal combustion engine.

Ford's move into production engineering and experimentation with self-propelled vehicles was more relevant for what it would mean down the road than for what it meant at the time. Many inventors were working on automobiles after all, Ford's contributions at the time were not revolutionary. When Ford committed himself to engineering, he did so at a point in time when he was moving back and forth between the factory and the farm. Settling down in the factory and pushing into production management would set the tone for Ford's greatest contributions to society and Ford Motor Company's greatest competitive advantages in its early years.

Ford's ventures into automobiles led to the founding of the Ford Motor Company in 1903. Five years later came the landmark vehicle, the Model T. The Model T. was perhaps the most significant single vehicle in American automaking. The car was in incredibly high demand, and to meet that demand forced Ford to apply his engineering expertise to automobile production. He developed several production concepts and methods that would soon become staples of industrial production. These included the use of standardized and interchangeable parts, division of labor and precision manufacturing. By 1913, his innovations included a continuous moving assembly line (The Henry Ford Museum, 2003).

By this point, Ford had already begun a path of international expansion. They set up a Canadian subsidiary in 1904 and by the mid 1920s opened several factories overseas. The move into international markets was unusual at the time and few companies had as many overseas production sites as did Ford. The international orientation that the company had from its earliest days would set the tone for the scope of Ford's future development.

In the late 1910s and early 1920s, Ford Motor Company began construction of what would be the world's largest industrial complex in Dearborn, Michigan, Ford's hometown. This facility would be vertically integrated, including a steel mill and a glass factory (Ibid). Towards the end of the Model T's run, its price dipped as low as $260, adding a new competitive dynamic to the automobile industry, as other car companies had trouble competing with the price.

With the decline of the Model T, Ford Motor was forced to chart a new course for the company, in order to support the massive Rouge River plant, which was completed in 1928 and had since the end of the war been producing tractors. The vehicle chosen as the next generation Ford was the Model A. This model was successful intitially, but the onset of the Great Depression took its toll on sales, leading to the replacement of the Model A with the Model B.

The next major event in the history of Ford was less a company initiative than a shock that happened to the company. In 1941, the company signed its first union contract. The path to this point was rocky. Ford was an early pioneer of the concept of paying workers top wages and benefits. He had done this primarily because he recognized that the monotony of assembly line work led to high turnover, and he felt this was the best means of increasing worker retention rates. As such, however, Ford felt that there was no need for unions in his company. This belief permeated management, culminating a period of violence in 1937. This included the Battle of the Overpass, an incident where in Ford security forces set upon union activists at the gates of Rogue River. This incident resulted in workers being injured and the case going before the National Labor Relations Board (Time, 1937).

After unionization, Ford contributed to military production, cutting all civilian production until July 1945.

The post-war era saw Ford embark on a new era alongside the country. As prosperity returned to America, so too was the love affair with the automobile rekindled. The '49 Ford is credited with revitalizing the company in the post-war era. In and of itself, the '49 was not the most landmark vehicle in the history of Ford, but it set about a chain of events that would propel the company for decades. First, it marked the evolution of automobile styling, ushering in a new era. The designs that had been prevalent in the automobile industry were entirely cast aside by Ford and the popularity of the '49 meant that the industry would soon follow. Moreover, this was the first Ford that was available in a variety of different types -- convertibles, coupes, sedans and station wagons (Ford.com, 2009). This segmentation would provide the basis for the segmentation in the automobile industry that still exists. Ford simply changed the entire competitive dynamic of the industry with this car.

On the heels of the success of the '49, Ford launched the Thunderbird in 1954 ('55 model year). The T-Bird furthered what the '49 had started with respect not only to product segmentation but also to what Ford represented to the American psyche. This car was the first American sports car of the post-war era. In 1953 they redesigned the F-Series, the pickup that Ford had been selling to farmers and tradesmen since 1948. The new design made it more car-like, which would serve the F-series well on its way to becoming the best-selling pickup truck of all time.

With two hot vehicles and a strong market share, Ford went public in 1956, with 10.2 million shares going on sale, representing 22% interest in the company. Ford's ownership continues to be one of its most important characteristics. The firm is still controlled by the family today, over 100 years after its founding. The Ford family owns a series of Special Class B stocks that allow it to maintain control. They have around 40% controlling interest at this point. Ford remains one of the largest family-owned firms in U.S. history.

After going public, Ford set up its credit arm in 1959. Henry Ford had dabbled in the idea, introducing layaway plans in the 1920s. The credit arm was significant for a couple of reasons. One is that it was a novel idea at the time, but one that has been emulated by every automaker and heavy equipment maker since. The second point of significance is that Ford Credit would ultimately become one of the most consistently profitable units of the company. Moreover, because it was a novel idea at the time it was a source of competitive advantage for the company, allowing it so sell more cars than it otherwise would have.

With a roster of strong products, ample capacity and distribution, and now coffers flush from the IPO, Ford was ready to build upon its successes. The next big brand was the Mustang, introduced in 1964. International expansion and further product line expansion followed, but over the next few decades the company grew and expanded upon its existing operations. The company continued with its vertical integration strategy and did not launch any significant new products during this era, nor did they make any key acquisitions. Indeed, for most of Ford's history it has eschewed growth through acquisition.

Ford peaked in the U.S. In 1973, and over time this would mark a turning point in their strategy. Formerly a hotshot growth company, Ford would now move towards strategies more in line with a mature firm in an increasingly competitive industry. They increased their product line dramatically in something of a saturation strategy. They acquired 25% of Mazda in 1979.

The company also became embroiled in scandal, the Pinto case. Ford had built a vehicle that tended to explode into flames when hit from behind. Rather than fix the problem, Ford calculated that it would be cheaper to settle the lawsuits than to recall the Pinto (Birsch & Fielder, 1994). This was recorded for posterity in a memo, which was later leaked. Compounding the problem was the degree to which Ford had fought making the easy and inexpensive change that would save thousands of lives. The damage to the company's reputation would take years to overcome.

The 1980s saw the modern Ford emerge. The company became involved in industry-wide consolidation. Over the course of the decade they acquired Jaguar and Aston Martin, entered into a joint venture with Kia. The Taurus and the Aerostar were introduced, two stalwarts in the lineup. Ford by this point had filled out its roster, sometimes in duplicate with Mercury brands overlapping the Ford brands. The company's strategy was to occupy every conceivable segment of the automobile market. They had seen the impact of foreign competition in the 1970s and 80s, and the subsequent decline in market share. The Aston Martin and Jaguar purchases… READ MORE

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