Ford initiated industrial mass production in his auto plants but his interest was in mass consumption (Iacocca, 1998). Ford said, "Mass production requires mass consumption, which means higher wages" (Foster, 1988: p. 14). His philosophy was simply this: if everyone earned a decent wage and he produced more cars in less time for less money, everyone in the country would buy his cars. One of the actions Ford took in 1913 to actualize his vision was to increase the minimum daily wage of workers to $5.00 from $2.34 for a 9-hour shift, which was the average in the auto industry. He also reduced the workday to 8-hour shifts. The Wall Street Journal called Ford's action "an economic crime" because no one could make that much money without a significant amount of training or education. Critics worldwide called it "Fordism," not meant as a compliment. Ford lowered his costs of building each car so much, that the wages did not really matter, in fact, the increase in daily wages made it possible for more people to buy cars (Iacocca, 1998).
Ford and his investors formed the Ford Motor Company in 1901. The first Model A was sold within a month of the company being established. Ten workmen functioning out of a converted wagon factory in Detroit built the car. During the next 15 months, 1,700 Model A's were sold. He kept improving the car, using the letters of the alphabet for each new design. The first Model T came out of the factory in 1908; it cost $850 and 10,660 cars were sold that first year. The Model T had a top speed of 45 miles per hour and it averaged 25 miles to the gallon. It had a 20 horsepower engine, side-valves, four cylinders, and 18-inch wheels with cotton cord tires. There was no gas gauge; instead, the driver had to check the gas level by lowering a wooden stick into the gas tank. Window wipers were hand operated, it had a very rough suspension and the sides of the car were open. The only color available was black. Still, even with what today's driver would consider a complete lack of amenities, the model T was a perfect car for the time. The roads were bad and the population lived mostly in rural areas where there were very few repair facilities.
The Model T was so well engineered and so simple to repair that if anything went wrong, it took only a screwdriver to fix it. The model T was also a remarkably versatile vehicle. Farmers could buy tractor wheels for it that replaced the rear axle wheels. The model T thus became a tractor that the farmer could use to haul, plow, plant and harvest. They could even use the rear axle to power mobile sawmills, electric generators, water pumps and feed grinders. This made the model T very attractive to buyers and helped to influence the rapid increase in demand for the vehicle.
The demand was high for the car but production was slow because each car was individually handmade. Ford knew that if he were going to satisfy the demand he would have to speed up production. This demand led Ford to investigate conveyor belts and how he could use them to increase production and lower costs. Ford built an automatic conveyor belt and organized teams that added parts to each Model T as it moved down the line. By 1914, his Highland Park plant was churning out a car every 93 minutes (Iacocca, 1998). The chassis assembly alone was cut from 12 hours to one hour and 33 minutes, a dramatic time saver for the assemblers. Ford spent about $3,500 to build the conveyor belt that would move the cars down an assembly line. This was a significant change; rather than the workers moving from one car assembly to the next, the car moved saving time and money. The components needed were funneled to the teams so the workers didn't even have to waste time moving to parts bins for what they needed (Iacocca, 1998). In 1915, mass production had allowed Ford to sell its millionth car (Crews, 1998). By 1927, the year production ended for the Model T, more than 15 million cars had been sold. That was half of the world's output of cars. Ford had designed a car that was easy to manufacture and one that could be owned by a large number of people (Iacocca, 1998).
Ford's vision not only created a middle class in this country, but he also fostered urbanization and rising wages. Consider these demographics: when Ford left his own family farm at the age of 16 and walked eight miles to get his first job in a Detroit machine shop, only two out of eight Americans lived in cities. An overwhelming majority of people lived on farms in rural areas. One of the reasons for the increase was the Model T. People flocked to Detroit to obtain jobs in Ford's factories. Once employed, they could afford to purchase a car that afforded them great mobility. After the war, even more people moved to urban areas for jobs and more cars were sold (Iacocca, 1998). Ford helped to supplement and greatly increase the employment of the economy.
Ford did not invent mass production through assembly lines and moving conveyor belts; he just integrated the concept with building automobiles. It all might not have happened if it had not been for the ideas of Alfred P. Sloan, who established General Motors. Sloan understood how to decentralize and manage a large manufacturing company by the late 1800s with many marine engine builders who were familiar with how internal combustion engines worked. Hundreds of entrepreneurs who wanted to build cars used this expertise, but it did not quite work. Even though these people increased their production output, their costs did not drop as significantly as did Ford's costs. Their crude, craft-based production techniques left each automobile costing the same amount no matter how many they built. The competing companies did not use the standard gauging systems and the tools of the day could not cut hardened steel so all the components were machined and cut to shape, then put in ovens to harden. The very process of heating the parts caused many of the parts to warp, which made them useless. Each vehicle was different from every other one because of the process. Ford did not do this; he made a simple car with standard parts and mass- produced them, which lowered his costs. For his Model T, all parts were the same because he used the idea of interchangeable parts and then made those parts easy to manufacture, easy to repair and easy to drive. He began this process in 1908 with his first model T (Iacocca, 1998).
Ford was never satisfied; he analyzed the production process continually always trying to find new ways to increase production and cut costs at the same time. He initially found that it would be faster to have assemblers perform specialized tasks and move from automobile to automobile around the assembly area. By 1913, his line was a magneto assembly line that used all the principles he devised through his analysis and which he continued to refine. One of the benefits of the line he built was that the conveyor belt maintained a constant pace. That pace could be speeded up to make the workers work faster (Iacocca, 1998). In 1914, Ford built 308,162 cars, which exceeded the number produced by all the other automobile manufacturers put together (Crews, 1998). He also reduced the price of the car to $500, making it even more affordable for the American worker to purchase one (The economist, 1996). In 1924, Ford reduced the price of his Model T to $290. Mass production also allowed Ford to open international franchises. By 1924, Ford opened operations in Indonesia, Siam, Brazil, China and Argentina. He also opened satellite factories in the United States, such as in Norfolk, Virginia (Crews, 1998).
The assembly line was responsible for an enormous increase in the number of people employed in the automobile industry. In 1914, 3,000 people worked in automotive plants in Detroit. By 1919, that number increased to 75,000. The reason was simply Ford's initial breaking down of tasks to each individual worker. Ford, himself, improved his own productivity by 90 percent in one year between 1913 and 1914.
Mass production reached its peak in Ford's giant Rouge complex in Dearborn. By 1927, Ford had the raw materials coming in on one end and the finished automobile coming out the other end. His reasoning for the raw materials was simply that he could build the components faster and more cost-effectively than any supplier could (Iacocca, 1998).
The assembly line and mass production of automobiles was not the only contribution Ford made to the industry. He was responsible for the advancements in the means and ways of transportation. He knew that if people were going to drive the cars they would need places to buy fuel. So Ford pushed to have gasoline stations open everywhere. He also used his money and power to push for better roads. His efforts led to better roads, which eventually led to an interstate-highway system (Iacocca, 1998).
Ford also knew that he needed a system to sell and repair cars and he knew the facilities needed to be local. He invented the dealer-franchise system to fill these needs. The facilities were nicknamed Ford's "road men." By 1912, there were 7,000 Ford dealers across the country (Iacocca, 1998).
Henry Ford did not live to see his ultimate competitors rise. Although Ford Motor Company had ongoing competition for market share in the United States against General Motors and Chrysler, none would be more of a hit than the incorporation of Japanese car manufacturers within the domestic car market. Toyota, Honda, Datsun and Subaru took what had never been a major issue in auto manufacturing to their advantage. The Japanese imports were taking a very close look at quality and durability of these growing investments. Along with quality, Japanese manufacturing incorporated a more fuel efficient and economical approach. With the outside world crashing in on the manufacturing process in the 1970's, domestic manufacturing had to consider new changes. Changes in the forms of new government standards with regards to air pollution and increased safety, combined with the threat of higher gas prices coming out of the Middle East. Decision-making from a consumer standpoint was greatly affected. "As late as 1978, the 'Big Three' (G.M., Ford and Chrysler) accounted for 81% of the 11 million vehicles sold domestically in that year. By 1991 the Big Three's share had fallen to only 63 percent of the 8 million vehicles sold. This reduction in the competitiveness of domestic cars is widely blamed on a large deterioration in their quality relative to the Japanese imports." (Nichols, 1998.)
Henry Ford paved the road and revolutionized not only the manufacturing of automobiles but he established a process for selling the cars. Manufacturers still, to this day model this process of selling and servicing globally. He was an innovator that was always looking for the edge. He even built a biomass car that was hemp fueled and fabricated. Its plastic panels had impact strengths 10 times greater than steel. They were made from flax, wheat, hemp and spruce pulp. Ford was not necessarily an inventor but, in fact, his strengths and visions were in the manufacturing process. He took ideas already available, such as the conveyor belt and adapted the idea for use in his automobile production factories. By doing so, he was able to cut the time of producing each car to a fraction of the time by using the assembly line approach. The price of automobiles could be lowered and the wage of workers could then be increased. Between these two acts, Ford created an economic society in which every person employed at a decent livable wage could buy a car.
