I’m David Veech and this is Elevate Your Performance.
The automobile industry literally changed the face of America. This single enterprise led to more technological innovations in manufacturing, metallurgy, electronics, oil refining, distribution systems, road construction, labor relations, and management practices than any other in the history of the world. Until the dawn of the computer age, the automobile industry was the absolute technological driver for the United States.
We can’t talk about cars without talking about Henry Ford, but he certainly wasn’t the first or the only person focused on mass producing cars. Leonardo da Vinci designed a self-propelled wagon way back in the 15th century. A steam-powered “road locomotive” was invented in England in 1801, but it really took the internal combustion engine to make an automobile economically feasible.
The Otto engine was the first patented 4-stroke internal combustion engine, back in 1867. Karl Benz and Gottlieb Daimler each developed practical cars in Germany in 1885 and 1886. Shortly after that, in 1893, Ford finished his own internal combustion engine and then in 1896 built a steel frame around it, added 4 bicycle tires, and the Quadricycle was born. When he tried to get it out of his shed to take it for a test drive, it was too wide to fit through, so he had to bust down a brick wall to get it out.
His first auto venture was as mechanical superintendent of the Detroit Automobile Company, formed in August of 1899. By this time, there were 60 automakers in the US, a number that would grow to 253 by 1908. This early competition killed the Detroit Automobile Company, but in 1901, with the same financial backers, he started the Henry Ford Company which also failed. Finally, in 1903, and the Ford Motor Company launched with a simple car called the Model A that eventually morphed into the Model T.
In 1908, Ford produced 10,607 Model Ts. In contrast, Daimler, working in the most integrated factory in Europe, with 1,700 workers, produced fewer than 1,000.
In 1908, Ford’s Model T cost $850, which was more money than his workers made in a year of labor. Ford’s vision was to build a simple but durable car at the lowest possible cost, then pay his workers high enough wages to allow them to afford the very cars they built. At the root of this vision was a core value that a corporation exists to serve society (Henry Ford, Today and Tomorrow).
To accomplish his vision, Ford needed to do something dramatic and revolutionary. While all the other automakers employed teams of fitters working in dozens of workshops, custom shaping standard components to make them fit together, Ford, inspired by a visit to Chicago Meat Packers, decided to divide the labor involved among his entire workforce.
In 1910, he built a new factory in Highland Park, Michigan and began work on a moving assembly line. In 1913, the assembly line began operations. It relied on each worker specializing in one small area of work and bringing the work to the worker by moving the car from station to station on a moving conveyor belt. This single innovation resulted in a 900% improvement in productivity over the craftsmen fitters.
In 1914, in response to high turnover rates and low morale, Ford began paying his workers $5 per day when the rest of the industry was paying $11 per week. By 1916, Ford was making over 730,000 cars a year and selling them for about $350 each.
The Government recognized the need for new roads and passed the Federal Aid Road Act in 1916, and the Federal Highway Act in 1921.
Several factors combined to enable this revolution in the auto industry, which essentially saved two other industries.
First, the price of steel was low thanks to the construction of the nation-wide railroad. But the railroads were no longer expanding at the same rate as through the last part of the 1800’s. A reduction in the demand for steel may have forced some steel mills to close, but now they had another primary customer, the auto industry.
The oil industry was about to fall victim to electricity until the automobile created the demand for a modified version of kerosene called gasoline.
The availability of cheap raw materials, a shortage of skilled labor, and the high demand for cars drove Ford to mechanize the manufacturing process. This in turn drove the consolidation of the automobile industry so that those 253 independent auto makers of 1908 turned into 44 makers in 1929.
Of those 44, the big three (Ford, General Motors, and Chrysler) accounted for over 80% of
new car sales in America.