MODEL T INNOVATION IN

AUTMOBILE
MANUFACTURING

Introduction:
People often credit Henry Ford with inventing the automobile and the
assembly line. In fact, he did neither! What Mr. Ford actually did was change
the way manufacturers operate. Henry Ford brought together many
innovative ideas that helped revolutionize mass production.
Henry Ford did not invent the automobile or the assembly line. He did,
however, change the world by using an assembly line technique to produce
cars which could be afforded by everyone. From 1909 to 1927, the Ford
Motor Company built more than 15 million Model T cars. Without a doubt,
Henry Ford transformed the economic and social fabric of the 20th century.
Mr. Ford is often quoted as saying "I will build a motorcar for the great
multitude". At the time it was a revolutionary business model to lower a
product's cost and the company's profit margin in exchange for increased
sales volume. Up until this point in time the automobile had been a status
symbol and cars were painstakingly built by hand for the wealthy.
The first production Model T Ford (1909 model year) was assembled at the
Piquette Avenue Plant in Detroit on October 1, 1908. Over the next 19 years
relatively few fundamental changes were made to the basic design. By 1926
the design was so antiquated that the Model T could not compete with more
modern offerings from competitors like Chevrolet. 1927 was the last year for
Henry's lady, the "Universal Car".

Model T:
Ford and his company's engineers designed a car named the Model T. First
offered for sale in 1908, the Model T was produced like other carsone
vehicle at a time. But the Model T was more sturdy and powerful than other
cars. Considered relatively simple to operate and maintain, the auto offered
no factory options, not even a choice of color. The Model T was also less
expensive than most other cars. At an initial price of $950, 10,000 autos
were sold the first yearmore than any other model.
Model T changed the world forever. A Ford customer could buy a reliable
automobile that was fairly easy to drive. Ford sold over ten thousand Model T
cars in the first year of production, a new record for any automobile model.
The Model T was revolutionary because it combined the then-rare attributes
of reliability, ruggedness, utility and economy--all in one machine that was
1

eminently affordable. And that was something no other car had done before.
The T was sized just right, and its 100-in. wheelbase made it a perfect
platform for a wide variety of bodies, from sporty roadsters to touring cars,
pickup trucks to even delivery vans.

Model T History and facts:

1908 - The first 1909 Model T was built at Ford's Piquette Ave. Plant
1909 - The Model T came in first place in the New York to Seattle race,
4100 miles in 22 days and 55 minutes averaging 7.75 mph.
1910 - Model T production moved to Ford's Highland Park Assembly
Plant, also known as the 'Crystal Palace' because of the vast expanse
of windows.
1913 - Ford implements the moving assembly line at its Highland Park
Assembly Plant, reducing chassis build time from 14 hours per car to
just 1.5 hours
1914 - Henry Ford is alleged to have proclaimed, "You can have and
color you want, as long as it's black." From 1914 to 1925 the Model T
was only available in black.
1917 - The 2 millionth Model T Ford rolled off the line on June 14th.
1919 - Ford introduced an electric starter for the Model T which meant
owners no longer had to crank the engine to start it.
1921 - The 5 millionth Model T Ford rolled off the line on May 28th.
1924 - The 10 millionth Model T Ford rolled off the line on June 4th.
Famed ford racing driver Frank Kulick drove it from New York to San
Francisco on the Lincoln Highway, the only coast-to-coast highway at
the time.
1925 - The Ford Model T Runabout with a pickup body was introduced,
the first Ford factory installed pickup bed in history.
1927 - After 19 years and more than 15 million vehicles, Ford Model T
production ended on May 26th
1999 - On December 18th, the Ford Model T was named 'Car of the
Century' by a panel of 133 automotive journalists and experts who
began with a list of 700 candidates in 1996 and sequentially narrowed
the nominees through seven rounds of balloting over three years.
2003 - 43 vintage Model T Fords journeyed across the country to
participate in a 100th Anniversary celebration of the Ford Motor
Company.

The aim of this report is to understand the innovation, planning and foresight
that has made this product unique and set the platform for Ford motor
Company to face the new challenges of 20th Century.

Material management:
Material management is defined as a function of not only receiving material,
storing materials, purchasing, but an overall function of an organization. It
constitutes the major cost for the organization, and a low profile of the
department should be maintained to curtail costs, so the organization could
go making profit. As materials constitute 70% of the bulk requirement the
possibility is to curtail cost to the minimum. The planning and control of the
functions supporting the complete cycle of flow of materials, and the
associated flow of information. These functions include Standardization, need
determination.

Challenges of materials management in beginning of 20 th

century:

Poor quality of steel and other raw materials

High cost and monopoly pricing
Lack of supply chain management
No standards or defined procurement principles
Improper storage facilities
No/Poor technical knowledge

Following are several revolutionary initiatives that has changed the concept
of material planning and management in automobile industry in 20th century.

Vanadium Steel:
Henry Ford searched the world for the best materials he could find at the
cheapest cost. During a car race in Florida, he examined the wreckage of a
French car and noticed that many of its parts were made of a metal that was
lighter but stronger than what was being used in American cars. The
development team ascertained that the French steel was a vanadium alloy,
but that no one in America knew how to make it. The finest steel alloys then
3

used in American auto making provided 60,000 pounds of tensile strength.

Ford learned that vanadium steel, which was much lighter, provided 170,000
pounds of tensile strength. As part of the pre-production for the new model,
Ford imported a metallurgist and bankrolled a steel mill. As a result, the only
cars in the world to utilize vanadium steel in the next five years would be
French luxury cars and the Model T.
Since that time, new processes have continued to be developed that improve
the effectiveness and benefits of using vanadium as an alloy with steel.
The result has been a great expansion in the use of V-steels with roughly
92% of all vanadium consumed today being used in the expanding steel
production market.
By contributing to the reliability, machinability and cost-effectiveness of
steel, vanadium is now widely used in various steel products, from
crankshafts and connecting rods to the chassis of many cars and trucks.
According to the Vanadium International Technical Committee (Vanitec) latest
survey, vanadium is the most widely used alloying element for strengthening
steels used in buildings and bridges, and is the most effective alloy for
increasing the strength of reinforcing bars used in construction.

Interchangeable parts:
Ford looked at other industries and found strategies that he could apply to
making the Model T. Gun making was considered an extremely skilled craft in
the 18th century, and firearms, including pistols and muskets, were all
constructed by hand. In this way, every gun was a one-of-a-kind possession,
and a gun broken could not be easily repaired. At the very least, the process
was time consuming and expensive, as the gun had to be brought to a
craftsman and repaired to order. In the mid-18th century, the French
gunsmith Honor LeBlanc suggested the gun parts be made from
standardized patterns, so that all gun parts would follow the same design
and could be easily replaced if broken. LeBlanc was not alone in imagining
the potential value of this concept; an English naval engineer Samuel
Bentham had earlier pioneered the use of uniform parts in the production of
wooden pulleys for sailing ships. LeBlancs idea didnt catch on in the French
gun market, however, as competing gunsmiths saw clearly the effect that it
would have on their craft.

Using interchangeable parts required making the individual pieces of the car
the same every time. All pieces would fit with all others. Any valve would fit
any engine and any engine would fit any frame. Interchangeability of parts
was achieved by combining a number of innovations and improvements in
machining operations and the invention of several machine tools, such as the
slide rest lathe, screw-cutting lathe, turret lathe, milling machine and metal
planer. Additional innovations included jigs for guiding the machine tools,
fixtures for holding the work piece in the proper position, and blocks and
gauges to check the accuracy of the finished parts.
Interchangeable parts are perhaps one of the greatest and least -discussed
engineering inventions. These are parts that are designed to fit in any device
of the same type, rather than being designed for one specific item, and they
revolutionized the world of manufacturing. With their development, the
groundwork for mass manufacturing and distribution was laid, and the
Industrial Revolution was born. These parts are made in a centralized
manufacturing facility and stored until they are needed, and they fit in all
cars of the same make, model, and year.

Supplier & Quality management:

Henry Ford, the pioneer of assembly-line JIT manufacturing. He was well
aware of this type of rural reciprocity, having grown up in a small agricultural
community outside Detroit, Mich.
Just-in-time (JIT) manufacturing represents a return to the kind of relationship
between producers and consumerssuch as blacksmiths and farmersthat
existed before the Industrial Revolution: people specified what they wanted
and craftsmen met these individual requirements.
Necessity was the mother of invention, Ford learned this lesson through the
company's own growing pains. Prior to the emergence of the assembly line
and the five-dollars-a-day wage, Ford Motor Company relied on skilled labor
to essentially make automobiles fit to the specification of available
components. This resulted in numerous time and cost inefficiencies, observe
Daniel Raff and Lawrence Summers in their paper, Did Henry Ford Pay
Efficiency Wages?
"Ford was not manufacturing, but merely assembling, cars. The parts were
produced by outside machine shops and were not made to any particularly
5

high tolerances. A great deal of shaping and fitting was required to get them
together properly," they wrote during the period.
What was lacking was controlover the quality and standard of parts and
components in the supply stream, and over the inbound flow of materials
coming from outside sources. No checks and balances were in place to
mediate discrepancies within the manufacturing and assembly processand
it showed.
As manufacturing demand began to dictate the flow of supply, the
company's Highland Park, Detroit, plant emerged as the center of this new
productivity revolution. Ford diversified the company's business interests to
include a number of village industries to gain better control over supply. Not
only was Ford Motor Company producing a revolutionary vehicle for
transport, and in the process controlling the means of production, the
manufacturer also became its own supply line, acquiring raw materials,
energy resources, and transportation assets necessary to support the entire
enterprise. The idea of controlling such a vast breadth of resources, rather
than relying on suppliers who invariably spiked their prices, fueled Ford's
business philosophy to create the best product at the lowest cost to the
consumer, while still paying employees a high wage. It also presented a
revolutionary productivity paradigm that, at its core, depended on the
seamless integration of inbound and outbound transportation processes and
product flows. The idea of a "supply chain" comprising myriad points of
supply, many more points of consumption, and an infinite number of touch
points in between, required a new way of looking at managing global
transportationand matching demand to supply.
Within this emerging dynamic, the Ford JIT model sparked new ideas and
justifications for following demand signals and managing inbound
transportation. But it wasn't a linear process.
For some companies it was purely driven by cost economies; others saw it as
a means to dig deeper into their supply chains to reduce inventory; fewer
still saw an opportunity to create a nexus for change by breaking down silos
and integrating functions across and beyond the enterprise. In a variety of
ways, businesses embraced these ideas and ran.
Together, Ford and suppliers broke the mold for demand-driven logistics. But,
they did not break the barrier. Rather, they positioned themselves and others
to take the next leap.

Figure 1 supplier communication and delivery strategy

Figure 2 Supply chain planning

Standardization, cost reduction and effectiveness:

Henry Ford realized that a more efficient production process was needed to
lower the price and meet increasing consumer demand for his popular new
car. He needed to improve productivitythe amount of goods and services
7

produced from a given amount of productive resources. Economists refer to

goods and services as output.
In an attempt to cut cost and standardize on production materials Ford
decided to roll out Model T only in black color. Ford engineering documents
suggest that the color black was chosen because it was cheap and it was
durable. Over 30 different types of black paint were used to paint various
parts of the Model T. The different types of paint were formulated to satisfy
the different means of applying the paint to the different parts, and had
different drying times, depending on the paint and the drying method used
for a particular part.
Earlier cars from Ford were available in green, red, blue and grey. In fact, in
the first year, Model T Fords were not available in black at all. The switch to
all black cars was due to Ford's ongoing obsession with cost reduction, and
not, as is commonly believed, to reduce drying time and hence increase
production. Though this might not prove to be an idea in todays automobile
scenario, it proved to be effective means of cutting cost. Ford during the
early nineties. In 1926 colors other than black were once again offered, in an
attempt to boost dwindling sales.

Plant layout, production method and capital investments:

Following are the two buzz words that Ford bumped into automobile industry
in the 19th Century.

Mass Production:
Mass production", "flow production" or "continuous production" is the
production of large amounts of standardized products, including and
especially on assembly lines. Together with job production and batch
production, it is one of the three main production methods.
The term mass production was popularized by a 1926 article in the
Encyclopedia Britannica supplement that was written based on
correspondence with Ford Motor Company. The New York Times used the
term in the title of an article that appeared before publication of the
8

Britannica article. Mass production is a diverse field, but it can generally be

contrasted with craft production or distributed manufacturing. Some mass
production techniques, such as standardized sizes and production lines,
predate the Industrial Revolution by many centuries; however, it was not
until the introduction of machine tools and techniques to produce
interchangeable parts were developed in the mid-19th century that modern
mass production was possible. Mass production systems for items made of
numerous parts are usually organized into assembly lines. The assemblies
pass by on a conveyor, or if they are heavy, hung from an overhead crane or
monorail.
In a factory for a complex product, rather than one assembly line, there may
be many auxiliary assembly lines feeding sub-assemblies (i.e. car engines or
seats) to a backbone "main" assembly line. A diagram of a typical massproduction factory looks more like the skeleton of a fish than a single line.

Assembly line:
An assembly line is a manufacturing process (most of the time called a
progressive assembly) in which parts (usually interchangeable parts) are
added as the semi-finished assembly moves from workstation to workstation
where the parts are added in sequence until the final assembly is produced.
By mechanically moving the parts to the assembly work and moving the
semi-finished assembly from work station to work station, a finished product
can be assembled faster and with less labor than by having workers carry
parts to a stationary piece for assembly.
Assembly lines are common methods of assembling complex items such as
automobiles and other transportation equipment, household appliances and
electronic goods.
In the early days, Ford built cars the same way as everybody else one at a
time. The car sat on the ground throughout the build as mechanics and their
support teams sourced parts and returned to the car to assemble it from the
chassis upwards. To speed the process up, cars were then assembled on
benches which were moved from one team of workers to the next. But this
was not fast, as Ford still needed skilled labour teams to assemble the 'handbuilt' car. So production levels were still low and the price of the car was
higher to cover the costs of mechanics.

What was needed was automation. Henry and his engineers invented
machines to make large quantities of the parts needed for the vehicle and
devised methods of assembling the parts as fast as they were made. They
were ready for the breakthrough.

The Highland Park Plant:

The Ford Motor Companys 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.

Vertical Integration:
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.

Moving assembly line:

In 1913, the Ford Motor Company established the first moving assembly line
ever used for large-scale manufacturing.

10

On a trip to Chicago, Henry Ford observed meat packers removing cuts of

beef from a carcass, as it was passed along by a trolley, until nothing was
left. He was inspired to reverse the process for the production of his
automobile.
Parts were attached to a moving Model T chassis in order, from axles at the
beginning to bodies at the end of the line. As vehicles moved past the
workers on the line, each worker would do one task. Some components took
longer to put together and attach than others. Subassemblies were
established for these. For example, each radiator with all its hose fittings was
put together on a separate line feeding into the main assembly line. The
interval between delivery of the car and its components was carefully timed
to maintain a continuous flow.
Assembly wound downward in the factory starting on the fourth floor where
body panels were hammered out. On the third floor workers placed tires on
wheels and painted auto bodies. After the assembly was completed on the
second floor, the autos moved down a ramp past the first-floor offices. Test
your comprehension of this lesson in the following activity.
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 mentions several benefits of the assembly line including:

Workers do no heavy lifting.

No stooping or bending over.
No special training required.
There are jobs that almost anyone can do.
Provided employment to immigrants.

11

The Lines Strategic Role and Use:

Ford used multiple assembly lines flexibly in contrast to the modern
understanding of how they should function. The implications are that Ford
better understood their system than have later users or theorists. Ford ran
not just one assembly line to produce up to the required maximum capacity,
or at some theoretical maximum efficiency, the company used as many as
six with lower capacities in combinations suitable for achieving its maximum
output, and fewer as required to meet demand when it varied. There was no
established theory to restrict what Ford might think of doing, and modern
ideas that demand must be stable for these systems to be effectively used is
erroneous.
Multiple lines gave Ford a degree of flexibility not previously recognized.
Having four lines available in 1914 allowed Ford to match output closely to
demand. The four lines were sufficient to meet the maximum monthly
demand that year, that two lines produced enough for the lowest demand
periods; and three lines matched the average monthly demand. Fords
multiple lines allowed them to respond to the practical demands of matching
their production activities to sales. Fords flexible use of the assembly line is
supported by multiple mutually supporting data sets and analyses: employee
numbers, hours worked, cars sold, numbers produced and inventories,
contemporary reports, workers comment; with corporate history establishing
their existence; and collaborated by other modern research.

Impact of the Assembly Line on Production:

The immediate impact of the assembly line was revolutionary. The use of
interchangeable parts allowed for continuous work flow and more time on
task by laborers. Worker specialization resulted in less waste and a higher
quality of the end product.
Sheer production of the Model T dramatically increased. The production time
for a single car dropped from over 12 hours to just 93 minutes due to the
introduction of the assembly line.
Production doubled in each of the first three years the Highland Park Plant
operatedfrom 19,000 cars in 1910, to 34,858 in 1911, to a staggering
68,773 in 1912.

12

Fords 1915 production rate of 308,162 eclipsed the number of cars produced
by all other automobile manufacturers combined.

Following chart shows the significant progress that Ford was able to make
with moving assembly line.

Year
1909
1910
1911
1912
1913

Produc
tion
10,666
19,050
34,858
68,773
170,211

1914*
1915
1916

202,667
308,162
501,462

Incre
ase
79%
83%
97%
147%
19%
52%
63%

*Fiscal year was only 10 months long due to change in end date from Sep 30
to July 31

Production and increase trend

600,000

160%
140%

500,000

120%
400,000

100%

300,000

80%
60%

200,000

40%
100,000
0
1909

20%
1910

1911

1912

Production

13

1913

1914

1915

Increase

0%
1916

These concepts allowed Ford to increase his profit margin and lower the cost
of the vehicle to consumers. The cost of the Model T would eventually drop
to $260 in 1924, the equivalent of approximately $3500 today.

Human resource initiative and incentive planning:

Henry Ford also invested in human capital that is, he invested in peopleto
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 where
workers were taught English so they could be safe and more productive on
the job. A plant hospital provided health care.
The assembly line also drastically altered the lives of those in Fords employ.
The work day was cut from nine hours to eight hours so that the concept of
the three shift workday could be implemented with greater ease.
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 couldnt 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.
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 business people, 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
14

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.
Fords gamble paid off his workers soon used some of their pay increases to
purchase their own Model T. By the end of the decade, the Model T had truly
become the automobile for the masses that Ford had envisioned.

Variability and Flexibility:

Recognizing the variability of Fords production and capacity changes makes
capacity change costs a new, important factor in system design and
modelling. With stable operations, such costs could be ignored, but Fords
starting and stopping lines involved costs. The role of deskilling to increase
production volume is well understood. A finer division of tasks allowed
greater specialization and increased productivity. The greater fragmentation
of tasks also facilitated line balancing since these smaller tasks could be
more evenly spread across workstations. Reducing the lumpiness of the
tasks being assigned made the problem less difficult.
Ford benefited from increased productivity through both a faster and a more
regular, steady flow. The lines operations dictated those of the factory
overall. Variations in assembly were necessarily matched by variations in
feeder lines and parts production, and by deliveries from suppliers.
Consequently, Ford also deskilled their upstream production work by using
farmer machines that a worker straight off the farm could operate with
minimal training and supervision.
The whole system was designed for flexibility as well as, and perhaps even
more than, high volume, low cost manufacturing. Deskilling reduced Fords
capacity change costs. When tasks were very narrowly defined, training and
other staff assimilation costs were reduced to virtually nothing. Staff could be
hired and fired as required. Organizationally, Ford could promote favored
workers to supervisory positions when demand grew and more line workers
were needed; and then, when demand reduced again, could be returned to
15

their normal line tasks. This staff flexibility was also eased by Fords rapid
growth since good performance in a temporary supervisory position could
lead to a more permanent posting in the near future.

Fords personnel office reputedly had the capability of hiring nearly 600
people per day, further highlighting the organization-wide capacity for
managing operational variations.
Ford employed an average of 12,145 people monthly in 1914, ranging
from a minimum of 9694 in July to a maximum of 13971 in February.
The personnel office seemingly had the capacity for moving from the
minimum staffing level up to the maximum (13971 9694 = 4277) within
just 7 days time given they could process 600 people a day.

This implies that the smaller within month adjustments could be made within
just a day or two, so Ford probably had more difficulty in adapting its
material flows than in adjusting the workforce size. Fords flexible operations
and variability in employment it particularly seems that such high wages
were an incentive ensuring workers would be immediately available when
required for any tasks needed.
Fords system design adapted to the sales variability. The work was designed
so that it could be easily performed at speed, and workers quickly trained to
take on work they had not previously done. The production systems as well
as the staff were adapted to the need for flexibility with simple, low cost
materials handling and production equipment used where possible.

Recycling:
Henry Ford used wood scraps from the production of Model T to make
charcoal. Originally named Ford Charcoal, the name was changed to
Kingsford Charcoal after Ford's brother-in-law E. G. Kingsford brokered the
selection of the new charcoal plant site.
Lumber for production of the Model T came from the same location, built in
1920 called the Ford Iron Mountain Plant, which incorporated a sawmill
where lumber from Ford purchased land in the Upper Peninsula of Michigan
was sent to the River Rouge Plant; scrap wood was then returned for
charcoal production.

16

The Changing Market for Automobiles:

At the turn of the 20th Century, automakers thought the best way to
maximize profit was to build a car for the rich. But Henry Ford had a different
vision. He wanted to produce a car that everyday peoplelike the workers in
his factoriescould afford. With lower prices, cars would be more affordable
to the general public. He also figured that if he paid his factory workers a
better wage, more of his workers would be able to afford the cars they
helped make. Henry Ford would make a profit by selling MORE cars.
Following chart explains how the sales increased rapidly.
Year
1911
1912
1913
1914
1915
1916

Price
$
$
$
$
$
$

Sales
680
590
525
440
390
345

Decrease
34,858
68,773
170,211
202,667
308,162
501,462

24%
13%
11%
16%
11%
12%

Price Vs Sales
600,000

$800
$700

500,000

$600

400,000

$500

300,000

$400
$300

200,000

$200

100,000
0

$100
1911

1912

1913
Sales

1914

1915

1916

$-

Price

In October 1908, the first Model T Fords were sold for $950. New ways of
production helped to reduce production costs, Ford passed the savings on to
consumers as lower prices. By 1912, the car was selling for $575. It was the
first time that a new car had sold for less than the average wage of U.S.
17

workers. The price of the Model T would continue to drop during its 19 years
in production, at one point dipping as low as $280. With each price cut, more
and more consumers could afford to buy the cars.
This reduction in price meant that the Ford Motor Company had smaller profit
margins (on each Model T), but its revenue stayed the same. How was that
possible? In 1909 the profit on a Classic Car was $220. By 1914, the margin
had dropped to $99. But sales were exploding. While profit margins on
individual cars were smaller, the added sales volume increased total profits.
During this period, the companys net income rose from $3 million to $25
million. Its U.S. market share rose from 9.4 percent in 1908 to a remarkable
48 percent in 1914.

Conclusion:
Critical to the success of the Model T was Henry Ford's ability to increase
productivityoutput per unit of input. Specialization and division of labor
helped Henry Ford and his company increase Model T productivity. Assembly
line production was more efficient than having individual workers making
complete products. Interchangeable parts made this new way to organize
production feasible.
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. His $5 day forced other employers in the auto industry and
other industries to follow his lead to attract and keep workers. As a result,
wages for many U.S. workers increased. The increase in wages increased
18

consumer demand for automobiles. The demand curve shifted right as more
consumers were willing and able to buy cars.
Henry Ford permanently changed the auto industry. To remain competitive,
other automakers had to adopt his innovations in mass production.
By the time Henry Ford halted production of the Model T in 1927, more than
15 million cars had been sold, half the world's output of automobiles. His
innovations in the auto industry completely transformed life in the 20th
century. Manufacturing productivity soared as other industries adopted his
approach to mass production. Wage increases allowed workers to buy goods
that were formerly considered luxuries. Volume selling at low prices proved
to be a profitable strategy.

19