[vasudeva]

As the thread title says, Oct 1, 2008 marks the 100th birth anniversary of one of the 3 most important automobiles ever produced, and the automobile that marked the beginning of the present age. The other 2 automobiles which have perhaps Model T include VW Beetle and Toyota Corolla. Some key facts about Model T (from the latest issue of TIME):

1. Made left hand steering standard in the US.
2. Originally priced at $850 ($20000 worth today).
3. Specs: 15KW engine, top speed 64-72 kmph; FE: 5.5-9 kmpl
4. By 1921, Model T accounted for 57% of the world's auto production.
5. in 1972, Beetle surpassed Model T as the best selling vehicle ever.
6. Post Ford/Model T era known as AF or after Ford (for its revolution in manufacturing, most notably assembly line).

[vasudeva]

Some more interesting facts about Model T from Brinkley `Wheels for the World':

1. Suspension offered a near gymnastic flexibility, suited for the near non-existent roads. One person said he wanted to buried in a T because `I aint never seen a hole yet that she could not get out of'.
2. First car with left hand steering that enabled drivers to better see oncoming traffic.
3. Price of $850 did not get a buyer the top of the car, or windshield or headlights. Options cost $135 till Oct 1909 when all these were included in a price of $950.
4. New York Times reported that while it cost $1500 per year to operate a competing automobile, Model T cost less than $100. A well kept T cost a penny a mile to run, or a quarter penny when a family of 4 rode along. One person noted that covering a 1000 miles on foot cost $10 in shoes; but $7.7 in a Model T.

[Sudipto-S-Team]

Vasudeva
Have you read Henry Ford's autobiography? I picked it up for around Rs 100. New. It's one of the most brilliant books I have ever read that is written by a businessman.
Sudipto

[vasudeva]

I have read David Halberstam's `The Reckoning', DeLorean, Iacocca, Liker, Womack/Jones/Roos books, among others. I am presently into Douglas Brinkley's book referred above.

[Sudipto-S-Team]

You will love reading the autobiography of Ford. Get a copy. It should be a standard text book in all management schools, particularly in entrepreneurship class. What a modern mind. His theories are still relevant. And he practised everything that he talks about. The best part was his HR policies.

[vasudeva]

For an outside view, one of the best book about the production innovations introduced at Ford is David Hounshell’s , From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United State.

The biggest factor behind Model T success was that it was designed for rural America and its poor road surfaces. Ford was convinced that the future of the automobile lay with the average person, not the elite. Benchmarked against the Merc, it was less less expensive but retained its advantages of comfort, speed, and reliability. Others tried to copy but not with much success.

Ford's basic concept-of Model T included roadworthiness, ease of driving, and ease of servicing. At only 550 kg, with 20 HP, it was powerful for its weight. High-grade materials made it strong. It had high torque which was important given that the transmission had only two speeds. As noted above, the torque and the light weight allowed the Model T to pull itself through mud that would have incapacitated many other heavier automobiles. The light weight also made the Model T easy to steer, and the foot-controlled planetary transmission, even though it had only two speeds, obviated the problem of changing gears that almost-all drivers had and would continue to have until GM patented the synchromesh transmission in 1929.

However, what worked in 1908-early 1920s did not work anymore and Model T peaked and then declined in the mid-1920s. Chevrolet became the acknowledged leader in the low-priced, closed-car field. The price of the two-door Chevrolet sedan fell from $735 in 1925 to $594 in 1927. In the same year Ford dropped the price of the increasingly out dated and outclassed Model T sedan from $580 to $495, but nearly $100 worth of extras were required to make it as well equipped as the Chevrolet. But the light weight chassis of the Model T flexed under the weight of a sedan body, and thus rapidly became noisy and leaky.

Another important factor behind the eventual decline of T was Ford’s policy of cash down and his scorn of advertising. By comparison, GM created the General Motors Acceptance Corporation (GMAC) to facilitate buying a car on credit.Gm also initiated a huge ad/publicity campaign under Sloan. GM's advertising also kickstarted the career and later success of an advertising icon--Bruce Barton.

Finally in a twist of irony, Model T led to construction of good roads which killed the Model T. The road boom of the 1920s had a negative effect on Ford's Model T. The suspension that had been superb on poorly surfaced roads proved unsatisfactory on smooth roads and at high speeds. Under those conditions the Model T `rolled like a ship in a bad storm’ The addition of the front-wheel brakes and the balloon tires produced a disastrous front-end shimmy when braking at high speeds. As ruts became roads, drivers wanted large, fast, smooth riding cars cushioned by good springs and shock absorbers. Urban customers in particular wanted a standard three-speed, selective transmission rather than Ford's two-speed, pedal-operated device.

In response, Ford ceased production of the Model T and introduced the Model A, which incorporated many innovations associated with the success of Chevrolet: closed, stylish bodywork, a three-speed transmission, and an improved chassis and front axle. Ford, however, was the first to use safety glass in the windshield of an inexpensive automobile and hydraulic shock absorbers. The latter feature made the Model A a most roadworthy automobile, and the excellent ride in combination with the powerful new engine and light weight allowed the Model A to recapture in 1929 the market preeminence that had been lost to Chevrolet.

[vasudeva]

In 1986, NBER published a paper `Did Henry Ford Pay Efficiency Wages?’ by Daniel Raff and Lawrence Summers. This paper related to Ford’s introduction of the five dollar day in January 1914, which doubled the pay of his factory workers. The paper is available here:

http://www.nber.org/papers/w2101.pdf

Ford himself noted that `There was. . .no charity in any way involved.. .We wanted to pay these wages so that the business would be on a lasting foundation. We were building for the future. A low wage business is always insecure.. .The payment of five dollars a day for an eight hour day was one of the finest cost cutting moves we ever made’.

The NBER paper analysed the key motivations and background for this:


By 1910 roughly two-thirds of the workforce were either foremen or mechanics rated either "highly skilled" or "skilled". Further, by 1914, three quarters of it was foreign-born and more than half were recent immigrants from the unindustrialized regions of southern and eastern Europe.

However the assembly line and division of labor had been carried on to such a point that an overwhelming majority of the jobs consisted of a very few simple operations. In most cases a complete mastery of the movements did not take more than from five to ten minutes. As tasks came to be divided more and more finely and to become more and more routinized, work became more menial. At the same time, the need for workers to be in lockstep to make the assembly line work smoothly increased the pressure on workers. As one worker said `If I keep putting on Nut No.86 for about 86 more days, I will be Nut No.86 in the Pontiac bughouse’.

As a result, worker dissatisfaction at Ford took visible form. In 1913, annual turnover at the Ford plant reached 370 percent. Ford had to hire 50,448 men during the course of the year in order to maintain the average labor force at 13,623. The 370 percent was high even by the standards of the fluid Detroit labor market, in which turnover rates of 200 percent were quite common. High turnover was a result of a combination of factors including the monotony of jobs, arbitariness of some foremen, inequities in pay, and inadequacies in plant conditions. Absenteeism was also high at 10% daily. This meant that on the average day it was necessary to make use of 1300 or 1400 replacement workers each of whom was inexperienced at the specific task they were to perform.

Based on this, the authors conclude that Ford may have increased wages in an effort to raise productivity by reducing the turnover and absenteeism, or through getting directly at some morale problem. Alternatively, he may have doubled wages for some personal reason--to be magnanimous or perhaps to become famous. There is evidence in the events leading up to the five-dollar day to support and to refute both interpretations.

The increase resulted in the quit rate fell 87 percent between March of 1913 and March of l9l4. Further, profits rose steadily in both nominal and real terms in 1914 and 1915, inspite of out of pocket cost of $10 million for the five-dollar day programme. Productivity improved as between 1913 and 1914 the Ford company produced 15 percent more cars per day, with 2000 (or about 14 percent fewer) workers and a reduction in the number of hours worked per worker. Estimates indicate that Ford plan raised wages by 105 percent, but labour costs by only 35 perent, implying about a 50 percent improvement in productivity.

[Sudipto-S-Team]

The logic behind raising wages is very clearly explained by Henry Ford himself in the autobiography with detailed tables. The wage hike didn't happen only in 1914. It happened every year since, in tandem with price reduction of Model T !!