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Henry Ford and the Model T: A Case Study in Productivity (Part 2)

Key Economic Concepts:

• Entrepreneur
• Factors of Production
• Human Capital
• Human Resources
• Incentive
• Innovation
• Labor
• Production
• Productive Resources
• Productivity
• Resources

Description:

When Henry Ford announced he was going to produce an automobile that would be affordable to the masses, he probably did not realize what a great impact his achievement would have on life in the United States. and, eventually, the world. Ford’s use of mass production strategies to manufacture the Model T revolutionized industrial manufacturing and initiated a new era in personal transportation. This three-part learning unit provides students with the story of Henry Ford and the Model T from an economics perspective. Parts 1 and 2 explore how the Ford Motor Company successfully introduced mass production strategies to the auto industry. Students learn how specialization and investments in capital (machines, people, etc.) increased productivity and allowed Ford to slash the price of his popular vehicle. Students chart a plan for the assembly line production of bookmarks, test their plan, and make recommendations for improvements. Students also explore how Henry Ford used economic incentives to address a problem created by mass production techniques—worker turnover. An optional Part 3 explains how increased productivity resulted in shifts in the supply and demand for the Model T. Students analyze how a variety of non-price determinants continue to influence the automobile market today. The unit also provides a wealth of extension activities. 

Lesson Objectives:

Students will:

• Identify Henry Ford as an innovator who helped revolutionize modern manufacturing.
• Explain how capital can improve productivity by reducing inputs and increasing outputs.
• Describe how Henry Ford used economic incentives to address worker turnover and improve productivity.

Introduction:

Part 1	Part 2	Part 3

Write the word “Productivity” on the board. Have the students reflect on what they learned in Part 1, using the following discussion questions:

1. What does “productivity” mean? [Output per unit of input.]
2. What was Henry Ford’s output? [The model T or automobiles]
3. How did Henry Ford's use of the moving assembly line increase productivity? [Workers specialized. Each worker had a specific task he was responsible for doing. The division of labor and movement of cars and parts to the line workers reduced the amount of time workers spent getting parts and tools to do their work.]

On the board, to the left of “Productivity,” write “Specialization and Division of Labor.” Connect the terms with an arrow pointing to “Productivity.” Explain that producers also can improve productivity through investments in capital. Write “Investments in Capital” on the board below “Specialization and Division of Labor.” Connect this new term with another arrow to “Productivity.” Tell the students that Henry Ford made many investments in capital to fine-tune the operation of his assembly line and to improve productivity in manufacturing the Model T. In Part 2, the students will learn more about these investments and their impact on productivity.

Resources:

The following web pages provide additional information on Henry Ford’s investments in capital:

• Highland Park Plant ^[1] [ www.nps.gov/history/nr/travel/detroit/d32.htm ] —the home of Henry Ford’s first moving assembly line.
  Source: The National Park Service
• The English School ^[2] [www.autolife.umd.umich.edu/Labor/L_Overview/FordEnglishSchool.htm], a free school for workers and their families; it taught English and the “American way of life.”
  Source: University of Michigan

These links tell the story of Ford’s worker problem and how he solved it:

• Henry Ford and the $5 Workday: Henry Ford's $5-a-Day Revolution ^[3] [www.ford.com/about-ford/heritage/milestones/5dollaraday/677-5-dollar-a-day]
    The Ford Five Dollar Day ^[6] [www-personal.umd.umich.edu/~ppennock/L-FiveDollarDay.htm]
  Source: Ohio State University’s eHistory.com
• The Assembly Line and the $5 Day ^[5] [www.michigan.gov/hal/0,1607,7-160-17451_18670_18793-53441--,00.html]
  Source: State of Michigan

Other Materials

• For the assessment activity, each student will need a copy of this worksheet.
• Assessment Rubrics

Process:

Have the students work in teams of 2-3 at computers, reading the background information on Henry Ford's investments in capital to improve productivity in the manufacture of the Model T. The students are provided the following text and hyperlinks.

The Highland Park Plant

The Ford Motor Company’s construction of the Highland Park Plant ^[1] [www.cr.nps.gov/nr/travel/detroit/d32.htm] was an investment in capital. At the time it opened in 1910, the four-story factory was the largest building under one roof in the state of Michigan. It was considered the model for factory design. Large, open floors allowed for the efficient arrangement of machinery. To enhance natural lighting and ventilation, there were massive windows. About 75 percent of the wall space was glass, and there were skylights as well.

Vertical Integration

Single-purpose machines and tools were created for the different steps in the manufacturing process. New power technologies such as electricity were used to run machines more efficiently than humans could run them. Electrical lighting was a key factor in making it possible to operate the factory by day and night, in three shifts.

 To facilitate the moving assembly line, an “endless chain-driven” conveyor was built to move each chassis from one workstation to another. Work slides, rollways, trolleys, elevators and other devices were also created to move cars and parts to workers so that workers could repeat their assigned tasks without having to move their feet.

Henry Ford also invested in human capital— to improve productivity. He realized that good health, education, and training all contributed to a worker's productivity. Thousands of immigrants from dozens of countries worked side by side at Highland Park . Many did not read, write, or speak English.

The Ford Motor Company established a school ^[2] [www.autolife.umd.umich.edu/Labor/L_Overview/FordEnglishSchool.htm] where workers were taught English so they could be safe and more productive on the job. A plant hospital provided health care.

What was the impact of all these changes? Production doubled in each of the first three years the Highland Park Plant operated—from 19,000 cars in 1910, to 34,500 in 1911, to a staggering 78,440 in 1912.

The $5 Work Day

 With a new factory, new machines, and new ways of organizing production, everything should have been great--but it wasn't. Spending hours and hours doing the same task over and over was unpleasant for workers. In addition, the work was dangerous. Morale was often low. Workers couldn't be counted on to show up on a regular basis. Many just quit and looked for jobs elsewhere.

Given these problems, it was difficult to keep the line running smoothly. Making matters worse, new workers required a costly break-in period that reduced productivity. Ford found himself spending $100 to train each new worker, but many of these men only stayed a month or two before quitting. Find out more about Ford's worker problem and how he solved it by reading:

Henry Ford and the $5 Workday: Henry Ford's $5-a-Day Revolution ^[3] [www.ford.com/about-ford/heritage/milestones/5dollaraday/677-5-dollar-a-day] and The Ford Five Dollar Day ^[4] [www-personal.umd.umich.edu/~ppennock/L-FiveDollarDay.htm]

The Assembly Line and the $5 Day ^[5] [www.michigan.gov/hal/0,1607,7-160-17451_18670_18793-53441--,00.html]

Ford's solution? He used incentives to maintain a stable and productive workforce. He boosted pay to $5 a day.

Ford's $5 day sent shockwaves through the auto industry. Many businesspeople including stockholders in the Ford Motor Company regarded the pay increase as crazy. Many thought the company would soon go out of business. But Ford believed that retaining more skilled, satisfied employees would increase productivity and lower production costs. He was right! Turnover and absenteeism disappeared almost overnight. In addition Ford greatly increased the size of his plants by adding new and additional equipment to further raise the productivity of his workforce.

• In 1914, 13,000 workers at Ford made 260,720 cars. By comparison, in the rest of the industry, it took 66,350 workers to make 286,770 cars.
• Between 1914 and 1916, Ford's profits doubled, going from $30 million to $60 million.

Ford was producing cars at a record-breaking rate. In the early days of Model T production, completing one vehicle required 12 hours. By 1914, vehicles rolled out of the Highland Park Plant at the rate of one every 93 minutes. In 1920, a Ford was turned out every minute, and one out of every two automobiles in the world was a Model T. At one point, the pace picked up to one Ford being manufactured every 24 seconds!

Conclusion:

When the students have completed their worksheet analyzing how Henry Ford ' s changes influenced input and output, discuss some of their responses.

1. How did Ford’s methods reduce the inputs needed to produce Model Ts? [Standardization of parts (1), offering just one paint color (3), and investments in new machinery (7) reduced the amount of labor needed. Improved factory lighting (6) reduced the capital and natural resources needed because there were fewer production errors.]
2. How did Ford's methods increase Model T output? [Operating Highland Park day and night increased the number of cars that could be produced from the same building and equipment (2). The $5 day (4) and restrictions on gambling (5) resulted in more skilled, focused workers who could move more cars down the line. Improved factory lighting (6) also made it possible to speed up the line and produce more vehicles per worker. Investing in the rubber plantation (8), ships (9), and the iron foundry (10) all contributed to a continuous flow of work on the assembly line, reducing workers' idle time.]
3. Why was Henry Ford able to pay higher wages to his workers? [His labor costs per car were lower than the costs of his competitors because each of his workers was more productive.] 

Identify a well-known business in your local community. Discuss how it invests in capital to improve productivity. For example, farmers use tractors and other equipment to reduce the number of workers they need to plant and harvest. Some farmers rent or buy more land so they can also maximize their output from these capital investments. A grocery store uses new scanning equipment to speed up the checkout lines and track inventory, reducing the number of workers needed. Some corporations provide or pay for employee training and education.

Assessment Activity:

Using this worksheet, the students explain how the changes Henry Ford instituted in production of the Model T increased productivity. The students are instructed to frame their responses in terms of reductions in input and increases in output. ANSWER KEY

The students may print out copies of the worksheet from their computers, or you may print copies out in advance and distribute them. Each student will need a copy of the worksheet.

For an additional assessment activity encompassing Parts 1 and 2, you may also use Extension Activity #1. In this activity, students compare procedures for manufacturing the Model T with auto-making procedures today. They should compare findings with one another in a class presentation and discussion. Emphasize the importance of identifying innovations made by Henry Ford that are still in use today.

Base your assessment of learning on student responses to the worksheet and classroom discussion questions. Adjust and weight this assessment rubric to fit your needs throughout this three-part unit.

Extension Activity:

Have the students:

1. View the video clip Cars ^[7] ocated in the Products I section of How Everyday Things are Made [http://manufacturing.stanford.edu/] ( 8:54 minutes). They should look for ways in which auto production today is the same as it was for the Model T. They also should watch for ways in which auto production has changed. They should record their responses on this worksheet. Note: Be sure you start the video at the very beginning--a web page featuring a red Mustang car. ANSWER KEY
2. Take a field trip to a local factory, office, or restaurant. At their chosen sites, the students should make observations about strategies used to increase production. Then they should prepare reports on those strategies.
3. Imagine they have a choice today that is similar to the one faced by Detroit workers in 1914. They can be a craftsperson customizing vehicles in a small shop or a worker on an auto assembly line. What would they choose? They should give three reasons for their choice and also note at least one disadvantage.
   
   Possible advantages of work as a craftsperson:

• Less monotonous and boring
• Higher pay for some work requiring a high level of skill and responsibility
• More creative
• Ability to be part of a team effort
• Don’t have to deal with the pressure of keeping the assembly line working
  
  Possible advantages of work on an assembly line:
• Knowledge and skills needed to do the job are minimal
• Higher pay and benefits than some other jobs
• May only have to deal with the machine rather than people
• There may be more people around on the assembly line

4. Debate a policy that prohibits the employment of smokers. A controversial element of Henry Ford's $5 workday was the rules he imposed to govern workers' personal lives, such as no gambling and drinking. In 2003, Weyco Inc., a medical benefits company, established a policy to encourage employees to become healthier so they could be more productive personally and professionally. The company announced it would no longer employ smokers. Four employees who refused to submit to a breath test were later fired. Here are links to a few of the many news articles that can support student positions on the issue.

• The High Cost of Smoking ^[8] [http://articles.moneycentral.msn.com/Insurance/InsureYourHealth/
  HighCostOfSmoking.aspx]
  Source: MoneyCentral
• Whose Life Is It Anyway? ^[9] [www.cbsnews.com/stories/2005/10/28/60minutes/main990617.shtml] Source: CBS News
• Workers fume as firms ban smoking at home ^[10] [www.smokefreesociety.org/newsclip/LoseYourJob-1.asp] Source: smokefreesociety.org

Links Used:

1. ^{^ ^} "Highland Park Plant" - (www.nps.gov) Provides information on Henry Ford’s first moving assembly line.
2. ^{^ ^} "The English School" - (www.autolife.umd.umich.edu) This site provides a brief history of The English School from 1914.
3. ^{^ ^} "Henry Ford's $5-a-Day Revolution" - (www.ford.com) Learn about Henry Ford's $5 a day business plan and how it affected the economy.
4. ^{^} "The Ford Five Dollar Day" - (www-personal.umd.umich.edu) This site discusses Henry Ford's revolution of paying workers $5 dollars a day, one of the first attempts during the Progressive Era to increase worker satisfaction.
5. ^{^ ^} "The Assembly Line and the $5 Day" - (www.michigan.gov) Information on the assembly line and the five dollar a day program.
6. ^{^} "The Ford Five Dollar Day" - (www-personal.umd.umich.edu) This site discusses Henry Ford's revolution of paying workers $5 dollars a day, one of the first attempts during the Progressive Era to increase worker satisfaction.
7. ^{^} "How Everyday Things Are Made" - (manufacturing.stanford.edu) AIM has developed an introductory website for kids and adults showing how various items are made.
8. ^{^} "The High Cost of Smoking" - (articles.moneycentral.msn.com) This site adds up all of the costs of smoking. This includes money, laundry, insurance, and employment.
9. ^{^} "Whose Life Is It Anyway?" - (www.cbsnews.com) This site discusses the risk that businesses take when they insure and employ those who smoke or are excessively obese.
10. ^{^} "Quit Smoking or Lose Your Job!" - (www.smokefreesociety.org) Smokers in Michigan now face moves by some employers to either refuse to hire them, or in one case, to fire those who won't quit.

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