The Ford Motor Company is an American automaker, the world's fifth largest based on worldwide vehicle sales. Based in Dearborn, Michigan, a suburb of Detroit, it was founded by Henry Ford on June 16, 1903. Ford Motor Company would go on to become one of the largest and most profitable companies in the world. The largest family-controlled company in the world, the Ford Motor Company has been in continuous family control for over 110 years. Ford now encompasses two brands: Ford and Lincoln. Ford once owned 5 other luxury brands: Volvo, Land Rover, Jaguar, Aston Martin, and Mercury. Over time, those brands were sold to other companies and Mercury was discontinued.
Foundation Henry Ford built his first automobile, which he called a quadricycle, at his home in Detroit in 1896. The location has been redeveloped, where the Michigan Building now stands, and the tracks for the Detroit People Mover and the Times Square People Mover station are nearby. At the entrance to the Michigan Building, there is a commemorative plaque identifying the original location of the Ford home. The coal shed has been recreated using the original bricks at Greenfield Village in nearby Dearborn. His initial foray into automobile manufacturing was the Detroit Automobile Company, founded in 1899. The company foundered, and in 1901 was reorganized as the Henry Ford Company. In March 1902, after falling out with his financial backers, Ford left the company with the rights to his name and 900 dollars.
Henry Ford turned to an acquaintance, coal dealer Alexander Y. Malcomson, to help finance another automobile company. Malcomson put up the money to start the partnership "Ford and Malcomson" and the pair designed a car and began ordering parts. However, by February 1903, Ford and Malcomson had gone through more money than expected, and the manufacturing firm of John and Horace Dodge, who had made parts for Ford and Malcomson, was demanding payment. Malcomson, constrained by his coal business demands, turned to his uncle John S. Gray, the president of the German-American Savings Bank and a good friend. Malcomson proposed incorporating Ford and Malcomson to bring in new investors, and wanted Gray to join the company, thinking that Gray's name would attract other investors. Gray was not interested at first, but Malcomson promised he could withdraw his share at any time, so Gray reluctantly agreed. On the strength of Gray's name, Malcomson recruited other business acquaintances to invest, including local merchants Albert Strelow and Vernon Fry, lawyers John Anderson and Horace Rackham, Charles T. Bennett of the Daisy Air Rifle Company, and his own clerk James Couzens. Malcomson also convinced the Dodges to accept stock in lieu of payment.
On June 16, 1903, the Ford Motor Company was incorporated, with 12 investors owning a total of 1000 shares. Ford and Malcomson together retained 51% of the new company in exchange for their earlier investments. When the total stock ownership was tabulated, shares in the company were: Henry Ford (255 shares), Alexander Y. Malcomson (255 shares), John S. Gray (105 shares), John W. Anderson (50 shares), Horace Rackham (50 shares), Horace E. Dodge (50 shares), John F. Dodge (50 shares), Charles T. Bennett (50 shares), Vernon C. Fry (50 shares), Albert Strelow (50 shares), James Couzens (25 shares), and Charles J. Woodall (10 shares).
At the first stockholder meeting on June 18, Gray was elected president, Ford vice-president, and James Couzens secretary. Despite Gray's misgivings, the Ford Motor Company was immediately profitable, with profits by October 1, 1903, of almost $37,000. A dividend of 10% was paid that October, an additional dividend of 20% at the beginning of 1904, and another 68% in June 1904. Two dividends of 100% each in June and July 1905 brought the total investor profits to nearly 300% in just over two years; 1905 total profits were almost $300,000.
However, there were internal frictions in the company that Gray was nominally in charge of. Most of the investors, both Malcomson and Gray included, had their own businesses to attend to; only Ford and Couzens worked full-time at the company. The issue came to a head when the principal stockholders, Ford and Malcomson, quarreled over the future direction of the company. Gray sided with Ford. By early 1906 Malcomson was effectively frozen out of the Ford Motor Company, and in May sold his shares to Henry Ford. John S. Gray died unexpectedly in 1906, and his position as Ford's president was taken over by Ford himself soon afterward.
Ford was subject to lawsuits or threats from the Association of Licensed Automobile Manufacturers early in its history. The association claimed patent rights to most gasoline-powered automobiles. After several years of legal wrangling, the association eventually dropped its case against Ford in 1911.
Early developments and assembly line
During its early years, the company produced a range of vehicles designated, chronologically, from the Ford Model A (1903) to the Model K and Model S (Ford's last right-hand steering model) of 1907. The K, Ford's first six-cylinder model, was known as "the gentleman's roadster" and "the silent cyclone", and sold for US$2800; by contrast, around that time, the Enger 40 was priced at US$2000, the Colt Runabout US$1500, the high-volume Oldsmobile Runabout US$650, Western's Gale Model A US$500, and the Success hit the amazingly low US$250.
In 1908, Henry Ford introduced the Model T. Earlier models were produced at a rate of only a few a day at a rented factory on Mack Avenue in Detroit, Michigan and later at the Piquette Avenue Plant (the first company-owned factory), with groups of two or three men working on each car from components made to order by other companies (what would come to be called an "assembled car"). The first Model Ts were built at the Piquette Avenue Plant and in the car's first full year of production, 1909, just over 10,000 Model Ts were built. As demand for the car grew, the company moved production to the much larger Highland Park Plant in 1910. In 1911, 69,762 Model Ts were produced, with 170,211 in 1912. By 1913, the company had developed all of the basic techniques of the assembly line and mass production. Ford introduced the world's first moving assembly line that year, which reduced chassis assembly time from hours in October to 2 hours 40 minutes (and ultimately 1 hour 33 minutes), and boosted annual output to 202,667 units that year After a Ford ad promised profit-sharing if sales hit 300,000 between August 1914 and August 1915, sales in 1914 reached 308,162, and 501,462 in 1915; by 1920, production would exceed one million a year.
These innovations were hard on employees, and turnover of workers was very high, while increased productivity reduced labor demand. Turnover meant delays and extra costs of training, and use of slow workers. In January 1914, Ford solved the employee turnover problem by doubling pay to $5 a day cutting shifts from nine hours to an eight-hour day for a 5-day work week (which also increased sales; a line worker could buy a T with less than four months' pay), and instituting hiring practices that identified the best workers, including disabled people considered unemployable by other firms. Employee turnover plunged, productivity soared, and with it, the cost per vehicle plummeted. Ford cut prices again and again and invented the system of franchised dealers who were loyal to his brand name. Wall Street had criticized Ford's generous labor practices when he began paying workers enough to buy the products they made.
While Ford attained international status in 1904 with the founding of Ford of Canada, it was in 1911 the company began to rapidly expand overseas, with the opening of assembly plants in Ireland (1917), England and France, followed by Denmark (1923), Germany (1925), Austria (1925), and Argentina (1925). A factory was opened in Japan (1925) at Yokohama, and also in South Africa (1924) and Australia (1925) as subsidiaries of Ford of Canada due to preferential tariff rules for Commonwealth countries. By the end of 1919, Ford was producing 50 percent of all cars in the United States, and 40% of all British ones; by 1920, half of all cars in the U.S. were Model Ts. (The low price also killed the cyclecar in the U.S.) The assembly line transformed the industry; soon, companies without it risked bankruptcy. Of 200 U.S. car makers in 1920, only 17 were left in 1940.
It also transformed technology. Henry Ford is reported to have said, "Any customer can have a car painted any color that he wants so long as it is black." Before the assembly line, Ts had been available in a variety of colors, including red, blue, and green, but not black. Now, paint had become a production bottleneck; only Japan Black dried quickly enough, and not until Duco lacquer appeared in 1926 would other colors reappear on the T.
In 1915, Henry Ford went on a peace mission to Europe aboard a ship, joining other pacifists in efforts to stop World War I. This led to an increase in his personal popularity. Ford would subsequently go on to support the war effort with the Model T becoming the underpinnings for Allied military vehicles, like the Ford 3-Ton M1918 tank, and the 1916 ambulance.
Post-World War I developments
By 1916, the company had accumulated a capital surplus of $60 million, but Henry Ford declared that he intended to end special dividends for shareholders in favor of massive investments in new plants, including the River Rouge plant, allowing Ford to dramatically increase production, and the number of people employed at his plants, at the same time as cutting the prices of his cars. The Dodge brothers, John Francis Dodge and Horace Elgin Dodge, the largest non-family shareholders, with 10% of the company, objected and took Ford to court in 1917 in an often cited case, Dodge v. Ford Motor Company. The judge found in their favor requiring a $19million special dividend. The decision was then upheld in the 1919 appeal to the Michigan Supreme Court which stated that:
In response Henry Ford determined to buy out the remaining shareholders. To encourage this, he threatened to leave and set up a rival company, offering to buy out the minority shareholders, at varying prices. He gained complete control in July 1919 at a cost of $125 million, made up of $106 million of the stock and $19 million in court-ordered dividend, financed with a $75 million loan from two eastern banks. The Dodge brothers received $25 million. At this time Edsel Ford also succeeded his father as president of the company, although Henry still kept a hand in management.
While prices were kept low through highly efficient engineering, the company and neglected consumer demand for improved vehicles. So, while four-wheel brakes were invented by Arrol-Johnson (and were used on the 1909 Argyll), they did not appear on a Ford until 1927, only a year before Chevrolet. Ford steadily lost market share to GM and Chrysler, as these and other domestic and foreign competitors began offering fresher automobiles with more innovative features and luxury options. GM had a range of models from relatively cheap to luxury, tapping all price points in the spectrum, while less wealthy people purchased used Model Ts. The competitors also opened up new markets by extending credit for purchases, so consumers could buy these expensive automobiles with monthly payments. Ford initially resisted this approach, insisting such debts would ultimately hurt the consumer and the general economy. Ford eventually relented and started offering the same terms in December 1927, when Ford unveiled the redesigned Model A, and retired the Model T after producing 15 million units. An early version of the Ford script in the oval badge was first used on the 1928 Model A; the Ford script had been created in 1903 by Childe Harold Wills, and the oval trademark in 1907.myFord magazine, Fall 2006.