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Ford Motor Company - Lehman Brothers Collection

Ford Motor Company

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Shortly after Henry Ford quit his job with the Detroit Edison Company in 1899, he founded the Detroit Automobile Company. He later withdrew from this venture to work independently. Working in a small shed, Ford created two four-cylinder, 80-horsepower race cars, the "999" and the "Arrow." In 1903 Ford established a new shop, the Ford Motor Company, and began production of a two-cylinder, eight-horsepower design called the Model A.

Ford's company was sued by the Licensed Association of Automobile Manufacturers, an industrial syndicate that held patent rights for "road locomotives" with internal combustion engines. Ford countered that the patent was invalid and took the matter to the courts. While this was going on, Ford continued to manufacture cars and even relocated to a larger plant. In 1904 the company opened a plant in Canada. In 1908 Ford introduced the Model T. The company had to enlarge its production facilities to accommodate the demand for this car. In 1909 alone, more than 10,000 Model Ts were produced.

Henry Ford applied his "assembly line" concept of manufacturing to the Model T. 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.

In 1911 the Supreme Court finally decided in favor of Ford in the matter of the lawsuit brought by the Licensed Association of Automobile Manufacturers. This decision freed many automobile manufacturers from costly licensing obligations, and allowed others to enter the business. After Ford omitted its usual dividend in 1916, stockholders sued. The company responded by buying back all of its outstanding shares in 1919 and did not allow outside ownership again until 1956. Henry Ford created two classes of company stock: the B Class was reserved for family members and constituted the controlling 40 percent voting interest; the company retained the ordinary common shares until 1956.

During World War I, the company placed its resources at the disposal of the government. Through this period, Ford Motor produced large quantities of automobiles, trucks, ambulances, Liberty airplane motors, Whippet tanks, Eagle "submarine chasers," and munitions. After the war, the company experienced a fiscal crisis. In 1921 Ford Motor had $58 million in financial obligations due and only $20 million available to meet them. It seemed probable that the company would fall into bankruptcy. Henry Ford used unusual methods to gain a large amount of cash quickly. He transferred as many automobiles as possible to his dealerships, which were instructed to pay in cash. Almost immediately, this generated $25 million. Ford then purchased the Detroit, Toledo & Ironton railroad, the primary medium of transportation for his company's supplies. Ford rearranged the railroad's schedules, thus reducing by one-third the time that automotive components spent in transit. This allowed him to reduce inventories by one-third, releasing $28 million. With additional income from other sources, and reduction in production costs, Ford had $87 million in cash, which was $27 million more than he needed to pay off the company's debts.

In 1922, with the cash he had left over after paying the company's debts, Ford acquired the Lincoln Motor Company. Ford Motor acquired the Stout Metal Airplane Company in 1925, which then developed a popular three-engine passenger aircraft known as the Ford Trimotor.

In 1926 Ford Motor's competitor, General Motors Corporation, introduced its Chevrolet automobile. The Chevrolet was more stylish and powerful than the Model T; Model T sales dropped dramatically at this time. Ford discontinued the Model T in favor of the new Model A. That same year, the company reduced its workweek to five days and was one of the first companies to limit the workday to eight hours. Ford also established a minimum wage of $5 per day. In 1928 the company formed the British Ford Company, and soon thereafter also formed the German Ford Company.

The company survived the Depression years, though it was with losses of as much as $68 million per year. By 1932 Ford Motor was forced to reduce its minimum wage to $4 per day. In 1935, after the hard years of the Depression, the company raised its minimum wage to $6 per day. Despite his advances in human resources, Henry Ford discouraged workers from unionizing. In 1937 the United Automobile Workers union began a campaign to organize Ford workers. Unionization activities eventually climaxed in 1941, when Ford employees went on strike.

Henry Ford had been originally opposed to American involvement in World War II, and in 1940 he cancelled a contract to build 6,000 Rolls-Royce Merlin aircraft engines for the British Royal Air Force and 3,000 for the United States Army. Ford later reconsidered and agreed to construct a large new government-sponsored facility to manufacture aircraft at Willow Run. The Willow Run Aircraft plant, completed in 1942, was the largest manufacturing facility in the world, occupying 2.5 million square feet of floor space, with an assembly line three miles long.

After the war, Ford suffered heavy losses. Finally, in 1947, the company gained new leadership and began to register profits again. The Ford Motor Company had been a pioneer in the industry during the 1920s and 1930s. It was the first company to cast a V-8 engine block; the company had produced its 25-millionth automobile in 1937; and its Mercury line had proved to be highly successful in the growing market for medium-priced automobiles. By the late 1940s, however, the company was no longer a pioneer and was even seen by some as an imitator of General Motors.

Determined to regain its reputation, the company decided to introduce a new car model to fill a gap in the market between the Ford and Lincoln-Mercury lines. In 1958 the company introduced the Edsel. Unfortunately for Ford, the car was a failure. There was no gap in the market for it, and by 1960 the company had ceased production on the Edsel. The company grew during the 1960s. In 1961 Ford purchased the Philco Corporation. It established a tractor division in 1962 and the following year introduced the highly successful Mustang.

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