, Research Paper
Like most great enterprises, Ford’s beginnings were modest. The company had anxious moments in its infancy, balancing precariously on the brink of bankruptcy until cash inflows from sales began. The earliest record of a shipment is July 20, 1903, approximately one month after incorporation, to a Detroit physician. With the company’s first sales, came a ray of hope. A worried group of stockholders, skeptically eyeing a bank balance that had dwindled to $223.65, breathed easier, and a young Ford Motor Company had taken its first step.
During the next five years, young Henry Ford, as chief engineer and later as president, directed a development and production program which started in a converted wagon shop on Mack Avenue in Detroit
and later moved to a larger building at Piquette and Beaubien Streets In the Ford Motor Company’s first 15 months, 1,700 Model A cars chugged out of the old wagon shop. Between 1903 and 1908, Henry Ford and his engineers used the first 19 letters of the alphabet to designate their creations, beginning in 1903 with the first Model A. Several of the car models were experimental only and never reached the public. Of the eight early models produced, the most successful was the Model N — a small, light, four-cylinder machine which went on the market at $500. A $2,500 six-cylinder luxury car, the Model K, sold poorly.
The Model K’s failure, along with Mr. Ford’s insistence that the company’s future lay in the production of inexpensive cars for a mass market, caused increasing friction between Mr. Ford and Alexander Malcomson, a Detroit coal dealer who had been instrumental in purchasing equipment and raising the original $28,000 of cash for working capital. As a result, Mr. Malcomson left the company and Mr. Ford acquired enough of Malcomson’s stock to increase his own holdings to 58-1/2 percent. Mr. Ford became president in 1906, replacing John S. Gray, a Detroit banker who had served as the company’s first president.
Squabbles among the stockholders did not threaten the young company’s future as seriously as did a man named George Selden. Mr. Selden had a patent on “road locomotives” powered by internal combustion engines. T o protect his patent, he formed a powerful syndicate to license selected manufacturers and collect royalties for every “horseless carriage” built or sold in America, attempting to monopolize the industry. Hardly had the doors been opened at the Mack Avenue factory when Selden’s syndicate filed suit against the Ford company which bravely had gone into business without a Selden license.
Forced to choose between closing the doors or fighting a battery of attorneys who already had whipped bigger companies into line, Henry Ford and his partners decided to fight. Eight years later, in 1911, after incredibly complicated court proceedings, Ford Motor Company won the battle which freed it and the entire auto industry from Selden’s strait jacket. Despite harassment from Selden’s syndicate, the little company kept improving its machines, making its way through the alphabet from its first model, the original Model A, until it reached the Model T in 1908. A considerable improvement over all previous models, this car was an immediate success. Nineteen years and more than 15 million Model Ts later (1927), Ford Motor Company was a giant industrial complex that spanned the globe. Its cars had started an urban revolution. And the Ford assembly line ignited an industrial revolution.
Pre-World War II Expansion
During those years of hectic expansion, Ford Motor Company:
Began producing trucks and tractors (1917);
Became wholly owned by Henry Ford and his son, Edsel, who succeeded his father as president in 1919 after a conflict with stockholders over the millions to be spent to build the giant Rouge manufacturing complex in Dearborn, Mich.; Bought the Lincoln Motor Company (1922); and, Built the first of 199 Ford Tri-Motor airplanes used by America’s first commercial airlines (1925).
By 1927, time had run out on the Model T. Improved, but basically unchanged for so many years, it was losing ground to more stylish, powerful machines offered by Ford’s competitors. On May 31, Ford plants across the country closed down for five months while the company retooled for the new Model A. It was a vastly improved car in all respects. More than 4.5 million Model As, in several body styles and a wide variety of colors, rolled onto the nation’s highways between late 1927 and 1931. But even the Model
A eventually reached the end of the line when consumers demanded more luxury and power.
Ford Motor Company delivered both with its next entry — the Ford V-8 — which the
public saw for the first time on March 31, 1932. Ford was the first company in history to
successfully cast a V-8 engine block in one piece. Experts had told Mr. Ford that it couldn’t be done. It was many years before Ford’s competitors learned how to mass-produce a reliable V-8. In the meantime, the car and its powerful engine became the darling of performance-minded Americans. In 1938, six years after the V-8 was introduced, production started on the Mercury which became Ford’s entry in the growing medium-priced field.
In 1942, civilian car production came to a halt as the company threw all its resources into the U.S. war effort. Initiated by Edsel Ford, the giant wartime program produced more than 8,600 four-engined B-24 “Liberator” bombers, 57,851 aircraft engines, 278,000 jeeps, as well a s tanks, tank destroyers, and other pieces of war machinery, all in under three years.
The Post-War Reorganization
Edsel Ford died in 1943, just as his wartime program was reaching its maximum efficiency. A saddened Henry Ford resumed the presidency until the war’s end, when he resigned for the second time. His oldest grandson, Henry Ford II, became president on Sept. 21, 1945. Even as Henry Ford II drove the industry’s first post-war car off the assembly line, he was making plans to reorganize and decentralize the company. Losing money at the rate of several million dollars a month, Ford Motor Company was in critical condition to resume its pre-war position as a major force in a fiercely competitive auto industry.
He proved to be the ideal individual to lead Ford from a family business to a modern publicly-owned corporation. In much the same manner as his grandfather had faced problems at the company’s beginning, Henry Ford II tackled the job of building an automobile company all over again. His post-war reorganization and expansion plan rapidly restored the company’s health.
Henry Ford II’s genius was in his ability to find the most talented people and bring them into leadership positions in the rapidly growing post-war organization. For example, he hired Ernie Breech, who would lead the Ford operation for the next 15 years. He also hired ten young former Air Force intelligence officers, whom the press quickly dubbed “The Whiz Kids.” They included J. Edward Lundy, Arjay Miller, and Robert McNamara, financial disciplinarians who brought quantitative analysis, the science of modern management, to Ford Motor Company.
In the fall of 1954, the Thunderbird, an American classic, joined the Ford family as a 1955 model two-seater sports car. Its introduction single-handedly started the personal luxury car segment of the market in the United States. The original Thunderbird was offered with a 190 to 198 horsepower V-8 engine and three-speed manual transmission and had a unique feature — a convertible canvas roof for fair and sunny weather and a detachable plastic hardtop for foul weather.
In January 1956, Ford took a decisive step forward when it went “public.” In what was believed to be the largest stock issue of all time, 10.2 million shares of the Ford Motor Company were put up for sale through underwriters to the public; investors rushed to buy $640.7 million worth of shares or approximately 20 percent of what, up to then, had been a family-owned business. As of February 24, 1956, the Ford Motor Company had approximately 350,000 new stockholders. Two years later, Ford announced its entry into the heavy and extra-heavy truck market and by 1959 it had produced it 50-millionth vehicle.
The direction of the American auto industry changed forever on April 17, 1964, when a very different kind of car was unveiled to the public at the World’s Fair in New York. The Ford Mustang, with its long hood, short rear deck, and sporty features, caused a sensation that confirmed the theories of Ford product planners who thought a car with a youthful touch would appeal to World War II baby boomers.
Like the U.S. appearance of the Beatles two months earlier, this fun and affordable new car proved to be a springtime boost to a nation that had spent a long winter mourning the death of President John F. Kennedy. The Mustang possessed the attributes of a sports car, but in the Ford tradition, provided simplicity and value for the money. Dealers were swamped with some 22,000 orders on the car’s first day of production. Ford has been an international company for almost all of its history. Within a year of its founding, Ford was exporting cars to Europe. Within ten years, Ford had assembly plants in Canada, Europe and South America. Henry Ford’s policy was to become a contributing citizen in every country where Ford sold cars, and his operating philosophy was to “build them where you sell them.”
By the 1960s, Ford leaders anticipated a weakening of trade barriers and moved to regional trading blocks ahead of the pack. Ford of Europe was established in 1967, 20 years ahead of the European Economic Community’s arrival. And Ford established the North American Automotive Operations (NAAO), consolidating the U.S., Canadian and Mexican operations in 1971, more than two decades ahead of the North American Free Trade Agreement.
Ford Lio Ho Motor Company. Ltd. was established in 1972 in Chung Li, near Taipei. This manufacturing and vehicle assembly complex produces Festiva (three- and five-door models), Liata/Aztec (public launch in June), Telstar and Mondeo cars; plus Pronto (Suzuki-derived) and Econovan trucks. In addition, Ford Lio Ho markets Mondeo and Scorpio models imported from Ford of Europe, and Windstar and Taurus from North America. Ford owns 70 percent of this affiliate, which employs about 3,000 people and has 55 dealers.
In 1973, Ford renewed operations in Spain with the incorporation of Ford Espana S.A. and the opening of a sales office in Madrid. In 1976, Ford launched a car assembly and manufacturing complex at Almusafes (near Valencia, Spain) which now produces Fiesta and Escort cars and manufactures engines.
In 1979, Ford acquired 25 percent equity interest in Toyo Kogyo, as the maker of Mazda was then known. Two pieces of property in Yokohama were key assets in the Mazda equity transaction. In 1986, Ford acquired a 10 percent equity in Kia Motors Corporation. Kia supplies the Ford Festiva, a subcompact car sold in Taiwan, Australia, New Zealand, Venezuela, and Japan and some smaller markets.
In 1987, Ford Motor Company bought 75 percent of Aston Martin Lagonda and the remaining shares in July 1994. In addition to providing financial security, Ford enabled Aston Martin to gain access to its worldwide technical, manufacturing and supply systems for the design and development of new products. Aston Martin dates back to 1914, when Lionel Martin and Robert Bamford, who were Singer dealers in London, decided to build their own car. They mounted a 1.4 liter four-cylinder Coventry Simplex engine in an Isotto Fraschini chassis and called it Aston Martin.
In February 1990, Jaguar was acquired by Ford Motor Company. Founded in1922 by William Lyons and William Walmsley, Jaguar got its start as the Swallow Sidecar Company. From motorcycle sidecars, they branched into custom-bodied automobiles and, in 1931, into their own line of high-performance automobiles called “SS” cars.
In 1991, Ford and Volkswagen announced the formation of a joint venture, AUTOEUROPA, to produce a new multi-purpose vehicle in spring 1995. A new 200,000-square metre AUTOEUROPA manufacturing plant was built in Palmela (southeast of Lisbon in the Setubal region), Portugal. The plant will have a capacity of 180,000 units per year.
The legacy of belief in working people continued throughout Henry Ford II’s years. He reiterated his grandfather’s equal employment policies, predating Federal civil rights legislation. In 1968, Henry Ford II expanded the company’s commitment to social responsibility by expanding minority employment and creating minority dealer and supplier development programs.
In the late 1970s when the American worker was being criticized for producing poor quality, Henry Ford II said, “there is no such thing as a bad employee, only bad managers.” Ford Motor Company leadership accepted responsibility, and Ford was the first American auto company to make quality “Ford’s number one operating priority.”
The first Ford chiefs after Henry Ford II retired were Phillip Caldwell, Donald Petersen and then Harold “Red” Poling. Each made major contributions, leading Ford to become the American auto industry’s quality leader.
While others in industry believed that high tech robots could increase quality by “replacing” workers, Ford Motor Company held to its long-standing belief in people. “Teamwork” became the norm, from in-plant participatory groups to a new way of developing cars based on cross-functional teams. The idea was to bring representatives from every engineering and management specialty together into each vehicle development team, then give them the authority to make as many decisions as possible.
The first team effort was a bold new car, the Ford Taurus. The effort was so immensely successful that each subsequent vehicle team was given more authority and independence. As more Ford teams worked more directly with customers, they realized that the very definition of “quality” had to expand. And in 1980, Ford introduced the 1981 Escort, its first attempt at a “World Car.”
The real opportunity to once again become a global company came with the electronics revolution of the late 1980s. While many companies initially saw the computer age as a means of replacing humans with artificial intelligence, Ford leaders recognized that the real value in this new technology was that it could greatly expand the power of each individual.
Electronic communication allowed Ford to connect individuals to one another as never before — to increase knowledge exponentially and empower individuals to become more complete participants in decision making processes. In 1987, Ford launched a computer-based system know as the Worldwide Engineering Release System (WERS) to link manufacturing and engineering groups in Ford locations throughout the world. This emerging technology allowed Ford to establish a global network, not only inside of the company, but also with suppliers, joint venture partners, in common research efforts with academia and governments, and a direct and open link to customers around the globe.
Enabling communications technology also allowed Ford leadership to develop a genuine global car, the CDW27. Ford of Europe needed a new mid-sized family car, yet with a market potential of only 250,000 units a year, the company could not afford to build a sophisticated new vehicle for one region. Yet if Ford could spread the cost of development and production around the world, realizing a 100,000 unit of more market potential, then the astronomical cost could be offset.
CDW27 became Ford’s first modern global car. It was named Mondeo in Europe, Taiwan and the Middle East, and slightly modified versions went on sale in North America with the names Ford Contour and Mercury Mystique. The CDW27 was not, however, a return to a world car like the legendary Model T Ford. The original idea of a world car as exemplified by the Model T was to achieve an ultimately simplified vehicle with universal acceptance. That was no longer possible in a world market where sophisticated customers expected advanced technologies and given the complexity of social and environmental expectations in vastly different countries.
The Model T was designed for the lowest common denominator. The Ford CDW27, on the other hand, was a highly sophisticated car with two all-new, state-of-the-art, high-output engines, a new electronically controlled transmission, new electronic traction control adaptive dampers, air bags, anti-lock brakes, and all of the other technological refinements customers wanted. Ford’s CDW27 became the prototype for a new way of thinking about product development. It proved that true globalization was finally possible, and that customer-focused teams were the way of the competitive future.
Today, Ford Motor Company is the second-largest car and truck producer in the world and is ranked second on the Fortune 500 list of the largest U.S. industrial corporations, based on sales. In 1996, Ford’s world wide sales and revenues totaled $147.0 billion, up 7 percent from 1995. Ford was also the leading exporter of vehicles from the United States and Canada, with a record of 139,418 units. Although Ford is better known as a manufacturer of cars and trucks, it now produces a wide range of other products including industrial engines, construction machinery, glass and plastics. And Ford is established in a wide range of other businesses — including financial services, insurance, automotive replacement parts, electronics and land development.
On November 1st of 1993, Alex Trotman became Chairman and Chief Executive Officer of Ford Motor Company, and everyone at Ford understood what would happen next, for Trotman is a globalist. He was born and raised in England and Scotland, with the first half of his career in product planning in Europe, where he played a key role in establishing Ford of Europe. Within three weeks of his appointment, Trotman initiated a year-long series of studies and development efforts to globalize Ford. The results of this effort led to Ford 2000.
Ford 2000 is an initiative that became effective on January 1, 1995 and began with the consolidation of Ford’s North American and European operations; it continues with a commitment to bring the entire Ford global organization into a single operation by the year 2000.
Ford 2000 created a single, global management team. This has allowed the company to eliminate duplication, initiate best practices, use common components and designs for the advantage of scale, and allocate resources to wherever they are needed to best serve market needs. Ford 2000 combines the power, resources, and reach of a world company with the immediacy, the intimacy, the agility, and the spirit of a small one. This was accomplished with the creation of five vehicle centers.
Ford 2000’s strength is that it fully utilizes the company’s depth of human diversity. Ford believes that diversity will be the engine that drives the creative energy of the corporation of the 21st century. Successful companies will be those who are able to draw on this diversity, to stay on the innovative and competitive edge of their fields.
So the company that started this century with a single man envisioning products that would service more people is ending the century with a global organization that retains and expands Ford’s heritage of serving people, inside and outside of the Ford global community.