In Part I, you learned how specialization and division of labor on the assembly line helped Henry Ford and his company increase Model T productivity. Another significant way Ford reduced input and increased output was through investments in capital.
TASKIn the activities that follow, you will read about some of the capital investments that Ford made and analyze how they improved productivity.
The Highland Park Plant
The Ford Motor Company’s construction of the Highland Park Plant 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.
A complex surrounding the Highland Park Plant included a power plant, machine shop, and foundry. Ford was starting to bring together the various stages in the manufacture of automobiles , a strategy called vertical integration. By the 1920s, Ford had purchased a rubber plantation in Brazil , coal mines in Kentucky , acres of timberland and iron-ore mines in Michigan and Minnesota , a fleet of ships, and a railroad. These efforts to vertically integrate helped Ford make sure his company would have raw materials and parts when they were needed, guaranteeing a continuously operating assembly line. These efforts also enabled the company to profit from more of the processes involved in producing the automobile.
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 that is, he invested in people—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.
It is almost essential that a workman have a knowledge of English, from a safety standpoint as well as to thoroughly understand the requirements of his work.
The Ford Motor Company established a school 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's $5-a-Day Revolution .
Ford's solution? He used an incentive to maintain a stable and productive workforce. He raised workers' 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, the company's profits doubled—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, Ford turned out one car 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!
Henry Ford believed “Everything can always be done better than it is being done.” He applied this principle to every facet in the manufacture of the Model T. He looked constantly for improvements in product design and manufacturing. The introduction of the $5 day in 1914 was the turning point where all his ideas came together and really started to pay off in terms of productivity and corporate profits.
Check your understanding of the varied ways Henry Ford increased Model T productivity.
- View the video clip “Cars ” located in the Products I section of How Everyday Things are Made (8:54 minutes). Look for ways that auto production today is the same as production for the Model T. Also watch for ways that it is different. Record your responses on this worksheet. [NOTE: Be sure you start the video at the very beginning--a web page featuring a red Mustang car.]
- Take a field trip to a local factory, office or restaurant. At the site you visit, make observations about strategies used to increase production. Prepare a report on these strategies.
- Imagine that you have a choice today that is similar to the one faced by Detroit workers in 1914. You can be a craftsperson customizing vehicles in a small shop or a worker on an auto assembly line. What would you choose? Give three reasons for your choice. Also note at least one disadvantage.
- 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. Debate this policy. Here are links to a few of the many news articles that can support your position.