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Vinod Jacob

THE automotive industry came into being in the 1880s and, over the decades, created a revolution of science, technology and people. Unlike the aerospace industry, the auto industry is of the masses and is, as Peter Drucker claims, "the industry of industries". Henry Ford, with his Ford Motor Company, helped make automobiles a part of our day-to-day lives.

On June 16, 2003, hundreds of people whose lives have been changed by this revolution travelled to the city of Dearborn, in Michigan, where the Ford Motor Company headquarters lies. On the sprawling grounds of its main building, old Ford models that revolutionised the world were displayed. And old stories of how the Ford legacy touched their lives were shared, because it was on this day 100 years ago that Henry Ford set up his Ford Motor Company, a company which gave birth not only to the automotive revolution but also created an industrial revolution for the masses.

Henry Ford still continues to be an American icon, a role model for success, entrepreneurial skills, volume building, and the founder of The Ford Motor Company, by far the world's largest family-controlled industrial corporation.

Henry Ford started his career as a machinist and engineer in Edison Company. Eight years later, in 1902, he got into the automotive business. Later he was involved in a dispute with the bankers and left the then would be Cadillac.

With 11 business associates and $28,000 in cash on June 16, 1903 he set up his company in a small converted wagon factory in the American city of Detroit, the city that also saw the birth of the Pontiac, the Cadillac and many other automobile models.

Henry Ford started with his Model A and in just five years produced almost 20 designs from A to T. With the successful launch of Model T, Ford was forced to go in for assembly line technique in 1908. With increasing demand he migrated from the fixed assembly line technique to moving assembly line on 1913.

Thus, the more cars he produced, the lesser became their cost. This made him go for his five-dollar a day. On January 15, 1914, the then Vice-President of Ford, James Couzens, stated: "At one stroke it will reduce the hours of labour from nine to eight, and add to every man's pay a share of the profits of the house. The smallest amount to be received by a man twenty-two years old and upward will be $5 per day".

The day after the announcement was made, jobseekers started knocking at Ford's gates. Besides making workers satisfied, the $5 workday stabilised the Ford work-force, which was suffering from the boredom of mass production techniques.

It greatly increased the car sales and Henry Ford became an instant celebrity. It also helped him to successfully resist the first efforts to unionise workers at Ford plants. Till 1926 it was the world's highest profit-making organisation.

With the collapse of the global economy in 1929, Ford was forced to set up factories at Dagenham, UK and Cologne, Germany. In 1931 he set up the famous mega Rouge plant at Detroit, which became the symbol of America's industrial might.

Ford's success inspired many others to copy his methods. There was a steady stream of visitors to Ford's plants namely Andre Citroen, Louis Renault, Giovanni Agnelli of Fiat, Herbert Austin and William Morris. Henry Ford was remarkably open in discussing his techniques and showed them around the Rouge complex, near Detroit. During World War II, his plants were used to produce tanks and trucks for the US army.

In 1919, Henry Ford left Ford's presidency after a dispute with the bankers during the downturn after the War. He never wanted bankers to snoop into his business.

He started considering his company's five-dollars-a-day system a personal fiefdom and started imposing conditions on the workers, which irritated many.

His son Edsey Ford became the President of Ford in 1919. Unlike his father, Edsey Ford was more concerned with style of Ford's models. He personally supervised the design of certain models. He made peace within the shareholders and bought back some shares, thus restoring full control of the company. Edsey died at an early age of 49 in 1945. Henry Ford then retook charge of the company until his death in 1948.

By 1948, the company was totally mismanaged and was in the red. After World War II, his grandson, Henry Ford II took charge of the company. He was entrusted with the charge of restructuring the company from ruins, decentralising the business, and revitalising its models.

Henry Ford II became famous for joining hands with professionals and trusting them. He always kept track of people who outperformed. The first person who came to his attention was Ernest Beech. Beech's skill as a problem-solver in GM was noticed and he was invited to join Ford in 1946 as Vice-President.

He also brought in his colleagues from the Navy, Robert McNamara and Arjay Miller. They were given time to understand the Ford process and their method of reasoning and questioning the Ford process got them the name "The whiz kids".

They consolidated the business of Ford and both became presidents in the company while Robert went on to become Defence Secretary during John F. Kennedy's regime. They built Ford's hierarchy, preserved it, and made the turnaround, that Henry Ford needed so much.

However, Henry Ford's relations with the professionals does not have a happy ending. After the whiz kids, Henry Ford II brought from GM an equally competent president William S. Knudsen "Bungie", who formerly was Ford's production engineer during the 1920s. He was removed when their honeymoon ended. Then Lee Iacocca became President in 1970.

Iacocca's chemistry didn't match with Henry Ford's. He saw and faced the tremendous onslaught of the Japanese industry, especially that of Toyota. He was fired in 1978 to pave way for his archrival, Philip Caldwell.

Caldwell became the first individual outside the Ford family to serve as President and CEO of the Ford Motor Company. He carried Ford during the oil crisis of 1979, a time when the automotive industry was suffering from almost a quadruple of oil prices. It was during his time that Ford became the top truck producer of the world.

Finally, Trotman and Nasser pulled Ford back to profit with a slew of cost-cutting measures. Jacques Nasser was credited in 1997 with bringing Ford back to being the biggest profit-making company after 1926. But, just before Bill Ford came to the helm, the company suffered from the Firestone crisis, product recalls and a never-seen loss of $5 billion, and this at a time of economic slowdown.

As it hits a century

Ford Motor Company today has $162 billion of sales with a cash reserve of $25 billion. It has a big representation throughout the world with companies such as Lincoln, Mercury, Mazda, Aston Martin, Jaguar, Land Rover and Volvo. It has numerous subsidiaries in financial and customer services.

Ford's North American market share is 21 per cent. Still, it has many things to worry about. It lost 4.5 per cent of its market share in the past 10 years. Also, it could not boost its top margin North American truck sales, while GM has boosted its C&K truck model line by pushing its modular strategy. Ford, which started the SUV boom during the 1990s with its Explorer, is now finding it hard to catch up with GM's new models such as Escape and Expedition.

Waiting in the wings?

Even with all these problems, Mr Bill Ford has a vision of revitalising Ford to become a $7-billion pre-tax profit company by 2007. This year, as a part of its $3-billion cost-cutting exercise, Mr Bill Ford made a $300-million cut in IT budget. Ford Motor Co is also set to cut a fifth of its marketing and administrative costs over the next two years.

It remains to be seen how Mr Ford will fulfil his vision by 2007. He has set four business principles for the Ford's next century "imagine it; build it; deliver it; and love it". Can the Ford drawing boards imagine what people want today and need tomorrow? Will the plants at Rouge, Cologne and Dearborn be able to build for the market tomorrow?

Will Ford with its finance and service subsidiaries be able to cater to its ever-demanding, increasingly capricious customer's tastes? It was Henry Ford's love for automobiles that started the automobile revolution; will the customer's love for blue oval see another revolution?

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