BOOM - Henry Ford and the Motor Industry (+ stock market)

Question 1

How did Ford use mass production?

Answer 1

• the first Ford factory was built in 1903 in Detroit, Michigan
• by 1913, Ford introduced a new method of production - the assembly line - which meant that the cars would be made quicker and cheaper
• Ford’s assembly line used an electric conveyor belt that carried the partly assembled car past workers who did one or two small jobs repeatedly, such as fitting wheels or doors
• Ford’s Model T car was mass produced on the assembly line
• as production got quicker, the price of the car fell. Costing nearly $800 in 1911, by 1928 it was only $295. 15 million people bought Model Ts between 1911 and 1929

Question 2

What was the Ford Model T like?

Answer 2

• the Model T was slow, considered ugly by some and hard to drive, but sturdy, very reliable and built with easy-to-change parts
• it was the right product at the right time, catching the public imagination when they were desperate for new gadgets and the chance to go beyond their own backyards. Ford called his Model T ‘an affordable car for ordinary people’ and it changed the motor industry forever.
• by 1926, there were nearly 20 million cars on America’s roads, and one in two of them was a Ford

Question 3

What was the impact of the boom in the motor industry?

Answer 3

• for every worker in a car factory, there were ten more making the parts the cars needed
• there were also jobs building roads, highways and oil refineries to supply the fuel as well as in petrol stations, roadside hotels, garages and restaurants.

There were social changes:
Positive - car owners felt a new sense of freedom. People no longer had to live near offices and factories. They could buy a house out of town and drive into work
Negative - traffic jams, accidents and pollution

Question 4

How does the stock market work?

Answer 4

1. To set up a company you need money for wages, equipment, land and so on
2. Most companies get this money from investors. In return, investors own a share of the company - they become shareholders
3. A shareholder makes money by:
   
   • receiving a share of the company profits - a dividend - each year
   • selling their share for a higher price than they bought it for (if the company does well, its shares become more valuable, but a shareholder might not be able to sell their share if the company is doing badly - a shareholder could be stuck with a share no one wants to buy and pays no dividends)

Question 5

How many people bought shares in the 1920s?

Answer 5

During the 1920s, millions of ordinary Americans, not just the rich, bought shares in all sorts of companies and made money by selling them on. In 1920, there were only 4 million people who owned shares. By 1929, there were five times as many.

Question 6

How did ordinary people manage to buy shares?

Answer 6

Many people bought shares with money they had borrowed from the bank or with a small deposit of 10%. They would pay the remaining amount with the profits they made when the shares were sold. This method of purchasing shares was called ‘buying on the margin’.