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Ford Motor Company

Ford Motor Company

One American Road
Dearborn, Michigan 48126-2798
U.S.A.
Telephone: (313) 322-3000
Toll Free: (800) 555-5259
Fax: (313) 845-6073
Web site: http://www.ford.com

Public Company
Incorporated: 1919
Employees: 327,531
Sales: $164.1 billion (2003)
Stock Exchanges: New York Pacific Euronext Paris Swiss London
Ticker Symbol: F
NAIC: 336111 Automobile Manufacturing; 336112 Light Truck and Utility Vehicle Manufacturing; 33612 Heavy Duty Truck Manufacturing; 33621 Motor Vehicle Body Manufacturing; 532112 Passenger Car Leasing; 524126 Direct Property and Casualty Insurance Carriers

As the second-largest automobile company in the world, Ford Motor Company represents a $164 billion multinational business empire. Known primarily as a manufacturer of automobiles, Ford also operates Ford Credit, which generates more than $3 billion in income, and owns The Hertz Corporation, the largest automobile rental company in the world. The company manufactures vehicles under the names Ford, Lincoln, Mercury, Jaguar, Volvo, Land Rover, and Aston Martin. Ford also maintains controlling interest in Mazda Motor Corporation. Ford's financial stability was shaken in early years of the new millennium as a result of slowing sales, quality issues, and a debacle involving Firestone tires.

Origins of an American Legend

Henry Ford, the founder of the Ford Motor Company, was born on a farm near Dearborn, Michigan, in 1863. He had a talent for engineering, which he pursued as a hobby from boyhood, but it was not until 1890 that he commenced his engineering career as an employee of the Detroit Edison Company. In his spare time, Ford constructed experimental gasoline engines and in 1892 completed his first gasoline buggy. Dissatisfied with the buggy's weight, he sold it in 1896 to help fund the construction of a new car. Ford's superiors at the electric company felt his hobby distracted him from his regular occupation and, despite his promotion to chief engineer, he was forced to quit in 1899.

Shortly afterwards, with financial backing from private investors, Ford established the Detroit Automobile Company. He later withdrew from the venture after a disagreement with business associates over the numbers and prices of cars to be produced. Ford advocated a business strategy which combined a lower profit margin on each car with greater production volumes. In this way, he hoped to gain a larger market share and maintain profitability.

Independently in a small shed in Detroit, Henry Ford developed two four-cylinder, 80-horsepower race cars, called the 999 and the Arrow. These cars won several races and helped to create a new market for Ford automobiles. With $28,000 of capital raised from friends and neighbors, Henry Ford established a new shop on June 16, 1903. In this facility, a converted wagon factory on Mack Avenue in Detroit, the Ford Motor Company began production of a two-cylinder, eight-horsepower design called the Model A. The company produced 1,708 of these models in the first year of operation.

The Ford Motor Company was sued by the Licensed Association of Automobile Manufacturers, an industrial syndicate which held patent rights for road locomotives with internal combustion engines. Ford responded by taking the matter to the courts, arguing that the patent, granted to George B. Selden in 1895, was invalid. During the long process of adjudication, Ford continued to manufacture cars and relocated to a larger plant on Piquette and Beaubien Streets. A Canadian plant was established in Walkerville, Ontario, on August 17, 1904.

Henry Ford and his engineers designed several automobiles, each one designated by a letter of the alphabet; these included the small, four-cylinder Model N (which sold for $500), and the more luxurious six-cylinder Model K (which sold poorly for $2,500). The failure of the Model K, coupled with Henry Ford's persistence in developing inexpensive cars for mass production, caused a dispute between Ford and his associate Alexander Malcolmson. The latter, who helped to establish the company in 1903, resigned and his share of the company was acquired by Henry Ford. Ford's holdings then amounted to 58.5 percent. In a further consolidation of his control, Ford replaced John S. Gray, a Detroit banker, as president of the company in 1906.

In October 1908, despite the continuing litigation with the Selden syndicate, Ford introduced the durable and practical Model T. Demand for this car was so great that Ford was forced to enlarge its production facilities. Over 10,000 Model Ts were produced in 1909. Able to vote down business associates who favored more conventional methods of production, Henry Ford applied his assembly line concept of manufacturing to the Model T.

In developing the assembly line, Ford noted that the average worker performed several tasks in the production of each component, and used a variety of tools in the process. He improved efficiency by having each worker specialize in one task with one tool. The component on which the employee worked was conveyed to him on a moving belt, and after allowing a set time for the task to be performed, the component was moved on to the next operation. Slower workers thus needed to increase their work rate in order to maintain production at the rate determined by the speed of the belts.

Ford's battle with the Selden group led to a decision by the Supreme Court in 1911, eight years after the initial suit. The Court ruled that the Selden patent was invalid. The decision freed many automobile manufacturers from costly licensing obligations; it also enabled others to enter the business.

When the United States became involved in World War I (April 1917), the Ford Motor Company placed its resources at the disposal of the government. For the duration of the war, Ford Motor produced large quantities of automobiles, trucks, and ambulances, as well as Liberty airplane motors, Whippet tanks, Eagle submarine chasers, and munitions. In 1918, Henry Ford officially retired from the company, naming his son Edsel president and ceding to him a controlling interest. But, in fact, Henry continued to direct company strategy and spent much of his time developing a farm tractor called the Fordson. He also published a conservative weekly journal, the Dearborn Independent. Edsel, who was more reserved and pragmatic than his father, concerned himself with routine operations.

At the end of the war Henry and Edsel Ford disagreed with fellow stockholders over the planned expenditure of several million dollars for a large new manufacturing complex at River Rouge, near Detroit. The Fords eventually resolved the conflict by buying out all the other shareholders. Their company was re-registered as a Delaware corporation in July 1919. The River Rouge facility, built shortly afterward, was a large integrated manufacturing and assembly complex which included a steel mill of substantial capacity.

Cash-Strapped in the 1920s

Between January 1 and April 19, 1921, the Ford Motor Company had $58 million in financial obligations due, and only $20 million available to meet them. Convinced that Ford Motor would be forced into bankruptcy, representatives of several large financial houses offered to extend loans to the company, on the condition that the Fords yield financial control. When the offer was refused, the bankers retreated, certain that they would soon be called upon to repossess the company.

With little time available, Henry Ford transferred as many automobiles as possible to his dealerships, who were instructed to pay in cash. Almost immediately, this generated $25 million. Next, Ford purchased the Detroit, Toledo & Ironton railroad, the primary medium of transportation for his company's supplies. By rearranging the railroad's schedules, Ford was able to reduce by one-third the time that automotive components spent in transit. This allowed him to reduce inventories by one-third, thereby releasing $28 million. With additional income from other sources, and reduction in production costs, Ford had $87 million in cash by April 1, $27 million more than he needed to pay off the company debts.

The Ford Motor Company's only relationship with banks after this crisis was as a depositor. Moreover, despite poor financial management, Ford maintained such strong profitability that it offered to lend money on the New York markets, in competition with banks. With large quantities of cash still available, Ford acquired the financially troubled Lincoln Motor Company in 1922.

Edsel Ford was more enthusiastic about the development of the aircraft industry than his father, and in 1925 persuaded his fellow shareholders (all family members) to purchase the Stout Metal Airplane Company. His close friend William Stout, who was retained as vice-president and general manager of the company, developed a popular three-engine passenger aircraft known as the Ford Trimotor. Nearly 200 of these aircraft were built during its production run.

After 18 years producing the Model T, the Ford Motor Company faced its first serious threat from a competitor. In 1926, General Motors Corporation introduced its Chevrolet automobile, a more stylish and powerful car. Sales of the Model T dropped sharply. After months of experimenting with a six-cylinder model, Ford decided to discontinue the Model T in favor of the new Model A. On May 31, 1926, Ford plants across the country were closed for six months while assembly lines were retooled.

Company Perspectives:

Our vision is to become the world's leading consumer company for automotive products and services. We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world.

That year Ford voluntarily reduced its work week to five days, declaring that workers should also benefit from the success of the company. Ford was also one of the first companies to limit the work day to eight hours, and to establish a minimum wage of $5 per day. At Henry Ford's own admission, these policies were instituted more to improve productivity than to appease dissatisfied (and unrepresented) workers.

The British Ford Company was formed in 1928 and shortly thereafter the German Ford Company was founded. Henry Ford recognized the Soviet Union as a market with great potential, and like a number of other American industrialists, he fostered a relationship with officials in the Soviet government. Later, Ford participated in the construction of an automobile factory at Nishni-Novgogrod.

The economic crisis of October 1929, which led to the Great Depression, forced many companies to close. Ford Motor managed to remain in business, despite losses of as much as $68 million per year. By 1932, economic conditions became so difficult that the Ford minimum wage was reduced to $4 per day. But for its Model A, which sold 4.5 million units between 1927 and 1931, Ford's situation would have been much worse.

The economy of Detroit was heavily dependent on large, locally based industrial manufacturers and when companies less successful than Ford were forced to suspend operations, a banking crisis developed. The Ford Motor Company, and Edsel Ford personally, extended about $12 million in loans to these banks in an effort to maintain their solvency. But these efforts failed and the banks were forced to close in February 1933. Ford lost over $32 million in deposits and several million more in bank securities. The principal Ford bank, Guardian National, was subsequently reorganized by Ford interests as the Manufacturers National Bank of Detroit. Ford's largest business rival, General Motors, having suffered a similar crisis, emerged with control over the National Bank of Detroit.

The implementation of President Roosevelt's New Deal made conditions more favorable to the organization of labor unions. But Henry Ford, who had supported President Hoover in the election, advised his workers to resist union organization, and in 1935 raised the company's minimum wage to $6 per day.

In 1937, the United Automobile Workers (UAW) union began a campaign to organize Ford workers by sponsoring the employee occupation of a Ford plant in Kansas City. The conflict was resolved when Ford officials agreed to meet with union representatives. That same year, there was trouble at the River Rouge complex. Several men distributing UAW pamphlets at the gates were severely beaten by unidentified assailants, believed to have been agents of the Ford security office. Following an investigation by the National Labor Relations Board, Ford was cited for numerous unfair labor practices. The finding was contested, but eventually upheld when the Supreme Court refused to hear the case.

The War Years

In 1940, Henry Ford, who opposed American involvement in World War II, canceled a contract (arranged by Edsel) to build 6,000 Rolls-Royce Merlin aircraft engines for the British Royal Air Force, and 3,000 more for the U.S. Army. In time, however, public opinion led Ford to change his mind. Plans were made for the construction of a large new government-sponsored facility to manufacture aircraft at Willow Run, west of Dearborn.

Unionization activities climaxed in April 1941 when Ford employees went on strike. The NLRB called an employee election, under the terms of the Wagner Act, to establish a union representation for Ford workers. When the ballots were tabulated in June, the UAW drew 70 percent of the votes. Henry Ford, an avowed opponent of labor unions, suddenly altered his stand. He agreed to a contract with union representatives which met all worker demands.

The company devoted its resources to the construction of the Willow Run Aircraft plant. Eight months later, in December 1941, the Japanese bombing of Pearl Harbor resulted in a declaration of war by the United States against Japan, Germany, and Italy. Willow Run was completed the following May. It was the largest manufacturing facility in the world, occupying 2.5 million square feet of floor space, with an assembly line three miles long. Adjacent to the plant were hangars, covering 1.2 million square feet, and a large airfield. The airplanes produced at this facility were four-engine B-24E Liberator bombers, the Consolidated Aircraft version of the Boeing B-24. Production of aircraft got off to a slow start, but after adjustments the rate of production was raised to one plane per hour, 24 hours a day. During the war, other Ford Motor plants produced a variety of engines, as well as trucks, jeeps,4 tanks,10 tank destroyers, and transport gliders. The company also manufactured large quantities of tires, despite the removal of its tire plant to the Soviet Union.

Edsel Ford died unexpectedly in May 1943 at the age of 49. At the time of his death, Edsel was recognized as a far better manager than his father. Indeed, Henry Ford was often criticized for repeatedly undermining his son's efforts to improve the company, and the managerial crisis which occurred after Edsel's death is directly attributable to Henry Ford's persistent failure to prepare capable managers for future leadership of the company.

Key Dates:

1903:
Henry Ford sets up shop in a converted wagon factory.
1908:
Ford's Model T is introduced.
1922:
Lincoln Motor Company is acquired.
1945:
Henry Ford II is appointed company president.
1963:
Ford Mustang is released.
1985:
Ford Taurus is introduced.
1989:
Jaguar Cars Ltd. is acquired.
1999:
Swedish automaker Volvo is acquired in a $6.45 billion deal.
2001:
The company takes a $2.1 billion charge to cover the cost of replacing Firestone tires on its vehicles; William Clay Ford, Jr., is named CEO.

Edsel had been responsible for much of the company's wartime mobilization and his absence was deeply felt by his aging father, who was forced to resume the company presidency. In need of assistance, Henry Ford sought a special discharge from the Navy for Edsel's son Henry II. The navy complied, citing the special needs of Ford management during wartime. Henry Ford vigorously prepared his grandson to succeed him. By the end of the war, when the Willow Run plant was turned over to the government, Ford had produced 8,600 B-24E bombers and over 57,000 aircraft engines.

In September 1945, Henry Ford II, aged 28, was named president of the Ford Motor Company. The inexperienced man could not have started at a worse time. No longer supported by government contracts, the company began to lose money at a rate of $10 million per month. The source of the problem was Henry Ford I's financial management policy, specifically designed to perplex the Internal Revenue Service and discourage audits. The severe economic conditions after the war made Ford's finances an albatross.

Unable to bring the company's finances under control, Henry II hired Ernest R. Breech, a General Motors executive and past chairperson of Bendix, in 1946. Breech was placed in charge of two groupsa managerial group and a financial one. The first one was comprised of several managers hired away from General Motors, and the second group was made up of ten talented financial experts who had served with the Air Force Office of Statistical Control. The Air Force group included Robert S. McNamara, J. Edward Lundy, Arjay Miller, and Charles Tex Thornton; they spent several years reconstructing the company's system of financial management.

Henry Ford I, who had retained the title of chairperson since 1945, died in April 1947 at the age of 83. Henry II and Ernest Breech were then able to implement their own strategies for recovery, and these included the adoption of the proven General Motors management structure, and the decision to establish the Ford Motor Company in foreign markets. In its first year under Breech, the company registered a profit and it continued to gain strength in the late 1940s and early 1950s. Breech's top priority was strict adherence to a financial plan with strong profit margins; unfortunately, this proved to be at the expense of developing automobiles for an increasingly complex market.

Over the previous two decades, the Ford Motor Company had been a notable pioneer and achiever in the industry, and it was the first company to cast a V-8 engine block (1932). Ford had produced its 25 millionth automobile in 1937 and the following year its Lincoln Division introduced the Mercury line, which proved highly successful in the growing market for medium-priced automobiles. Ford's good image had been further enhanced by its contributions to the Allied effort in World War II; even Josef Stalin had kind words for the enterprising American company.

Before he died, Henry Ford I had created two classes of Ford stock. The B Class was reserved for family members and constituted the controlling 40 percent voting interest. The ordinary common shares were to be retained by the company until January 1956, when they were to be offered to the public for the first time.

Two years after Henry I's death, in 1949, the company unveiled a number of new automatic styles. But while the cars were practical, and to a degree fashionable, the company no longer appeared to be a pioneer; indeed it gained a reputation, not wholly justified, as being an imitator of General Motors.

Regaining its initiative, the Ford Motor Company decided to introduce a new model to fill a gap in the market between the Ford and Lincoln-Mercury lines. In 1958, the much heralded 410 horsepower Edsel made its debut. It was a terrible flop. Ford's market researchers had been very wrong; there was no gap in the market for the Edsel to fill. After just two years, production of the ill-fated car ceased110,847 units had been produced, at a loss of some $250 million.

The 1960s70s

The 1960s saw many changes at Ford: dissatisfied with his secondary role in the company decision-making, Henry Ford stripped Breech of his power, replacing him with Robert McNamara. But McNamara left the Ford Motor Company in 1961 to serve as Secretary of Defense in the Kennedy administration. Many of McNamara's duties were taken over by Arjay Miller, who succeeded the interim president, John Dykstra, in 1963.

The Ford Motor Company purchased the Philco Corporation in 1961 and established a tractor division in 1962. The following year, Ford introduced its highly successful Mustang; more than 500,000 of these cars were sold in 18 months. The man most responsible for developing the Mustang was a protege of Robert McNamara named Lee Iacocca.

In another move intended to assert his authority over management, Henry Ford II dismissed Arjay Miller in 1968 and named Semon E. Knudsen as president. Knudsen, a former executive vice-president at General Motors known for his aggressive personality, found himself in constant conflict with Henry Ford, and after 19 months he was replaced by Lee Iacocca. Iacocca was a popular figure, highly talented in marketing and sales, but like Knudsen, he frequently disagreed with Henry Ford.

Ford Motor Company subsidiaries in Europe entered a period of strong growth and high profitability in the early 1970s, and these subsidiaries produced components for the Pinto, a sub-compact introduced in the United States in 1971. Pinto models from 1971 to 1976 and similarly configured Bobcats from 1975 to 1976 drew a great deal of attention after several incidents in which the car's gas tank exploded in rear-end collisions. The unfavorable publicity from news reports damaged Ford's public image, as did wrongful death litigation.

In April 1977, Henry Ford II reduced Iacocca's power by creating a new executive triumvirate. Iacocca was a member of this, along with Ford himself and Philip Caldwell. But a year later, Ford added his brother William Clay Ford to the group and relegated Iacocca to a subordinate position; then within a few months, Ford suddenly fired Iacocca and installed Caldwell as president. Henry Ford was battling stockholder allegations of financial misconduct and bribery at the time and his dismissal of Iacocca made him more unpopular than ever. Iacocca went on to head Chrysler Corporation.

Henry Ford made a critical decision and a very misguided one. He cancelled development of a small car which had been proposed by Iacocca and which was intended to succeed the aging Pinto. Thus, as the Japanese compacts became increasingly popular in the United States, Ford found itself quite unable to compete. Adding to its woes, Ford, along with other U.S. car manufacturers, was obligated by Congressional legislation (particularly the Clean Air Act) to develop automobiles which would emit less pollutants. Henry Ford relinquished his position as chief executive officer to Philip Caldwell in October 1979. The following March, Ford retired and gave the chair to Caldwell, while retaining his seat on the board of directors.

Ford Motor Company encountered severe economic losses as a result of a reduction in market share, as well as the high costs incurred by labor contracts and the development of automobiles that met the new federal standards. In 1980, the company lost $1.54 billion, despite strong profits from the truck division and European operations. Ford lost a further $1.06 billion in 1981 and $658 million in 1982 while trying to effect a recovery; its market share fell from 3.6 percent in 1978 to 16.6 percent in 1981.

Company officials studied Japanese methods of industrial management, and worked more closely with Toyo Kogyo, the Japanese manufacturer of Mazda automobiles (Ford gained a 25 percent share of Toyo Kogyo in November 1979, when a Ford subsidiary merged with the company). Ford imported Mazda cars and trucks, and in many ways treated Toyo Kogyo as a small car division until the Escort, its successor to the Pinto, reached the showrooms. This new compact was modeled after the Ford (Europe) Erika; another version of it, the Lynx, was produced by Ford's Lincoln-Mercury division.

Caldwell transferred the talented manager Harold Poling from the European division to the United States in an attempt to apply successful European formulas to the American operation. In the restructuring that followed, several plants were closed and more than 100,000 workers were dismissed. Ford's weakness in the market was a major concern of the unions; consequently, the company inaugurated a policy of employee involvement in plant operations and was able to secure more favorable labor contracts. Productivity improved dramatically.

In 1984, with costs reduced, Ford started to repurchase 30 million shares (about 10 percent of the company's stock). Its production of cars in Mexico was increased, and through its interest in Kia Motors, output was stepped up in South Korea. The following year, Ford introduced the Taurus (another version, the Sable, was produced by its Mercury division), a modern full-size automobile which had taken five years to develop at a cost of $3 billion. The Taurus proved highly successful and won several design and safety awards.

Sales and profits reached record levels in 1984, and in 1986 Ford surpassed General Motors in income for the first time since 1924. In addition, Ford's market share increased to just under 20 percent. Ford Motor purchased several companies in the mid-1980s, including the First Nationwide Financial Corporation and the New Holland tractor division of Sperry, which was later merged with Ford Tractor. Ford also purchased a 30 percent share of Otosan, the automotive subsidiary of the Turkish KoX Group. The attempted acquisition of the Italian car maker Alfa Romeo in 1986 failed, due to a rival bid from Fiat.

Challenging Early 1990s

The diversification into financial services that began in the mid-1980s continued in earnest throughout the rest of the decade, as each of the major U.S. car manufacturers sought to insulate themselves against the cyclical nature of their business. Ford spent $5.5 billion acquiring assets for its financial services group during the latter half of the decade, including a $3.4 billion purchase in 1989 of The Associates, a Dallas-based finance company. That acquisition, completed the same year Ford purchased the venerable British car manufacturer Jaguar Cars Ltd. for $2.5 billion, made Ford the country's second largest provider of diversified financial services, ranking only behind Citicorp. With plans to eventually derive 30 percent of the company's profits from financial service-related business, Ford entered the 1990s with $115 billion worth of banking-related assets, a portfolio that provided the company's only bright moments during the otherwise deleterious early 1990s.

An economic recession crippled U.S. car manufacturers during the early 1990s, and Ford bore the brunt of the financial malaise that stretched around the globe. Domestically, car sales faltered abroad, particularly in Great Britain and Australia, Ford's sales plummeted. In 1991, Ford's worldwide automotive operations lost an enormous $3.2 billion after recording a $99 million profit the year before. In the United States, automotive losses reached an equally staggering $2.2 billion on the heels of a $17 million loss in 1990. The losses struck a serious blow to Ford, which as recently as 1989 had generated $3.3 billion in net income; however, the financial results of 1991 would have been worse without the company's strategic diversification into financial services. For the year, Ford's financial services group registered a record $927 million in earnings, up from the previous year's total of $761 million, which left the company with a $2.25 billion loss for the year, an inauspicious record in Ford's nearly 90-year history.

The financial disaster of 1991, however, was just a prelude to more pernicious losses the following year, as the global recession reached its greatest intensity. In 1992, with revenue swelling to slightly more than $100 billion, Ford posted a $7.38 billion loss. Although 1992 represented one of the bleakest years in Ford's history, the worst was over, and as the economic climate improved, the company emerged with renewed vitality. Against the backdrop of successive financial losses, Ford had increased its presence in the truck and minivan market niche, which represented the fastest-growing segment of the broadly defined automotive market. Roughly 200,000 minivans and sports utility vehicles were sold in the United States a decade earlier and now, as consumers once again returned to car dealers' showrooms, more than 2.3 million opted for minivans and light trucks, a trend that bolstered Ford's financial position and predicated its return to a profitable future.

During this time, the gap separating Japanese and American car manufacturers' production standards had narrowed considerably, with the U.S. manufacturers emerging from the early 1990s in a more enviable positionFord included. As the technological and managerial race between U.S. car manufacturers and their Japanese counterparts tightened, the importance of prudent product development and effective distribution networks increased. Toward this end, Ford reorganized its production and distribution operations in mid-1994 to better respond to the changing economic structure of the numerous countries in which Ford operated facilities. Regional trading areas, rather than nation states, would represent the primary focus of Ford's future efforts, a direction the company moved toward with its worldwide reorganization in 1994.

Ford's notable achievements during the latter half of the 1990s were philosophical in nature, as the company attempted to replace the corporate culture of its past with a new way of thinking for the future. The proponent of Ford's new vision was Lebanese-born, Melbourne, Australia-raised Jacques Nasser, who was named president and chief executive officer in January 1998, concurrent with the appointment of William Clay Ford, Jr., great-grandson of the founder, as chairman. Two years before his historic promotionat age 51, Nasser became the youngest, non-family chief executive in the company's historyNasser was named president of Ford's worldwide automotive operations, and he did not like what he saw. The company had the lowest profits from total vehicle sales of any U.S. automaker, an alarming statistic that Nasser began to improve by slashing costs. His cost-cutting efforts earned Nasser the nickname Jac the Knife, but once he was named Ford's chief executive in 1998, the characterization of his influence took on an added dimension. Nasser's aim was to replace the corporate culture of decades past with an entrepreneurial style that placed a much more intense emphasis on the customer. He continued making his trademark cuts in costs, realizing $5 billion in savings between 1997 and 1999, but he also worked toward instilling a new ethos at Ford.

As part of the new movement espoused by Nasser, the company's Lincoln-Mercury division was relocated from Detroit to Irvine, California, an unprecedented move for a major U.S. auto-maker. Nasser wanted the division to attract younger customersLincoln's typical customer was 63 years old, Mercury's was 56 years oldand to be closer to suppliers and to emerging auto trends. Nasser wanted the division to breathe new life into itself away from the scrutiny of company headquarters, to benefit from a more entrepreneurial-driven perspective.

The changes at Lincoln-Mercury typified the profound currents of change sweeping through Ford at the century's end. Much remained to be done to achieve Nasser's vision of a fundamentally revamped Ford, but by the end of the 1990s there were impressive signs of progress. The company ended the decade as the most profitable automaker in the world. Its stock price increased 130 percent between 1996 and 1999, outpacing the increases recorded by its rivals. Analysts predicted great things for Ford, thanks in large part to the company's increased ownership stake in Mazda Motor Corporation (from 25 percent to 33.4 percent in 1996) and its $6.45 billion acquisition of Swedish auto maker Volvo in 1999.

The New Millennium

However, Ford faced major challenges in the early years of the new millennium. While it continued to lay the groundwork for future growth by spinning off its Visteon unit, acquiring BMW's Land Rover SUV business, and purchasing the remaining shares of Hertz that it did not already own, it was dealt a significant blow when Bridgestone recalled over 6.5 million Firestone brand tirestires used as original equipment on Ford's popular Explorer model, the Mercury Mountaineer, the Ranger, and some of its F-150 pickups. In the largest recall in automotive history, Ford was forced to call back over 300,000 vehicles and replace over 13 million Firestone tires at a cost of $3 billion in 2001 alone. To make matters worse, several deaths had been linked to faulty tires on the Ford Explorer, and some alleged that Ford had known about the problem all along and had failed to act.

As a result of the tire debacle and several other product recalls, Ford was ranked last in the industry in terms of quality according to J.D. Power & Associates. In 2001, the company posted a loss of $5.45 billion. Nasser was ousted in late that year, leaving William Clay Ford, Jr., at the helm. The task set before him was monumental; he faced faltering employee morale, major quality issues, sluggish sales, and intense price wars.

In early 2002, Ford launched a major restructuring effort that included the closure of five plants, the elimination of 35,000 jobs, over $9 billion in cost cutting measures, and the shuttering of several car lines including the Mercury Cougar and the Lincoln Continental. Included in the plan were efforts to boost the morale of employees. In a speech quoted in a November 2002 Fortune article, CEO Ford reminded his work force "We've come back from adversity many times in our history. We're going to do it again. On the eve of our 100th anniversary, the stage is set for a dramatic return to greatness. We started the job; now let's finish it."

The company forged ahead in 2002 cutting its losses to $559 million. Market share continued to fall, however, hovering at 21 percent versus the 25 percent it held in 1998. In response, Ford sold some non-core assets and ramped up new product development, launching the Ford Focus C-MAX in Europe, the Jaguar XJ, the Volvo S40, a new Ford F-150, the Ford Freestar, and the Mercury Monterey in 2003. Ford anticipated launching 40 new products in 2004 including the new Mustang and the Escape Hybrid, the first gasoline/electric SUV. Overall, the company planned to have 150 new products in the marketplace by mid-decade.

While a turnaround at the Ford Credit subsidiary bolstered the company's income, automotive operations, especially the international arm, continued to struggle. James J. Padilla, elected chief operating officer in 2004, and William Clay Ford, Jr., indeed faced a long road ahead. Restoring Ford's image and getting the company back on a successful financial path would no doubt be their focus in the years to come.

Principal Subsidiaries

Ford Brasil Ltda.; Ford Capital B.V. (Netherlands); Ford Motor Company (Belgium) N.V.; Ford Espana S.A.; Ford European Holdings, Inc.; Ford Holdings LLC; Volvo Car Holding Germany GmbH; Ford Motor Land Development Corporation; The Hertz Corporation; Ford Global Technologies, LLC; Ford International Capital Corporation; Jaguar Ltd.; Ford Italia S.p.A.; Ford Mexico Holdings, Inc.; Ford Motor Company of Canada, Ltd.; Land Rover Holdings; Ford Motor Company of Southern Africa (Pty) Ltd.; Ford Motor Company of Australia Ltd.; Ford Deutschland Holding, GmbH; Ford Motor Credit Company; Ford Credit Canada Ltd.; Ford Motor Service Company; Ford Motor Vehicle Assurance Company; Ford Trading Company, LLC; Groupe FMC France SAS; Volvo Cars of North America, LLC.

Principal Competitors

DaimlerChrysler AG; General Motors Corporation; Toyota Motor Corporation.

Further Reading

Beynon, Huw, Working for Ford, London: Penguin, 1984.

"Carload of Trouble," Business Week, March 27, 2000, p. 56.

Connelly, Mary, "Ford's Biggest Job: Lift Lincoln," Automotive News, July 31, 2000, p. 23.

"A Crisis of Confidence," Business Week, September 18, 2000, p. 40.

Dubashi, Jagannath, "Ford: Looking Beyond the Shadows," FW, February 6, 1990, p. 23.

"Ford: Will Slow and Steady Win the Race?," Business Week, May 10, 2004, p. 43.

Gelderman, Barbara, Henry Ford: The Wayward Capitalist, New York: Dial Press, 1981.

Gross, Ken, "Ford: Big, Bigger, Biggest," Automotive Industries, July 2000, p. 64.

Keatley, Robert, "Ford Reorganizes to Stay Competitive and Reach New Markets in the World," Wall Street Journal, July 22, 1994, p. A4.

Kerwin, Kathleen, "One of Ford's Engines is Humming," Business Week, July 21, 2003, p. 26.

Kerwin, Kathleen, and Joann Muller, "Bill Takes the Wheel," Business Week, November 12, 2001, p. 50.

Lewis, David L., The Public Image of Henry Ford: An American Folk Hero and His Company, Detroit: Wayne State University Press, 1976.

Meyer, Stephen, The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company 19081921, Albany: State University of New York Press, 1981.

Moreau, Dan, "Instant Prosperity: Behind Ford's Fast Turnaround," Kiplinger's Personal Finance Magazine, July 1993, p. 28.

Morris, Betsy, "Can Ford Save Ford?," Fortune, November 18, 2002, p. 52.

"Nasser: Ford Be Nimble," Business Week, September 27, 1999, p. 42.

Nye, David E., Henry Ford: Ignorant Idealist, Port Washington: Kennikat Press, 1979.

Reiff, Rick, "Slowing Traffic Ahead," Forbes, April 30, 1990, p. 82.

"Remaking Ford," Business Week, October 11, 1999, p. 132.

Sorge, Marjorie, "1999 Executive of the Year," Automotive Industries, February 1999, p. 54.

Taylor III, Alex, "Getting Ford in Gear," Fortune, May 12, 2003, p. 102.

, "The Fiasco at Ford," Fortune, February 4, 2002, p. 111.

, "Why Ford's Chairman Has Kept Mostly Mum," Fortune, October 2, 2000, p. 43.

Thomas, Charles M., "Ford Loses a Record $2.3 Billion," Automotive News, February 17, 1992, p. 4.

Zesiger, Sue, "Ford's Hip Transplant," Fortune, May 10, 1999, p. 82.

, "Mr. Ford and Mr. Nasser Learn to Share: The Lords of Ford," Fortune, October 12, 1998, p. 34.

updates: Jeffrey L. Covell and

Christina M. Stansell

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Ford Motor Company

Ford Motor Company

The American Road
Dearborn, Michigan 48121-1899
U.S.A.
Telephone: (313) 845-8540
Toll Free: (800) 555-5259
Fax: (313) 845-6073
Web site: http://www.ford.com

Public Company
Incorporated:
1919
Employees: 364,550
Sales: $162.55 billion (1999)
Stock Exchanges: New York Boston Pacific Midwest Toronto Montreal London
Ticker Symbol: F
NAIC: 336111 Automobile Manufacturing; 336112 Light Truck and Utility Vehicle Manufacturing; 33612 Heavy Duty Truck Manufacturing; 33621 Motor Vehicle Body Manufacturing (pt); 532112 Passenger Car Leasing; 524126 Direct Property and Casualty Insurance Carriers (pt)

One of a handful of companies that contributes significantly to the growth of the United States, Ford Motor Company represents a more than $150 billion multinational business empire. Known primarily as a manufacturer of automobiles, Ford also holds a considerable stake in financial services, which generate more than $1 billion in income, and owns 81 percent of The Hertz Corporation, the largest automobile rental company in the world. The company manufactures vehicles under the names Ford, Lincoln, Mercury, Jaguar, Volvo, and Aston Martin. Ford also maintains controlling interest in Mazda Motor Corporation.

Origins of an American Legend

Henry Ford, the founder of the Ford Motor Company, was born on a farm near Dearborn, Michigan, in 1863. He had a talent for engineering, which he pursued as a hobby from boy-hood, but it was not until 1890 that he commenced his engineering career as an employee of the Detroit Edison Company. In his spare time, Ford constructed experimental gasoline engines and in 1892 completed his first gasoline buggy. Dissatisfied with the buggys weight, he sold it in 1896 to help fund the construction of a new car. Fords superiors at the electric company felt his hobby distracted him from his regular occupation and, despite his promotion to chief engineer, he was forced to quit in 1899.

Shortly afterwards, with financial backing from private investors, Ford established the Detroit Automobile Company. He later withdrew from the venture after a disagreement with business associates over the numbers and prices of cars to be produced. Ford advocated a business strategy which combined a lower profit margin on each car with greater production volumes. In this way, he hoped to gain a larger market share and maintain profitability.

Independently in a small shed in Detroit, Henry Ford developed two four-cylinder, 80-horsepower race cars, called the 999 and the Arrow. These cars won several races and helped to create a new market for Ford automobiles. With $28,000 of capital raised from friends and neighbors, Henry Ford established a new shop on June 16, 1903. In this facility, a converted wagon factory on Mack Avenue in Detroit, the Ford Motor Company began production of a two-cylinder, eight-horsepower design called the Model A. The company produced 1,708 of these models in the first year of operation.

The Ford Motor Company was sued by the Licensed Association of Automobile Manufacturers, an industrial syndicate which held patent rights for road locomotives with internal combustion engines. Ford responded by taking the matter to the courts, arguing that the patent, granted to George B. Selden in 1895, was invalid. During the long process of adjudication, Ford continued to manufacture cars and relocated to a larger plant on Piquette and Beaubien Streets. A Canadian plant was established in Walkerville, Ontario, on August 17, 1904.

Henry Ford and his engineers designed several automobiles, each one designated by a letter of the alphabet; these included the small, four-cylinder Model N (which sold for $500), and the more luxurious six-cylinder Model K (which sold poorly for $2,500). The failure of the Model K, coupled with Henry Fords persistence in developing inexpensive cars for mass production, caused a dispute between Ford and his associate Alexander Malcolmson. The latter, who helped to establish the company in 1903, resigned and his share of the company was acquired by Henry Ford. Fords holdings then amounted to 58.5 percent. In a further consolidation of his control, Ford replaced John S. Gray, a Detroit banker, as president of the company in 1906.

In October 1908, despite the continuing litigation with the Selden syndicate, Ford introduced the durable and practical Model T. Demand for this car was so great that Ford was forced to enlarge its production facilities. Over 10,000 Model Ts were produced in 1909. Able to vote down business associates who favored more conventional methods of production, Henry Ford applied his assembly line concept of manufacturing to the Model T.

In developing the assembly line, Ford noted that the average worker performed several tasks in the production of each component, and used a variety of tools in the process. He improved efficiency by having each worker specialize in one task with one tool. The component on which the employee worked was conveyed to him on a moving belt, and after allowing a set time for the task to be performed, the component was moved on to the next operation. Slower workers thus needed to increase their work rate in order to maintain production at the rate determined by the speed of the belts.

Fords battle with the Selden group led to a decision by the Supreme Court in 1911, eight years after the initial suit. The Court ruled that the Selden patent was invalid. The decision freed many automobile manufacturers from costly licensing obligations; it also enabled others to enter the business.

When the United States became involved in World War I (April 1917), the Ford Motor Company placed its resources at the disposal of the government. For the duration of the war, Ford Motor produced large quantities of automobiles, trucks, and ambulances, as well as Liberty airplane motors, Whippet tanks, Eagle submarine chasers, and munitions.

In 1918, Henry Ford officially retired from the company, naming his son Edsel president and ceding to him a controlling interest. But, in fact, Henry continued to direct company strategy and spent much of his time developing a farm tractor called the Fordson. He also published a conservative weekly journal, the Dearborn Independent. Edsel, who was more reserved and pragmatic than his father, concerned himself with routine operations.

At the end of the war Henry and Edsel Ford disagreed with fellow stockholders over the planned expenditure of several million dollars for a large new manufacturing complex at River Rouge, near Detroit. The Fords eventually resolved the conflict by buying out all the other shareholders. Their company was re-registered as a Delaware corporation in July 1919. The River Rouge facility, built shortly afterward, was a large integrated manufacturing and assembly complex which included a steel mill of substantial capacity.

Cash-Strapped in the 1920s

Between January 1 and April 19, 1921, the Ford Motor Company had $58 million in financial obligations due, and only $20 million available to meet them. Convinced that Ford Motor would be forced into bankruptcy, representatives of several large financial houses offered to extend loans to the company, on the condition that the Fords yield financial control. When the offer was refused, the bankers retreated, certain that they would soon be called upon to repossess the company.

With little time available, Henry Ford transferred as many automobiles as possible to his dealerships, who were instructed to pay in cash. Almost immediately, this generated $25 million. Next, Ford purchased the Detroit, Toledo & Ironton railroad, the primary medium of transportation for his companys sup-plies. By rearranging the railroads schedules, Ford was able to reduce by one-third the time that automotive components spent in transit. This allowed him to reduce inventories by one-third, thereby releasing $28 million. With additional income from other sources, and reduction in production costs, Ford had $87 million in cash by April 1, $27 million more than he needed to pay off the company debts.

The Ford Motor Companys only relationship with banks after this crisis was as a depositor. Moreover, despite poor financial management, Ford maintained such strong profitability that it offered to lend money on the New York markets, in competition with banks. With large quantities of cash still available, Ford acquired the financially troubled Lincoln Motor Company in 1922.

Edsel Ford was more enthusiastic about the development of the aircraft industry than his father, and in 1925 persuaded his fellow shareholders (all family members) to purchase the Stout Metal Airplane Company. His close friend William Stout, who was retained as vice-president and general manager of the company, developed a popular three-engine passenger aircraft known as the Ford Trimotor. Nearly 200 of these aircraft were built during its production run.

Company Perspectives

Ford Motor Company is committed to fully utilizing the rich diversity of its human resources. Company leadership believes that diversity will be the engine that powers the creative energy of corporations of the 21st century. Successful companies will be those that are able to draw on the diverse talents of their people to stay on the innovative and competitive edges of their fields. Ford Motor Company started this century with a single man envisioning products that would meet the needs of people in a world on the verge of high-gear industrialization. The company is ending the century with a worldwide organization that retains and expands Henry Fords heritage by developing products that serve the varying and ever-changing needs of people in the global community.

After 18 years producing the Model T, the Ford Motor Company faced its first serious threat from a competitor. In 1926, General Motors Corporation introduced its Chevrolet automobile, a more stylish and powerful car. Sales of the Model T dropped sharply. After months of experimenting with a six-cylinder model, Ford decided to discontinue the Model T in favor of the new Model A. On May 31,1926, Ford plants across the country were closed for six months while assembly lines were retooled.

That year Ford voluntarily reduced its work week to five days, declaring that workers should also benefit from the success of the company. Ford was also one of the first companies to limit the work day to eight hours, and to establish a minimum wage of $5 per day. At Henry Fords own admission, these policies were instituted more to improve productivity than to appease dissatisfied (and unrepresented) workers.

The British Ford Company was formed in 1928 and shortly thereafter the German Ford Company was founded. Henry Ford recognized the Soviet Union as a market with great potential, and like a number of other American industrialists, he fostered a relationship with officials in the Soviet government. Later, Ford participated in the construction of an automobile factory at Nishni-Novgogrod.

The economic crisis of October 1929, which led to the Great Depression, forced many companies to close. Ford Motor man-aged to remain in business, despite losses of as much as $68 million per year. By 1932, economic conditions became so difficult that the Ford minimum wage was reduced to $4 per day. But for its Model A, which sold 4.5 million units between 1927 and 1931, Fords situation would have been much worse.

The economy of Detroit was heavily dependent on large, locally based industrial manufacturers and when companies less successful than Ford were forced to suspend operations, a banking crisis developed. The Ford Motor Company, and Edsel Ford personally, extended about $12 million in loans to these banks in an effort to maintain their solvency. But these efforts failed and the banks were forced to close in February 1933. Ford lost over $32 million in deposits and several million more in bank securities. The principal Ford bank, Guardian National, was subsequently reorganized by Ford interests as the Manufacturers National Bank of Detroit. Fords largest business rival, General Motors, having suffered a similar crisis, emerged with control over the National Bank of Detroit.

The implementation of President Roosevelts New Deal made conditions more favorable to the organization of labor unions. But Henry Ford, who had supported President Hoover in the election, advised his workers to resist union organization, and in 1935 raised the companys minimum wage to $6 per day.

In 1937, the United Automobile Workers union began a campaign to organize Ford workers by sponsoring the employee occupation of a Ford plant in Kansas City. The conflict was resolved when Ford officials agreed to meet with union representatives. That same year, there was trouble at the River Rouge complex. Several men distributing UAW pamphlets at the gates were severely beaten by unidentified assailants, believed to have been agents of the Ford security office. Following an investigation by the National Labor Relations Board, Ford was cited for numerous unfair labor practices. The finding was contested, but eventually upheld when the Supreme Court re-fused to hear the case.

In 1940, Henry Ford, who opposed American involvement in World War II, canceled a contract (arranged by Edsel) to build 6,000 Rolls-Royce Merlin aircraft engines for the British Royal Air Force, and 3,000 more for the U.S. Army. In time, however, public opinion led Ford to change his mind. Plans were made for the construction of a large new government-sponsored facility to manufacture aircraft at Willow Run, west of Dearborn.

Unionization activities climaxed in April 1941 when Ford employees went on strike. The NLRB called an employee election, under the terms of the Wagner Act, to establish a union representation for Ford workers. When the ballots were tabulated in June, the UAW drew 70 percent of the votes. Henry Ford, an avowed opponent of labor unions, suddenly altered his stand. He agreed to a contract with union representatives which met all worker demands.

The company devoted its resources to the construction of the Willow Run Aircraft plant. Eight months later, in December 1941, the Japanese bombing of Pearl Harbor resulted in a declaration of war by the United States against Japan, Germany, and Italy. Willow Run was completed the following May. It was the largest manufacturing facility in the world, occupying 2.5 million square feet of floor space, with an assembly line three miles long. Adjacent to the plant were hangars, covering 1.2 million square feet, and a large airfield. The airplanes produced at this facility were four-engine B-24E Liberator bombers, the Consolidated Aircraft version of the Boeing B-24. Production of aircraft got off to a slow start, but after adjustments the rate of production was raised to one plane per hour, 24 hours a day. During the war, other Ford Motor plants produced a variety of engines, as well as trucks, jeeps, M-4 tanks, M-10 tank destroyers, and transport gliders. The company also manufactured large quantities of tires, despite the removal of its tire plant to the Soviet Union.

Edsel Ford died unexpectedly in May 1943 at the age of 49. At the time of his death, Edsel was recognized as a far better manager than his father. Indeed, Henry Ford was often criticized for repeatedly undermining his sons efforts to improve the company, and the managerial crisis which occurred after Edsels death is directly attributable to Henry Fords persistent failure to prepare capable managers for future leadership of the company.

Key Dates

1903:
Henry Ford sets up shop in a converted wagon factory.
1908:
Fords Model T is introduced.
1922:
Lincoln Motor Company is acquired.
1945:
Henry Ford II is appointed company president.
1963:
Ford Mustang is released.
1985:
Ford Taurus is introduced.
1989:
Jaguar Cars Ltd. is acquired.
1999:
Swedish automaker Volvo is acquired in a $6.45 billion deal.

Edsel had been responsible for much of the companys war-time mobilization and his absence was deeply felt by his aging father, who was forced to resume the company presidency. In need of assistance, Henry Ford sought a special discharge from the Navy for Edsels son Henry II. The navy complied, citing the special needs of Ford management during wartime. Henry Ford vigorously prepared his grandson to succeed him. By the end of the war, when the Willow Run plant was turned over to the government, Ford had produced 8,600 B-24E bombers and over 57,000 aircraft engines.

In September 1945, Henry Ford II, aged 28, was named president of the Ford Motor Company. The inexperienced man could not have started at a worse time. No longer supported by government contracts, the company began to lose money at a rate of $10 million per month. The source of the problem was Henry Ford Fs financial management policy, specifically de-signed to perplex the Internal Revenue Service and discourage audits. The severe economic conditions after the war made Fords finances an albatross.

Unable to bring the companys finances under control, Henry II hired Ernest R. Breech, a General Motors executive and past chairperson of Bendix, in 1946. Breech was placed in charge of two groupsa managerial group and a financial one. The first one was comprised of several managers hired away from General Motors, and the second group was made up often talented financial experts who had served with the Air Force Office of Statistical Control. The Air Force group included Robert S. McNamara, J. Edward Lundy, Arjay Miller, and Charles Tex Thornton; they spent several years reconstructing the companys system of financial management.

Henry Ford I, who had retained the title of chairperson since 1945, died in April 1947 at the age of 83. Henry II and Ernest Breech were then able to implement their own strategies for recovery, and these included the adoption of the proven General Motors management structure, and the decision to establish the Ford Motor Company in foreign markets. In its first year under Breech, the company registered a profit and it continued to gain strength in the late 1940s and early 1950s. Breechs top priority was strict adherence to a financial plan with strong profit mar-gins; unfortunately, this proved to be at the expense of developing automobiles for an increasingly complex market.

Over the previous two decades, the Ford Motor Company had been a notable pioneer and achiever in the industry, and it was the first company to cast a V-8 engine block (1932). Ford had produced its 25 millionth automobile in 1937 and the following year its Lincoln Division introduced the Mercury line, which proved highly successful in the growing market for medium-priced automobiles. Fords good image had been further enhanced by its contributions to the Allied effort in World War II; even Josef Stalin had kind words for the enterprising American company.

Before he died, Henry Ford I had created two classes of Ford stock. The B Class was reserved for family members and constituted the controlling 40 percent voting interest. The ordinary common shares were to be retained by the company until January 1956, when they were to be offered to the public for the first time.

Two years after Henry Is death, in 1949, the company unveiled a number of new automatic styles. But while the cars were practical, and to a degree fashionable, the company no longer appeared to be a pioneer; indeed it gained a reputation, not wholly justified, as being an imitator of General Motors.

Regaining its initiative, the Ford Motor Company decided to introduce a new model to fill a gap in the market between the Ford and Lincoln-Mercury lines. In 1958, the much heralded 410 horsepower Edsel made its debut. It was a terrible flop. Fords market researchers had been very wrong; there was no gap in the market for the Edsel to fill. After just two years, production of the ill-fated car ceased110,847 units had been produced, at a loss of some $250 million.

The 1960s and 1970s

The 1960s saw many changes at Ford: dissatisfied with his secondary role in the company decision-making, Henry Ford stripped Breech of his power, replacing him with Robert McNamara. But McNamara left the Ford Motor Company in 1961 to serve as Secretary of Defense in the Kennedy administration. Many of McNamaras duties were taken over by Arjay Miller, who succeeded the interim president, John Dykstra, in 1963.

The Ford Motor Company purchased the Philco Corporation in 1961 and established a tractor division in 1962. The following year, Ford introduced its highly successful Mustang; more than 500,000 of these cars were sold in 18 months. The man most responsible for developing the Mustang was a protege of Robert McNamara named Lee lacocca.

In another move intended to assert his authority over management, Henry Ford II dismissed Arjay Miller in 1968 and named Semon E. Knudsen as president. Knudsen, a former executive vice-president at General Motors known for his aggressive personality, found himself in constant conflict with Henry Ford, and after 19 months he was replaced by Lee lacocca. lacocca was a popular figure, highly talented in marketing and sales, but like Knudsen, he frequently disagreed with Henry Ford.

Ford Motor Company subsidiaries in Europe entered a period of strong growth and high profitability in the early 1970s, and these subsidiaries produced components for the Pinto, a sub-compact introduced in the United States in 1971. Pinto models from 1971 to 1976 and similarly configured Bobcats from 1975 to 1976 drew a great deal of attention after several incidents in which the cars gas tank exploded in rear-end collisions. The unfavorable publicity from news reports dam-aged Fords public image, as did wrongful death litigation.

In April 1977, Henry Ford II reduced lacoccas power by creating a new executive triumvirate. lacocca was a member of this, along with Ford himself and Philip Caldwell. But a year later, Ford added his brother William Clay Ford to the group and relegated lacocca to a subordinate position; then within a few months, Ford suddenly fired lacocca and installed Caldwell as president. Henry Ford was battling stockholder allegations of financial misconduct and bribery at the time and his dismissal of lacocca made him more unpopular than ever (lacocca, of course, went on to head Chrysler Corporation).

Henry Ford made a critical decision and a very misguided one. He cancelled development of a small car which had been proposed by lacocca and which was intended to succeed the aging Pinto. Thus, as the Japanese compacts became increasingly popular in the United States, Ford found itself quite unable to compete. Adding to its woes, Ford, along with other U.S. car manufacturers, was obligated by Congressional legislation (particularly the Clean Air Act) to develop automobiles which would emit less pollutants. Henry Ford relinquished his position as chief executive officer to Philip Caldwell in October 1979. The following March, Ford retired and gave the chair to Caldwell, while retaining his seat on the board of directors.

The Ford Motor Company encountered severe economic losses as a result of a reduction in market share, as well as the high costs incurred by labor contracts and the development of automobiles that met the new federal standards. In 1980, the company lost $1.54 billion, despite strong profits from the truck division and European operations. Ford lost a further $1.06 billion in 1981 and $658 million in 1982 while trying to effect a recovery; its market share fell from 23.6 percent in 1978 to 16.6 percent in 1981.

Company officials studied Japanese methods of industrial management, and worked more closely with Toyo Kogyo, the Japanese manufacturer of Mazda automobiles (Ford gained a 25 percent share of Toyo Kogyo in November 1979, when a Ford subsidiary merged with the company). Ford imported Mazda cars and trucks, and in many ways treated Toyo Kogyo as a small car division until the Escort, its successor to the Pinto, reached the showrooms. This new compact was modeled after the Ford (Europe) Erika; another version of it, the Lynx, was produced by Fords Lincoln-Mercury division.

Caldwell transferred the talented manager Harold Poling from the European division to the United States in an attempt to apply successful European formulas to the American operation. In the restructuring that followed, several plants were closed and more than 100,000 workers were dismissed. Fords weakness in the market was a major concern of the unions; consequently, the company inaugurated a policy of employee involvement in plant operations and was able to secure more favorable labor contracts. Productivity improved dramatically.

In 1984, with costs reduced, Ford started to repurchase 30 million shares (about ten percent of the companys stock). Its production of cars in Mexico was increased, and through its interest in Kia Motors, output was stepped up in South Korea. The following year, Ford introduced the Taurus (another version, the Sable, was produced by its Mercury division), a modern full-size automobile which had taken five years to develop at a cost of $3 billion. The Taurus proved highly successful and won several design and safety awards.

Sales and profits reached record levels in 1984, and in 1986 Ford surpassed General Motors in income for the first time since 1924. In addition, Fords market share increased to just under 20 percent. Ford Motor purchased several companies in the mid-1980s, including the First Nationwide Financial Corporation and the New Holland tractor division of Sperry, which was later merged with Ford Tractor. Ford also purchased a 30 percent share of Otosan, the automotive subsidiary of the Turkish Kog Group. The attempted acquisition of the Italian car maker Alfa Romeo in 1986 failed, due to a rival bid from Fiat.

Torturous Early 1990s

The diversification into financial services that began in the mid-1980s continued in earnest throughout the rest of the decade, as each of the major U.S. car manufacturers sought to insulate themselves against the cyclical nature of their business. Ford spent $5.5 billion acquiring assets for its financial services group during the latter half of the decade, including a $3.4 billion purchase in 1989 of the Associates, a Dallas-based finance company. That acquisition, completed the same year Ford purchased the venerable British car manufacturer Jaguar Cars Ltd. for $2.5 billion, made Ford the countrys second largest provider of diversified financial services, ranking only behind Citicorp. With plans to eventually derive 30 percent of the companys profits from financial service-related business, Ford entered the 1990s with $115 billion worth of banking-related assets, a portfolio that provided the companys only bright moments during the otherwise deleterious early 1990s.

An economic recession crippled U.S. car manufacturers during the early 1990s, and Ford bore the brunt of the financial malaise that stretched around the globe. Domestically, car sales faltered abroad, particularly in Great Britain and Australia, Fords sales plummeted. In 1991, Fords worldwide automotive operations lost an enormous $3.2 billion after recording a $99 million profit the year before. In the United States, automotive losses reached an equally staggering $2.2 billion on the heels of a $17 million loss in 1990. The losses struck a serious blow to Ford, which as recently as 1989 had generated $3.3 billion in net income; however, the financial results of 1991 would have been worse without the companys strategic diversification into financial services. For the year, Fords financial services group registered a record $927 million in earnings, up from the previous years total of $761 million, which left the company with a $2.25 billion loss for the year, an inauspicious record in Fords nearly 90-year history.

The financial disaster of 1991, however, was just a prelude to more pernicious losses the following year, as the global recession reached its greatest intensity. In 1992, with revenue swelling to slightly more than $100 billion, Ford posted a crushing $7.38 billion loss. Although 1992 represented one of the bleakest years in Fords history, the worst was over, and as the economic climate improved, the company emerged with renewed vitality. Against the backdrop of successive financial losses, Ford had increased its presence in the truck and minivan market niche, which represented the fastest-growing segment of the broadly defined automotive market. Roughly 200,000 mini-vans and sports utility vehicles were sold in the United States a decade earlier and now, as consumers once again returned to car dealers showrooms, more than 2.3 million opted for minivans and light trucks, a trend that bolstered Fords financial position and predicated its return to a profitable future.

In 1993, Ford generated $2.52 billion in net income from $108.5 billion in revenue during a year in which the company actually lost money on passenger car sales, yet recouped the losses through minivan and truck sales. By 1994, such vehicles accounted for 50 percent of Fords automotive sales, a prodigious increase from the preceding decade and the primary engine driving the companys growth.

Despite the losses suffered several years earlier, there was justifiable hope for further growth as Ford entered the mid-1990s. The gap separating Japanese and American car manufacturers production standards had narrowed considerably, with the U.S. manufacturers emerging from the early 1990s in a more enviable positionFord included. As the technological and managerial race between U.S. car manufacturers and their Japanese counterparts tightened, the importance of prudent product development and effective distribution networks in-creased. Toward this end, Ford reorganized its production and distribution operations in mid-1994 to better respond to the changing economic structure of the numerous countries in which Ford operated facilities. Regional trading areas, rather than nation states, would represent the primary focus of Fords future efforts, a direction the company moved toward with its worldwide reorganization in 1994.

Fords notable achievements during the latter half of the 1990s were philosophical in nature, as the company attempted to replace the corporate culture of its past with a new way of thinking for the future. The proponent of Fords new vision was Lebanese-born, Melbourne, Australia-raised Jacques Nasser, who was named president and chief executive officer in January 1998, concurrent with the appointment of William Clay Ford, Jr., great-grandson of the founder, as chairman. Two years before his historic promotionat age 51, Nasser became the youngest, non-family chief executive in the companys historyNasser was named president of Fords worldwide auto-motive operations. He did not like what he saw. The company had the lowest profits from total vehicle sales of any U.S. automaker, an alarming statistic that Nasser began to improve by slashing costs. His cost-cutting efforts earned Nasser the nickname Jac the Knife, but once he was named Fords chief executive in 1998, the characterization of his influence took on an added dimension.

At a gathering of Fords top 300 executives shortly after his promotion, Nasser delivered the essence of the new spirit he hoped to inculcate. We are all bureaucrats, he informed his management team, as quoted in the February 1999 issue of Automotive Industries. I hope that offends you. I want you to be lousy bureaucrats, not sit there with your tie buttoned up, polishing your shoes. Nassers aim was to replace the corporate culture of decades past with an entrepreneurial style that placed a much more intense emphasis on the customer. He continued making his trademark cuts in costs, realizing $5 billion in savings between 1997 and 1999, but he also worked toward instilling a new ethos at Ford, one in which the retirement of one executive did not automatically trigger the promotion of the next executive in line.

As part of the new movement espoused by Nasser, the companys Lincoln-Mercury division was relocated from Detroit to Irvine, California, an unprecedented move for a major U.S. automaker. Nasser wanted the division to attract younger customersLincolns typical customer was 63 years old, Mercurys was 56 years oldand to be closer to suppliers and to emerging auto trends. Nasser wanted the division to breathe new life into itself away from the scrutiny of company headquarters, to benefit from a more entrepreneurial-driven perspective.

The changes at Lincoln-Mercury typified the profound cur-rents of change sweeping through Ford at the centurys end. Much remained to be done to achieve Nassers vision of a funda-mentally revamped Ford, but by the end of the 1990s there were impressive signs of progress. The company ended the decade as the most profitable automaker in the world. Its stock price in-creased 130 percent between 1996 and 1999, outpacing the in-creases recorded by its rivals. Further, some analysts projected Ford would eclipse General Motors in worldwide sales by 2001, thanks in large part to the companys increased ownership stake in Mazda Motor Corporation (from 25 percent to 33.4 percent in 1996) and its $6.45 billion acquisition of Swedish auto maker Volvo in 1999. The ultimate success or failure of the Nasser-led era, however, was to be determined in the first decade of the 21st century, as Ford concluded its first 100 years of business and redefined its style of operation for the future.

Principal Subsidiaries

Ford Electronics and Refrigeration Corp.; Ford Export Corp.; Ford International Capital Corp.; Ford International Finance Corp.; Ford Holdings, Inc.; Ford Motor Credit Co.; Ford Leasing Development Co.; Ford Motor Land Development Corp.; First Nationwide Financial Corp.; First Nationwide Savings; Ford Motor Company Ltd. (U.K.); Ford Motor Credit Company Ltd. (U.K.); Ford-Werke A.G. (Germany); Ford Credit Bank A.G. (Germany); Ford Motor Company of Canada Ltd.; Ensite Ltd. (Canada); Ford Glass Ltd. (Canada); Ford Motor Company of Australia Ltd.; Ford Motor Company of New Zealand Ltd.; Ford Brasil S.A. (Brazil); Ford Motor de Venezuela; Ford France S.A.; Ford Motor Company (Belgium) N.V.; Ford Credit N.V. (Belgium); Ford Italiana S.p.A. (Italy); Ford Credit S.p.A. (Italy); Ford Leasing S.p.A. (Italy); Ford Motor Argentina S.A.; Ford Motor Company AS (Denmark); Ford Motor Company S.A. (Mexico); Ford Nederland B.V. (Netherlands); Ford Espana S.A. (Spain); Ford Credit S.A. (Spain); Ford Leasing S.A. (Spain); Ford Credit A.B. (Sweden); Ford Credit S.A. (Switzerland); Transcom Insurance Ltd. (Bermuda); Mazda Motor Corporation (Japan; 33.4%); Ford Motor Company (Japan) Ltd.; Ford Lio Ho Motor Company Ltd. (Taiwan); Jaguar Ltd.

Principal Competitors

DaimlerChrysler AG; General Motors Corporation; Toyota Motor Corporation.

Further Reading

Beynon, Huw, Working for Ford, London: Penguin, 1984.

Carload of Trouble, Business Week, March 27, 2000, p. 56.

Connelly, Mary, Fords Biggest Job: Lift Lincoln, Automotive News, July 31, 2000, p. 23.

Dubashi, Jagannath, Ford: Looking Beyond the Shadows, FW, February 6, 1990, p. 23.

Gelderman, Barbara, Henry Ford, the Wayward Capitalist, New York: Dial Press, 1981.

Gross, Ken, Ford: Big, Bigger, Biggest, Automotive Industries, July 2000, p. 64.

Keatley, Robert, Ford Reorganizes to Stay Competitive and Reach New Markets in the World, Wall Street Journal, July 22, 1994, p. A4.

Lewis, David L., The Public Image of Henry Ford: An American Folk Hero and His Company, Detroit: Wayne State University Press, 1976.

Meyer, Stephen, The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company 19081921, Albany: State University of New York Press, 1981.

Moreau, Dan, Instant Prosperity: Behind Fords Fast Turnaround, Kiplingers Personal Finance Magazine, July 1993, p. 28.

Nasser: Ford Be Nimble, Business Week, September 27,1999, p. 42.

Nye, David E., Henry Ford: Ignorant Idealist, Port Washington: Kennikat Press, 1979.

Reiff, Rick, Slowing Traffic Ahead, Forbes, April 30, 1990, p. 82.

Remaking Ford, Business Week, October 11, 1999, p. 132.

Sorge, Marjorie, 1999 Executive of the Year, Automotive Industries, February 1999, p. 54.

Thomas, Charles M., Ford Loses a Record $2.3 Billion, Automotive News, February 17, 1992, p. 4.

Zesiger, Sue, Fords Hip Transplant, Fortune, May 10, 1999, p. 82.

______, Mr. Ford and Mr. Nasser Learn to Share: The Lords of Ford, Fortune, October 12, 1998, p. 34.

updated by Jeffrey L. Covell

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"Ford Motor Company." International Directory of Company Histories. 2001. Encyclopedia.com. 25 Sep. 2016 <http://www.encyclopedia.com>.

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"Ford Motor Company." International Directory of Company Histories. 2001. Retrieved September 25, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2844000057.html

Ford Motor Company

Ford Motor Company

The American Road
Dearborn, Michigan 48121-3236
U.S.A.
(313) 322-3000
Fax: (313) 322-7896

Public Company
Incorporated:
1919
Employees: 322,213
Sales: $108.52 billion
Stock Exchanges: New York Boston Pacific Midwest
Toronto Montreal London
SICs: 3711 Motor Vehicles and Car Bodies; 3714 Motor
Vehicles Parts and Accessories; 6159 Miscellaneous
Business Credit Institutions; 6141 Personal Credit
Institutions; 6035 Federal Savings Institutions; 6331 Fire,
Marine, and Casualty Insurance; 7515 Passenger Car
Leasing

One of a handful of companies that contributed significantly to the growth of the United States, Ford Motor Company represents a more than $100 billion multinational empire. Known primarily as a manufacturer of automobiles, Ford also holds a considerable stake in financial services, which by themselves generated more than $1 billion in income. With these vast resources in banking-related assets complementing its storied record of automobile production, Ford stood as formidable economic force.

Henry Ford, the founder of the Ford Motor Company, was born on a farm near Dearborn, Michigan, in 1863. He had a talent for engineering, which he pursued as a hobby from boyhood, but it was not until 1890 that he commenced his engineering career as an employee of the Detroit Edison Company. In his spare time, Ford constructed experimental gasoline engines and in 1892 completed his first gasoline buggy. Dissatisfied with the buggys weight, he sold it in 1896 to help fund the construction of a new car. Fords superiors at the electric company felt his hobby distracted him from his regular occupation, and despite his promotion to chief engineer, he was forced to quit in 1899.

Shortly afterwards, with financial backing from private investors, Ford established the Detroit Automobile Company. He later withdrew from the venture after a disagreement with business associates over the numbers and prices of cars to be produced. Ford advocated a business strategy which combined a lower profit margin on each car with greater production volumes. In this way, he hoped to gain a larger market share and maintain profitability.

Working independently in a small shed in Detroit, Henry Ford developed two four-cylinder, 80-horsepower race cars, called the 999 and the Arrow. These cars won several races and helped to create a new market for Ford automobiles. With $28,000 of capital raised from friends and neighbors, Henry Ford established a new shop on June 16, 1903. In this facility, a converted wagon factory on Mack Avenue in Detroit, the Ford Motor Company began production of a two-cylinder, eight-horsepower design called the Model A. The company produced 1,708 of these models in the first year of operation.

The Ford Motor Company was sued by the Licensed Association of Automobile Manufacturers, an industrial syndicate which held patent rights for road locomotives with internal combustion engines. Ford responded by taking the matter to the courts, arguing that the patent, granted to George B. Selden in 1895, was invalid. During the long process of adjudication, Ford continued to manufacture cars and relocated to a larger plant on Piquette and Beaubien Streets. A Canadian plant was established in Walkerville, Ontario, on August 17, 1904.

Henry Ford and his engineers designed several automobiles, each one designated by a letter of the alphabet; these included the small, four-cylinder Model N (which sold for $500), and the more luxurious six-cylinder Model K (which sold poorly for $2500). The failure of the Model K, coupled with Henry Fords persistence in developing inexpensive cars for mass production, caused a dispute between Ford and his associate Alexander Malcolmson. The latter, who helped to establish the company in 1903, resigned and his share of the company was acquired by Henry Ford. Fords holdings then amounted to 58 and one-half percent. In a further consolidation of his control, Ford replaced John S. Gray, a Detroit banker, as president of the company in 1906.

In October 1908, despite the continuing litigation with the Selden syndicate, Ford introduced the durable and practical Model T. Demand for this car was so great that Ford was forced to enlarge its production facilities. Over 10,000 Model Ts were produced in 1909. Able to vote down business associates who favored more conventional methods of production, Henry Ford applied his assembly line concept of manufacturing to the Model T.

In developing the assembly line, Ford noted that the average worker performed several tasks in the production of each component, and used a variety of tools in the process. He improved efficiency by having each worker specialize in one task with one tool. The component on which the employee worked was conveyed to him on a moving belt, and after allowing a set time for the task to be performed, the component was moved on to the next operation. Slower workers thus needed to increase their work rate in order to maintain production at the rate determined by the speed of the belts.

Fords battle with the Selden group led to a decision by the Supreme Court in 1911, eight years after the initial suit. The Court ruled that the Selden patent was invalid. The decision freed many automobile manufacturers from costly licensing obligations; it also enabled others to enter the business.

When the United States became involved in World War I (April 1917), the Ford Motor Company placed its resources at the disposal of the government. For the duration of the war, Ford Motor produced large quantities of automobiles, trucks, and ambulances, as well as Liberty airplane motors, Whippet tanks, Eagle submarine chasers, and munitions.

In 1918, Henry Ford officially retired from the company, naming his son Edsel president and ceding to him a controlling interest. But, in fact, Henry continued to direct company strategy and spent much of his time developing a farm tractor called the Fordson. He also published a conservative weekly journal, The Dearborn Independent. Edsel, who was more reserved and pragmatic than his father, concerned himself with routine operations.

At the end of the war Henry and Edsel Ford disagreed with fellow stockholders over the planned expenditure of several million dollars for a large new manufacturing complex at River Rouge, near Detroit. The Fords eventually resolved the conflict by buying out all the other shareholders. Their company was reregistered as a Delaware corporation in July 1919. The River Rouge facility, built shortly afterward, was a large integrated manufacturing and assembly complex which included a steel mill of substantial capacity.

Between January 1 and April 19, 1921, the Ford Motor Company had $58 million in financial obligations due, and only $20 million available to meet them. Convinced that Ford Motor would be forced into bankruptcy, representatives of several large financial houses offered to extend loans to the company, on the condition that the Fords yield financial control. When the offer was refused, the bankers retreated, certain that they would soon be called upon to repossess the company.

With little time available, Henry Ford transferred as many automobiles as possible to his dealerships, who were instructed to pay in cash. Almost immediately, this generated $25 million. Next, Ford purchased the Detroit, Toledo & Ironton railroad, the primary medium of transportation for his companys supplies. By rearranging the railroads schedules, Ford was able to reduce by one-third the time that automotive components spent in transit. This allowed him to reduce inventories by one-third, thereby releasing an additional $28 million. With additional income from other sources, and reduction in production costs, Ford had $87 million in cash by April 1, $27 million more than he needed to pay off the company debts.

The Ford Motor Companys only relationship with banks after this crisis was as a depositor. And despite poor financial management, Ford maintained such strong profitability that it offered to lend money on the New York markets, in competition with banks. With large quantities of cash still available, Ford acquired the financially troubled Lincoln Motor Company in 1922.

Edsel Ford was more enthusiastic about the development of the aircraft industry than his father, and in 1925 persuaded his fellow shareholders (all family members) to purchase the Stout Metal Airplane Company. His close friend William Stout, who was retained as vice-president and general manager of the company, developed a popular three-engine passenger aircraft known as the Ford Trimotor. 196 of these aircraft were built during its production run.

After 18 years producing the Model T, the Ford Motor Company faced its first serious threat from a competitor. In 1926, the General Motors Corporation introduced its Chevrolet automobile, a more stylish and powerful car. Sales of the Model T dropped sharply. After months of experimenting with a six-cylinder model, Ford decided to discontinue the Model T in favor of the new Model A. On May 31 1926, Ford plants across the country were closed for six months while assembly lines were retooled.

That year Ford voluntarily reduced its work week to five days declaring that workers should also benefit from the success of the company. Ford was also one of the first companies to limit the work day to eight hours, and to establish a minimum wage of $5 per day. At Henry Fords own admission, these policies were instituted more to improve productivity than to appease dissatisfied (and unrepresented) workers.

The British Ford Company was formed in 1928 and shortly thereafter the German Ford Company was founded. Henry Ford recognized the Soviet Union as a market with great potential, and like a number of other American industrialists, he fostered a relationship with officials in the Soviet government. Later, Ford participated in the construction of an automobile factory at Nishni-Novgogrod.

The economic crisis of October 1929, which led to the Great Depression, forced many companies to close. Ford Motor managed to remain in business, despite losses of as much as $68 million per year. By 1932, economic conditions became so difficult that the Ford minimum wage was reduced to $4 per day. But for its Model A, which sold 4.5 million units between 1927 and 1931, Fords situation would have been much worse.

The economy of Detroit was heavily dependent on large, locally based industrial manufacturers and when companies less successful than Ford were forced to suspend operations, a banking crisis developed. The Ford Motor Company, and Edsel Ford personally, extended about $12 million in loans to these banks in an effort to maintain their solvency. But these efforts failed and the banks were forced to close in February 1933. Ford lost over $32 million in deposits and several millions more in bank securities. The principal Ford bank, Guardian National, was subsequently reorganized by Ford interests as the Manufacturers National Bank of Detroit. Fords largest business rival, General Motors, having suffered a similar crisis, emerged with control over the National Bank of Detroit.

The implementation of President Roosevelts New Deal, made conditions more favorable to the organization of labor unions. But Henry Ford, who had supported President Hoover in the election, advised his workers to resist union organization, and in 1935 raised the companys minimum wage to $6 per day.

In 1937, the United Automobile Workers union began a campaign to organize Ford workers by sponsoring the employee occupation of a Ford plant in Kansas City. The conflict was resolved when Ford officials agreed to meet with union representatives. That same year, there was trouble at the River Rouge complex. Several men distributing UAW pamphlets at the gates were severely beaten by unidentified assailants, believed to have been agents of the Ford security office. Following an investigation by the National Labor Relations Board, Ford was cited for numerous unfair labor practices. The finding was contested, but eventually upheld when the Supreme Court refused to hear the case.

In 1940, Henry Ford, who opposed American involvement in World War II, cancelled a contract (arranged by Edsel) to build 6000 Rolls-Royce Merlin aircraft engines for the British Royal Air Force, and 3000 more for the United States Army. In time, however, public opinion led Ford to change his mind. Plans were made for the construction of a large new government-sponsored facility to manufacture aircraft at Willow Run, west of Dearborn.

Unionization activities climaxed in April 1941 when Ford employees went on strike. The NLRB called an employee election, under the terms of the Wagner Act, to establish a union representation for Ford workers. When the ballots were tabulated in June, the UAW drew 70 percent of the votes. Henry Ford, an avowed opponent of labor unions, suddenly altered his stand. He agreed to a contract with union representatives which met all worker demands.

The company devoted its resources to the construction of the Willow Run Aircraft plant. Eight months later, in December 1941, the Japanese bombing of Pearl Harbor resulted in a declaration of war by the United States against Japan, Germany, and Italy. Willow Run was completed the following May. It was the largest manufacturing facility in the world, occupying 2.5 million square feet of floor space, with an assembly line three miles long. Adjacent to the plant were hangars, covering 1.2 million square feet, and a large airfield. The airplanes produced at this facility were four-engine B-24E Liberator bombers, the Consolidated Aircraft version of the Boeing B-24. Production of aircraft got off to a slow start, but after adjustments the rate of production was raised to one plane per hour, 24 hours a day. During the war, other Ford Motor plants produced a variety of engines, as well as trucks, jeeps, M-4 tanks, M-10 tank destroyers, and transport gliders. The company also manufactured large quantities of tires, despite the removal of its tire plant to the Soviet Union.

Edsel Ford died unexpectedly in May 1943 at the age of 49. At the time of his death, Edsel was recognized as a far better manager than his father. Indeed, Henry Ford was often criticized for repeatedly undermining his sons efforts to improve the company, and the managerial crisis which occurred after Edsels death is directly attributable to Henry Fords persistent failure to prepare capable managers for future leadership of the company.

Edsel had been responsible for much of the companys wartime mobilization and his absence was deeply felt by his aging father, who was forced to resume the company presidency. In need of assistance, Henry Ford sought a special discharge from the Navy for Edsels son Henry II. The navy complied, citing the special needs of Ford management during wartime. Henry Ford vigorously prepared his grandson to succeed him. By the end of the war, when the Willow Run plant was turned over to the government, Ford had produced 8600 B-24E bombers and over 57,000 aircraft engines.

In September 1945, Henry Ford II, aged 28, was named president of the Ford Motor Company. The inexperienced man could not have started at a worse time. No longer supported by government contracts, the company began to lose money at a rate of $10 million per month. The source of the problem was Henry Ford Is financial management policy, specifically designed to perplex the Internal Revenue Service and discourage audits. The severe economic conditions after the war made Fords finances an albatross.

Unable to bring the companys finances under control, Henry II hired Ernest R. Breech, a General Motors executive and past chairperson of Bendix, in 1946. Breech was placed in charge of two groupsa managerial group and a financial one. The first one was comprised of several managers hired away from General Motors, and the second group was made up of ten talented financial experts who had served with the Air Force Office of Statistical Control. The Air Force group included Robert S. McNamara, J. Edward Lundy, Arjay Miller, and Charles Tex Thornton; they spent several years reconstructing the companys system of financial management.

Henry Ford I, who had retained the title of chairperson since 1945, died in April 1947 at the age of 83. Henry II and Ernest Breech were then able to implement their own strategies for recovery, and these included the adoption of the proven General Motors management structure, and the decision to establish the Ford Motor Company in foreign markets. In its first year under Breech, the company registered a profit and it continued to gain strength in the late 1940s and early 1950s. Breechs top priority was strict adherence to a financial plan with strong profit margins; unfortunately, this proved to be at the expense of developing automobiles for an increasingly complex market.

Over the previous two decades, the Ford Motor Company had been a notable pioneer and achiever in the industry, and it was the first company to cast a V-8 engine block (1932). Ford had produced its 25 millionth automobile in 1937 and the following year, its Lincoln Division introduced the Mercury line which proved highly successful in the growing market for medium-priced automobiles. Fords good image had been further enhanced by its contributions to the Allied effort in World War II; even Josef Stalin had kind words for the enterprising American company.

Before he died, Henry Ford I had created two classes of Ford stock. The B Class was reserved for family members and constituted the controlling 40 percent voting interest. The ordinary common shares were to be retained by the company until January 1956, when they were to be offered to the public for the first time.

Two years after Henry Is death, in 1949, the company unveiled a number of new automatic styles. But while the cars were practical, and to a degree fashionable, the company no longer appeared to be a pioneer; indeed it gained a reputation, not wholly justified, as being an imitator of General Motors.

Regaining its initiative, the Ford Motor Company decided to introduce a new model to fill a gap in the market between the Ford and Lincoln-Mercury lines. In 1958, the much heralded 410 horsepower Edsel made its debut. It was a terrible flop. Fords market researchers had been very wrong; there was no gap in the market for the Edsel to fill. After just two years, production of the ill-fated car ceased. 110,847 units had been produced, at a loss of some $250 million.

The 1960s saw many changes at Ford: dissatisfied with his secondary role in the company decision-making, Henry Ford stripped Breech of his power, replacing him with Robert McNamara. But McNamara left the Ford Motor Company in 1961 to serve as Secretary of Defense in the Kennedy administration. Many of McNamaras duties were taken over by Arjay Miller, who succeeded the interim president, John Dykstra, in 1963.

The Ford Motor Company purchased the Philco Corporation in 1961 and established a tractor division in 1962. The following year, Ford introduced its highly successful Mustang; more than 500,000 of these cars were sold in 18 months. The man most responsible for developing the Mustang was a protege of Robert McNamara named Lee Iacocca.

In another move intended to assert his authority over management, Henry Ford dismissed Arjay Miller in 1968 and named Semon E. Knudsen as president. Knudsen, a former executive vice-president at General Motors, known for his aggressive personality, found himself in constant conflict with Henry Ford, and after 19 months he was replaced by Lee Iacocca. Iacocca was a popular figure, highly talented in marketing and sales, but like Knudsen, he frequently disagreed with Henry Ford.

Ford Motor Company subsidiaries in Europe entered a period of strong growth and high profitability in the early 1970s, and these subsidiaries produced components for the Pinto, a sub-compact introduced in the U.S. in 1971. Pinto models from 1971 to 1976 and similarly configured Bobcats from 1975 to 1976 drew a great deal of attention after several incidents in which the cars gas tank exploded in rear-end collisions. The unfavorable publicity from news reports damaged Fords public image, as did the wrongful death litigation.

In April 1977, Henry Ford II reduced Iacoccas power by creating a new executive triumvirate. Iacocca was a member of this, along with Ford himself and Philip Caldwell. But a year later, Ford added his brother William Clay Ford to the group and relegated Iacocca to a subordinate position; then within a few months, Ford suddenly fired Iacocca and installed Caldwell as president. Henry Ford was battling stockholder allegations of financial misconduct and bribery at the time and his dismissal of Iacocca made him more unpopular than ever.

Henry Ford made a critical decision and a very misguided one. He cancelled development of a small car which had been proposed by Iacocca and which was intended to succeed the aging Pinto. Thus, as the Japanese compacts became increasingly popular in the United States, Ford found itself quite unable to compete. Adding to its woes, Ford, along with other U.S. car manufacturers, was obligated by Congressional legislation (particularly the Clean Air Act) to develop automobiles which would emit less pollutants.

Henry Ford relinquished his position as chief executive officer to Philip Caldwell in October 1979. The following March, Ford retired and gave the chair to Caldwell, while retaining his seat on the board of directors.

The Ford Motor Company encountered severe economic losses as a result of a reduction in market share, as well as the high costs incurred by labor contracts and the development of automobiles that met the new federal standards. In 1980, the company lost $1.54 billion, despite strong profits from the truck division and European operations. Ford lost a further $1.06 billion in 1981 and $658 million in 1982 while trying to effect a recovery; its market share fell from 23.6 percent in 1978 to 16.6 percent in 1981.

Company officials studied Japanese methods of industrial management, and worked more closely with Toyo Kogyo, the Japanese manufacturer of Mazda automobiles (Ford gained a 25 percent share of Toyo Kogyo in November 1979, when a Ford subsidiary merged with the company). Ford imported Mazda cars and trucks, and in many ways treated Toyo Kogyo as a small car division until the Escort, its successor to the Pinto, reached the showrooms. This new compact was modelled after the Ford (Europe) Erika; another version of it, the Lynx, was produced by Fords Lincoln-Mercury division.

Caldwell transferred the talented manager Harold Poling from the European division to the United States in an attempt to apply successful European formulas to the American operation. In the restructuring which followed several plants were closed and more than 100,000 workers were dismissed. Fords weakness in the market was a major concern of the unions; consequently, the company inaugurated a policy of employee involvement in plant operations and was able to secure more favorable labor contracts. Productivity improved dramatically.

In 1984, with costs reduced, Ford started to repurchase 30 million shares (about ten percent of the companys stock). Its production of cars in Mexico was increased, and through its interest in Kia Motors, output was stepped up in South Korea. The following year, Ford introduced the Taurus (another version, the Salde, was produced by its Mercury division), a modern full-size automobile which had taken five years to develop at a cost of $3 billion. The Taurus proved highly successful and won several design awards.

Sales and profits reached record levels in 1984, and in 1986 Ford surpassed General Motors in income for the first time since 1924. In addition, Fords market share increased to just under 20 percent. Ford Motor purchased several companies in the mid 1980s, including the First Nationwide Financial Corporation and the New Holland tractor division of Sperry, which was later merged with Ford Tractor. Ford also purchased a 30 percent share of Otosan, the automotive subsidiary of the Turkish Koc Group. The attempted acquisition of the Italian car maker Alfa Romeo in 1986 failed, due to a rival bid from Fiat.

The diversification into financial services that began in the mid-1980s continued in earnest throughout the rest of the decade, as each of the major U.S. car manufacturers sought to insulate themselves against the cyclical nature of their business. Ford spent $5.5 billion acquiring assets for its financial services group during the latter half of the decade, including a $3.4 billion purchase in 1989 of the Associates, a Dallas-based finance company. That acquisition, completed the same year Ford purchased the venerable British car manufacturer, Jaguar Cars Ltd., for $2.5 billion, made Ford the countrys second largest provider of diversified financial services, ranking only behind Citicorp. With plans to eventually derive 30 percent of the companys profits from financial service-related business, Ford entered the 1990s with $115 billion worth of banking-related assets, a portfolio that provided the companys only bright moments during the otherwise deleterious early 1990s.

An economic recession crippled U.S. car manufacturers during the early 1990s, and Ford bore the brunt of the financial malaise that stretched around the globe. Domestically, car sales faltered and abroad, particularly in Great Britain and Australia, Fords international sales plummeted. In 1991, Fords worldwide automotive operations lost an enormous $3.2 billion after recording a $99 million profit the year before. In the United States, automotive losses reached an equally staggering $2.2 billion on the heels of a $17 million loss in 1990. The losses struck a serious blow to Ford, which as recently as 1989 had generated $3.3 billion in net income, but the financial results of 1991 would have been worse without the companys strategic diversification into financial services. For the year, Fords financial services group registered a record $927 million in earnings, up from the previous years total of $761 million, which left the company with a $2.25 billion loss for the year, an inauspicious record in Fords nearly 90-year history.

The financial disaster of 1991, however, was just a prelude to more pernicious losses the following year, as the global recession reached its greatest intensity. In 1992, with revenue swelling to slightly more than $100 billion, Ford posted a crushing $7.38 billion loss. Although 1992 represented one of the bleakest years in Fords history, the worst was over, and as the economic climate improved, the company emerged with renewed vitality. Against the backdrop of successive financial losses, Ford had increased its presence in the truck and minivan market niche, which represented the fastest growing segment of the broadly defined automotive market. Roughly 200,000 mini-vans and sports-utility vehicles were sold in the United States a decade earlier and now, as consumers once again returned to car dealersshowrooms, more than 2.3 million opted for minivans and light trucks, a trend that bolstered Fords financial position and predicated its return to a profitable future.

In 1993, Ford generated $2.52 billion in net income from $108.5 billion in revenue during a year in which the company actually lost money on passenger car sales, yet recouped the losses through minivan and truck sales. By 1994, such vehicles accounted for 50 percent of Fords automotive sales, a prodigious increase from the preceding decade and the primary engine driving the companys growth.

Despite the losses suffered several years earlier, there was justifiable hope for further growth as Ford entered the mid-1990s. The gap separating Japanese and American car manufacturers production standards had narrowed considerably, with the U.S. manufacturers emerging from the early 1990s in a more enviable positionFord included. As the technological and managerial race between U.S. car manufacturers and their Japanese counterparts tightened, the importance of prudent product development and effective distribution networks increased. Toward this end, Ford reorganized its production and distribution operations in mid-1994 to better respond to the changing economic structure of the numerous countries in which Ford operated facilities. Regional trading areas, rather than nation states, would represent the primary focus of Fords future efforts, a direction the company moved toward with its worldwide reorganization in 1994 and a direction that promised to redefine its style of operation for the twenty-first century.

Principal Subsidiaries

Ford Electronics and Refrigeration Corp.; Ford Export Corp.; Ford International Capital Corp.; Ford International Finance Corp.; Ford Holdings, Inc.; Ford Motor Credit Co.; Ford Leasing Development Co.; Ford Motor Land Development Corp.; First Nationwide Financial Corp.; First Nationwide Savings; Ford Motor Company Ltd. (England); Ford Motor Credit Company Ltd. (England); Ford-Werke A.G. (Germany); Ford Credit Bank A.G. (Germany); Ford Motor Company of Canada Ltd.; Ensite Ltd. (Canada); Ford Glass Ltd. (Canada); Ford Motor Company of Australia Ltd.; Ford Motor Company of New Zealand Ltd.; Ford Brasil S.A. (Brazil); Ford Motor de Venezuela; Ford France S.A.; Ford Motor Company (Belgium) N.V.; Ford Credit N.V. (Belgium); Ford Italiana S.p.A. (Italy); Ford Credit S.p.A. (Italy); Ford Leasing S.p.A. (Italy); Ford Motor Argentina S.A.; Ford Motor Company AS (Denmark); Ford Motor Company S.A. (Mexico); Ford Nederland B.V. (Netherlands); Ford Espana S.A. (Spain); Ford Credit S.A. (Spain); Ford Leasing S.A. (Spain); Ford Credit A.B. (Sweden); Ford Credit S.A. (Switzerland); Trans-corn Insurance Ltd. (Bermuda); Mazda Motor Corporation (Japan); Ford Motor Company (Japan) Ltd.; Ford Lio Ho Motor Company Ltd. (Taiwan); Jaguar Ltd.

Further Reading

Beynon, Huw, Working for Ford, London: Penguin, 1984.

Dubashi, Jagannath, Ford: Looking Beyond the Shadows, FW, February 6, 1990, p. 23.

Gelderman, Barbara, Henry Ford, the Wayward Capitalist, New York: Dial Press, 1981.

Keatley, Robert, Ford Reorganizes to Stay Competitive and Reach New Markets in the World, Wall Street Journal, July 22, 1994, p. A4.

Lewis, David L., The Public Image of Henry Ford: An American Folk Hero and His Company, Detroit: Wayne State University Press, 1976.

Meyer, Stephen, The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company 1908-1921, Albany: State University of New York Press, 1981.

Moreau, Dan, Instant Prosperity: Behind Fords Fast Turnaround, Kiplingers Personal Finance Magazine, July 1993, p. 28.

Nye, David E., Henry Ford: Ignorant Idealist, Port Washington: Kennikat Press, 1979.

Reiff, Rick, Slowing Traffic Ahead, Forbes, April 30, 1990, p. 82.

Thomas, Charles M., Ford Loses a Record $2.3 Billion, Automotive News, February 17, 1992, p. 4.

updated by Jeffrey L. Covell

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"Ford Motor Company." International Directory of Company Histories. 1995. Encyclopedia.com. 25 Sep. 2016 <http://www.encyclopedia.com>.

"Ford Motor Company." International Directory of Company Histories. 1995. Encyclopedia.com. (September 25, 2016). http://www.encyclopedia.com/doc/1G2-2841500054.html

"Ford Motor Company." International Directory of Company Histories. 1995. Retrieved September 25, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2841500054.html

Ford Motor Company

Ford Motor Company

The American Road
Dearborn, Michigan 48121
U.S.A.
(313) 322-3000

Public Company
Incorporated:
July 9, 1919
Employees: 383,300
Sales: $62.17 billion
Market value: $21.2 billion
Stock Index: New York Boston Pacific Midwest
Toronto Montreal London

Until recently, the Ford Motor Company has been one of the most dynastic of major American enterprises, a factor which has both benefited the company and brought it to the brink of disaster. Today, Ford is the second largest manufacturer of automobiles and trucks in the world, and its operations are well diversified, both operationally and geographically. The company operates the worlds second largest finance company in the world, and is a major producer of tractors, glass, and steel. It is most prominent in the United States, but also has plants in Canada, Britain, and West Germany, and facilities in almost 100 other countries.

Henry Ford, the founder of the Ford Motor Company, was born on a farm near Dearborn, Michigan in 1863. He had a talent for engineering, which he pursued as a hobby from boyhood, but it was not until 1890 that he commenced his engineering career as an employee of the Detroit Edison Company. In his spare time Ford constructed experimental gasoline engines, and in 1892 completed his first gasoline buggy. Dissatisfied with the buggys weight, he sold it in 1896 to help fund the construction of a new car. Fords superiors at the electric company felt his hobby distracted him from his regular occupation, and despite his promotion to chief engineer, he was forced to quit in 1899.

Shortly afterwards, with financial backing from private investors, Ford established the Detroit Automobile Company. He later withdrew from the venture after a disagreement with business associates over the numbers and prices of cars to be produced. Ford advocated a business strategy which combined a lower profit margin on each car with greater production volumes. In this way, he hoped to gain a larger market share and maintain profitability.

Working independently in a small shed in Detroit, Henry Ford developed two four-cylinder, 80-horsepower race cars, called the 999 and the Arrow. These cars won several races and helped to create a new market for Ford automobiles. With $28,000 of capital raised from friends and neighbors, Henry Ford established a new shop on June 16, 1903. In this facility, a converted wagon factory on Mack Avenue in Detroit, the Ford Motor Company began production of a two-cylinder, eight-horsepower design called the Model A. The company produced 1,708 of these models in the first year of operation.

The Ford Motor Company was sued by the Licensed Association of Automobile Manufacturers, an industrial syndicate which held patent rights for road locomotives with internal combustion engines. Ford responded by taking the matter to the courts, arguing that the patent, granted to George B. Selden in 1895, was invalid. During the long process of adjudication, Ford continued to manufacture cars and relocated to a larger plant on Piquette and Beaubien Streets. A Canadian plant was established in Walkerville, Ontario on August 17, 1904.

Henry Ford and his engineers designed several automobiles, each one designated by a letter of the alphabet; these included the small, four-cylinder Model N (which sold for $500), and the more luxurious six-cylinder Model K (which sold poorly for $2500). The failure of the Model K, coupled with Henry Fords persistence in developing inexpensive cars for mass-production, caused a dispute between Ford and his associate Alexander Malcolmson. The latter, who helped to establish the company in 1903, resigned and his share of the company was acquired by Henry Ford. Fords holdings then amounted to 581/2%. In a further consolidation of his control, Ford replaced John S. Gray, a Detroit banker, as president of the company in 1906.

In October 1908, despite the continuing litigation with the Selden syndicate, Ford introduced the durable and practical Model T. Demand for this car was so great that Ford was forced to enlarge its production facilities. Over 10,000 Model Ts were produced in 1909. Able to vote down business associates who favored more conventional methods of production, Henry Ford applied his assembly line concept of manufacturing to the Model T.

In developing the assembly line, Ford noted that the average worker performed several tasks in the production of each component, and used a variety of tools in the process. He improved efficiency by having each worker specialize in one task with one tool. The component on which the employee worked was conveyed to him on a moving belt, and after allowing a set time for the task to be performed, the component was moved on to the next operation. Slower workers thus needed to increase their work rate in order to maintain production at the rate determined by the speed of the belts.

Fords battle with the Selden group led to a decision by the Supreme Court in 1911, eight years after the initial suit. The Court ruled that the Selden patent was invalid. The decision freed many automobile manufacturers from costly licensing obligations; it also enabled others to enter the business.

When the United States became involved in World War I (April 1917), the Ford Motor Company placed its resources at the disposal of the government. For the duration of the war, Ford Motor produced large quantities of automobiles, trucks, and ambulances, as well as Liberty airplane motors, Whippet tanks, Eagle submarine chasers, and munitions.

In 1918 Henry Ford officially retired from the company, naming his son Edsel president, and ceding to him a controlling interest. But in fact, Henry continued to direct company strategy, and spent much of his time developing a farm tractor called the Fordson. He also published a conservative weekly journal, The Dearborn Independent. Edsel, who was more reserved and pragmatic than his father, concerned himself with routine operations.

At the end of the war Henry and Edsel Ford disagreed with fellow stockholders over the planned expenditure of several million dollars for a large new manufacturing complex at River Rouge, near Detroit. The Fords eventually resolved the conflict by buying out all the other shareholders. Their company was re-registered as a Delaware corporation in July 1919. The River Rouge facility, built shortly afterward, was a large integrated manufacturing and assembly complex which included a steel mill of substantial capacity.

Between January 1 and April 19, 1921 the Ford Motor Company had $58 million in financial obligations due, and only $20 million available to meet them. Convinced that Ford Motor would be forced into bankruptcy, representatives of several large financial houses offered to extend loans to the company, on the condition that the Fords yield financial control. When the offer was refused, the bankers retreated, certain that they would soon be called upon to repossess the company.

With little time available, Henry Ford transferred as many automobiles as possible to his dealerships, who were instructed to pay in cash. Almost immediately, this generated $25 million. Next, Ford purchased the Detroit, Toledo & Ironton railroad, the primary medium of transportation for his companys supplies. By rearranging the railroads schedules, Ford was able to reduce by one-third the time that automotive components spent in transit. This allowed him to reduce inventories by one-third, thereby releasing an additional $28 million. With additional income from other sources, and reduction in production costs, Ford had $87 million in cash by April 1, $27 million more than he needed to pay off the company debts.

The Ford Motor Companys only relationship with banks after this crisis was as a depositor. And despite poor financial management, Ford maintained such strong profitability that it offered to lend money on the New York markets, in competition with banks. With large quantities of cash still available, Ford acquired the financially troubled Lincoln Motor Company in 1922.

Edsel Ford was more enthusiastic about the development of the aircraft industry than his father, and in 1925 persuaded his fellow shareholders (all family members) to purchase the Stout Metal Airplane Company. His close friend William Stout, who was retained as vice president and general manager of the company, developed a popular three-engine passenger aircraft known as the Ford Trimotor. 196 of these aircraft were built during its production run.

After 18 years producing the Model T, the Ford Motor Company faced its first serious threat from a competitor. In 1926 the General Motors Corporation introduced its Chevrolet automobile, a more stylish and powerful car. Sales of the Model T dropped sharply. After months of experimenting with a six-cylinder model, Ford decided to discontinue the Model T in favor of the new Model A. On May 31 1926, Ford plants across the country were closed for six months while assembly lines were retooled.

That year Ford voluntarily reduced its work week to five days declaring that workers should also benefit from the success of the company. Ford was also one of the first companies to limit the work day to eight hours, and to establish a minimum wage of $5 per day. At Henry Fords own admission, these policies were instituted more to improve productivity than to appease dissatisfied (and unrepresented) workers.

The British Ford Company was formed in 1928 and shortly thereafter the German Ford Company was founded. Henry Ford recognized the Soviet Union as a market with great potential, and like a number of other American industrialists, he fostered a relationship with officials in the Soviet government. Later, Ford participated in the contruction of an automobile factory at Nishni-Novgogrod.

The economic crisis of October 1929, which led to the Great Depression, forced many companies to close. Ford Motor managed to remain in business, despite losses of as much as $68 million per year. By 1932 economic conditions became so difficult that the Ford minimum wage was reduced to $4 per day. But for its Model A, which sold 4.5 million units between 1927 and 1931, Fords situation would have been much worse.

The economy of Detroit was heavily dependent on large, locally based industrial manufacturers and when companies less successful than Ford were forced to suspend operations, a banking crisis developed. The Ford Motor Company, and Edsel Ford personally, extended about $12 million in loans to these banks in an effort to maintain their solvency. But these efforts failed and the banks were forced to close in February 1933. Ford lost over $32 million in deposits and several millions more in bank securities. The principal Ford bank, Guardian National, was subsequently reorganized by Ford interests as the Manufacturers National Bank of Detroit. Fords largest business rival, General Motors, having suffered a similar crisis, emerged with control over the National Bank of Detroit.

The implementation of President F.D. Roosevelts New Deal, made conditions more favorable to the organization of labor unions. But Henry Ford, who had supported President Hoover in the election, advised his workers to resist union organization, and in 1935 raised the companys minimum wage to $6 per day.

In 1937 the United Automobile Workers union began a campaign to organize Ford workers by sponsoring the employee occupation of a Ford plant in Kansas City. The conflict was resolved when Ford officials agreed to meet with union representatives. That same year there was trouble at the River Rouge complex. Several men distributing UAW pamphlets at the gates were severely beaten by unidentified assailants, believed to have been agents of the Ford security office. Following an investigation by the National Labor Relations Board, Ford was cited for numerous unfair labor practices. The finding was contested, but eventually upheld when the Supreme Court refused to hear the case.

In 1940 Henry Ford, who opposed American involvement in World War II, cancelled a contract (arranged by Edsel) to build 6000 Rolls-Royce Merlin aircraft engines for the British Royal Air Force, and 3000 more for the United States Army. In time, however, public opinion led Ford to change his mind. Plans were made for the construction of a large new government-sponsored facility to manufacture aircraft at Willow Run, west of Dearborn.

Unionization activities climaxed in April 1941 when Ford employees went on strike. The NLRB called an employee election, under the terms of the Wagner Act, to establish a union representation for Ford workers. When the ballots were tabulated in June, the UAW drew 70% of the votes. Henry Ford, an avowed opponent of labor unions, suddenly altered his stand. He agreed to a contract with union representatives which met all worker demands.

The company devoted its resources to the construction of the Willow Run Aircraft plant. Eight months later, in December 1941, the Japanese bombing of Pearl Harbor resulted in a declaration of war by the United States against Japan, Germany, and Italy. Willow Run was completed the following May. It was the largest manufacturing facility in the world, occupying 2.5 million square feet of floor space, with an assembly line three miles long. Adjacent to the plant were hangars, covering 1.2 million square feet, and a large airfield. The airplanes produced at this facility were four-engine B-24E Liberator bombers, the Consolidated Aircraft version of the Boeing B-24. Production of aircraft got off to a slow start, but after adjustments the rate of production was raised to one plane per hour, 24 hours a day. During the war, other Ford Motor plants produced a variety of engines, as well as trucks, jeeps, M-4 tanks, M-10 tank destroyers, and transport gliders. The company also manufactured large quantities of tires, despite the removal of its tire plant to the Soviet Union.

Edsel Ford died unexpectedly in May 1943 at the age of 49. At the time of his death, Edsel was recognized as a far better manager than his father. Indeed, Henry Ford was often criticized for repeatedly undermining his sons efforts to improve the company, and the managerial crisis which occurred after Edsels death is directly attributable to Henry Fords persistent failure to prepare capable managers for future leadership of the company.

Edsel had been responsible for much of the companys wartime mobilization and his absence was deeply felt by his aging father, who was forced to resume the company presidency. In need of assistance, Henry Ford sought a special discharge from the Navy for Edsels son Henry II. The navy complied, citing the special needs of Ford management during wartime. Henry Ford vigorously prepared his grandson to succeed him.

By the end of the war, when the Willow Run plant was turned over to the government, Ford had produced 8600 B-24E bombers and over 57,000 aircraft engines.

In September 1945, Henry Ford II, aged 28, was named president of the Ford Motor Company. The inexperienced man could not have started at a worse time. No longer supported by government contracts, the company began to lose money at a rate of $10 million per month. The source of the problem was Henry Ford Is financial management policy, specifically designed to perplex the Internal Revenue Service and discourage audits. The severe economic conditions after the war made Fords finances an albatross.

Unable to bring the companys finances under control, Henry II hired Ernest R. Breech, a General Motors executive and past chairman of Bendix, in 1946. Breech was placed in charge of two groupsa managerial group and a financial one. The first one was comprised of several managers hired away from General Motors, and the second group was made up of ten talented financial experts who had served with the Air Force Office of Statistical Control. The Air Force group included Robert S. McNamara, J. Edward Lundy, Arjay Miller, and Charles Tex Thornton; they spent several years reconstructing the companys system of financial management.

Henry Ford I, who had retained the title of chairman since 1945, died in April 1947 at the age of 83. Henry II and Ernest Breech were then able to implement their own strategies for recovery, and these included the adoption of the proven General Motors management structure, and the decision to establish the Ford Motor Company in foreign markets. In its first year under Breech, the company registered a profit and it continued to gain strength in the late 1940s and early 1950s. Breechs top priority was strict adherence to a financial plan with strong profit margins; unfortunately, this proved to be at the expense of developing automobiles for an increasingly complex market.

Over the previous two decades, the Ford Motor Company had been a notable pioneer and achiever in the industry, and it was the first company to cast a V-8 engine block (1932). Ford had produced its 25 millionth automobile in 1937 and the following year, its Lincoln Division introduced the Mercury line which proved highly successful in the growing market for medium-priced automobiles. Fords good image had been further enhanced by its contributions to the Allied effort in World War II; even Josef Stalin had kind words for the enterprising American company.

Before he died, Henry Ford I had created two classes of Ford stock. The B Class was reserved for family members and constituted the controlling 40% voting interest. The ordinary common shares were to be retained by the company until January 1956, when they were to be offered to the public for the first time.

Two years after Henry Is death, in 1949, the company unveiled a number of new automatic styles. But while the cars were practical, and to a degree fashionable, the company no longer appeared to be a pioneer; indeed it gained a reputation, not wholly justified, as being an imitator of General Motors.

Regaining its initiative, the Ford Motor Company decided to introduce a new model to fill a gap in the market between the Ford and Lincoln-Mercury lines. In 1958 the much heralded, 410 horsepower Edsel made its debut. It was a terrible flop. Fords market researchers had been very wrong; there was no gap in the market for the Edsel to fill. After just two years, production of the ill-fated car ceased. 110,847 units had been produced, at a loss of some $250 million.

The 1960s saw many changes at Ford: dissatisfied with his secondary role in the company decision-making, Henry Ford stripped Breech of his power, replacing him with Robert McNamara. But McNamara left the Ford Motor Company in 1961 to serve as Secretary of Defense in the Kennedy administration. Many of McNamaras duties were taken over by Arjay Miller, who succeeded the interim president, John Dykstra, in 1963.

The Ford Motor Company purchased the Philco Corporation in 1961 and established a tractor division in 1962. The following year Ford introduced its highly successful Mustang; more than 500,000 of these cars were sold in 18 months. The man most responsible for developing the Mustang was a protege of Robert McNamara named Lee Iacocca.

In another move intended to assert his authority over management, Henry Ford dismissed Arjay Miller in 1968 and named Semon E. Knudsen as president. Knudsen, a former executive vice president at General Motors, known for his strong personality, found himself in constant conflict with Henry Ford, and after 19 months he was replaced by Lee Iacocca. Iacocca was a popular figure, highly talented in marketing and sales, but like Knudsen, he frequently disagreed with Henry Ford.

Ford Motor Company subsidiaries in Europe entered a period of strong growth and high profitability in the early 1970s, and these subsidiaries produced components for the Pinto, a sub-compact introduced in the U.S. in 1971. Pinto models from 1971 to 1976 and similarly configured Bobcats from 1975 to 1976 drew a great deal of attention after numerous incidents in which the cars gas tank exploded in rear-end collisions. The unfavorable publicity from news reports damaged Fords public image, as did the wrongful death litigation.

In April 1977 Henry Ford reduced Iacoccas power by creating a new executive triumvirate. Iacocca was a member of this, along with Ford himself and Philip Caldwell. But a year later, Henry Ford added his brother William Clay Ford to the group and relegated Iacocca to a subordinate position; then within a few months, Ford suddenly fired Iacocca and installed Caldwell as president. Henry Ford was battling stockholder allegations of financial misconduct and bribery at the time and his dismissal of Iacocca made him more unpopular than ever.

Henry Ford made a critical decision and a very misguided one. He cancelled development of a small car which had been proposed by Iacocca and which was intended to succeed the aging Pinto. Thus, as the Japanese compacts became increasingly popular in the U.S., Ford found itself quite unable to compete. Adding to its woes, Ford Motor, along with other U.S. car manufacturers, was obligated by Congressional legislation (particularly the Clean Air Act) to develop automobiles which would emit less pollutants.

Henry Ford relinquished his position as chief executive officer to Philip Caldwell in October 1979. The following March, Ford retired and gave the chairmanship to Cald-well, but he retained his seat on the board of directors.

The Ford Motor Company encountered severe economic losses as a result of a reduction in market share, and high costs incurred by labor contracts and the development of automobiles that met the new federal standards. In 1980 the company lost $1.54 billion, despite strong profits from the truck division and European operations. Ford lost a further $1.06 billion in 1981 and $658 million in 1982 while trying to effect a recovery; its market share fell from 23.6% in 1978 to 16.6% in 1981.

Company officials studied Japanese methods of industrial management, and worked more closely with Toyo Kogyo, the Japanese manufacturer of Mazda automobiles (Ford gained a 25% share of Toyo Kogyo in November 1979, when a Ford subsidiary merged with the company). Ford imported Mazda cars and trucks, and in many ways treated Toyo Kogyo as a small car division until the Escort, its successor to the Pinto, reached the showrooms. This new compact was modelled after the Ford (Europe) Erika; another version of it, the Lynx, was produced by Fords Lincoln-Mercury division.

Caldwell transferred the talented manager Harold Poling from the European division to the United States in an attempt to apply successful European formulas to the American operation. In the restructuring which followed several plants were closed and more than 100,000 workers were dismissed. Fords weakness in the market was a major concern of the unions; consequently, the company inaugurated a policy of employee involvement in plant operations and was able to secure more favorable labor contracts. Productivity improved dramatically.

In 1984, with costs reduced, Ford started to repurchase 30 million shares (about 10% of the companys stock). Its production of cars in Mexico was increased, and through its interest in Kia Motors, output was stepped up in South Korea. The following year Ford introduced the Taurus (another version, the Salde, was produced by its Mercury division), a modern full-size automobile which had taken five years to develop at a cost of $3 billion. The Taurus proved highly successful and won several design awards.

Sales and profits reached record levels in 1984, and in 1986 Ford surpassed General Motors in income for the first time since 1924. In addition, Fords market share increased to just under 20%. Ford Motor purchased several companies in the mid 1980s, including the First Nationwide Financial Corporation and the New Holland tractor division of Sperry, which was later merged with Ford Tractor. Ford also purchased a 30% share of Otosan, the automotive subsidiary of the Turkish Koc Group. The attempted acquisition of the Italian car maker Alfa Romeo in 1986 failed, due to a rival bid from Fiat.

Philip Caldwell retired as chairman and chief executive officer in February 1985 and was succeeded by Donald Petersen. While Ford family interests continue to control the Ford Motor Company, it is unlikely that a Ford family member will play an active role in the management of the company for some time to come.

Principal Subsidiaries

Rouge Steel Co.; Ford Aerospace & Communications Corp.; Ford Electronics and Refrigeration Corp.; Ford Export Corp.; Ford International Capital Corp.; Ford International Finance Corp.; Ford Motor Credit Co.; Parker Chemical Co.; The American Road Insurance Co.; Ford Leasing Development Co.; Ford Motor Land Development Corp.; First Nationwide Financial Corp.; First Nationwide Savings; Ford Motor Company Ltd. (England); Ford Motor Credit Company Ltd. (England); Henry Ford & Son (Finance) Ltd. (England); Ford-Werke A.G. (West Germany); Ford Credit Bank A.G. (West Germany); Ford Motor Company of Canada Ltd.; Ensite Ltd. (Canada); Ford Glass Ltd. (Canada); Ford Motor Company of Australia Ltd.; Ford Motor Company of New Zealand Ltd.; Ford Brasil S.A. (Brazil); Ford Motor de Venezuela; Ford France S.A.; Ford Motor Company (Belgium) N.V.; Ford Credit N.V. (Belgium); Ford Italiana S.p.A. (Italy); Ford Credit S.p.A. (Italy); Ford Leasing S.p.A. (Italy); Ford Motor Argentina S.A.; Ford Motor Company A/S (Denmark); Ford Motor Company S.A. (Mexico); Ford Nederland B.V. (Netherlands); Ford Espana S.A. (Spain); Ford Credit S.A. (Spain); Ford Leasing S.A. (Spain); Ford Credit A.B. (Sweden); Ford Credit S.A. (Switzerland); Transcon Insurance Ltd. (Bermuda); Mazda Motor Corporation (Japan); Ford Motor Company (Japan) Ltd.; Ford Lio Ho Motor Company Ltd. (Taiwan). Ford also has 262 American and 81 foreign vehicle dealerships and 162 other American and foreign subsidiaries.

Further Reading

The Public Image of Henry Ford: An American Folk Hero and His Company by David L. Lewis, Detroit, Wayne State University Press, 1976; Henry Ford, Ignorant Idealist by David E. Nye, Port Washington, New York, Kennikat Press, 1979; Henry Ford, the Wayward Capitalist by Barbara Gelderman, New York, Dial Press, 1981; The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company 1908-1921 by Stephen Meyer, Albany, State University of New York Press, 1981; Working for Ford by Huw Beynon, London, Penguin, 1984.

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"Ford Motor Company." International Directory of Company Histories. 1988. Encyclopedia.com. 25 Sep. 2016 <http://www.encyclopedia.com>.

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Ford Motor Company

Ford Motor Company

1 American Road
Dearborn, Ml 48126

(313) 845-8540
www.ford.com

Thinking of the Ford Motor Company conjures up many imagesdurable trucks that are "built Ford tough"; fancy coupes like the Thunderbird; fast cars, such as the Mustang; and sport utility vehicles (SUVs) like Explorers. Ford cars are part of American culture, and have been since company founder, Henry Ford, designed and built his first Model T in 1908. In the twenty-first century, Ford Motor continues to expand its empire, which includes not only Ford, but Lincoln, Mercury, Aston Martin, Jaguar, Land Rover, Mazda, and Volvo.

The Birth of the Automobile

In the last decades of the nineteenth century, the world was rapidly changing. Many modern conveniences were invented, including the typewriter and telephone, electric lights, and the first automobiles. Inventors had been experimenting with steam-powered vehicles since the late 1700s, but these early cars were noisy, hard to operate, and sometimes dangerous since they had the potential to explode. In 1885, German engineer Karl Benz (1844-1929) is credited with building the first automobile of modern design.

Benz's three-wheeled vehicle was very primitive and could only travel about eight miles per hour. Every passing year, however, inventors and engineers from all over the world continued to make advancements. In Germany, Gottlieb Daimler (1834-1900) and William Maybach (1846-1929) together were inspired to build motor-powered vehicles to replace the slow, bumpy rides of horse-drawn carriages. And, in the United States, Henry Ford built his first car, called the "Quadricycle," in 1896.

While Ford, Benz, Daimler, and a host of others were building these early automobiles, the buying public was not terribly interested. Ford entered several of his early cars in races just to gain attention for his increasingly sophisticated vehicles. The strategy worked and over the next few years he was involved in the start-up of three new companies. The first was the Detroit Automobile Company, a partnership Ford formed in 1899 with the city's mayor and a local lumber baron. It was the first official auto manufacturer in Detroit, Michigan. The company lasted only a year, but was reorganized in 1901 as the Henry Ford Company.

Ford Motor at a Glance

  • Employees: 350,000
  • CEO: William Clay Ford Jr.
  • Subsidiaries: Ford Motor Credit Company; Mazda Motor Corporation; Premier Automotive Group (Aston Martin, Jaguar, Lincoln, Land Rover, Volvo); QualityCare Service; Kwik-Fit; Hertz
  • Major Competitors: General Motors Corporation; DaimlerChrysler AG; Toyota Motor Corporation
  • Notable Products: F-Series trucks; Mustang; Thunderbird; Explorer; Lincoln Towncar and Navigator; Land Rover Discover, Freelander, and Range Rover; Mazda Miata and MPV; Jaguar X-and S-Series cars; Volvo S-and V-Series cars, Aston Martin Vantage and Vanquish

Ford and his investors disagreed about the kinds of cars their company should build. In 1902, Ford resigned to design and build his own race cars, including the "Arrow" and the "999." The "999" won a local competition and set a new record by racing five miles in five minutes and twenty-eight seconds. This exposure led to financial backing, and soon Ford and Alexander Malcomson, a local coal merchant, formed the Ford Motor Company on June 16, 1903. It was the very same year that brothers Orville (1871-1948) and Wilbur Wright

Timeline

1903:
Ford Motor Company is founded.
1906:
Henry Ford takes over presidency of the company.
1908:
Model T is introduced.
191 3:
The assembly line is introduced.
1919:
Henry's son, Edsel, takes over as president.
1922:
Ford acquires Lincoln Motor Company.
1925:
Company builds first airplane, the 199 Ford TriMotor.
1927:
Last Model T is produced.
1932:
First V-8 (eight-cylinder) engine is produced.
1939:
Edsel's Lincoln Continental causes a sensation.
1943:
Edsel dies and Henry retakes the presidency.
1945:
Henry steps down again; grandson Henry II replaces him.
1947:
Henry Ford dies at age eighty-three.
1948:
First F-Series pickup trucks produced.
1955:
Ford Thunderbird sports car introduced.
1964:
Ford Mustang launched at World's Fair.
1968:
Jacques Nasser joins company.
1979:
Company buys stake in Toyo Kogyo (later Mazda).
1980:
Henry Ford II resigns as chairman.
1985:
Ford Taurus introduced.
1986:
Company buys stake in Kia Motors of Korea.
1989:
Buys British luxury carmaker jaguar.
1999:
William "Bill" Clay Ford Jr., great-grandson of Henry Ford, becomes chairman.
2001:
Bill Ford becomes CEO and president after Nasser leaves.
2003:
Ford celebrates its one-hundredth anniversary.

(1867-1912) flew their first airplane at Kitty Hawk, North Carolina.

A New Era of Car Making

Ford Motor was a company with a simple goal: to produce and sell well-built cars at a competitive price. Using an old wagon shop on Mack Avenue in Detroit, Michigan, Ford designed the company's first vehicle called the "Model A." He sold his first car about a month later to a local doctor. As chief engineer, Ford improved on his design and developed new cars. He named the cars by following the alphabet. For example, the Model A was followed by Models B, C, E, and F. By 1904, the Ford Motor Company had done so well that the partners were able to finance their first manufacturing plant outside the United States in Ontario, Canada. The company also moved from the converted wagon shop to larger quarters at the intersection of Piquette Avenue and Beaubien Street in Detroit.

With success, however, also came failure. Although the Model A and its successors had been quite popular, the new Model K brought out in 1906 was not. This caused trouble between Ford and his business partners, who quarreled with the direction Henry seemed to be taking the company. Ford insisted that the company make less expensive vehicles so average people could afford to own a car. The result was a major shift in management, with Ford taking over as president and buying out many of his original investors and their shares of the business.

In 1906, the Model N was introduced. It was a four-cylinder car that sold for just $700, as opposed to the alarming price tag of the Model K, which was $2,800. The Model N brought Ford into a new era, with profits reaching $1 million for the first time. Having outgrown its plant in Detroit, the company began construction on a huge new facility in Highland Park, north of the Detroit city limits. As builders broke ground on the new plant, Ford used the Model N as a base for his next new automobilewhich was destined to change the Ford Motor Company forever.

The Model T was introduced in 1908 as Henry Ford's idea of a "universal" cara stylish, sturdy automobile that was affordable to all Americans who wanted to drive. Solid, dependable, and popular with buyers, the Model T became the sole car built by Ford. The company produced around eight thousand Model T's in 1908. That number more than doubled over the next year, and by 1912, Ford was manufacturing approximately seventy-eight thousand cars.

Celebrating Success

The reason why Ford could sell his cars cheaper was that he had developed a way to make cars faster. In 1913, he introduced the assembly line method of production, which revolutionized the automotive industry. In an assembly line, the framework of a car rests on a moving surface called a conveyor belt. The belt passes by different workers, each of whom is responsible for a single task. With the assembly line, the time required to build a new car was reduced from over twelve hours to an hour and a half. This means that a manufacturer could produce many cars in a single day instead of just one or two. Because he could "mass produce," Ford was soon selling about half of all the cars sold in the United States. At the same time, more assembly plants were built to keep up with consumer demands and dealerships popped up across the country to sell Ford cars.

Ford not only streamlined the work in his companies, he also paid his employees well. In 1914, hoping to build loyalty and worker pride, he doubled wages to $5 per day. The work day was also cut to eight hours. This change made Ford a famous man; his face and business policies were soon written about in countless newspapers and magazines. With the assembly line method in full use by thousands of well-paid workers, Ford production soared over the next few years, reaching nearly half a million cars in 1916.

During this time Ford also began designing farm equipment, beginning with tractors and small trucks. Yet as World War I (1914-18) raged in Europe, it became apparent America would soon join the war effort. When the United States officially declared war on Germany in April 1917, Ford turned the use of his factories over to the government and the company began building trucks, ambulances, small tanks, airplane motors, and even helmets.

A Son Takes the Helm

After the war ended in November 1918, Henry Ford announced his retirement. In 1919, his son Edsel (1893-1943) took over the company. That same year, Ford Motor broke ground for an immense plant on the Rouge River in Dearborn, Michigan. In 1922, Ford purchased rival automaker Lincoln Motor Company, which had introduced the first V-8, or eight-cyclinder, engine the year before.

The first automobiles were very expensive to manufacture and only the very rich could afford to buy them. In 1900, an average worker earned less than $500 a year. When the Model T was introduced, it sold for around $900, which was almost twice as much as an individual's yearly salary. By the 1920s, the price of a Model T was less than $300, which made it affordable for the average middle class worker.

Ford Motor also shifted into the aircraft industry. Convinced that airplanes were the transportation of the future, Edsel Ford bought the Stout Metal Airplane Company in 1925. Ford's first plane, the 199 TriMotor, was produced the same year.

In 1927, after nineteen years of production, Ford decided to discontinue the Model T. Although it had been extremely popular, the Model T was facing stiff competition, most notably from Chevrolet, which had come out with faster, more luxurious cars. After the last Model T rolled off the assembly line in May, Ford closed down its plants while engineers went to work on a new vehicle. After several months of sitting idle, the factories began work on the Model A, an updated version of the original. The new and improved car had a more powerful engine, more space, and a "safety glass" windshield that resisted shattering.

The new Model A was introduced in December 1927 and was a favorite with buyers until the Great Depression hit in 1929. Although the Depression financially devastated much of the United States and its citizens, Ford survived. The company did, however, suffer losses since most people had no money to buy cars.

The United States was drawn into World War II (1939-45) and Ford supported the war effort by manufacturing airplane motors and parts for a bomber called the "Liberator." Two years into the war, tragedy hit the Ford family when Edsel died of cancer at the age of forty-nine. Henry, whose own health had been declining, came back to run the company as president, then turned the reins over to grandson

Henry II (1917-1987) in 1945. In 1947, Henry died and his legacy was carried on by Henry II, whose guidance helped turn the family company into a huge international corporation. Two other Ford grandsons, Benson and William Clay, also joined the business and lent a hand.

A New Era

Over the next years, Ford had its ups and downs: the rugged F-Series trucks were launched in 1948 to much acclaim; a fancy two-seater called the Thunderbird excited the industry with its power and luxury in 1955; the Edsel sedan flopped in 1958; and the speedy Mustang, introduced in 1964, was an extremely hot seller, especially with young people. Ford then entered the mostly ignored off-road category of vehicles with four-wheel or all-wheel drive. To compete with Jeep and Land Rover, which had been in business since the 1940s, Ford introduced the Bronco in 1965.

At the end of the 1960s a young man named Jacques Nasser joined Ford's training program while a college student in Australia. During the 1970s, Nasser moved around the world, working at various Ford divisions and earning a reputation as a sharp businessman with leadership qualities. As Ford opened new assembly plants and expanded operations in Asia and Europe, Nasser steadily climbed the corporate ladder.

Legend has it that while vacationing in Florida in 1939, Edsel Ford was seen driving a flashy new car called a Lincoln Continental. He caused quite a commotion, and hundreds of hopeful buyers called Ford Motor Company to ask about the car. The Lincoln Continental was soon a major hit in the automotive industry.

In 1979, Ford bought part of the Japanese firm Toyo Kogyo, which later became known as Mazda. The next year, 1980, Henry II stepped down as president. In 1985, in order to compete in the family market, Ford launched two mid-sized sedansthe Ford Taurus and Mercury Sable. The company also pushed into the ultra luxury market when it purchased two British automakers, Aston Martin and Jaguar, in 1989.

In the 1990s, Ford started to produce minivans and SUVs, and by 1992 the Ford Explorer ruled the sport utility market. Ford bought into the rental car industry in 1992, acquiring Hertz and then rival Budget in 1996, supplying these firms with thousands of Ford-made cars, trucks, and sport utility vehicles. Budget was sold in 1997, but Ford held on to Hertz, the nation's number-one rental car company.

Hit by Scandal

In 1999, William "Bill" Clay Ford Jr., great-grandson of founder Henry, was named chairman and Jacques Nasser became chief executive officer (CEO) and president. That same year, Ford faced perhaps the biggest crisis in the company's history. Ford Explorers, the country's top SUV, were involved in rollover accidents injuring and sometimes killing occupants. After intense investigation, the problems were attributed to the Firestone Wilderness AT tires, which were installed on all Explorers at Ford factories. Forced to recall and replace thirteen million tires, both Ford and Bridgestone/Firestone were faced with scores of lawsuits and lost billions.

The Explorer and Firestone tire crisis, as well as other problems, brought an end to Jacques Nasser's long career at Ford. He left the company in late 2001 and Bill Ford assumed his responsibilities as CEO. Bill Ford was determined to get back to business as usual, yet this required several immediate measures, including the discontinuation of the Lincoln Continental, the Mercury Cougar and Villager, and the Ford Escort compact car. The model cutbacks were just the beginning of a major rehaul for the company, which included layoffs and the closing of three assembly plants in the United States and Canada.

Gearing Up for the Future

As Ford Motor prepared to hit its one-hundredth anniversary in 2003, the company was ranked as the world's largest truck manufacturer and the second-largest producer of cars with operations in thirty countries around the globe. With annual sales of more than $160 billion, today's Ford Motor Company is a giant of the automotive industry. After one hundred years, Ford has changed a great deal but remains in the familyfounded by Henry Ford in 1903 and run by Bill Ford in 2003.

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Ford Motor Company

Ford Motor Company

BIBLIOGRAPHY

The Ford Motor Company established a system of modern mass production, labor relations, and wage policies that made it one of the most influential corporations of the twentieth century.

While the Ford Motor Company is the enterprise most closely associated with its namesake, Henry Ford, its incorporation in 1903 marked Fords third attempt to build an automobile company. Ford began his automotive career with the short-lived Detroit Automobile Company (18981900), which was followed by the Henry Ford Company (19011902).

Ford manufactured for both domestic and foreign markets. In its first year of operation, it contracted with an overseas distributor to sell cars in Canada and Europe. In 1905 a Canadian plant began producing Ford vehicles for the British Empire.

Ford, unlike its chief rival General Motors, did not adopt a multidivisional structure. Ford and Lincoln (later Lincoln-Mercury), purchased in 1922, remain the only divisions within the auto company. A similarly atavistic quality characterizes Fords ownership and management. The Ford family has consistently played a dominant role in ownership or direct managerial control throughout the companys history. This structure of centralized control is at odds with the historical trajectory toward managerial capitalism typical of most large-scale twentieth-century American corporations.

Ford engineers did not invent the modern assembly line. The basic concept was adapted from the meatpacking industry, in which animals were transported along a system of overhead pulleys and systematically butchered. Over the years 1910 to 1914 the assembly line evolved from the system of conveyors and gravity slides on which the Model T car was assembled in tightly sequenced stages. Production at the Highland Park plant relied on work rhythms that matched the pace of machines. Rather than using generalpurpose tools and machinery, Ford manufactured machines to achieve specific tasks. Individual parts were made to be interchangeable, in order to speed production and reduce the need for skilled craftsmen. Investment in expensive, specialized machinery allowed for the introduction of economies of scale whereby unit costs fall as output rises. Ford produced half a million cars in 1915 and two million cars and trucks in 1923. It diversified into shipbuilding during World War I and aircraft manufacture in 1926. In addition to Europe and the British Empire, the newly industrializing Soviet Union was an important market; by 1927 the majority of tractors in the Soviet Union were Ford-built Fordsons. That same year Ford announced plans to acquire a 3,900-square-mile tract of land in Brazil to use as a rubber plantation to be named Fordlandia.

Integrated mass production was taken even further with the construction of the sprawling Rouge River plant in Dearborn, Michigan, during the 1920s. The Rouge plant inspired the photographer Charles Sheeler, whose pictures of it appeared in the pages of Vanity Fair magazine, and the painter Diego Rivera, who included it in the Detroit Industry murals; both depicted the factory as an icon of modern capitalism.

Along with time studies, Ford used various other strategies to organize work to meet the efficiency standards of plant machinery. In this sense the Ford system represents a refinement and extension of F. W. Taylors scientific management approach. The resulting work environment was fast-paced and continuous, and workers were hard-pressed to keep up. Turnover rates reached 370 percent in 1913. In 1914, to overcome workers resistance to machine-paced industrial work, the company inaugurated a radical plan to double hourly wages to five dollars a day. The extra money took the form of profit-sharing. To qualify for the higher wage, workers needed to demonstrate proper behavior at work and at home. Ford Sociological Department investigators inquired about workers drinking habits, marital strife, criminal records, church-going activities, and other evidence of moral character. In this way Ford Motor exerted social control over its employees off the job, as well as technical control of work efforts on the job.

Ford paid black workers the same wages as similarly qualified white workers. While blacks comprised between 10 and 20 percent of the workforce at Ford, they were overwhelmingly assigned the most dangerous, difficult, and unpleasant jobs, such as those in the foundry. Because their wages were far superior to those obtainable from any alternative sources of employment, black workers, especially young married men, were much less likely to quit these jobs and less willing to embrace unionization.

To expand sales, Ford needed to encourage new segments of the population to buy cars. Higher wages allowed workers to acquire mass-produced goods. The interdependence of mass production and mass consumption came to be characterized as Fordism. The Italian political theorist Antonio Gramsci used the term to describe the combination of social, technological, and political control over workers lives. It has since been extended to cover all institutions (factories, unions, families, and the state) that help to regulate the accumulation of profit in advanced capitalist economies.

Workers at Ford Motor unionized in 1941, four years after the United Auto Workers gained recognition at General Motors and Chrysler. Unionization at Ford was preceded by a strike at the Rouge plant that resulted in Fords recruitment of African American strikebreakers, thereby exacerbating racial divisions within the ranks of the working class at Ford. During this same year U.S. manufacturers, following directives from the governments Office of Production Management, shifted to wartime production. Ford announced plans to mass-produce bombers at a new plant in Willow Run, Michigan. The Rouge plant was turned over to the production of aircraft engines and jeeps.

After the death of Henry Ford in 1947 and, earlier, that of his son and heir apparent, Edsel, in 1943, Henrys grandson Henry II headed the company. He transformed the organization by bringing in modern management experts (nicknamed the Whiz Kids) with little or no experience at Ford. Among these new Ford executives was Robert McNamara, who later served as secretary of defense in the Kennedy and Johnson administrations during the Vietnam War.

The U.S. automobile market after World War II was marked by both consolidationleading to the dominance of the Big Three (GM, Ford, and Chrysler)and the increasing presence of foreign models. In 1955 Toyota Motors built its first modern Japanese mass-production plant, modeled on Fords Rouge factory. In 1957 foreign automobile imports to the United States exceeded exports for the first time in over half a century. Ford began to reassert control of its foreign subsidiaries in Canada and Britain. In 1957 the European Common Market was formed. This spurred Ford to try to build cars for regional rather than national markets (Europe instead of Germany, for instance). In 1967 Ford of Europe was established and in the 1970s it introduced an ultra-subcompact car. From the 1980s through the mid-1990s Ford was the leading car company in Europe. Nevertheless, more aggressive plans to build a world car that would integrate North American and European markets failed to produce success.

As part of this strategy of global integration, Ford completed a series of acquisitions in the 1980s and 1990s that included producers from Japan (Mazda), Europe (Volvo), and Britain (Jaguar, Land Rover, and Aston Martin). Ford recovered from the OPEC oil crisis of the 1970s and the product quality problems of the 1980s by designing the best-selling Taurus along with the increasingly popular Explorer sport utility vehicle. By 1995 Fords share of the U.S. automobile market stood at 25.6 percent. However, well into the first years of the twenty-first century the company continued to rely on sales of trucks and sport utility vehicles at a time when environmental concerns and dependence on foreign oil were emerging as major concerns for U.S. consumers. Ford CEO William Ford Jr. sought to reorient production toward environmentally friendly hybrid vehicles while continuing to offer traditional gas-powered cars. The Rouge plant was reengineered to incorporate green building technology. As Fords share of the U.S. market fell below 20 percent during the 2000s, the company embarked on a strategy of planned shrinkage of facilities and workforce in the United States. This mirrored the trend toward shrinking market share and falling sales for each of the Big Three U.S. auto companies.

SEE ALSO Automobile Industry

BIBLIOGRAPHY

Bonin, Hubert, Yannick Lung, and Steven Tolliday, eds. 2003. Ford, 19032003: The European History. 2 vols. Paris: P.L.A.G.E.

Brinkley, Douglas G. 2003. Wheels for the World: Henry Ford, His Company, and a Century of Progress. New York: Penguin Books.

Edwards, Richard. 1979. Contested Terrain: The Transformation of the Workplace in the Twentieth Century. New York: Basic Books.

Foote, Christopher L., Warren C. Whatley, and Gavin Wright. 2003. Arbitraging a Discriminatory Labor Market: Black Workers at the Ford Motor Company, 19181947. Journal of Labor Economics 21 (3): 493532.

Hounshell, David A. 1984. From the American System to Mass Production, 18001932: The Development of Manufacturing Technology in the United States. Baltimore, MD: Johns Hopkins University Press.

Meyer, Stephen, III. 1981. The Five Dollar Day: Labor Management and Social Control in the Ford Motor Company, 19081921. Albany: State University of New York Press.

Nevins, Allan, with Frank Ernest Hill. 19541962. Ford. Vol. 1: The Times, The Man, The Company ; vol. 2: Expansion and Challenge: 19151933 ; vol. 3: Decline and Rebirth: 19331962. New York: Scribners and Sons.

Wilkins, Mira, and Frank Ernest Hill. 1964. American Business Abroad: Ford on Six Continents. Detroit, MI: Wayne State University Press.

Bruce Pietrykowski

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Ford Motor Company

FORD MOTOR COMPANY


Ford Motor Company is the largest manufacturer of trucks in the world and the second largest manufacturer of automobiles, behind only General Motors Corporation (GM). Headquartered in Dearborn, Michigan, Ford has plants in 19 countries and facilities in more than 100 others. The company markets vehicles under the brand names of Ford, Lincoln, Mercury, Jaguar, and Aston Martin. Ford owns a controlling interest in Japanese automaker Mazda Motor Corporation and in the Hertz Corporation, the world's number one rental-car company. Ford Credit, one of the company's subsidiaries, is the world's leading provider of automotive financing.

Henry Ford (18631947) founded the Ford Motor Company on June 16, 1903. The company was launched from a small converted wagon factory in Detroit, and its assets initially consisted of tools, appliances, machinery, blueprints, patents, and a few models. Henry Ford experimented with a number of early automobile designs during the 1890s, developing a reputation as a pioneer in the area. This reputation grew with Ford's release of the Model A, a two-cylinder, eight-horse-power design that sold 1,708 models in the company's first year of operation. Over the next five years Ford engineers feverishly developed 19 different models, designating each by a letter between B and S. Some models succeeded, some failed, and some never left the plant. The most successful of the group was the Model N, a small four-cylinder car that sold for $500. The biggest failure was the Model K. At $2,500 it priced most consumers out of the market.

The Model K's failure fueled Ford's desire to design an inexpensive and reliable car that could be mass produced. The 1908 Model T was the answer. Affectionately dubbed the "Lizzy" by U.S. car buyers, Ford's Model T came to symbolize low-cost, and durable transportation. The four-cylinder vehicle, which could travel at a top speed of 45 miles per hour, sold 10,660 units in its first year. As demand climbed, Ford invented the world's first moving automobile assembly line in 1913. Henry Ford believed that automobile production would become more efficient if all employees were assigned one place to work, where they could focus on a specific task to accomplish in a diligent manner.

Within 12 months of the invention, Ford workers had reduced the time during which a chassis could be assembled from 12 hours and eight minutes to one hour and 33 minutes. Ford manufactured 308,162 cars in 1914, more than all 299 other car manufacturers combined. The Model T's success and the use of the assembly line allowed Ford Motor Company to drop its price from the original sticker of $850 to $350. It could also double its employees' minimum wage to five dollars and open new factories in the United States, Canada, Europe, Australia, South America, and Japan. It also provided Ford with revenue to purchase luxury carmaker Lincoln Motor Company in 1922.

Consumer interests gradually shifted in the 1920s. Competitors began rolling out more powerful and stylish cars. To stem dwindling profits Ford discontinued production of the Model T in 1927 and closed plants around the country so the company could retool. When Ford opened its doors six months later it unveiled a vastly improved Model A. Featuring hydraulic shock absorbers, automatic windshield wipers, a gas gauge, and a speedometer, the Model A sold more than 4.5 million units in four years. Now refusing to sit idle in face of increasing competition, Ford pushed aside the Model A in 1932, introducing the world's first V-8 engine block that was cast in a single piece. Six years later Ford introduced the Lincoln Continental and a new line of Mercury automobiles.

The 1930s and 1940s also marked a time of transition for the automaker. Ford's market share slipped behind those of GM and the Chrysler Corporation. An avowed opponent of labor unions, Ford was forced to recognize the United Automobile Workers of America (UAW) as the collective bargaining representative for all of the company's workers. In 1941 Ford shut down its civilian automobile production to manufacture B-24 bombers, aircraft engines, tanks, jeeps, trucks, munitions, and equipment for the Allies during the balance of World War II (19391945). When the war ended, most of Ford's contracts with the government terminated, and the car company soon started suffering losses of $10 million per month. In 1947 founder Henry Ford died, four years after the premature death of his 49-year-old son Edsel, who had succeeded his father as the company's president in 1918.

Henry Ford II, Edsel's eldest son, took over as president in 1945. For the next three decades he helped modernize Ford and return it to profitability. In 1955 Ford introduced the Thunderbird. The sleek and sporty two-seat roadster sold more than 16,000 units in its first year, while Chevrolet sold comparatively meager 657 Corvettes. In 1956 Ford Motor Company went public. In the largest stock sale ever at the time, Ford sold 10.2 million shares to 250,000 investors for $657 million, or 20 percent of the family's business. In 1956 Ford created an aerospace division, and two years later the company announced its entry into the heavy and extra-heavy truck market. In 1963 Ford debuted the highly successful Mustang sports coupe, which remains one of the company's most popular muscle cars.

The reign of Henry Ford II as president was not one of uninterrupted success. In 1958 the company released the Edsel, a 410-horsepower, 17-foot sedan that generated losses of $250 million in just two years. During the 1960s Ford's management fought bitterly over the company's direction, changing executives throughout the decade. In the 1970s Ford Motor Co. was named as a defendant in a series of wrongful death lawsuits stemming from numerous incidents when the gas tanks on its subcompact Bobcat and Pinto models exploded during rear-collisions. The OPEC oil embargo of the 1970s also made Ford's bigger, gas-guzzling vehicles a liability, and many U.S. citizens started turning to smaller, more fuel-efficient Japanese vehicles.

The 1980s brought downsizing to Ford. After losing $3.2 billion from 1980 to 1982, the company reduced its workforce by one-third and closed 15 plants. Ford diversified during this period as well. Its 1986 purchase of the Sperry Corporation's New Holland tractor division helped Ford become the world's third largest maker of agricultural equipment. Ford also purchased First Nationwide Financial Corporation and U.S. Leasing in the mid-1980s. On December 26, 1985, Ford introduced the Taurus, an affordable mid-size vehicle that was named car of the year in 1986. By 1987 the Taurus was outselling every other car in the United States. The Ford F-Series pickup truck and subcompact Escort were also gaining in popularity as the decade ended, when Ford was reporting record profits.

Ford continued restructuring in 1990s. It gradually dropped out of the heavy-truck business during this period and consolidated its operations in North America and Europe. In 1994 Ford introduced its year 2000 initiative, under which the entire Ford family of enterprises would be organized into a single operation by the beginning of the next millennium. Ford also announced a plan to make all of its vehicles more environmentally safe before the twenty-first century. Emissions for sport utility vehicles (SUVs) would be reduced to levels required for new cars, while new car emissions would be decreased by 70 percent. In 1999 Ford teamed with DaimlerChrysler AG and the state of California to test zero emission cars powered by fuel cells that produce electricity through the chemical reaction of hydrogen and oxygen. At the same time Ford announced its plan to purchase auto junkyards over the Internet and to recycle undamaged car parts to mechanics.

These announcements, however, were tempered by Ford's plans to roll out the industry's biggest SUV to date. A 3.5-ton, six-door, 19-foot long colossus was scheduled to go on sale for about $50,000 in the fall of 2000. The environmental group, the Sierra Club, described the SUV as a "tanker" that will "guzzle enough gas to make Saddam Hussein smile." Such criticism has concerned the Ford family, which still owns a controlling interest in the company. But the family also recognize that the company's success has always been linked to meeting consumer demands.

See also: Assembly Line, Automobile Industry, Automobile (origin of), Henry Ford, Model T


FURTHER READING

Collier, Peter. The Fords: An American Epic. New York: Summit Books, 1987.

"Ford Motor Company," [cited May 25, 1999] available from the World Wide Web @ www.hoovers.com/.

"Ford Motor Company,"[cited May 25, 1999] available from the World Wide Web @ www2.ford.com/.

"Ford Takes Control of Mazda." St. Petersburg Times, April 13,1996.

"GM, Ford Still Top Fortune 500 List." The Detroit News, April 7, 1999.

Langworth, Richard, M. The Complete History of Ford Motor Company. New York: Beekman House, 1987.

ford motor company is the largest manufacturer of trucks in the world and the second largest manufacturer of automobiles.

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Ford Motor Company

FORD MOTOR COMPANY

FORD MOTOR COMPANY. Founded in 1903 by Henry Ford, and based in the Detroit suburb of Dearborn, Michigan, the Ford Motor Company quickly revolutionized the market for cars. After several years of making a range of autos, in 1908 Ford decided to concentrate on producing only one car, the Model T. His goal was to compete on the basis of price not product variety. Crucial to this strategy was his adroit use of the moving assembly line, where workers specialized in one minor part of the car-assembly process. As prices fell, sales of the Model T rose from 10,607 in 1909 to 472,350 in 1916. By 1921 Ford accounted for 62 percent of all car sales. As the 1920s wore on, however, many consumers demanded greater product variety in addition to low prices. As sales of the Model T fell, Ford Motor replaced it with the Model A, which sold 4.5 million units from 1927 to 1931.

During World War II, Ford Motor Company played an active role in the war effort. It produced a wide range of military hardware, including tanks, trucks, jeeps, engines, and airplanes. Edsel Ford, who had assumed the presidency of the company from his father in 1918, died in 1943. Henry Ford reassumed formal control of the company after his son's death, and helped position his grandson Henry Ford II to become president in 1945. Henry Ford died in 1947.

Ford Motor Company regained its place as America's number two car producer in 1950, overtaking Chrysler, which had supplanted it in the early 1930s. In 1963 Ford unveiled one of its most popular cars, the Mustang, which registered more than 500,000 sales in its first eighteen months. In 1971 Ford introduced another model, the Pinto, which was designed to compete in the sub-compact market. Despite the Pinto's potential, it generated a good deal of negative publicity for the company after the gas tanks in several cars exploded in rear-end collisions.

In 1979 Philip Caldwell replaced Henry Ford II as CEO, and within five years had helped Ford register record sales and profits. Donald Petersen succeeded Caldwell as CEO in 1985, and under his direction Ford acquired the British luxury car producer Jaguar and introduced the Taurus, a model that proved very popular with consumers. As the twentieth century drew to a close, Ford was comfortably positioned as America's second largest car producer, trailing only General Motors.

BIBLIOGRAPHY

McGraw, Thomas. American Business, 19202000: How It Worked. Wheeling, Ill.: Harlan Davidson, 2000.

Nevins, Allan. Ford. New York: Scribners, 1954.

Scherer, F. M. Industry Structure, Strategy, and Public Policy. New York: HarperCollins, 1996.

Martin H. Stack

See also Assembly Line ; Automobile ; and vol. 9: Ford Men Beat and Rout Lewis .

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