File 15: The moving assembly line and its aftermath Flashcards
Who was Henry Ford?
Henry Ford was an apprenticeship in machinist.
He tried farming but did not enjoy it.
Starting working for Eddison Illuminating Comapny and become chief engineer.
In his spare time, he developped an interest in horseless carriages
in 1903, he moved into the manufacture of automobies creating Ford Motor Company with 28 000$ provided by Malcolmson (coal dealer), Couzens (business skills) and Dodge brothers (owned a machine company)
Why was Malcolmson bought out of Ford Motor Cie?
Malcomson wanted build high priced 6 cylinder cars and Ford wanted to build reliable low priced car
What did Ford Motor cie first bring out for consumers to buy?
The Model T: rugged, simple and easy to repair meant that it could be sold to those living rural areas because the car could drive over poor quality roads and be easily fixed
How was Ford Motor Cie able to sell the Model T at a low price?
improvements in production organization
Describe the organization of the chassis construction (frame of car) earlier on in the Ford Motor Cie. (3)
- divided the floor into 100 chassis assemble stations
- group of workers laid down axles, attached the frames and put on wheels
- skilled workers moved around to parts where they were needed
What was introduced to the chassis construction in Ford in 1913? Describe it.
The moving assembly line:
Chassis were moved by endless chains to workers (workers didnt waste time moving around) and parts were brought to workers by converyor, railways and gravity slides. Tasks were also narrowed down for each worker.
What was the consequence of introducing the moving assembly line to chassis construction in Ford?
chassis construction time dropped from 12 hours to 1.5 hours. thus leading to a massive decline in prices and reduction in paid labour time (example of adaptive change in technology and learning by doing)
What is GM?
GM is the rival motor company of Ford. It is a very loosely organized conglomerate that almost went bankrupt but survived due to financing by wealthy families and institutions (Dupont and House of Morgan)
What occured in North America in 1920-1921? How did it impact Ford? What did Ford do? What was the consequence of his actions?
1920-1921: financial crisis created a collapse in demand for automobiles
Ford had financial difficulties from the market collapse because: he had bought out Dodge (though he was cheating him on part cost), he spent 60$ million on contruction of River Rouge plant and spent 20$ million vertical intergration (buying ore rights, timber rights, coal mines, roadrails)
To deal with this financial crisis: Ford forced inventories onto dealers (forced them to borrow thus displaced responsibility of financing inventory) and slashed production cost.
This temporarily led to the domination of the industry by Ford.
Explain how GM took over the automobile industry from Ford by 1924.
- by 1924: the model t was swamped (everyone had one) and the market had mature meaning that individuals were now looking for replacement vehicles (doesnt help that model t were easy to fix).
- GM’s strategy were more suited for the mature market than ford’s:
- product differentiation: Ford offered the T model and lincold. GM offered chevrolet, pontiac, oldsmobile, oakland, buick and cadillac. Each of GM’s products targeted a different market segment (it was possible to move up auto quality as income rose)
- GM encourage the move up of its hierachy of automobiles by encouraging dealers to offer incentive of trade in (discount on new car, if trade in old car)
- GM increased size of market by offering credit (GMAC)
- Ford concentrated on making profit from both new and old cars. GM developed policy of relating price of new/old cars to maket conditions (if new car inventory was high, they kept the price of used cars high to reduce their relative attractiveness compared to new cars)
Looking at the automobile industry, what does it suggest about the definition of productivity improvement?
Ford used cost cutting to dominant market. GM developped a strategy to increase the size of the market.
=> output/man hour input is not enough for productivity improvement. Commercial success requires attention to market: providing people with what they want (product differentiation) and taking steps to increase their capacity to pay.
